Health care costs in this country continue to rise without a commensurate increase in quality.1 These increased costs squeeze public budgets and individual and family pocketbooks, including through higher health insurance premiums. Many states are interested in addressing these rising costs and have multiple tools available to do so. This report is the second in a series that explores how states that are seeking to lower the cost of care can also advance health equity as part of that effort through policy design and implementation, rather than as an afterthought.2

This report focuses on addressing consolidation through an equity lens, building on the existing literature that focuses on the impact of consolidation on prices and quality.3 It begins by providing background on consolidation in the health care system that has rapidly increased in recent years, as well as its impacts on equitable health care access and affordability. It ends by providing several policy tools that states can use in implementing enhanced merger review to slow the growth of consolidation and enable state officials to better promote health equity through the design, implementation, and execution of policies aimed at curbing the rise of health care costs.

Consolidation in the health care system has increased dramatically in recent years

Consolidation in the health care sector has increased dramatically in recent years. There are two different unique types of consolidation—horizontal consolidation and vertical consolidation.4 With horizontal consolidation, two or more health systems merge, such as hospitals merging with each other or physician practices joining together. With vertical consolidation, different types of health care organizations come together. This might mean hospitals or health systems taking ownership of physician practices; it might also mean hospitals and physicians joining with insurers.

Both horizontal and vertical consolidation have increased over time. Between 1998 and 2021, 1,887 hospital mergers were reported by the American Hospital Association, reducing the number of hospitals from around 8,000 to just over 6,000.5 As of October 2023, there were fifty-three announced hospital mergers for the year, matching the total number of mergers in 2022 and marking an increase over the forty-nine mergers that occurred in all of 2021.6

From 2016 to 2018, the percentage of physician practices owned by hospitals increased 11 percent and from 2019 to 2022, the percentage of hospital-owned physician practices increased by 8 percent.7 This meant that as of January 2022, over 25 percent of physician practices were owned by hospitals, and more than half of all physicians were employed by hospitals (see Figures 1 and 2).8

Figure 1

Figure 2

For at least the past thirty years, the percentage of hospital markets that were unconcentrated—that is, had multiple hospital systems competing to provide health care services—decreased significantly.9 According to the Herfindahl-Hirschman Index (HHI),10 a measure of market concentration, by 2017, 90 percent of metropolitan areas in this country had highly concentrated hospital markets.11 Among these metropolitan areas, the median increase in HHI was 222, more than twice as high as the increase that the U.S. Department of Justice considers significant. According to a recent analysis from the Health Care Cost Institute, 140 metro areas were highly or very concentrated in 2021.12

The most concentrated markets in this analysis were in metropolitan areas with populations under 350,000: Johnson City, Tennessee; Wilmington, North Carolina; and Kingsport, Tennessee (which is twenty minutes from Johnson City). And if these metropolitan areas are contiguous, the footprint of this concentration can be massive. In the region around Johnson City, for example, there is only one major health system option for about 1.1 million residents in a twenty-nine-county radius, an area that has a poverty rate 30 percent higher than the national average.13 The health system in question—Ballad Health—is the only option residents in the area have for hospital care, yet it has failed to fulfill annual community care obligations (falling $148 million short over four years) and has failed to meet 80 percent of quality-of-care benchmarks (including infection rates and death rates).14 More broadly, about three-fifths of the entire U.S. population (202 million people) live in an area where increases in hospital concentration have warranted scrutiny from the U.S. Department of Justice (DOJ) and Federal Trade Commission (FTC).15

Why has consolidation increased?

The primary reason why health care markets have become increasingly consolidated over time is financial incentives. Health care systems have a strong interest in strengthening their negotiating power and competitive advantage with payers to apply pressure to increase payment rates for services.16 Many independent systems have been struggling as well with increased labor costs and, especially during the pandemic, revenue losses due to lower utilization.17 One reason behind increased vertical consolidation in particular is the incentive that systems have to capture all possible revenues associated with health care delivery.18

The growing and remarkable intrusion of private equity into the health care market has also accelerated consolidation trends, because private equity is highly incentivized to consolidate in order to maximize profits and build market power.19 In 2021 alone there were over 1,400 private equity deals in the health care sector, with an overall value of over $208 billion.20

The impact of consolidation on affordability and equitable access to care

There is increasing evidence of the negative relationship between more concentrated health care markets and equitable access to care and affordability. Overall, increased provider consolidation increases prices and reduces access, hindering efforts to advance health equity.

Affordability

First, not unexpectedly, an increase in market power for a consolidated health care system is associated with an increase in prices because of a decrease in competition and an increase in negotiating power with payers.21 Vertical consolidation is associated with 14 percent higher physician prices and 10–20 percent higher total spending per patient.22

One of the arguments proponents make for consolidation is that it will lead to increased efficiency and lower administrative costs. However, in reality, this type of consolidation incentivizes systems to provide the same treatment in higher-cost settings, not passing along any efficiencies that may result from a merger. Hospital mergers are associated with an increase in price of hospital services upwards of 6–18 percent, even though operating costs were said to decrease between 15 and 30 percent.23 Evidence on quality impacts of consolidation is generally inconclusive, offering an insufficient understanding, although it is safe to say that it is associated with worse patient experience.24

Hospital mergers are associated with an increase in price of hospital services upwards of 6–18 percent, even though operating costs were said to decrease between 15 and 30 percent.

