Could health reform create hospital monopolies?


By guest blogger Robert Field:


When is a hospital big enough to be dangerous? Larger hospitals can provide more services and can better coordinate care. However, when they become too big they may have the power to stifle competition. Consumer advocates fear this could lead to higher costs and lower quality.
The biggest concern is over the growth of hospital systems. These are combinations of institutions that offer a range of services under one umbrella. In addition to hospitals, they may contain physician practices, nursing homes, labs, and outpatient clinics. These sprawling enterprises can offer one-stop shopping for patients, but they may also grow into corporate behemoths.
The health reform law encourages hospital systems to grow even larger. They would do this by adopting a new kind of arrangement called an Accountable Care Organization. These are collections of providers at all levels of care that oversee and coordinate each patient’s course of treatment. In doing so, they will be accountable for all of a patient’s health care needs. If they work as planned, ACOs will promote efficiency, enhance quality, and reduce errors caused by miscommunication.
However, critics see a more ominous side. ACOs that grow too large could dominate the health care market in their region. They might use this dominance to extract high prices from insurance companies while relaxing quality standards. A recent study by the Center for Studying Health System Change linked hospital market power with higher costs. The net effect could be that ACOs produce an opposite result from the one intended.
Recent actions of provider organizations have intensified these concerns. Groups representing hospitals and physicians have begun lobbying Congress to relax existing legal rules that could limit the size and scope of ACOs, such as rules concerning antitrust, fraud, and abuse. Critics wonder whether a looser legal environment could make marketplace abuses more likely.
Integrating health care is a commendable goal. Many of the problems in our health system can be traced to the disjointed care that many patients receive. ACOs could play an important role in bringing about better integration to improve overall care. However, Congress and regulators should watch them carefully as they develop lest these new creations generate a set of unintended and undesired consequences.


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