It’s Time to Fight the Healthcare Monopoly

A recent Gallup poll found that 38% of Americans put off medical care in 2022 due to high costs. That is the highest recorded number since Gallup began polling this question. Rising healthcare costs are a severe problem that is destroying the lives of millions across the country who lack affordable healthcare options. One of the drivers of these higher healthcare prices has been the rise of hospital market monopolies.

While a record-high number of Americans had to forego medical treatment, a recent report found that 2022 was a good year for the monopolists. A total of 53 mergers and acquisitions took place, up from 49 in 2021. Transaction revenue reached a historic high of $45 billion, surpassing the previous record high from 2017. This is partly due to the high percentage of mega mergers—mergers of two already large health systems.

In western North Carolina there is an ongoing dispute over hospital monopolies. Last summer, the city of Brevard sued HCA Healthcare, the owner of local healthcare giant Mission Health System. The lawsuit notes that after the acquisition, HCA raised prices while limiting the supply of doctors—by firing many and closing their clinics. The result? Healthcare procedures cost 75 to 100% more at Mission’s facilities in western North Carolina than the average for the same procedures across the state.

Other hospitals have sought to break down this monopoly. Novant Health, for instance, sought to build a hospital in Asheville to compete with Mission’s high costs and limited care options. Despite being willing to invest over $300 million in a new facility, misguided government policies stopped Novant from entering the market.

North Carolina, like many states, has a certificate of need (CON) law, which means healthcare providers must get government approval whenever a group wants to open a new hospital or add beds to existing healthcare facilities. They must prove to the government that there is a need for more facilities. Often, existing providers, which would face additional competition from the group seeking to expand, serve on the approving board. Despite monopoly prices and the obvious need for new entrants into the market, Novant was denied the certificate and the opportunity to compete in the western North Carolina healthcare market.

While the City of Brevard may be suing the local hospitals for using its market power to charge monopoly prices, it is the government that caused the monopolies.

It’s not just happening in North Carolina. In Michigan, a group sought to build a hospital in the town of Oxford after a 2019 study found a need for over a hundred new hospital beds in the town with no existing hospital. Despite nearly 200,000 residents within a 10-mile radius of Oxford, residents seeking care had to travel to neighboring cities facing their own full hospitals. Despite investing $3 million to prepare for the construction of the Oxford hospital, the group was stopped by Michigan’s CON laws. Township Supervisor Jack Curtis lamented, “we have a private company that wants to spend $225 million to give us a hospital but can’t.” As a result, he says, “our community suffers every day and is really getting hammered without a hospital.”

And, despite the federal government’s original involvement in forcing states to create CON laws, the Federal Trade Commission and the Antitrust Division of the Department of Justice issued a joint statement in 2016 highlighting that “CON laws raise considerable competitive concerns and generally do not appear to have achieved their intended benefits for healthcare consumers.” In fact, the agencies note that CON laws can impede the FTC’s antitrust remedies when monopoly cases reach them. Hospital monopolies cannot go away until the CON laws that keep them in place are repealed.

At the federal level, two key policies further limit competition and favor consolidated corporate healthcare over physician-driven healthcare.

The first is the federal ban on physician-owned hospitals. When passed as part of Obamacare in 2010, losses were immediately realized. $275 million of planned expansions at 45 physician-owned hospitals across the country were terminated, and plans for 75 new hospitals were abandoned, amounting to roughly $2.2 billion in losses. This cannot take into account the number of new hospitals and practices since 2010 that would have been planned, pursued, and opened were the ban not in effect, as well as the effect such competition would have on lowering healthcare costs.

A bipartisan coalition in Congress has sought to remove the ban on physician-owned hospitals; however, the issue has failed to gain traction in Congress. Now is the time to take action.

The second federal issue is related to Medicare reimbursement. Because of existing Medicare reimbursement rules, without making any changes, a hospital health system that buys a medical practice is instantly compensated by Medicare at a higher amount because of the change in ownership. The obvious conclusion is the payment disparities promote consolidation and put private practices at a disadvantage to hospital systems because they receive less compensation from the government for providing identical services. Instead of these unfair rules, Congress should equalize Medicare payments regardless of who owns the medical practice. The Center for a Responsible Federal Budget notes that this idea is bipartisan with recommendations from both the Obama and Trump administrations as well as the federal government’s Medicare Payment Advisory Commission.

It is necessary to oppose healthcare monopolies at the state and federal levels. CON laws, federal bans on physician entrepreneurship, and unfair reimbursement policies contribute to rising healthcare prices, and lawmakers must tear down barrier to allow for more competition, better care, and lower prices. Let’s make 2023 the year that healthcare prices become much more reasonable so that no American must forego critical treatments.

Dr. G. Keith Smith is a board-certified anesthesiologist and co-founder of The Surgery Center of Oklahoma.