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Senate Antitrust Subcommittee Turns the Spotlight on Hospital Consolidation

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Senate Antitrust Subcommittee Turns the Spotlight on Hospital Consolidation

While much of the antitrust world is focused on the actions brought by federal and state antitrust regulators against “big tech,” the Senate Judiciary Subcommittee on Competition Policy, Antitrust and Consumer Rights recently held a hearing to consider the impact of hospital consolidation on the healthcare industry and consumers.  Led by Subcommittee Chairwoman Senator Amy Klobuchar, the Committee heard divergent views on the causes of hospital consolidation and its potential impacts on consumers.

Senator Klobuchar opened the hearing by noting that there have been almost 1600 hospital mergers in the last 20 years, and that there have also been a significant increase in the number of physician practices that have been acquired by hospitals in the last several years. The purpose of the hearing, as explained by Senator Klobuchar, was to consider what impact these developments have had on healthcare costs and patient treatment.  While Senator Klobuchar stopped short of identifying either the cause or effect of hospital consolidation at the hearing, she called for an increase in funding for the Federal Trade Commission and the DOJ Antitrust Division to provide them with the resources to review past, current and future hospital transactions.

Senator Klobuchar then turned to the industry witnesses to hear their views on the subject.  Doctor Rod Hochman, testifying on behalf of the American Hospital Association, explained that the 21st Century healthcare challenges, including COVID, require more integration than ever, and that hospital consolidation has been an important, and necessary, means of addressing that need.  Dr. Hochman also noted that many hospital consolidations have been the result of financial pressures faced by small and rural critical access hospitals, with over a 100 such hospitals having been forced to close since 2010.   Hochman also identified health insurer consolidation as a cause of hospital consolidation, an observation also made by Senator Klobuchar as she described a chicken-and-egg phenomenon with each consolidation in one industry requiring a merger response from the other.  In addition, Dr. Hochman also stated that the increase in resources available to hospitals as they consolidate has permitted them to gain efficiencies (permitting them to lower their per-patient costs) and fueled quality improvements.  In closing, Hochman stated that “as a physician with over four decades of experience caring for patients,” “integration is the key” to ensuring that every community has access to high quality care, and that without the financial resources that hospital consolidation has brought, they would not have been able to “marshal the resources” needed to save lives during the pandemic.  Dr. Hochman also stated that “there is vigorous oversight by every level of government” to assure that hospital consolidations do not adversely impact consumers, refuting the suggestion that antitrust enforcement by federal and state regulators in this area has been inadequate or insufficient in the past.

Providing a decidedly different view on the subject was Professor Martin Gaynor, a former Director of the Federal Trade Commission’s Bureau of Economics and a noted critic of hospital consolidations.  Professor Gaynor testified that the impact of hospital consolidation has been largely negative for consumers, citing research that he claimed demonstrated that consolidation in hospital markets has led to substantial price increases.  Professor Gaynor also disputed Dr. Hochman’s claims that consolidation has led to improvements in quality, and Professor Gaynor also stated that, in his view, hospital consolidation has had an adverse impact on hospital employee wages (a view embraced by Senator Klobuchar in her opening statement).   Professor Gaynor concluded his testimony by urging the Subcommittee to increase funding at the FTC and DOJ Antitrust Division so that they could strengthen their efforts in healthcare, to expand the FTC’s enforcement authority against non-profits (including non-profit hospitals), and to require pre-merger reporting of healthcare transactions that are below the current reporting level thresholds (currently, all transactions valued below $92 million are exempt from federal merger reporting requirements). 

While the testimony heard by the Subcommittee was not novel – indeed, the views expressed by those on each side of the healthcare antitrust debate have become somewhat well entrenched – Subcommittee Chairwoman Klobuchar’s decision to hold a hearing focused on healthcare antitrust issues so early in the year likely signals that healthcare antitrust issues will be a significant agenda item for her as Chair.  Accordingly, it would not be surprising if additional hearings focused on healthcare antitrust issues are conducted later this year, particularly as the pressing need to address pandemic-related healthcare issues starts to fade into the past.  Stay tuned.