A closer look at private equity in health care, which is part of the health care consolidation story, shows an association with increased costs, greater use of lesser-trained staff, pressure on physicians to upcharge in billing and referral to affiliated sites, and increase in medical debt for consumers through aggressive bill-collection tactics.25  All of this is at the expense of overall affordability for patients, families, care providers, and communities, especially communities of color that are more likely, for example, to be exposed to medical debt, more vulnerable to increased costs, and more likely to be part of the lower-wage workforce bearing the brunt of many of the harsh business practices.26

Equitable access to care

Consolidation is also associated with worse access to care, especially for certain populations and in specific communities. Hospital consolidation from 1998 to 2021 resulted in 1,887 mergers and reduced the number of hospitals nationwide by about 25 percent.27 Reducing the number of hospitals by one-quarter can have significant implications for people seeking care, such as increased travel, increased severity of injury or illness due to delayed care because of time spent traveling farther distances, and disproportionate burden for people who cannot afford to travel; travel is often impossible for low-income patients, for example, who may lack access to the paid time off, accessible transportation, or affordable child care needed to make the trip to a health care provider located far from their home. These closures also frequently force patients to travel outside their communities in search of medical care; this can be challenging for anyone, but is particularly difficult for people who need accommodations and supports to access medical care, such elderly and disabled patients, or patients with limited English proficiency.

These closures also impact LGBTQ+ people—particularly LGBTQ+ populations who live in rural areas—due to increased difficulty finding trusted health care providers. In a recent survey, 41 percent of non-metro LGBTQ+ people said it would be “very difficult” or “not possible” to find an alternative provider if they were to be turned away by their hospital.28

Other access implications are related to the fact that merging hospital systems often close less profitable departments, such as maternity wards or behavioral health departments, even if those departments are addressing important community needs. Lois Uttley, co-founder of Community Voices for Health System Accountability, notes that, “Acquiring systems often move to close services like intensive care, labor and delivery, psychiatric care, and cardiac surgery.”29 Hospital closures force patients to travel farther to receive care, which is particularly dangerous to patients with time-sensitive conditions, such as pregnancy. In 2022, 36 percent of counties in the United States—home to 6.9 million women and 500,000 births that year—were considered “maternity care deserts,” meaning they have no obstetric providers and no birth centers.30 Maternal care deserts are associated with higher costs, longer hospital stays, and greater risk of poor health outcomes.31 These deserts also disproportionately affect people of color; one in six Black babies and one in four Native American babies are born in areas with limited or no access to maternity care.32

There are also significant implications for access when mergers include hospitals owned by religiously sponsored systems, because the new owner may restrict reproductive health care. Such mergers have specific and important access implications, especially for people needing reproductive- or fertility-related health care services, and many LGBTQ+ patients who face barriers to health care in religious health care systems. Currently, four of the ten largest health systems in the United States are Catholic, and due to mergers and acquisitions, the ten largest Catholic health systems grew by 50 percent between 2001 and 2020.33 Each of these hospitals are governed by the Ethical and Religious Directives for Catholic Health Care Services, which explicitly prohibit contraception, abortion, and infertility services.34 They have also been interpreted to curtail the provision of other services, such as gender-affirming care for transgender patients or medically assisted suicide for terminally ill patients. Qualitative studies show that many of these patients are unaware of religious restrictions of care until they are at the hospital.35

Equitable health care access is also tightly connected to the size, composition, happiness, and overall adequacy of the health care workforce, as a health care system that truly meets patients’ needs requires a health care workforce that is supported, respected, and trusted. The past several years have seen an increase in health care labor market disruption,36 stress, burnout, turnover, exit, and overall shortages, in part related to consolidation.37

Consolidation decreases job competition by limiting the number of local employment options for health care workers. With expanded power over the regional labor market following a merger, hospitals have greater leverage in employee negotiations, leaving employees to grapple with restrictive noncompete agreements that limit their agency and autonomy and lower wages.38 Recent research suggests that the wages of nonmedically skilled workers were 4.0 percent lower following a merger.39 Those who have made academic and professional investments into medical training are even more susceptible to these effects due to their skillset not being easily translated to another sector. For example, research finds that the wages of nurses and pharmacy workers were 6.8 percent lower following a merger.40 However, research indicates that higher unionization rates and the absence of state right-to-work laws—both tools to increase worker negotiation power—could mitigate the effect consolidation has on suppressing wages.41

Lastly, consolidation and mergers can have a broader impact on community health. Nonprofit hospitals are required to administer community benefit programs in exchange for their tax-exempt status. These programs include activities designed by the nonprofit system to improve community health, including affordability and access to health care services. Merged nonprofit hospitals have been found to decrease community benefit spending—including subsidized health services—compared to unmerged hospitals, further exacerbating affordability issues for these underserved populations in a community.42 A 2023 analysis by the Kaiser Family Foundation estimated that the total value of tax exemption for nonprofit hospitals in 2020 was around $28 billion, representing a significant sum that could be reinvested into the communities these hospitals serve.43

Policy tools to address consolidation at the state level with an equity lens

States have a major interest in addressing consolidation because of its significant role in accelerating health care costs, and reducing access to affordable, equitable care. This report is not focused on making the case to states to address consolidation but rather how states can leverage an important opportunity to advance health equity as part of addressing consolidation. In order to address consolidation, states will need to utilize several of their fundamental authorities. This report touches on these authorities briefly below, but the focus is on what states can do specifically to advance equity as part of efforts to curb and address consolidation.

One of the most powerful tools states have to prevent further consolidation is merger review. Merger reviews are the investigation of any proposed transaction between two entities that has the potential to raise antitrust concerns, reduce competition, and raise prices and/or lower quality for consumers. The Hart-Scott-Rodino Act requires companies to report proposed mergers over certain financial thresholds ($111.4 million in 2023) to the Federal Trade Commission (FTC), as well as to the Antitrust Division of the U.S. Department of Justice (DOJ), though states have the ability to impose their own thresholds.44 The FTC and DOJ can then take formal legal action to stop a merger once it has been reviewed, and state governments may also intervene under their laws, as discussed below.

