Who polices hospitals merging across markets? States give different answers.

By the end of this year, more than 28 hospitals on both sides of Missouri will be combined by the merger of BJC HealthCare, the largest health system in St. Louis, with Saint Luke’s Health System, the second-largest health system in Kansas City.

The merger, which would connect markets 250 miles apart and incorporate institutions in Kansas and Illinois, two adjacent states, is just the most recent in a hospital business that is rapidly consolidating. According to a report by antitrust law experts, cross-market purchases made up more than half of all hospital mergers and acquisitions over the past ten years. Today, around 60% of healthcare organizations run multiple hospitals in various regions.

Such deals not only occur more frequently, but they also can cost patients more money. hospital mergers in the
Researchers discovered that hospitals in the same state but in separate marketplaces increased prices by as much as 10% when compared to other hospitals. According to a different study, independent hospitals increased their costs by 17% after being purchased by a hospital corporation from a different market.

However, for the past 50 years, federal authorities have not intervened to stop hospitals from merging with
systems in other markets, in accordance with specialists on antitrust law. States that without federal intervention
Michigan and California, two states that have witnessed such megamergers, are frequently left to deal with the
Given the potential of rising pricing for its citizens, the question of how to react is complicated.

Nearly a monopoly

Draft merger rules intended to prevent mergers in a variety of industries, including the health care industry, are now being reviewed by the Federal Trade Commission and the Justice Department in response to public submissions. Cross-market hospital mergers within a state may be impacted, but it is unclear whether or how. However, the draft states that expansion into “new markets” should not “entrench or extend a dominant position.”

These market-to-market mergers, however, aren’t quite a textbook example of a monopoly. Federal regulators have stepped in to stop these conventional mergers when hospitals have acquired local rivals, eliminating their competitiveness, in order to safeguard patients from the ensuing loss of competition. They have recently assisted in blocking merger proposals in New Jersey, Utah, and Rhode Island. Without local competition, it is believed that costs will rise and care quality will deteriorate.

If the hospitals don’t operate in a single market, it’s more difficult to demonstrate how cross-market mergers, like the one proposed in Missouri, lessen competition, according to Chris Garmon, an assistant professor at the University of Missouri-Kansas City who studies hospital mergers. Regulators would have to show that the mergers not only cause price increases but also break the law by stifling competition.

We haven’t yet encountered a cross-market merger challenge because of this. The reason is that it’s challenging to explain why this would be an issue, he explained.

The Federal Trade Commission declined to comment on the BJC-Saint Luke’s merger or its general approach to similar agreements when contacted by KFF Health News. It is not known whether an inquiry is active, according to agency spokesperson Mitchell Katz.

Following the FTC’s failure to prevent cross-market hospital mergers in California and Michigan, those states’ approaches to the transactions diverged sharply. Michigan did not step in when California challenged an agreement and obtained concessions.

Spectrum Health – Beaumont Health in Michigan

The 2020 agreement in Michigan between Grand Rapids-based Spectrum Health and Beaumont Health in the Detroit region was heavily scrutinized by the FTC. Nevertheless, it ultimately decided not to fight the union that gave rise to Corewell Health, the state’s largest hospital group with 22 hospitals spread across areas more than 150 miles apart.

Bret Jackson, CEO of the Economic Alliance for Michigan, an organization that aids employers in managing health expenditures, was among those who found the lack of intervention to be frustrating. Jackson claimed that Spectrum was already the more expensive provider. He is concerned that once the insurance agreements with the various hospital systems expire, Beaumont’s costs would rise to parity with Spectrum’s.

Spectrum won’t want to take a salary cut, according to Jackson. We are very worried about that.

Jackson stated that he, as well as the laborers and automobile firms he represents, are already tired of the escalating cost of healthcare. The average American family spends 10% of their income on health-related expenses.

In response to inquiries from KFF Health News about patient expenses, Ellen Bristol, a Corewell Health representative, claimed that the collaboration is enhancing quality across the state and generating efficiencies that aid the business in navigating economic challenges.

According to correspondence obtained by KFF Health News through a public records request from the state, FTC officials and Michigan’s Department of the Attorney General traded emails back and forth for months despite regulators remaining silent.

According to the emails, the FTC requested information and data on the state’s healthcare system as well as connections to employers and state authorities for its personnel. Executives from CMS Energy and automobile supplier BorgWarner were questioned by the FTC.

Jackson claimed that the FTC interviewed him as well, however he claimed that the FTC was more interested in Michigan’s market characteristics than his opinions on the purchase.

Since many of the emails the state provided to KFF Health News were censored, it is difficult to draw many conclusions from the FTC’s evaluation of the merger. But they do show what data and who the FTC consulted in order to make a determination.

The emails imply that state officials were informed of the FTC’s conclusions as well. According to the email’s subject line, an assistant attorney general wrote a lengthy email to Michigan Attorney General Dana Nessel on January 13, 2022, discussing the FTC’s investigation into potential antitrust consequences. The whole email was blacked out in the version sent to KFF Health News, with the exception of the greeting and the signature.

Other emails reveal that the following day, hospital representatives and the AG’s office started discussing the press release’s precise wording and when the deal would close.

Michigan took no action to thwart the purchase or launch an investigation. Jackson of the Economic Alliance for Michigan was further irritated when Danny Wimmer, a spokesman for Nessel, a Democrat, claimed the agreement was outside the scope of her office’s power.

“We need to give state regulators the tools to at least assess mergers in the health care system,” Jackson said.

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