Put a stop to hospital merger mania

Merger mania for Wisconsin hospital corporations came to a crescendo last week without even a sniff of interest from the state’s regulators.

The merger of Bellin Health of Green Bay and Gunderson Health of La Crosse was finalized last week, creating a conglomerate that covers the western and northeastern parts of Wisconsin.

With almost identical timing, also completed, was the consolidation of Advocate Aurora Health of Milwaukee and Chicago with, believe it or not, Atrium Health of North Carolina.

Bellin and Gunderson have been two high-performing provider health care organizations for years. On their own, each was innovative and has adopted the customer-centric lean disciplines that have moved the manufacturing worlds to unachievable levels of performance. Why then did they need to get bigger and more spread out?

The merger of Advocate-Aurora-Atrium creates a sprawling hospital system with a total of 67 hospitals and 150,000 employees in six states and 850 miles of separation. The synergy is hard to see.

Advocate and Aurora merged in 2018 – with the Chicago CEO taking control. The new headquarters is in Charlotte, North Carolina.

Most managers and executives would agree that running a gigantic, far-flung organization is far more difficult that running a compact, medium-sized company. Don’t buy their contention that “integration” improves service or quality of outcome.

Note also that merger CEOs never promise lower prices.

The answer on who wins and loses in these deals is fairly obvious. The executives in the C-Suites come out smelling like roses. One set of executives leaves fairly quickly after the merger with lucrative golden parachute compensation retirement packages. The surviving team wins much better compensation packages on the grounds that they are leading the larger organizations.

The consolidated organization is another winner. With the greater number of patients served, they pick up leverage in negotiations with the big health care insurance companies. It is a battle of the elephants. Analyses of post-merger effects always uncover major price increases to the customers.

Who loses? As always in the Medical Industrial Complex (MIC), it’s the payers who eat the higher price structure. Is it any wonder that health care inflation has been around 7% or more for several decades?

The higher prices come with no discernible increase in quality. There are miraculous breakthroughs in medical outcomes with new drug and treatment advances, but they almost always come at higher prices.

The rising cost/prices are killing the budgets of businesses and households, which are the ultimate payers of both the public and private sectors of health care in America.

Health care bills are the leading cause of personal bankruptcy in the country.

So where are our political leaders stopping the anti-competition issues enmeshed in the merger mania?

President Biden talked the talk last summer on challenging unnecessary mergers, but his attorney general hasn’t done much. His rhetoric accelerated the urge to merge. MIC wanted to get ahead of anti-trust action.

Gov. Evers hasn’t lifted a finger on consolidation in Wisconsin; nor has Wisconsin Attorney General Josh Kaul; nor has the Wisconsin insurance commissioner.

Their negligence on this matter amounts to governmental malpractice. They must be doing the political calculation that patients/payers/voters don’t make the connection between giant mergers and soaring health costs. Their inaction can only be viewed as cynical, especially since the MIC curries their hands-off behavior with political donations and intense lobbying pressure.

There are two more pending health care system mergers that will impact Western Wisconsin. The governor and attorney general still have an opportunity to show leadership.

Meanwhile, the Rand Corporation, using Medicare prices as a baseline, puts Wisconsin 4th highest of 50 states in health costs. Lucky us.

Other big winners in the merger mania are the law firms and investment bankers who make buckets of money doing the deals.

It is exceedingly clear that it will be up to private sector lawsuits to challenge these anti-competitive practices and structures in the Medical Industrial Complex. As an example, a pro-bono law firm, Fairmark Partners, has filed an anti-competitive suit against Aurora Advocate on behalf of self-insured private companies in Wisconsin.

Will such suits cause the courts to bust up the health care empire? Don’t hold your breath.

Trust-busting at the federal level will become imperative. Biden will need to follow through on curbing anti-competitive moves such the on-going attempt by the established health systems to shut down a proposed doctor-owned orthopedic hospital in Madison.

There is some precedent. The U.S. Attorney General’s office did bring an action in 2008 against Atrium in North Carolina. Atrium settled.

And the AG put a stop in 2015 of two mega-mergers of the nation’s biggest health insurers. The collusive dance of elephants looked to be over.

But it’s not over.

Dr. Jesse Ehrenfeld, senior associate dean of the Medical College of Wisconsin and president-elect of the American Medical Association, recently co-wrote: “Research clearly demonstrates the ills of monopoly – hospital consolidation leads to higher insurance premiums, higher prices for hospital services, higher consumer cost-sharing, all the while generating reductions in patient experience.”

Sally Pipes, CEO of the Pacific Research Institute and a national leader in health care reform, concurred: “The trend toward concentration has suppressed competition, driving prices up and quality down across the health system – outcomes both Democrats and Republicans can agree harm patients.

“Consequently, boosting competition in the hospital market is a worthy objective for the next Congress.”

Reversing the Advocate-Aurora-Atrium merger would be a good start.

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