In the context of health care, however, federal investigation has not had a major chilling effect, for several reasons. First, federal financial thresholds often fail to trigger reporting requirements, as the value of provider consolidation transactions—especially physician practice acquisitions—typically fall below the amount required to trigger reporting of a merger.45 As a result, the FTC and DOJ are often unaware of these transactions and are unable to intervene via the court system. Second, the federal government has not taken on cross-market mergers—that is, mergers involving entities that are in different geographic markets—and an increasing number of health care consolidation activity falls into this category.46 Third, while the FTC and DOJ do have broad authority generally, the FTC’s authority to challenge nonprofits is more limited, and nonprofit ownership is common in health care provider markets.47

Despite these limitations, the FTC and DOJ have had success in blocking some large consolidations that raised the most serious anticompetitive concerns. However, their impact is still fairly limited, and the Biden administration has taken steps to address these limits. In December 2023, the FTC and DOJ finalized a set of new merger guidelines that substantially lowers the threshold for review and may be used to begin to intervene in cross-market mergers.48

States can challenge health care mergers under federal law and most states require at least some hospitals to notify offices of attorneys general or other state entities in the state with plans to merge. To have a greater impact, states should create state-level reporting requirements with lower financial thresholds than the current federal standards. Most states have already passed such laws for at least some hospital merger transactions.49 For example, Washington State passed HB 1607 in 2019, which requires nearly all transactions between health care organizations that would “result in a material change” to be reported to the state’s attorney general.50 Importantly, this requirement also applies to out-of-state entities if that entity generates $10 million or more in revenue from state residents—more than an order of magnitude lower than the federal reporting requirement.51 Map 1 shows which states have passed reporting requirement laws, including which states require approval.

Map 1

The National Academy for State Health Policy (NASHP) has proposed model legislation that would expand the authority of attorneys general to address provider consolidation.52 Under this law, state attorneys general are empowered to review and block or approve proposed mergers administratively, rather than via the courts. Rather than requiring a costly trial and limiting attorneys generals to intervening only in the most significant mergers, this approach allows states to more easily block problematic transactions. It also lowers the barriers to entry for a state to intervene in a proposed merger. This approach also allows states to more easily impose requirements onto proposed mergers.

There are several ways that states can build upon expanded merger review to center health equity:

  • establishing accountability for advancing equity as part of merger review,
  • explicitly including equity lens as part of merger review and enforcement authority,
  • requiring reporting on the impact of mergers, and
  • rectifying anti-competitive impacts of consolidation.

Establish accountability for advancing equity as part of merger review

To ensure that efforts to address provider consolidation prioritize equity, states should develop a locus of accountability focused solely on the equity impacts of a potential merger as part of the merger response process. Here are two potential ways that states can operationalize this locus of accountability.

One way that states can prevent mergers that would harm health care equity or mitigate their harmful effects is by adopting something similar to what Massachusetts has done through their state Health Policy Commission (HPC).53 Massachusetts requires that the HPC receive notice of all proposed transactions and then determines if the proposed merger is likely to have a “significant impact on the state’s ability to meet the health care cost growth benchmark.” While this initial standard is price-focused, the subsequent “Cost and Market Impact Review” that the HPC can conduct in response to this notice has wide authority to address many factors, including the quality of care provided and the role of the provider in serving publicly insured patients. The HPC can then recommend that the state’s attorney general intervene in the transaction, including by filing an antitrust case.

The review process alone can help avoid bad action by health systems, even if no further intervention occurs. In 2022, the HPC recommended against a proposed expansion of the Mass Brigham General health system based on the Commission’s determination that the expansion would significantly increase spending in the state.54 Before a final decision had been made on the expansion by state regulators, Mass General Brigham withdrew its application for expansion, highlighting the potential impact of reviewing and publicly criticizing proposed consolidations.55

A state looking to apply this model more broadly could give authority to a commission or working group in the state with authority and information from providers to assess whether and how all proposed mergers are likely to impact equitable access to care and affordability; to make a relevant recommendation to the state attorney general to intervene, depending on this analysis; and to ensure that any impact on access and affordability are mitigated as part of the transaction.

A second option is that, in addition to or instead of appointing a separate equity accountability group, states could expand the capacity of their attorney general offices. Attorney general offices are often limited in staffing and other resources, impeding their ability to intervene in cases that will likely have a negative impact on equitable access to care and health care affordability; by expanding the attorney general office to include staff dedicated to and accountable for conducting antitrust work with an equity lens, states would ease some of this burden, simultaneously centering equity in the merger review process and improving the state’s ability to intervene through the courts when an anticompetitive merger is proposed.

Regardless of whether a state takes one or both of these approaches, it is critically important that the perspective and lived expertise of community members and/or community-based organizations that are accountable to and trusted by marginalized communities in the state be included, similarly to what was recommended as part of advancing equity in the cost growth benchmark process, the first report in this series.56 This means that community voices, perspectives, and lived experiences would be critical and that community members would have a robust and meaningful opportunity use their expertise to inform the analysis, recommendations, and enforcement of the proposed merger. Without intentional representation, there is a real risk of people most impacted by health inequities continuing to be excluded from the process but facing the brunt of the harms of the merger itself.

Explicitly include an equity lens as part of merger review enforcement authority

Much of the research on improving health care merger reviews has focused on prices, but a state can, in addition to evaluating the impact on prices, examine the impact of a merger on equitable access and affordability and impose conditions on any merger predicted to potentially lower access to care, decrease affordability, or otherwise reduce health equity. States should require their attorneys general to examine the impact that a proposed merger would have on access to care for different population groups, empower them to ensure that health equity is centered as part of the implementation plan (for example, by imposing conditions), and enforce any agreements made about access, affordability, and equity.

Many states have embedded equity into their merger review processes. For example, the Office of Health Strategy in Connecticut is required by the state to review mergers on a variety of metrics, including how the merger would “improve quality, accessibility and cost effectiveness of health care delivery in the region, including, but not limited to, provision of or any change in the access to services for Medicaid recipients and indigent persons” and confirming that the merger would not “adversely affect health care costs or accessibility to care.”57 One example of potential conditions might be that abortion care be maintained upon purchase of a physician practice by a Catholic hospital system.

