Consolidation in health care is not reducing health care costs and not serving consumers
SACRAMENTO–Assemblymember Jim Wood (D-Healdsburg) has introduced two bills, AB 1091 and AB 1092 to address mergers and acquisitions in health care.
“A majority of studies show that mergers and acquisitions in health care are not lowering costs for anyone but the entities doing it,” said Wood. “We are led to believe that mergers and acquisitions in health care will save money and that it’s good for consumers, but what we are actually seeing is that it reduces competition and results in higher corporate and shareholder profits. I also have real concerns about how these mergers and acquisitions could reduce or limit access to certain health care services, like reproductive care.”
AB 1091 expands the authority of the state Attorney General (AG) to review and approve or deny any merger or acquisition of a nonprofit health facility to for-profit changes in ownership and control. The bill also requires the AG to hold one or more public hearings before issuing a decision on a major transaction and prohibits health care entities from engaging in specified unfair contracting practices brought to light by the recent Sutter Health settlement.
The Medicare Payment Advisory Commission (MedPAC), in its report, “March 2020 Report to the Congress: Medicare Payment Policy,” concluded that a majority of these mergers led to higher prices. A New York Times article reported that an analysis looking at 25 metropolitan areas with the highest rates of hospital mergers from 2010 through 2013 found that the price private insurance paid for the average hospital stay increased in most areas between 11 and 54 percent after the mergers.
“Our Attorney General plays a critical role in reviewing and approving or denying health care mergers or acquisitions by being the very last stop to assure that the needs of the community and health care consumers are protected,” said Wood. “This process requires that a thoughtful balance exists between the needs of the health care consumer and the hospital providing the care, but the AG’s process is one that absolutely must be maintained.”
AB 1092 expands regulatory oversight over health plan transactions, building on prior legislation (AB 595, Wood, Chapter 292, Statutes of 2018), which requires an entity that intends to merge with a health plan to give notice to, and secure prior approval from, the DMHC Director. This bill applies to health plans that merge or acquire other entities, like a physician group, for example. The bill also permits the Director to forward to the AG information related to a disapproval when the transaction would have substantially lessened competition in a health system or among a particular category of health care providers.
“Although opponents have tried to argue that consolidation helps integrate care and control costs, it appears that only their studies show that – not the many objective studies that show these types of transactions in health care have, in fact, resulted in higher health care costs and profits for the corporations rather than lower costs for patients and health care consumers,” said Wood.
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