Competition between hospitals in a given market should provide incentives to ensure quality while also lowering costs. Over the past two decades, hospital markets have increasingly consolidated. This consolidation reduces competition and increases the comparative leverage that hospitals and associated health systems have. While there are some theoretical advantages of increased consolidation such as potential for economies of scale, prior research has shown that consolidation has been associated with higher costs, in addition to worse quality. In response, regulatory agencies at both the state and federal levels are more likely to scrutinize proposed mergers and acquisitions.
Concerns with Health Equity Following Consolidation
Beyond consideration of the impacts of consolidation across the general population, we should consider how effects may be distributed across different subgroups. Ostensibly, consolidation benefits certain groups while possibly harming other groups. These changes may exacerbate (or, in the hopeful case, improve) existing disparities by patient payer status or race/ethnicity. For example, prior research has shown that consolidation was associated with decreased admissions for patients covered by Medicaid. Other research has also shown that consolidation may increase racial/ethnic disparities in healthcare coverage as premiums increase as hospital prices do. Therefore, adapting existing policies to ensure health equity in the wake of ever-increasing merger activity represents an important frontier.
If, like me, you are not a lawyer, it can be challenging to find an easy entry point in navigating the complex world of market concentration, antitrust, and regulatory authority. In this post, I present some of the potential policy pathways and their associated considerations.
Health Equity and Antitrust: Federal Roles
Under the Biden administration, the Federal Trade Commission (FTC) has been far more active in taking action against hospital mergers. After hospital consolidation received a targeted mention in a 2021 Executive Order focused on promoting competition in the economy, the FTC has sued to block a number of healthcare mergers and acquisitions in the past few years; most recently, the agency sought to oppose Novant Health’s attempt to acquire two local hospitals in North Carolina.
This uptick in FTC behavior begs a natural question: what is the FTC’s role in protecting health equity? Like many other institutions following the protests against the killing of George Floyd in 2020, the FTC reckoned with its role in (or lack thereof at that point) combatting racism. Such considerations led FTC Commissioner Rebecca Kelly Slaughter to express her desire to make antitrust antiracist. However, antitrust action’s targeted approach to impacts on competition may be too narrow to allow it to be an effective tool to address equity. It is worth noting that, to this point, the FTC has yet to explicitly indicate any actions taken to preserve health equity.
Health Equity and Antitrust: State Responses
Given the limitations of relying on the FTC to be the primary challenger of mergers, many advocates have turned to reimagining how states and their regulatory agencies (such as their Offices of the Attorney General) can be empowered to take action against hospital mergers. Prior research has shown that expanded state agency authority over healthcare mergers is associated with increased regulatory activity. However, the need to be reactive to healthcare mergers limits the scope of state regulatory agencies. Given limited resources and competing priorities for those agencies, they are likely to only scrutinize the most egregious potential mergers. In addition, it is unclear whether state Attorneys General will have the expertise needed to assess health equity impacts in a detailed manner.
Beyond state enforcement via regulatory authorities, some states utilize Certificates of Public Advantage (COPA) to negotiate state supervision over proposed mergers and their post-merger effects in exchange for exemption from state and federal antitrust legislation. This flexibility can allow regulators to account for equity concerns, though the weight given to such considerations in the negotiations between the state and merging entities will vary. The FTC has previously argued against reliance on COPAs, noting that they are unable to effectively slow price growth and preserve quality of care.
New York’s Health Equity Impact Assessment: A Way Forward?
In the summer of 2023, New York’s state legislature passed a new law requiring Health Equity Impact Assessments (HEIAs) to be submitted alongside changes to Certificate of Need applications. Regulators designed these HEIAs “to demonstrate how a facility’s proposed project affects the accessibility and delivery of services, and whether the project will enhance health equity and contribute to mitigating health disparities in the project’s service area, specifically for medically underserved groups.” New York’s Department of Health then considers such documentation. These laws not only have value in considering mergers and acquisitions. They also ensure other potential changes in hospital services consider the impact on equity, including facility closure.
There is quite a bit to like about the structure of this law. First, it places the onus on merging hospitals to proactively evaluate and consider how the merger will influence health equity. This reduces potential strains on state agencies, who under current policies face resource constraints in pursuing action against unfavorable mergers.
Second, it places authority with the Department of Health, which does have expertise needed to appropriately assess impacts on disparities in health.
Lastly, it connects the equity evaluation to Certificate of Need (CON) processes. Currently, 35 states have Certificate of Need laws, which may provide a more convenient foundation for integrating considerations of equity. There are also synergies there that allow states to consider actions in the wake of other changes in healthcare services. For example, this law also covers closures and workforce reductions, beyond just mergers and acquisitions.
Looking to the Future of Consolidation
Assessment of how healthcare providers approach HEIAs will be vital. Similarly, the Department of Health’s willingness to take action when impacts on disparities are unfavorable is paramount. Future evaluations are likely to identify cases when an overall impact is favorable but the impact disadvantages underserved populations. Disaggregation of the data is the only way to identify these circumstances. Regardless, New York’s law represents a potentially promising mechanism for ensuring equity is at the forefront of merger decisions.
In the next few years, state and federal policymakers will increasingly consider policies to appropriately manage mergers and acquisitions. They will also need to consider how to effectively preserve the quality of care for vulnerable patient populations. Optimally, several new policies across both the state and federal levels will allow for regulatory synergies. For example, expanding state Attorneys’ General scope of powers and implementing HEIA laws would provide more comprehensive action against inequity. This additional flexibility may work better than simply relying on one policy pathway vs the other.
As consolidation continues to progress across hospital markets and other healthcare sectors, policymakers must prepare to protect patient welfare. Laws that can assert the importance of health equity in the aftermath of market changes will be essential. Meanwhile, the system must learn to measure and account for the protection of vulnerable patient populations.
***This post is part of a series highlighting winners of the 2023 APHA Medical Care Student Abstract Award. The author also presented their award-winning work at the Annual Meeting in Atlanta, GA in early November 2023.***