Similarly, Oregon passed a merger review law in 2021 that allows the Oregon Health Authority (OHA) to deny a merger unless the parties demonstrate that the proposed merger will: reduce or maintain cost growth, improve access to services in medically underserved areas, or rectify historical sources of health inequities; or, improve health outcomes for people in the state and there is no likelihood of anti-competitive impacts of the law that outweigh the benefits in improving or maintaining access to services for underserved populations.58 Under this law, the OHA has reviewed twelve transactions, including four health system transactions approved with conditions.59

New York State recently passed a law requiring a health equity impact assessment as part of any facility change, including change of ownership, especially those that would impact access to care in any way.60 The new law amends the New York State Department of Health’s Certificate of Need application process, requiring that a Health Equity Impact Assessment be filed, providing information and analysis on:

  • whether and how the project will improve health equity and reduce disparities, especially for people in medically underserved groups;
  • the extent to which medically underserved groups are expected to use the applicant’s services;
  • the performance of the applicant in meeting its obligations required by New York State law related to uncompensated care, community services, and access to care for marginalized populations;
  • amount of charity care provided by the applicant;
  • access by public transportation;
  • extent to which implementation will reduce barriers for people with mobility challenges; and
  • review of how the applicant will maintain or improve quality of hospital and health related services.

While it is not clear what will be done with this analysis as part of decision making, there may be a chilling effect related to further consolidation. For example, one health system in the state delayed its planned closure of a hospital birth center and began meeting with the community that would have been impacted by such a closure related to this assessment.61

Other states have built on these equity analyses, empowering their regulators to impose conditions on proposed transactions. For example, under Oregon’s enhanced merger review authority, the merger between Adventist Health and Mid-Columbia Medical Center (MCMC) was approved with conditions.62 The state determined that the merger was urgently needed to prevent closure of the medical center, but because MCMC is a secular provider and Adventist is faith-based, the state required the system to ensure that MCMC existing service levels of reproductive health services, gender-affirming care, and services allowed under the state Death with Dignity Act be maintained. Oregon indicates that there will be follow-up analyses to ensure compliance at one-, two-, and five-year increments after the transaction. Similarly, OHA required Amazon to file reports every six months for five years on the services provided, patients served, quality of care, and any governance changes as a condition of approving its acquisition of One Medical within the state.63

States should prepare for provider opposition to such laws, however. While Oregon’s law is one of the most expansive and effective in the country, a lawsuit has been filed against the program.64 In late 2022, the Oregon Association of Hospitals and Health Systems filed a suit against Oregon, claiming that Oregon’s law is unconstitutionally vague and does not clearly define several key terms of the law. While providing OHA the authority to define terms such as health equity and essential services has allowed it to engage more thoroughly on providers, it also has opened the door for the law potentially to be overturned. States should develop clear direction for whichever executive authority implements merger review laws to avoid similar suits being filed.

Ensure transparency with trusted, disaggregated data

Much of the U.S. health care market is already highly concentrated, and to address some of the negative effects of consolidation, greater transparency is necessary pre- and post-merger review as well. One of the biggest challenges in seeking to rein in health care costs and advance affordability is that so much information about health care spending and costs is opaque and proprietary.65 It is critically important then that state policymakers help to shine a light on health care markets in their states as part of addressing future consolidations. Many of the recommendations above will serve to advance equity, not only by incorporating greater authority and accountability but also by contributing to increased transparency and awareness of the relationship between health system actions and health equity.

One way states can go about this process is by requiring hospitals, especially those in highly consolidated areas, to regularly report on health outcomes and prices. It is important to note, however, that these tailored reporting requirements may only be possible for states with merger review and approval processes already in place. For already consolidated health systems, policymakers may need to impose widespread requirements on all hospitals, or all hospitals above certain revenue thresholds. These requirements will likely need to cover a large variety of topics to ensure that equity is advanced, including quality of care and access to care, in addition to price data. These broad requirements will also help bring to light the anti-competitive aspects of previously approved mergers. To understand the relationship between consolidation and access, affordability, and equity impacts, it is important that the data be disaggregated and usable by state regulators.

There are a variety of ways several states have gone about requiring these reports, though most methods are carried out through the office of the attorney general.66 For example, the Massachusetts attorney general required Beth Israel Lahey Health to hire an independent monitor to evaluate the impact on patients after a merger of Beth Israel Deaconess Medical Center and Lahey Health. Similarly, California permits its attorney general to hire an independent monitor to evaluate the impact of mergers.

While these states’ approaches begin through attorneys general offices, they do not rely on those offices to conduct the evaluations, allowing attorney general resources to be more effectively used. Other states do not hire independent monitors, but work with hospitals to develop reports. For example, Rhode Island requires merging hospitals to file reports annually with the state Department of Health and the attorney general’s office to describe compliance with various restrictions placed on mergers.

Rectify anti-competitive impacts of consolidation

States also have options to go beyond transparency and reporting requirements when it comes to post-consolidation review and mitigation of access, affordability, and other equity impacts. By imposing additional requirements on highly consolidated hospitals, states can not only undo the harm of provider consolidation but also address the impact of historic inequities, especially in communities that have been most marginalized.

One way states can address these anti-competitive impacts is by reforming community benefit requirements to ensure that communities truly benefit even after the nonprofit health care system in their community has consolidated. The Affordable Care Act requires nonprofit hospitals to provide community benefit, and nearly 60 percent of all non-federal, acute care hospitals are nongovernmental, nonprofit hospitals.67 As a result, a significant portion of high health spending can be addressed through nonprofit hospital regulation while also advancing health equity.

One of the most direct ways that states can go about improving the value of community benefit is by clarifying hospitals’ charity care requirements. Charity care is free or reduced-cost care provided to patients based on their inability to pay.68 In order to quantify how nonprofit hospitals should go about fulfilling their community benefit obligations, some states have established requirements to provide certain levels of charity care.69 For example, Nevada and Georgia require charity care with value equal to a percent of revenue. Similarly, Illinois requires nonprofit hospitals to provide charity care equal to their property tax exemption to receive their exemption.

