Admin_Adham
Hospital Mergers in 2024: Five Things to Know
Hospital mergers and acquisitions continue to garner intense scrutiny from lawmakers, with pressure likely to hold steady following the recent announcement of new antitrust guidelines and state and federal investigations into potential healthcare monopolies.
In December, the US Department of Justice (DOJ) and the Federal Trade Commission (FTC) released updated guidelines outlining the factors they consider when determining if a merger illegally monopolizes a local healthcare market or jeopardizes access to critical healthcare services.
Last week, the DOJ also announced a UnitedHealth Group antitrust probe, just months after the healthcare conglomerate's workforce numbers indicated it is now affiliated with or employs 10% of the US physician workforce.
While the impact of the latest guidelines is yet to be seen, concerns over healthcare market consolidation are not new. Over the past two decades, mergers have attracted attention for contributing to a decline in independent hospitals, said Rachel M. Werner, MD, PhD, executive director of the Leonard Davis Institute of Health Economics at the University of Pennsylvania, Philadelphia, Pennsylvania.
"At this point, most hospitals are operating in a pretty concentrated market," she said.
Here are five things to know about the current state of hospital mergers.
1. Record-Breaking Merger Enforcements
The DOJ and FTC reported the highest level of enforcement activity in over 20 years in fiscal year 2022 — the latest available data. Together, the agencies filed 50 merger enforcement actions and brought a record-breaking number of merger enforcement challenges, resulting in 11 approved actions, the restructuring or abandonment of seven mergers, and six business deals entering litigation.
Included in those statistics was a proposed merger between the two largest health systems in Rhode Island, Lifespan and Care New England Health System, which was abandoned after the FTC and the state Attorney General took steps to block it. Nashville-based HCA Healthcare abandoned plans to acquire five Salt Lake City area hospitals from competitor Steward Health Care System, as did RWJBarnabas Health after exploring a merger with Saint Peter's Healthcare System in New Jersey.
2. New Antitrust Guidelines Consider Labor Market
The new guidelines notably focus on labor competition, said Jody Boudreault, JD, attorney and chair of the Antitrust Life Sciences and Healthcare Group at Baker Botts law firm in Washington, DC. Health professionals typically have more employment opportunities in an urban area, unless hindered by restrictive noncompete agreements, and fewer options in rural settings.
In the Lifespan merger that fell through, Boudreault told Medscape Medical News that the newly created hospital system would have employed two thirds of Rhode Island's full-time nurses, limiting opportunities for local employment elsewhere.
"Going forward, I would expect federal authorities to review not only the competitive impact of the hospitals merging but also the competitive impact of the physician, and especially nursing, workforce," she said.
FTC Chair Lina M. Khan noted similar labor market concerns.
In a statement to Congress, she said that hospital consolidation reduces options for employees, who fear "being blacklisted from further hiring in a system that controls many of the hospitals in the area" and "makes workers afraid to file complaints, organize their workplace, or leave before the end of a contract."
3. Mergers Can Drive Care Costs Higher
When hospital markets become less competitive, the cost of care often increases. In Indiana, inpatient prices rose 13% in hospitals that merged. Another study found that prices at monopoly hospitals are 12% higher than in markets with four or more rivals. Even cross-market mergers, when hospitals in different geographic locations combine, can drive prices higher.
Werner told Medscape Medical News that more significant price hikes of 20-30% aren't unheard of, with reimbursements by some commercial insurance companies rising as much as 50%. "That's the direct price that the insurers pay, but the burden of those higher prices ultimately falls on patients through higher premiums," she said.
Still, the American Hospital Association (AHA) says that mergers and acquisitions can significantly lower annual operating expenses per admission and reduce inpatient readmission rates and mortality measures. In comments to the FTC, the AHA stated that mergers could provide a lifeline for rural and community hospitals struggling with shrinking payer reimbursement and rising labor and supply costs. The business arrangements also could ensure these communities maintain continuity of care.
Although a cross-market merger may initially benefit cash-strapped rural hospitals, Werner urged caution.
"In the long run, it's not clear that it is good for patients because we start to see decreased access to some types of service, like labor and delivery, which are services needed in rural markets,” she said.
4. Mergers to Watch in 2024
Boudreault, who represented RWJBarnabas in the abandoned Saint Peter's transaction, says the courts widely accepted the old merger guidelines, and it will take time to see how the new measures are interpreted. "The guidelines don't yet have the force of law, but they can be persuasive to a court."
Looking ahead, she is watching how Steward Health Care navigates its impending financial collapse. The nation's largest private for-profit health system was previously owned by private equity firm Cerberus Capital Management and includes nine Massachusetts hospitals plus entities in at least seven other states.
Boudreault also plans to monitor Jefferson Health's intent to merge with Lehigh Valley Health Network. "It's a pretty big deal because they would become a 30-hospital system," said Boudreault. The newly formed network would become the largest employer in Philadelphia.
5. Merger and Acquisition Reversals Unlikely
Werner said that mergers and acquisitions are complicated business moves that are nearly impossible to undo once approved, so it makes sense for agencies to continue to evaluate them closely.
"The costs of healthcare are borne by us as a society," she said. "We're going to have to live with the ill effects of a consolidated market once we let hospitals merge, so they deserve additional scrutiny."
Steph Weber is a Midwest-based freelance journalist specializing in healthcare and law.
