Mergers Spurred by the Health Law Gives Rise to Consumer Risk Concerns

The intention behind the 8-month-old health care law passed by the Congress was to push doctors and hospitals to jointly take the responsibility for bringing down the cost and improving the quality of patient care and possibly reward them with bonuses for achieving it.

 

But the strategy seems to have backfired with a slew of mergers taking place:

 

Johns Hopkins Medicine, which operates a hospital in Baltimore and 25 clinics in Maryland, has recently taken over Sibley Memorial Hospital in Washington.

 

In Kentucky, three of the largest hospital networks are negotiating a merger.

 

In upstate New York, three regional health care systems are attempting to merge their operations, which include hospitals, clinics and nursing homes in Albany and surrounding counties.

In the circumstances, it is feared that hospitals, clinics and doctor groups will go overboard to sharecosts and achieve savings so they can bag huge incentives. Competition will come down, costs will go up and hospitals will stint on care so they can retain their bonuses. Already they are trying to persuade the administration to relax or waive laws which prohibit monopoly and punish fraudulent billings of patients or Medicare.  

 

New organizations called accountable care organizations (ACOs) are being created to help reap the benefits of clinical cooperation and at the same time, enforce fraud, abuse and antitrust laws. Hospitals have taken the lead in forming ACOs. The Obama administration has additionally established a Center for Medicare and MedicaidInnovation, to evaluate new ways of coordinating and paying for services.

 

The new law’s potential for abuse has caused concern.  To save costs, hospitals may cherry-pick patients and deny care to the rest. With almost 25% of the Medicare beneficiaries suffering five or more chronic conditions and accounting for over 65% of the program’s spending, the consequences could prove disastrous. 

 

Hospitals and doctors argue that some extant laws run counter to the objectives of ACOs, which encourage doctors to work closely with select hospitals for monetary rewards. For example, extant laws generally prohibit financial relationships between hospitals and doctors. Barring some exceptions, it is a punishable offense to pay “any remuneration” to encourage the referral of Medicare and Medicaid patients to a particular care provider. In addition, the Federal Trade Commission (FTC) which jointly with the Justice Department enforces the antitrust laws, has in the past accused doctors of trying to fix prices by collectively negotiating fees, even though they do not share financial risk and are competing with one another. Some federal antitrust laws should be waived if they hinder the creation of effective ACOs. Safe harbors need to be developed so doctors, hospitals and other professionals can determine when they can collaborate and when they cannot, from an antitrust perspective. Similarly fraud and abuse rules should not come in the way of improving quality and reducing costs through ACOs.

 

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