In addition to direct charity care requirements, states can also require nonprofit hospitals to provide clear goals for their noncharity care community benefit spending and audit the results of that spending to determine if the programs are advancing health equity. For example, Montana audited the impact of community benefit programs in 2020, finding that “community benefit spending has no clear impact on the health of Montanans,” prompting ongoing legislative debate over how to promote better community benefit spending.70

In addition to strengthening community benefit requirements, states can also reform their contracting laws to ensure that consolidated hospitals cannot leverage their market power to drive up prices for patients. NASHP has proposed model legislation on this topic, as well.71 Three types of anti-competitive hospital contracts that should be limited or even prohibited because they have a disproportionate impact on insurers’ ability to negotiate lower prices for needed health care services are:72

  • all-or-nothing contracting,
  • anti-tiering or anti-steering clauses, and
  • most-favored-nation clauses.

All or nothing contracting describes contracts that require insurers to include all providers at a facility within their networks, allowing providers that the insurer would otherwise not include in the network to charge higher prices than insurers would otherwise accept. Similarly, anti-tiering/anti-steering clauses prohibit insurers from incentivizing patients to seek care from specific providers—such as those who charge lower prices or provide higher quality care—within their network, such as through lower cost sharing.

Both of these clauses distort health insurance networks, placing more burden on patients to seek higher quality care and driving up premiums and cost-sharing even for those patients who can and do make such an effort. Patients would reasonably expect their insurance networks to represent affordable, high-quality providers, and when these contracts are in place, that is not always the case.

Unlike these first two, however, the final contract provision impacted by NASHP’s model legislation—most-favored-nation clauses—addresses bad behavior by insurers, rather than providers. These contracts prohibit health care providers from offering prices that are lower to other insurers, limiting insurers’ abilities to compete against each other. Rather than working to continually provide a better insurance experience, dominant insurers exploit their dominance to ensure that competitors cannot provide a better, more affordable plan to patients.

Another contract provision with anti-competitive effects not included in NASHP’s model legislation is known as exclusive contracting.73 Under these contracts, insurers are prohibited from including other, competing providers in their networks. This is particularly concerning when used by large health systems, as insurers are torn between including a large hospital that can provide many services and other high-quality health providers for more specialized services.

Together, these contract provisions all represent barriers to advancing health equity. First, marginalized communities are disproportionately burdened by unaffordable health care. By driving up the cost of care, these provisions will put more care out of reach of patients of color and low-income patients. Second, rather than allowing competition to ensure that high-quality providers are rewarded by networks, exclusive contracts can push patients toward worse providers, even if other providers may be more appropriate. One example where this could be especially dire is pregnancy care—Black women and other birthing people of color will bear the brunt of providers who are not prepared to offer effective, culturally competent pregnancy care. In addition, these contract provisions can also undermine trust in the system for patients, as it becomes clear that the contract basis is more about power than about quality of care and patient relationships.

Conclusion: Reining in provider consolidation is crucial and can advance health equity

Health care consolidation is a serious barrier to advancing accessible, affordable, equitable health care, especially for marginalized communities. Concentration of health care markets drives up prices without improving the quality of care, and it reduces patients’ ability to access care even when they can afford it. States have a vested interest in addressing the negative impacts of provider consolidation, and they have many tools to do so while centering health equity.

States should begin by ensuring their merger review laws empower the attorney general (or other state official) to intervene in a wider variety of transactions, and they should intentionally build an equity review into these processes including by establishing accountability for advancing equity, and explicitly including an equity lens as part of merger review and enforcement authority. States will also need to take steps to address the reality that much of the health care system is already highly concentrated, including by requiring regular reporting on prices, access, and outcomes and reforming community benefit and hospital contracting practices.

