Healthcare consolidation in Connecticut is a cause for concern. In just over 20 years, the number of independent hospitals in the state has shrunk from 23 to six.
Yale-New Haven Health, for example, is currently finalizing purchases of Waterbury, Manchester, and Rockville hospitals. Healthcare systems seek mergers for a variety of reasons, but chief among them is seeking economies of scale. For the large, consolidated hospital systems, revenues and profits have spiked.
While hospital systems promise to increase access to specialists and improve services, the reality in Connecticut has been different. Instead, the effect on patients has been decreased convenience and increased costs. Although the state has some of the strongest anti-merger laws in the country, Connecticut residents are still victimized by the continued trend toward health care monopolization.
The cost of healthcare in America is greater than any other country in the world. According to Georgetown University’s Center on Health Insurance Reforms, the average annual family deductible has doubled in the past 10 years. Healthcare consolidation is a major driver of these cost increases. In addition to perpetuating the trend of ever increasing health care costs, consolidation reduces options for many users in the market, and fails to deliver improved quality.
Healthcare systems form monopolies to achieve economies of scale and reduce costs. Also, since the Affordable Care Act encouraged individuals to seek treatment in outpatient settings, hospital systems responded by scooping up outpatient practices and urgent care providers to capitalize on those revenues and secure referrals.
Another factor expediting consolidation is that independent providers are drowning in paperwork. The administrative burden on providers to gain approvals for procedures, for example, spreads resources thin in a small practice or hospital. One provider in Connecticut described needing six full-time employees to simply handle to business aspects of the practice, up from one staff member when he first opened his practice. By merging, providers can pool back-office resources and reduce costs.
Mergers can take different shapes. One version is horizontal integration, when different but complimentary systems merge. An example is when a hospital purchases a laboratory. Vertical integration occurs when two companies at different points in the supply chain, for example, physicians offices and hospitals, merge. Another example is cross-market integration, where a system in one geographic service area merges with another in a different geographic service area.
The Connecticut market has experienced increase merging of all types in the past 20 years. In addition to shrinking diversity of hospital ownership, private practices have also been scooped up by these conglomerates at alarming rates. Currently, the five large healthcare systems represent approximately 25% of the physicians in the state. Hartford Healthcare, for example, has purchased 15 practices over the past seven years.
One major problem with this trend is increased costs. Large conglomerates have greater negotiating power with insurance companies and can establish higher reimbursement rates for their services and the sticker price for the services follows. As healthcare systems grow, therefore, prices increase. Also, vertically integrated healthcare systems, as in when a primary care physicians office is purchased by a hospital system, are incentivized to refer primary care patients to their hospitals, giving them power to set higher prices, which are passed to the consumer. Nationally, hospital mergers result in increases of prices ranging from 20-44%.
Contrary to expectation, the increased costs are not justified by increased quality of care. According to a study in 2019, vertical integrations lead to increased post-transaction prices but do not translate to increased quality. In many cases, when a small hospital is purchased by a larger system, services are reduced.
For example, Sharon Hospital used to provide intensive care services before Nuvance bought it. Since then, the system has suspended some [see Editor’s note below] intensive care services and can no longer handle those acute cases. Patients in the rural area need to travel now further from their home to receive those critical services. Similarly, Nuvance has filed to halt maternity services at Sharon hospital as well. Hartford Healthcare has also filed to eliminate birthing services at Windham Hospital, while Saint Raphaels closed its maternity services after being subsumed by Yale Health.
Providing fewer options for critical services is not in the best interest of the residents who are served by these hospitals.
So what can be done? A 2020 Report from The Source on Healthcare Price & Competition suggested five actions a state legislature can take to protect its residents from the negative effects of healthcare consolidation. These include: 1.) require financial and economic information about the transaction; 2.) institute a multi-agency review of all healthcare transactions; 3.) establish specific transaction criteria for review at multi-agency level; 4.) enable transaction approval to be conditional and allow for negotiation of specific terms; and 5.) implement active post-transaction monitoring.
The good news is that, according to the report, Connecticut has implemented many of these recommendations. The bad news is that costs continue to rise, services continue to be cut, and fewer options remain for residents.
This session, Gov. Ned Lamont proposed Bill 983, an Act Limiting Anticompetitive Health Care Practices. This bill should be brought to the floor and debated to determine its viability in addressing the concerns of residents negatively affected by healthcare consolidation.
I urge residents to call their legislators and encourage them to support Bill 983 to prevent further elimination of critical services in our towns, reduce upward pressure on medical expenses, and diminish the power of healthcare monopolies in the state.
Tyler Driscoll lives in Manchester.
Editor’s note: Sharon Hospital currently has an application with the Connecticut Office of Health Strategy to convert its Intensive Care Unit to a Progressive Care Unit, which offers critical care but cannot treat all patients requiring ICU-level care. SOME ICU-level services at Sharon have been suspended while the hospital pursues that application.