Market Consolidation: Can Coordinated Care Live Up to Its Promised Benefits?

One of my most important responsibilities as a member of Congress is to try to anticipate problems that may accompany new legislation. Few laws work in practice exactly as intended, so it is essential that lawmakers continually monitor the effects of the statutes they enact. This obligation is especially crucial when the law in question is the Affordable Care Act (ACA), legislation that impacts the health care of every American.

One issue of particular concern is the accelerating consolidation within the health care industry. Many of the ACA-driven alternative payment models now being tested may encourage physicians, hospitals and other health care providers to affiliate. We want our physicians and hospitals to coordinate care among each other so that the primary care physician and the specialist physician can jointly provide appropriate patient care. Too much integration, however, can bring its own set of problems, including higher consumer prices as consolidated provider groups command higher payment rates. It is also important to note that consolidation isn't only intensifying among hospitals and physicians: Insurance companies, too, have amalgamated and realigned to increase their market power. In some areas of the country, there are only one or two insurers in a given market. There needs to be more scrutiny.

As we move toward greater integration of the health care industry, we simply do not know what impacts ongoing consolidation will have on health care prices. I am concerned that if we wait to address this issue, the damage will be done, and it will be too late to unravel the complicated arrangements that are redefining the health care market.

Although we lack conclusive data at this point, we do have some evidence that, at least in certain markets, the new ACA incentives may be spurring consolidation that is detrimental to consumers. St. Luke's Health System in Idaho recently announced it will purchase the largest primary care physician practice in the area, promising that the transaction will ensure a high degree of care coordination, thus providing patients a higher quality of care. Notably, St. Luke's is a participant in the Medicare Shared Savings Program and operates an "accountable care organization," the ACA designation for a coordinated group of care providers. Regulators have stepped in to aggressively challenge this arrangement, arguing that it will lead to higher prices for consumers because the consolidated practices will be able to demand higher payment rates from insurers, a cost that will be passed on to consumers.

Some states are proactively encouraging consolidation. New York recently enacted legislation that would immunize a specific health care entity from scrutiny under state and federal antitrust laws under the state action doctrine. Not surprisingly, this has created dissension between the governor's office and the attorney general; the latter argued that the legislation would allow the health care entity to accumulate too much market power. Even states hostile to the ACA have enacted legislation to ease integration in an attempt to ensure that providers in those states benefit financially from programs fostered by the ACA.

Market consolidation is certainly not the result of fraudulent or malevolent behavior by any particular actor in this arena. Hospitals are businesses that often must operate with a "no margin, no mission" mentality. Administrators understandably pursue incentives established by regulators or legislators. When Congress specifically encourages a certain behavior by providers, we should not be surprised when system participants adapt to such a reward structure. But market consolidation presents pitfalls as well as rewards. This is why I recently requested that the Government Accountability Office conduct a study designed to produce objective, specific data on the impact of hospital and physician consolidation. When we encourage providers to behave a certain way, we must proactively monitor the resulting behavior and make any adjustments necessary to improve our system. I believe in this responsibility, and I will continue to pursue this issue until I am satisfied that it has been addressed appropriately and adequately. American consumers deserve no less.