Notes

  1. Matthew McGough et al., “How Has U.S. Spending on Healthcare Changed over Time?” Peterson-KFF Health System Tracker, December 15, 2023, https://www.healthsystemtracker.org/chart-collection/u-s-spending-healthcare-changed-time/; Imani Telesford et al., “How Does the Quality of the U.S. Health System Compare to Other Countries?” Peterson-KFF Health System Tracker, October 24, 2023, https://www.healthsystemtracker.org/chart-collection/quality-u-s-healthcare-system-compare-countries/.
  2. For the first report in the series, see Tara Oakman and Thomas Waldrop, “Cost-Growth Benchmarks Can Make Health Care More Affordable and Equitable,” The Century Foundation, December 3, 2023, https://tcf.org/content/report/cost-growth-benchmarks-can-make-health-care-more-affordable-and-equitable/.
  3.  Karyn Schwartz et al., “What We Know About Provider Consolidation,” Kaiser Family Foundation, September 2, 2020, https://www.kff.org/health-costs/issue-brief/what-we-know-about-provider-consolidation/.
  4. Jodi L. Liu et al., Environmental Scan on Consolidation Trends and Impacts in Health Care Markets (Santa Monica, Calif.: RAND Corporation, 2022), https://doi.org/10.7249/rra1820-1.
  5. Hoag Levins, “Hospital Consolidation Continues to Boost Costs, Narrow Access, and Impact Care Quality,” University of Pennsylvania Leonard Davis Institute of Health Economics, January 19, 2023, https://ldi.upenn.edu/our-work/research-updates/hospital-consolidation-continues-to-boost-costs-narrow-access-and-impact-care-quality/.
  6. Ron Southwick, “Hospital Mergers Continue Upward Trend in 3rd Quarter,” Chief Healthcare Executive, October 16, 2023, https://www.chiefhealthcareexecutive.com/view/hospital-mergers-continue-upward-trend-in-3rd-quarter.
  7.  “Updated Physician Practice Acquisition Study: National and Regional Changes in Physician Employment 2012-2018,” Physicians Advocacy Institute, February 2019, https://www.physiciansadvocacyinstitute.org/Portals/0/assets/docs/021919-Avalere-PAI-Physician-Employment-Trends-Study-2018-Update.pdf?ver=2019-02-19-162735-117; “COVID-19’s Impact On Acquisitions of Physician Practices and Physician Employment 2019-2021,” Physicians Advocacy Institute, April 2022, http://www.physiciansadvocacyinstitute.org/Portals/0/assets/docs/PAI-Research/PAI Avalere Physician Employment Trends Study 2019-21 Final.pdf.
  8. Erin C. Fuse Brown, “State Policies to Address Vertical Consolidation in Health Care,” National Academy for State Health Policy, August 7, 2020, https://nashp.org/state-policies-to-address-vertical-consolidation-in-health-care/; Nathan Eddy, “Nearly 70% of U.S. physicians are employed by hospitals or corporate entities,” Healthcare Finance, July 13, 2021, https://www.healthcarefinancenews.com/news/nearly-70-us-physicians-are-employed-hospitals-or-corporate-entities.
  9. Liu et al., Environmental Scan on Consolidation Trends and Impacts in Health Care Markets.
  10. See, for example, “Hospital Concentration Index: An Analysis of U.S. Hospital Market Concentration,” Health Care Cost Institute, https://healthcostinstitute.org/hcci-originals/hmi-interactive#HMI-Concentration-Index.
  11. Brent D. Fulton, “Health Care Market Concentration Trends in the United States: Evidence and Policy Responses,” Health Affairs 36, no. 9 (September 2017): 1530–38, https://doi.org/10.1377/hlthaff.2017.0556.
  12. Aditi Sen, “Hospital Concentration Index,” Health Care Cost Institute, June 2023, https://healthcostinstitute.org/hcci-originals/hmi-interactive#HMI-Concentration-Index.
  13. Brett Kelman and Samantha Liss, “These Appalachia Hospitals Made Big Promises to Gain a Monopoly. They’re Failing to Deliver,” USA Today, September 29, 2023, https://www.usatoday.com/story/news/nation/2023/09/29/ballad-health-hospitals-fall-short-quality-and-charity-care/70975091007/.
  14. Ibid.
  15. Fulton, “Health Care Market Concentration Trends in the United States: Evidence and Policy Responses.”
  16. Susan Dentzer, “Susan Dentzer: Is Consolidation in Healthcare the Work of Modern-Day Robber Barons—or the Result of Overdue Reengineering?” Healthcare Financial Management Association, October 2, 2023, https://www.hfma.org/finance-and-business-strategy/healthcare-business-trends/is-consolidation-in-healthcare-the-work-of-modern-day-robber-barons-or-the-result-of-overdue-reengineering-2/; Paul B. Ginsburg, “Health Care Market Consolidations: Impacts on Costs, Quality and Access,” The Brookings Institution, March 16, 2016, https://www.brookings.edu/articles/health-care-market-consolidations-impacts-on-costs-quality-and-access/.
  17.  “Hospital Vitals: Financial and Operational Trends,” Syntellis, March 2023, https://www.syntellis.com/sites/default/files/2023-03/AHA%20Q2_Feb%202023.pdf.
  18.  Cheryl L. Damberg, Health Care Consolidation: The Changing Landscape of the U.S. Health Care System (Santa Monica, Calif.: RAND Corporation, 2023, https://doi.org/10.7249/cta2770-1.
  19. Jane M. Zhu and Zirui Song, “The Growth of Private Equity in US Health Care: Impact and Outlook,” National Institute for Health Care Management, May 17, 2023, https://nihcm.org/publications/the-growth-of-private-equity-in-us-health-care-impact-and-outlook.
  20.  Robert Seifert, “Doctored by Wall Street: Private Equity Bodes Ill for Health Care,” Americans for Financial Reform Education Fund, June 2023, https://ourfinancialsecurity.org/wp-content/uploads/2023/07/AFREF-Doctored-by-Wall-Street-COMPANION-final.pdf.
  21. Leemore Dafny, Kate Ho, and Robin S. Lee, “The Price Effects of Cross‐market Mergers: Theory and Evidence from the Hospital Industry,” The RAND Journal of Economics 50, no. 2 (April 10, 2019): 286–325, https://doi.org/10.1111/1756-2171.12270.
  22. Erin C. Fuse Brown, “State Policies to Address Vertical Consolidation in Health Care.”
  23. “The Impact of Hospital Consolidation on Medical Costs,” National Council on Compensation Insurance, July 11, 2018, https://www.ncci.com/Articles/Pages/II_Insights_QEB_Impact-of-Hospital-Consolidation-on-Medical-Costs.aspx#.
  24. M. Susan Ridgley, “Does Vertical Integration Improve or Imperil U.S. Health Care?” RAND Corporation, November 16, 2021, https://www.rand.org/pubs/commentary/2021/11/does-vertical-integration-improve-or-imperil-us-health.html; Liu et al., Environmental Scan on Consolidation Trends and Impacts in Health Care Markets; Nancy D. Beaulieu et al., “Changes in Quality of Care after Hospital Mergers and Acquisitions,” New England Journal of Medicine 382, no. 1 (2020): 51–59, https://doi.org/10.1056/nejmsa1901383.
  25. Robert Seifert, “Doctored by Wall Street: Private Equity Bodes Ill for Health Care.”
  26. Miranda Santillo et al., “Communities of Color Disproportionally Suffer from Medical Debt,” Urban Institute, October 14, 2022, https://www.urban.org/urban-wire/communities-color-disproportionally-suffer-medical-debt; Janette Dill and Mignon Duffy, “Structural Racism and Black Women’s Employment in the US Health Care Sector,” Health Affairs 41, no. 2 (February 2022): 265–72, https://doi.org/10.1377/hlthaff.2021.01400.
  27. Hoag Levins, “Hospital Consolidation Continues to Boost Costs, Narrow Access, and Impact Care Quality.”
  28. Shabab Ahmed Mirza and Caitlin Rooney, “Discrimination Prevents LGBTQ People from Accessing Health Care,” Center for American Progress, January 18, 2018, https://www.americanprogress.org/article/discrimination-prevents-lgbtq-people-accessing-health-care/.
  29. Levins, “Hospital Consolidation Continues to Boost Costs, Narrow Access, and Impact Care Quality.”
  30. Rachel Treisman, “Millions of Americans Are Losing Access to Maternal Care. Here’s What Can Be Done,” National Public Radio, October 12, 2022, https://www.npr.org/2022/10/12/1128335563/maternity-care-deserts-march-of-dimes-report; Christina Brigance et al., “Nowhere to Go: Maternity Care Deserts across the U.S.,” March of Dimes, 2022, https://www.marchofdimes.org/maternity-care-deserts-report.
  31. Peiyin Hung et al., “Why Are Obstetric Units in Rural Hospitals Closing Their Doors?” Health Services Research 51, no. 4 (January 25, 2016): 1546–60, https://doi.org/10.1111/1475-6773.12441.
  32. Rachel Treisman, “Millions of Americans Are Losing Access to Maternal Care. Here’s What Can Be Done.”
  33. Tess Solomon et al., “Bigger and Bigger: The Growth of Catholic Health Systems,” Community Catalyst, February 8, 2020, https://communitycatalyst.org/resource/bigger-and-bigger-the-growth-of-catholic-health-systems/.
  34. Morgan Casey, “Catholic Hospital Mergers Threaten Access to Reproductive Care—Even in Abortion ‘Safe Havens,’” News21, August 12, 2023, https://americaafterroe.news21.com/stories/catholic-hospital-erds-threaten-reproductive-abortion-safe-havens/.
  35. Jocelyn M. Wascher, Debra B. Stulberg, and Lori R. Freedman, “Restrictions on Reproductive Care at Catholic Hospitals: A Qualitative Study of Patient Experiences and Perspectives,” AJOB Empirical Bioethics 11, no. 4 (September 17, 2020): 257–67, https://doi.org/10.1080/23294515.2020.1817173.
  36. Tara Oakman and Vina Smith-Ramakrishnan, “The Largest Health Care Strike in U.S. History Is Underway,” The Century Foundation, October 6, 2023, https://tcf.org/content/commentary/the-largest-health-care-strike-in-u-s-history-is-underway/.
  37. Of note, the relationship can also go both ways. Workforce shortages can also help to incentivize consolidation to help to address shortages across systems.
  38. Tara Oakman and Emily McGrath, “Noncompete Agreements for the Health Care Workforce Put Profits over Patients,” The Century Foundation, August 14, 2023, https://tcf.org/content/commentary/noncompete-agreements-for-the-health-care-workforce-put-profits-over-patients/.
  39. Elena Prager and Matthew Schmitt, “Employer Consolidation and Wages: Evidence from Hospitals,” SSRN Electronic Journal, May 7, 2019, https://doi.org/10.2139/ssrn.3391889.
  40. “FTC Policy Perspectives on Certificates of Public Advantage,” Federal Trade Commission, August 15, 2022, https://www.ftc.gov/system/files/ftc_gov/pdf/COPA_Policy_Paper.pdf.
  41. Elena Prager and Matt Schmitt, “Employer Consolidation and Wages: Evidence from Hospitals,” American Economic Review 111, no. 2 (2021): 397–427, https://doi.org/10.1257/aer.20190690.
  42. Kelsey M. Owsley and Richard C. Lindrooth, “Understanding the Relationship between Nonprofit Hospital Community Benefit Spending and System Membership: An Analysis of Independent Hospital Acquisitions,” Journal of Health Economics 86 (October 25, 2022): 102696, https://doi.org/10.1016/j.jhealeco.2022.102696.
  43. Jamie Godwin, Zachary Levinson, and Scott Hulver, “The Estimated Value of Tax Exemption for Nonprofit Hospitals Was About $28 Billion in 2020,” Kaiser Family Foundation, March 14, 2023, https://www.kff.org/health-costs/issue-brief/the-estimated-value-of-tax-exemption-for-nonprofit-hospitals-was-about-28-billion-in-2020/.
  44. Hart-Scott-Rodino Antitrust Improvements Act of 1976, 15 U.S.C. § 18a (1976); “HSR Threshold Adjustments and Reportability for 2023,” Federal Trade Commission, February 16, 2023, https://www.ftc.gov/enforcement/competition-matters/2023/02/hsr-threshold-adjustments-reportability-2023.
  45. “A Tool for States to Address Health Care Consolidation: Improved Oversight of Health Care Provider Mergers,” National Academy for State Health Policy, November 12, 2021, https://nashp.org/a-tool-for-states-to-address-health-care-consolidation-improved-oversight-of-health-care-provider-mergers/.
  46. Ibid.
  47. Scott Hulver and Zachary Levinson, “Understanding the Role of the FTC, DOJ, and States in Challenging Anticompetitive Practices Of Hospitals and Other Health Care Providers,” Kaiser Family Foundation, August 7, 2023, https://www.kff.org/health-costs/issue-brief/understanding-the-role-of-the-ftc-doj-and-states-in-challenging-anticompetitive-practices-of-hospitals-and-other-health-care-providers/.
