The market forces quietly adding thousands to patient bills

Health care consolidation across the United States has led to increasing patient costs without improving care quality. Hospitals are acquiring doctors' practices, imaging centers, and even insurers. Insurers are buying specialty pharmacies and sometimes merging with them as well. Private equity firms often facilitate these deals, selling them at a profit.

While the stated goal is greater efficiency, studies show patients face higher prices and poorer outcomes. This is partly because the transactions are driven by financial efficiency, not better care. These deals are happening quickly in a gray area of competition law. Antitrust laws and regulatory tools to examine or stop them are slow and inadequate.

Patients may be directed to higher-priced locations for procedures or required to use insurers' specialty or retail pharmacies, which may not have the prescribed drug at the lowest price. The Federal Trade Commission and Justice Department enforce mergers to protect competition and patient choice. They oversee hospitals and doctors, scrutinize insurers, and have overlapping but sometimes gap-filled jurisdictions.

Middlemen like pharmacy benefit managers fall in between, though the FTC has focused more on them. However, regulators are playing catch-up. The number of doctors employed by hospitals has more than doubled in the past decade, with 82% of physicians now working for hospitals, corporations, or private equity firms. Many vertical transactions are too small for regulators to detect, leading to consolidation through slow accretion.

Cooper and his Health Care Affordability Lab studied hospital acquisitions of physician practices and found that 99% of the over 275 deals examined fell below the regulatory reporting threshold. The FTC has brought only eight actions against health care mergers and acquisitions during Donald Trump's second term, relying on complaints and news reports for smaller deals. The Justice Department has brought only two cases, both challenging hospital-insurer contracts rather than mergers.

The FTC and Justice Department's task is to enforce regulations, limiting their ability to challenge market distortions caused by regulations themselves. Some propose mandating site-neutral payment, a system where providers get the same amount for a procedure regardless of where it's performed. This idea is under review by the White House, but details are not public.

The economic theory behind vertical integration is nuanced. Horizontal integration, like a hospital merging with another hospital or an insurer with another insurer, is easier to assess and can lead to less choice and higher prices for patients. In a world with limited alternatives, patients have fewer options to walk away.