On June 12, 2019, the Senate Judiciary Subcommittee on Antitrust, Competition Policy, and Consumer Rights held a hearing on “Competitive Implications of Vertical Consolidation in the Healthcare Industry.” AHIP submitted a statement for the official record of this hearing.

Our statement emphasizes that one major cause of rising health care costs is vertical provider consolidation—when more and more of a region’s doctors and medical experts work for the same hospital or health system. We highlight research findings showing that when health systems in a region get bigger and squeeze out competition, prices go up for consumers:

A study published by the Journal of Health Economics examined what happens to prices when hospitals acquire physician practices and found that, following such acquisitions, the prices for services provided by the acquired physicians increased by an average of 14.1%.

A study published by Health Affairs found that “an increase in the market share of hospitals with the tightest vertically integrated relationship with physicians—ownership of physician practices—was associated with higher hospital prices and spending.” The authors further explain that “vertical relationships can be a way for physicians and hospitals to bundle their services together and charge insurers higher prices.”

Another study published by the Journal of Health Economics addresses the impact of hospital/physician integration on hospital choice. This study cautions: “We find that a hospital’s ownership of a physician dramatically increases the probability that the physician’s patients will choose the owning hospital. We also find that patients are more likely to choose a high-cost, low-quality hospital when their physician is owned by that hospital.”

Our statement offers recommendations to address concerns about anti-competitive provider consolidation:

• Ensure that the Federal Trade Commission (FTC) and the Department of Justice (DOJ) have the resources and authority to prevent anticompetitive vertical provider consolidation.
• Request that the FTC engage in a retrospective review of vertical provider consolidation and utilize the findings of that review to challenge transactions that have led to consumer harm.
• Require the Centers for Medicare & Medicaid Services (CMS), jointly with the FTC and the DOJ, to engage in a review of its payment and other policies to determine which are likely to have the unintended consequence of leading to provider consolidation.
• Require CMS to utilize the results of such a review to modify its payment and other policies to reduce the risk of this unanticipated consequence.
• Require federal health programs and the individual marketplace to, as appropriate, allow for innovations in care delivery to replace traditional care delivery in establishing adequate networks in order to reduce the market power of today’s provider monopolists.