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December 14 2017

Bad News: Consolidation in Health Care

by Hadley Heath

The Washington Post recently highlighted a "land grab" or turf war, as I might call it, in health care. This is part of a larger trend in health care: There are fewer payors (health insurance companies) and fewer providers (places to actually get health care). It's not new news, but it's still bad news. 

You may have noticed a huge shift in the physician workforce over the past couple of decades. From 2000 to 2012, the number of doctors working for hospitals (as opposed to working for themselves or in small practices) increased by a third. And the Affordable Care Act, which mostly came into effect in 2014, has also facilitated this trend by putting financial incentives in place that favor consolidation over independence and running down small practices with administrative burdens too big to bear. 

The death of private practice, as well as large hospital mergers, come with a serious downside for doctors who will now have less autonomy and ownership over their work. But the bigger downside may actually be for patients, who have fewer competing institutions offering care. 

Those in favor of big data, big government, and big hospitals might argue that the economies of scale and "negotiating power" of larger health providers will result in lower costs and greater efficiencies, which will ultimately be passed along to patients. But this isn't proving to be true, perhaps because patients don't directly pay for very much in health care. The pipeline of payment includes a lot of third parties. Or perhaps savings aren't passed along to patients because they're used to pay for an expand workforce in healthcare administration, a lot of which is needed to direct large hospitals. 

This isn't to be unfairly critical of big hospitals: Of course there's a place for them in our healthcare ecosystem. They can do great good. But the trouble comes with they start to gobble up all the other options for patients that can offer more individualized and diverse treatment options. 

And then on the other side of the "negotiations" mentioned above, we don't actually see patients, because patients aren't really the primary payors in our health system. The insurance companies -- and of course big programs like Medicare and Medicaid -- are the payors. And these big companies (those that have survived several years of the Affordable Care Act) are only getting bigger as well through mergers and acquisitions and the folding of smaller insurance carriers. So we have consolidation on all sides.

It's a sad situation when patients are left out of the discussion -- when the real power struggle is among big providers and insurers. How do we restore power to the individual patient? Well, one thing's for sure: we need to reverse course to allow greater freedom and more robust competition so that the market responds to the choices that patients make. Right now most patients have little choice: We accept the plan chosen by our employer and narrowly dictated by government bureaucrats. The network comes with the plan, so we see the providers who are in-network. If we don't like the service we're getting, we can't threaten to go across the street to the competing hospital. That's what we'd do if it were a hotel, restaurant, or department store. But that's not how health care works, because sadly, our lawmakers have not allowed the industry to operate as a competitive marketplace. 

You gotta wonder sometimes if this bad trend of consolidation will just make it easier for those in support of government-run health care to take over the industry. The players who've stuck around, in health insurance anyway, could easily be contracted by the government to simply manage the Medicaid-for-all we are frequently promised by the far left. Let's hope that's not the case. Even a few options are better than... just one.

Independent Women’s Forum’s mission is to improve the lives of Americans by increasing the number of women who value free markets and personal liberty. Sister organization of Independent Women’s Voice.
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