Hospital Merger Mania!
Here at the Medicare for All Podcast, we love calling out all the bad actors in our healthcare system – greedy insurance companies, soul-less CEOs in Big Pharma,profit-hungry “non-profit hospitals”, and all our favorite villains. Mostly, we look at the ways those predators target sick people and poor people for exploitation, but today we’re looking at what happens when they start fighting each other for a bigger piece of the pie? Specifically, we’re going to explore the world of hospital consolidation – that’s when smaller hospitals merge to form bigger corporate entities who can battle it out with insurance companies to secure more of patients’ healthcare dollars! What does hospital consolidation mean for regular people? No spoilers, but it turns out that when giant healthcare monsters go at each other, much like when Godzilla took on Mothra, it’s the rest of us tiny humans who suffer!
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Show Notes
Like every major industry in this country, healthcare is full of big corporations that will stop at nothing to get bigger, using the time-honored capitalist techniques of mergers and acquisitions to become HUGE corporations. But, of course, we live in America, where bigger is always better – what could possibly be wrong with bigger, better healthcare companies?
We start out this episode with a cautionary tale from Massachusetts that began in 1994, when two of Boston’s biggest hospitals merge to create a mega-corporation called “Partners Health,” which over the next two decades bought up… everything. This was a response to a national wave of insurance company mergers and consolidations, which allowed insurers to squeeze both patients and providers under “managed care.” Hospitals, not wanting to be out-squeezed, fought back with their own mergers, ostensibly so they could negotiate with insurance companies.
Of course, what actually happened was something much more nefarious – and secretive. In fact, we only know any of this happened thanks to the Boston Globe’s illustrious Spotlight reporting team, who dug up the truth in a 2008 article.
Basically, in 2000, Dr. Samuel O. Thier, chief executive of Partners HealthCare, and William C. Van Faasen, chief executive of Blue Cross Blue Shield of Massachusetts engaged in an unwritten agreement between the two entities without putting it in writing to avoid legal implications. The agreement involved Blue Cross Blue Shield giving significant payment increases to Partners’ doctors and hospitals, and in return, Partners would protect Blue Cross from allowing other insurers to pay less, effectively raising insurance prices statewide. This “market covenant” marked the beginning of a period of rapid escalation in Massachusetts insurance prices, leading to a significant annual rise in individual insurance premiums.
Partners used its clout to negotiate rate increases, pressuring other insurers to match or exceed the payment increases given by Blue Cross, leading to cost increases for consumers. In turn, Partners’ significant growth and influence in the healthcare industry compounded the impact of this backroom deal, leading to a substantial rise in medical costs in Massachusetts.
Partners employed aggressive tactics, resulting in major payment increases benefiting a few powerful hospital companies while leaving others behind. This led to significant payment disparities, with Partners’ flagship hospitals earning substantially more than other academic medical centers.
Partners is an outstanding example of the evils of hospital consolidation, but it’s not an anomaly. This episode was originally inspired by our friends at the Minnesota Nurses Association (shout out to Geri Katz), who last year were fighting a proposed merger of Fairview Health with Sanford Health, two giant corporations with dozens of hospitals and clinics.
Fortunately, the nurses and MN patients won this fight – merger talks were abandoned – but consolidation across the healthcare system in the United States has run rampant the past decade, with every possible healthcare corporation merging with every other possible healthcare corporation: hospitals buying other hospitals, for-profit private equity firms buying up anything they can flip for a short-term profit, insurance companies buying hospitals, retail pharmacy chains buying the pharmacy benefit management companies that exist only to negotiate with retail pharmacies. It has become almost impossible for free-standing, independent physicians to practice on their own, just as it’s become almost impossible for freestanding, independent community hospitals to survive. Whether you’re seeking care at a hospital, a physician’s office, a dialysis clinic, or a nursing home, the landscape facing patients is a shrinking number of mega-healthcare-corporations.
What are the consequences?
Generally, patients have fewer options for medical care. Between 1998 and 2021, the American Hospital Association reported 1,887 hospital mergers. By 2017, in most markets, a single hospital system had more than a 50-percent market share of hospital discharges.
Now all this negative talk about mergers might make us sound a little bit like old-school capitalists advocating for greater “competition” in the healthcare “marketplace” – but you know us better than that! Decades of for-profit healthcare in this country have demonstrated that market competition isn’t much better for patients than healthcare monopolies – it does nothing to decrease costs or improve care.
At Healthcare NOW, we’ll keep fighting to get the market out of our healthcare system altogether so we can stop talking about corporate nonsense like vertical integration and get back to focusing on health and human dignity!
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