A lack of competition in the large US hospital market is driving up healthcare costs for individuals and families. And Congress can do something about it.
In 2020, Americans will spend an estimated $4.1 trillion on health care, with hospitals accounting for the largest share, $1.3 trillion. The Centers for Medicare and Medicaid Services (CMS) expects hospital spending to grow 6.9% this year, well ahead of the national economy’s projected growth.
High hospital bills are not always worth the medical bills.
In most metropolitan markets, healthcare is dominated by a few hospital companies. The hospital market is concentrated in 90% of America’s metropolitan statistical areas, based on Federal Trade Commission (FTC) metrics. These large hospital systems are also acquiring private medical practices. Hospitals and other businesses now own nearly half of all physician practices.
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Independent medical practice, the birthplace of the traditional doctor-patient relationship, is rapidly disappearing.
This concentration of economic power is costly and has undesirable consequences. According to a recent American Enterprise Institute report, the lack of competition from hospitals isn’t just contributing to rising health care costs and, in turn, higher insurance premiums. It also results in less patient choice, less innovation in care delivery, and suboptimal quality measurements. To put it bluntly, patients are suffering.
Government policy is driving this trend, and government policy (state and federal) can reverse it. Researchers at Rand Corporation found that government policies to increase competition and deconcentrate the hospital market could save hospitals about $6.2 billion and $68.9 billion in annual spending, depending on the “scale” of the change. reported as possible.
With broad powers over care access and delivery, states have many policy options to improve competition and provide affordable care. One of the most effective is to reform or repeal the Certificate of Concession (CON) law, which requires medical professionals to obtain state permits to build or expand medical facilities. The Federal Trade Commission and the Department of Justice, in both Democratic and Republican administrations, have identified these state laws as anticompetitive, posing barriers to market entry without improving quality or reducing costs. .
Congress can also take three major steps to open up the hospital market and improve patient access to more affordable, quality care.
First, Congress could remove legal restrictions on Medicare and Medicaid payments to doctor-owned hospitals, including hospitals that specialize in areas such as heart, cancer, and orthopedics. Enacted in 2010 as part of the Affordable Care Act, the restrictions deprive these hospitals of the large federal health care costs that flow into the larger hospital system, putting them at a serious competitive disadvantage. is placed in
A major literature review conducted by analysts at the Mercatus Center at George Mason University showed that physician-owned hospitals provided higher quality care at lower or ‘comparable’ costs. Obamacare’s payment limits put these hospitals in financial trouble and pose a significant barrier to other hospitals entering the market. The Health Policy Consensus Group endorsed removing restrictions, and Rep. Victoria Spartz (R-Ind.) introduced legislation to do just that, The Flexibility in Hospital Ownership Act.
Second, Congress could make Medicare payments for medical services “site neutral.” Today, Medicare pays health care professionals more than they normally would if their services were provided in hospitals rather than clinics and clinics. Paying the same price for the same service is estimated to save taxpayers $63.2 billion over 10 years.
Medicare is the nation’s largest payer of health insurance, so “site neutrality” payments will have a positive knock-on effect in the private market, increasing provider competition and reducing patient costs. This policy has bipartisan potential. This has been endorsed by liberal Brookings Institution academics and the conservative Health Policy Consensus Group, and is embodied in Transparency in the Hospital Billing Act, also proposed by Rep. Spartz.
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Finally, Congress can codify price transparency rules for federal hospitals. Patients and their families are often shocked at the cost of common medical procedures that hospitals offer. This is because hospitals do not disclose prices up front. Bills for common procedures (such as hip and knee replacements) can vary by thousands of dollars, even between hospitals within the same geographic region.
To address this issue, the Trump administration released major hospital price transparency rules in 2019. The rule requires hospitals to post information about 300 “purchasable” medical procedures, with the goal of providing patients with easily accessible hospital pricing information. The Biden administration also accepted this rule.
Initial compliance with the rules was slow and spotty, but it is improving.
Congress could further improve policy by codifying regulations, standardizing price reporting formats, and requiring hospitals to post quality standards developed by state or private sector consumer groups. increase. Bipartisan congressional support is not out of the question. For example, last year, House Energy and Commerce Committee Chairman Frank Pallone (DN.J.) and ranking member Kathy McMorris Rogers (R-Washington) called for tougher penalties for hospitals that don’t follow the rules.
Congress should focus on fixing the dysfunctional hospital market in 2023. Congress should adopt procompetitive strategies instead of enacting policies such as price controls that further distort markets. Representatives and senators will work together to increase transparency in hospital pricing and performance, remove restrictions on physician-owned specialty hospitals, and establish competitive medical specialty hospitals with hospitals through “site-neutral” Medicare payments. Real progress can be made by working together to level the playing field between homes.
