Why Minnesotans Should Pay Attention to Hospital Consolidation

Why Minnesotans Should Pay Attention to Hospital Consolidation

CentraCare

By Tara Fugate

Tara Fugate
Tara Fugate
MNA Strategic Researcher

MNA Strategic Researcher

Hospital and health system consolidation is a rapidly expanding trend across the country, and Minnesota is no exception. Many large and mid-sized health systems have been looking to privatize the state’s dwindling number of public hospitals, combine smaller non-profit systems, and also incorporate physicians’ groups and outpatient services into hospital systems. The driving arguments to lobby for these mergers are that larger entities can provide more integrated care and have the ability to make bigger financial investments to improve the quality of care via new tools, such as electronic health records systems. Many studies, however, have shown that price, cost and quality of care are not improved by mergers (see below for links). As healthcare professionals, patients, and family members, we must ask ourselves what cost is associated with this increasing consolidation trend?

One of the largest arguments against this wave of hospital consolidations comes directly from the work of the US Federal Trade Commission (FTC). The FTC emphasizes the need to protect competition among healthcare providers. Competition means lower costs of care for those paying out of pocket and lower insurance premiums for a designated network. When hospitals, physicians’ groups, and other entities combine, they increase their control over health services in an area. Control over available services boosts a hospital system’s bargaining power with insurance providers, which means they can more effectively negotiate higher reimbursement rates from insurers. That trickles down to higher premiums for patients. A 2012 report form the Robert Wood Johnson Foundation states that, “when hospitals merge in already concentrated markets, the price increase can be dramatic, often exceeding 20 percent”.[1] This type of price increase is already happening in Minnesota healthcare mergers.

Take St. Cloud based CentraCare as an example, in 2016 CentraCare began the affiliation process with St. Cloud Medical Group.   Attorney General Lori Swanson began an antitrust review of the acquisition and raised concerns in a Star Tribune article. She said that, “what matters from an antitrust perspective is competition in the local market. Even with value-based payments, courts are still interested in how increased market clout by health care providers…can help them negotiate higher rates from insurers.”[2] The same article also indicated that the combined CentraCare/St. Cloud Medical Group entity would control between 50-80 percent of clinics and providers in the area depending on insurance network. Swanson and the FTC both raised concerns about the impact on the cost of care in the area.

What is also significant about the St. Cloud Medical Group/CentraCare affiliation is that healthcare providers in Minnesota are consolidating both horizontally and vertically. Healthcare systems are looking to provide patients with their annual physical, complex surgical procedures and everything in between.

This level of consolidation can lead to patient ‘data islands.’ Patients become trapped within one healthcare system, regardless of the size, if their health information lies only within one company. A patient going to a new provider might have to explain their entire health history again, which most people are loath to do. If a large system already captures a large amount of clinical information internally, it loses the motivation to join comprehensive health information exchanges. Systems may begin to use these ‘data islands’ to retain patients rather than to improve continuity of care vertically, between various providers. This points to care not only becoming more expensive but also an increased difficulty in receiving care from different providers.

While many questions about the impact of this horizontal and vertical consolidation of care remain unstudied, it is essential that we dig deeper into the consequences of these mergers for both the quality and cost of care. This trend is shaping the healthcare landscape in our state, it will impact both the care we receive and what we pay. Please see the links below for more information on hospital mergers.


[1] Gaynor, M., & Town, R. (2012). The Impact of Hospital Consolidation(The Synthesis Project, Tech.). Princeton, NJ: The Robert Wood Johnson Foundation.

[2] http://www.startribune.com/st-cloud-clinic-merger-under-antitrust-review-by-state/372278581/


Robert Wood Johnson Foundation:

American Medical Association:

The Brookings Institute: