The fate of health care's front lines: How U.S. mega-mergers hurt doctors and disrupt the delivery of care
February 27, 2018
By Robert E. Grant
Though there is plenty of evidence to suggest the Affordable Care Act of 2010 unleashed an epidemic of health care mega-mergers, many could successfully argue that the U.S. health care system had long been in a free fall even as far back as the 1960s. According to data from the Centers for Medicare & Medicaid Services (CMS), the implementation of Medicare and Medicaid in 1966 resulted in the rapid expansion of insurance coverage, as well as health care spending at an average annual rate of 13 percent between 1966 and 1982.
But no one can debate the fact that the U.S. health care sector has changed dramatically since then, increasing from 5 percent of the nation's gross domestic product (GDP) in 1960 to 17.4 percent in 2013. The CMS data also shows that in 2016, U.S. health care spending reached nearly $3.4 trillion, up 4.8 percent from 2015, and is projected to reach nearly $5.5 trillion by 2025, accounting for 19.9 percent of GDP. The agency attributes the increase, in large part, to America's aging population and rising prices for health care services. Moreover, the average American family of four spends $24,000 a year on health care – with little to show for it.
Given the numbers, it is easy to understand why health systems and hospitals are falling like dominoes, merging in order to contain costs and retain market share. In 2015, as global M&As across all industries skyrocketed and set new records by exceeding $5 trillion, the health care sector emerged as the clear front-runner, leading the charge that year with a total of $723.7 billion in deals. But who benefits? While management teams cash in stock options and increased earnings per share, health care costs remain at an all-time high for patients. This cost to society is reflected in an increase of false diagnoses, an overall cheapened quality of care, longer wait times and a significantly poorer patient experience. In fact, over the last three years the average new patient doctor appointment wait time in the U.S. increased by 30 percent, according to a 2017 Merritt Hawkins survey. In large markets, the average wait time to see a doctor was 24.1 days (up 30 percent from 2014), with average wait times to see a family medicine doctor up 50 percent. As patient care is shifted from specialists to primary care practitioners, and down the line to physician assistants, then nurse practitioners and finally to places like CVS Minute Clinics, the cost curve continues to climb.
But evidence that health care M&As hurt patients, doctors, nurses and administrators alike has been mounting since the 1996 Aetna acquisition of U.S. Healthcare. In a 2004 analysis by the University of California, Berkeley, health economist, James C. Robinson, offered solid evidence that hospital and insurance mergers, in particular, almost always lead to higher costs, less efficiency and less innovation. More recent analyses, such as Hospital Consolidation and the Nurse Labor Market, written in 2015 by Emory University economist Christina DePasquale, point to large employment decreases for registered nurses and licensed nurse practitioners when two hospitals merge. In addition, her research suggests greater job loss in the years to come.
Health care's merger mania
With Abbott Laboratories announcing its definitive agreement to acquire St. Jude Medical for $25 billion in 2016, a 2017 announcement by CVS to acquire the health insurance giant, Aetna, for roughly $70 billion, and an additional 115 hospital and health system mergers reported in 2017 by consulting firm Kaufman Hall and Associates, the industry has clearly defined its new model for the future. For doctors like Matthew Hahn, M.D., a New York-based family physician and author of "Distracted: How Regulations Are Destroying the Practice of Medicine and Preventing True Health Care Reform", that new definition includes "cumbersome government rules, newer health insurance policies with high premiums, high deductibles, prior authorizations, and narrow, inscrutable coverage" that blocks doctors from delivering the care patients need. Undoubtedly, the effects of these mergers will continue unfolding over time and will vary from stakeholder to patient, but one thing is certain: In this current health care climate, doctors, nurses and administrators have been forced to adapt not only to a new industry paradigm but also to more rules and regulations that have limited the provision of the best patient care possible. The outcome is obvious.
The time for disruption
2018 brought the announcement of a partnership between Amazon, Berkshire Hathaway and JP Morgan Chase, whose new venture aims to cut their employees’ health care costs in a time of skyrocketing premiums and market consolidation. While details about this potential independent company are yet to be unveiled, the reason for its inception remains clear: patients and employers alike are losing patience with the continuing trends of poor-quality health care at a luxury price.
A race to the bottom line
An increasing number of reports, including "Mirror, Mirror 2017: International Comparison Reflects Flaws and Opportunities for Better U.S. Health Care", released by the Commonwealth Fund, put into harsh perspective the state of U.S. health care. Rather than leading the world, we have fallen to last place on a list of the top 10 countries with similar high-income populations.
Commonwealth Fund: Mirror, Mirror 2017: International Comparison Reflects Flaws and Opportunities for Better U.S. Health Care
Defending the right to provide quality patient care
Across the U.S., from California to Pennsylvania, doctors are coming together in opposition to mega-mergers – not only because they inhibit their ability to practice to their highest potential but also to defend patients, who are increasingly paying so much more for so much less. Like retail, real estate, utilities and travel, health care is changing at rapid speed, with technology fast becoming the favorite in the race to transform it. But while the industry at large is embracing transformational technologies, devices and mobile applications that simplify data collection and processes, improving the patient experience through improved delivery of care, which has become central in our growing on-demand economy, will be the only cure.
About the Author: Robert E. Grant is founder and chief executive officer of CONCIERGE KEY Health, the world’s first mobile app for on-demand access to elite doctors, including specialists and care facilities. An entrepreneur, inventor and investor, he has played a pivotal role for more than 20 years in successful technology and business development in pharmaceutical, medical device and health care markets.
Though there is plenty of evidence to suggest the Affordable Care Act of 2010 unleashed an epidemic of health care mega-mergers, many could successfully argue that the U.S. health care system had long been in a free fall even as far back as the 1960s. According to data from the Centers for Medicare & Medicaid Services (CMS), the implementation of Medicare and Medicaid in 1966 resulted in the rapid expansion of insurance coverage, as well as health care spending at an average annual rate of 13 percent between 1966 and 1982.
But no one can debate the fact that the U.S. health care sector has changed dramatically since then, increasing from 5 percent of the nation's gross domestic product (GDP) in 1960 to 17.4 percent in 2013. The CMS data also shows that in 2016, U.S. health care spending reached nearly $3.4 trillion, up 4.8 percent from 2015, and is projected to reach nearly $5.5 trillion by 2025, accounting for 19.9 percent of GDP. The agency attributes the increase, in large part, to America's aging population and rising prices for health care services. Moreover, the average American family of four spends $24,000 a year on health care – with little to show for it.
Given the numbers, it is easy to understand why health systems and hospitals are falling like dominoes, merging in order to contain costs and retain market share. In 2015, as global M&As across all industries skyrocketed and set new records by exceeding $5 trillion, the health care sector emerged as the clear front-runner, leading the charge that year with a total of $723.7 billion in deals. But who benefits? While management teams cash in stock options and increased earnings per share, health care costs remain at an all-time high for patients. This cost to society is reflected in an increase of false diagnoses, an overall cheapened quality of care, longer wait times and a significantly poorer patient experience. In fact, over the last three years the average new patient doctor appointment wait time in the U.S. increased by 30 percent, according to a 2017 Merritt Hawkins survey. In large markets, the average wait time to see a doctor was 24.1 days (up 30 percent from 2014), with average wait times to see a family medicine doctor up 50 percent. As patient care is shifted from specialists to primary care practitioners, and down the line to physician assistants, then nurse practitioners and finally to places like CVS Minute Clinics, the cost curve continues to climb.
But evidence that health care M&As hurt patients, doctors, nurses and administrators alike has been mounting since the 1996 Aetna acquisition of U.S. Healthcare. In a 2004 analysis by the University of California, Berkeley, health economist, James C. Robinson, offered solid evidence that hospital and insurance mergers, in particular, almost always lead to higher costs, less efficiency and less innovation. More recent analyses, such as Hospital Consolidation and the Nurse Labor Market, written in 2015 by Emory University economist Christina DePasquale, point to large employment decreases for registered nurses and licensed nurse practitioners when two hospitals merge. In addition, her research suggests greater job loss in the years to come.
Health care's merger mania
With Abbott Laboratories announcing its definitive agreement to acquire St. Jude Medical for $25 billion in 2016, a 2017 announcement by CVS to acquire the health insurance giant, Aetna, for roughly $70 billion, and an additional 115 hospital and health system mergers reported in 2017 by consulting firm Kaufman Hall and Associates, the industry has clearly defined its new model for the future. For doctors like Matthew Hahn, M.D., a New York-based family physician and author of "Distracted: How Regulations Are Destroying the Practice of Medicine and Preventing True Health Care Reform", that new definition includes "cumbersome government rules, newer health insurance policies with high premiums, high deductibles, prior authorizations, and narrow, inscrutable coverage" that blocks doctors from delivering the care patients need. Undoubtedly, the effects of these mergers will continue unfolding over time and will vary from stakeholder to patient, but one thing is certain: In this current health care climate, doctors, nurses and administrators have been forced to adapt not only to a new industry paradigm but also to more rules and regulations that have limited the provision of the best patient care possible. The outcome is obvious.
The time for disruption
2018 brought the announcement of a partnership between Amazon, Berkshire Hathaway and JP Morgan Chase, whose new venture aims to cut their employees’ health care costs in a time of skyrocketing premiums and market consolidation. While details about this potential independent company are yet to be unveiled, the reason for its inception remains clear: patients and employers alike are losing patience with the continuing trends of poor-quality health care at a luxury price.
A race to the bottom line
An increasing number of reports, including "Mirror, Mirror 2017: International Comparison Reflects Flaws and Opportunities for Better U.S. Health Care", released by the Commonwealth Fund, put into harsh perspective the state of U.S. health care. Rather than leading the world, we have fallen to last place on a list of the top 10 countries with similar high-income populations.
Defending the right to provide quality patient care
Across the U.S., from California to Pennsylvania, doctors are coming together in opposition to mega-mergers – not only because they inhibit their ability to practice to their highest potential but also to defend patients, who are increasingly paying so much more for so much less. Like retail, real estate, utilities and travel, health care is changing at rapid speed, with technology fast becoming the favorite in the race to transform it. But while the industry at large is embracing transformational technologies, devices and mobile applications that simplify data collection and processes, improving the patient experience through improved delivery of care, which has become central in our growing on-demand economy, will be the only cure.
Robert E. Grant