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Executive Order on Antitrust Doesn’t Recognize Importance of Systems

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Last week, President Biden signed an executive order aimed at driving enhanced antitrust enforcement across multiple sectors of the U.S. economy, including several areas of focus within health care. Specifically, according to the fact sheet, the order encourages the Department of Justice and the Federal Trade Commission to enforce antitrust laws vigorously and “recognizes that the law allows them to challenge prior bad mergers that past administrations did not previously challenge.” 

The four areas of health care targeted are: prescription drugs, hospital consolidation, health insurance consolidations, and hearing aids. The fact sheet on the order states, in part: “Thanks to unchecked mergers, the ten largest healthcare systems now control a quarter of the market … Since 2010, 139 rural hospitals have shuttered, including a high of 19 last year, in the middle of a healthcare crisis. Research shows that hospitals in consolidated markets charge far higher prices than hospitals in markets with several competitors.” 

The American Hospital Association promptly responded: “[The executive order] does not recognize the exceptional value and essential services health systems provide to their patients and communities each day … The pandemic challenged hospitals to transform their operations, which included rapidly expanding telemedicine services, overcoming shortages of equipment and drugs, retooling operations and reconfiguring space to provide life-saving care for patients and protect others from contracting the virus.” 

A few additional points: 

  • The order fails to capture the already rigorous antitrust review processes that hospital partnerships undergo at both the state and federal level. 
  • Affiliation with systems in many underserved parts of California helps preserve access to care, keeping open hospitals that would otherwise be forced to shutter. 
  • Hospital integration has been shown to lower cost growth by realizing back-end savings on things like IT and HR services. 
  • The core concern should not be hospital integration, but rather, as the American Hospital Association notes, commercial insurance market concentration, where the top five largest insurers alone control nearly 50% of the market, and studies have found that when an insurance market is highly concentrated, insurers reduce provider payments and do not pass savings along to consumers. 

The focus on this issue at the federal level reflects a debate that has been taking place for years in California, and one that demands ongoing education and reinforcement of the case for new hospital partnerships, including the fact that 75% of California’s hospitals are part of a system, and California’s per capita hospital costs are 19th lowest in the nation. 

It’s important to note that this executive order grants no new authority to enforcement agencies and that health care is among several sectors to which the administration has called attention. We’ll continue to work with our federal partners at the American Hospital Association to ensure legislators understand not only how hospital affiliations and systems support health care throughout the state, but also what’s at risk should we step too far into overregulation of a system that already has significant oversight and accountability.