Association for Public Policy Analysis & Management

Consolidation and concentration are occurring in the U.S. health care system. Hospitals are combining to create systems, physician practices are getting larger and are being acquired by integrated delivery systems, and some of the nation’s largest insurers have tried to combine into even larger insurance entities. Health care industry consolidation is occurring both vertically (different types of entities combining) and horizontally (similar types of entities combining); it is happening locally, regionally, and nationally; and it is affecting urban, suburban, and rural communities. Consolidation and concentration in the health care industry is a response to market forces, changing preferences and attitudes, and the policy environment. However, the touted benefits of consolidation (economic efficiencies and improved quality resulting from economies of scale and better care coordination) are rarely realized. Consolidation is generally recognized to result in higher prices and premiums for consumers, and has mixed effects on health care quality. Furthermore, health care consolidation has numerous implications for the surrounding community in terms of health care worker satisfaction and autonomy, access to care for vulnerable populations, and tax coffers.

Moreover, health care consolidation is a phenomenon with few policy solutions – although the Federal Trade Commission and Department of Justice occasionally review the few mergers and acquisitions that trigger its monetary threshold for regulatory oversight, they do not have the capacity to review every deal, and are often not successful when they challenge health care industry mergers in court. Furthermore, once consolidation occurs, it is nearly impossible to reverse. The present study considers policy levers that can be used to mitigate the negative impacts of health care consolidation.

In the course of conducting a case study on health care consolidation in Pittsburgh, I conducted semi-structured interviews with 20 community stakeholders to learn about how the consolidation in Pittsburgh has affected them, their employees, and the people they serve in the region. In addition to their insights on what the impacts of consolidation on the region have been, they have discussed ways in which they have attempted to cope with the negative impacts of consolidation or proposed potential ways to do so. These ideas go beyond Federal antitrust enforcement, and include policy actions that can occur at the state, county, and city level, as well as activities by non-governmental actors. Based on analysis of these interviews and a literature review of additional policy levers used to mitigate negative effects of other monopolistic businesses or industry examples, I present a set of policy proposals beyond antitrust that address the negative outcomes of health care consolidation.