  48. “Justice Department and Federal Trade Commission Release 2023 Merger Guidelines,” United States Department of Justice Office of Public Affairs, December 18, 2023, https://www.justice.gov/opa/pr/justice-department-and-federal-trade-commission-release-2023-merger-guidelines.
  49. “Merger Review,” The Source on HealthCare Price and Competition, accessed December 18, 2023, https://sourceonhealthcare.org/market-consolidation/merger-review/.
  50. “Healthcare Transactions Notification Requirement,” Office of the Attorney General, accessed December 18, 2023, https://www.atg.wa.gov/healthcare-transactions-notification-requirement.
  51. Ibid.
  52. “A Tool for States to Address Health Care Consolidation: Improved Oversight of Health Care Provider Mergers,” National Academy for State Health Policy.
  53. Debra Lipson et al., “The Massachusetts Health Care Cost Growth Benchmark and Accountability Mechanisms: Stakeholder Perspectives,” Milbank Memorial Fund, October 31, 2022, https://www.milbank.org/publications/the-massachusetts-health-care-cost-growth-benchmark-and-accountability-mechanisms-stakeholder-perspectives/.
  54. Johanna Butler, “Massachusetts Health Policy Commission Takes Steps to Hold High-Cost Health System Accountable,” National Academy for State Health Policy, February 14, 2023, https://nashp.org/massachusetts-health-policy-commission-takes-steps-to-hold-high-cost-health-system-accountable/.
  55. Katie Lannan, “Mass General Brigham Pulls Suburban Expansion Plan,” WBUR, April 4, 2022, https://www.wbur.org/news/2022/04/04/mass-general-brigham-pulls-suburban-expansion-plan.
  56. Tara Oakman and Thomas Waldrop, “Cost-Growth Benchmarks Can Make Health Care More Affordable and Equitable,” The Century Foundation, December 5, 2023, https://tcf.org/content/report/cost-growth-benchmarks-can-make-health-care-more-affordable-and-equitable/.
  57. General Statutes of Connecticut, Title 368z, Section 19a-639.
  58. “H.B. 2362,” 81st Oregon Legislative Assembly, 2021 Regular Session.
  59. Erica Heartquist, “Transaction Notices and Reviews,” Oregon Health Authority Office of Health Policy, accessed December 18, 2023, https://www.oregon.gov/oha/HPA/HP/Pages/HCMO-transaction-notices-and-reviews.aspx.
  60. “Health Equity Impact Assessment,” New York State Department of Health, October 2023, https://www.health.ny.gov/community/health_equity/impact_assessment.htm.
  61. Lois Uttley, “Introducing Health Equity Analysis into State Review of Most Proposed Health Facility Changes,” Milbank Memorial Fund, November 9, 2023, https://www.milbank.org/2023/11/introducing-health-equity-analysis-into-state-review-of-most-proposed-health-facility-changes/.
  62. “Adventist-MCMC Transaction Review,” Oregon Health Authority, April 13, 2023, https://www.oregon.gov/oha/HPA/HP/HCMOPageDocs/2023-04-13-006-Adventist-MCMC-Exec-Summary.pdf.
  63. “Amazon-One Medical Transaction Review,” Oregon Health Authority, December 28, 2022, https://www.oregon.gov/oha/HPA/HP/HCMOPageDocs/2022-12-23-005-Amazon-OneMedical-30-Day-Report.pdf.
  64. Amy Y. Gu, “Oregon Law to Enhance Oversight of Healthcare Mergers & Acquisitions Faces Legal Challenge,” The Source on HealthCare Price and Competition, November 15, 2023, https://sourceonhealthcare.org/oregon-law-to-enhance-oversight-of-healthcare-mergers-acquisitions-faces-legal-challenge/.
  65. Joshua Cohen, “U.S. Healthcare Markets Lack Transparency; Stakeholders Want To Keep It That Way Forbes, December 7, 2020, https://www.forbes.com/sites/joshuacohen/2020/12/07/us-healthcare-markets-lack-transparency-stakeholders-want-to-keep-it-that-way/.
  66. Jaime S. King et al., “Preventing Anticompetitive Healthcare Consolidation: Lessons from Five States,” The Source on Healthcare Price and Competition, June 15, 2020, https://sourceonhealthcare.org/profile/preventing-anticompetitive-healthcare-consolidation-lessons-from-five-states/.
  67. “Fast Facts on U.S. Hospitals, 2023,” American Hospital Association, May 2023, https://www.aha.org/statistics/fast-facts-us-hospitals.
  68. Zachary Levinson, Scott Hulver, and Tricia Neuman, “Hospital Charity Care: How It Works and Why It Matters,” Kaiser Family Foundation, November 3, 2022, https://www.kff.org/health-costs/issue-brief/hospital-charity-care-how-it-works-and-why-it-matters/.
  69. Allie Atkeson and Elinor Higgins, “How States Can Hold Hospitals Accountable for Their Community Benefit Expenditures,” National Academy for State Health Policy, March 15, 2021, https://nashp.org/how-states-can-hold-hospitals-accountable-for-their-community-benefit-expenditures/.
  70. Sarah A. Carlson, Julia Conelley, and William Soller, “Community Benefit and Charity Care Obligations at Montana Nonprofit Hospitals,” Montana Department of Public Health and Human Services, September 2020, https://leg.mt.gov/content/Committees/Administration/audit/2019-20/Meetings/Oct-2020/18P-07.pdf; Katheryn Houghton, “Montana’s Tax-Exempt Hospitals Oppose Increased Oversight by State Officials,” KFF Health News, February 13, 2023, https://kffhealthnews.org/news/article/montanas-tax-exempt-hospitals-oppose-increased-oversight-by-state-officials/.
  71. Katherin L. Gudiksen, Erin C. Fuse Brown, and Johanna Butler, “A Tool for States to Address Health Care Consolidation: Prohibiting Anticompetitive Health Plan Contracts,” National Academy for State Health Policy, April 12, 2021, https://nashp.org/a-tool-for-states-to-address-health-care-consolidation-prohibiting-anticompetitive-health-plan-contracts/.
  72. A fourth contract type, gag clauses, was prohibited by the Consolidated Appropriations Act of 2021.
  73. Scott Hulver and Zachary Levinson, “Understanding the Role of the FTC, DOJ, and States in Challenging Anticompetitive Practices Of Hospitals and Other Health Care Providers.”

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