Tackling health care consolidation to build a better health system

The U.S. health care system has been increasingly dominated by monopolies, due to consolidation of health care providers, insurers, hospitals, electronic health record systems, medical supplies, and other parts of the health care sector.

What has been the impact of this consolidation, and what can we do to reverse the harm from health care monopolies? At the second in an Open Markets Institute webinar series, health care experts outlined some of the key steps forward. Watch the webinar in the video below!

Holding hospitals accountable

Shannon Brownlee, Senior Vice President of the Lown Institute, started off the conversation by sharing why the Lown Institute started the Lown Hospitals Index. One big result of health care consolidation is that nonprofit hospitals have started acting more and more like for-profit corporations, charging higher prices as hospitals gain power in price negotiations with insurers.

“The promise was synergy and economies of scale, but what we got was the clash of titans.”

Shannon Brownlee

This consolidation did not come out of nowhere; hospitals are responding to the economic and regulatory messages they get. “The system is set up to have them do exactly what they are doing– consolidate, demand higher prices, have C-suite take more revenue,” said Brownlee.

Kavita Patel, practicing primary care physician and nonresident fellow at the Brookings Institution agreed with Brownlee that the current system encourages consolidation and higher prices. Patel explained how the financing could lead change, if we shift from a fee-for-service model to one in which hospitals assume the risk for patients’ health.

Change what you measure and build power

Brownlee explained the Lown Institute and Right Care Alliance theory of change for hospitals in a 2-step plan: 1) Change what you measure and make that public 2) Build grassroots power to hold hospitals accountable. “We can’t do this without a lot of people,” said Brownlee.

The first step of the plan is where the Lown Hospitals Index comes in. Hospitals deal with a lot of regulation, but they are not held accountable for how much they pay executives, how much they spend on community benefits, or how often they provide low-value services. Most hospital rankings focus only on patient outcomes, are aimed at consumers, and are generally used by hospitals for marketing purposes. The Lown Index changes the conversation by measuring hospital performance on civic leadership and avoiding overuse as well as outcomes, and by making this information free and public.

“We need to imagine what a different hospital system would look like,” said Brownlee. “It is possible to have hospitals that can treat all people without overuse.”

Recognize the power problem

Lisa Frank, Executive Vice President of SEIU Health Care in Western PA, illustrated how extreme the problem of pay inequity in hospital systems has become. University of Pittsburgh Medical Center (UPMC) is the largest employer in Pennsylvania, and in 16 other states, health care companies are also the largest employers.

When there is only one place caregivers can work, they have less ability to negotiate wages, which then brings down wages in the whole community. Doctors are pressured to sign non-compete clauses, and are often afraid to speak out when there are safety issue or labor issues at the hospital, because they have nowhere else to work if they get fired.

“Many physicians are scared to be vocal with many of our concerns about transparency and financing of our organization,” said Patel. “You can be told you are in violation of contract, not a team player.”

“If the people who work in the kitchen at UPMC started working during the Civil War, they would still have to work another century to make as much as the CEO made in a year.”

Lisa Frank, Executive VP, SEIU Western PA

The power of large hospital systems also threatens communities. When the hospital wants to expand and the community wants a community benefits agreement, sometimes the hospital threatens to leave. Frank calls this the “Pack up your toys and go home” power.

Because the hospital controls wages, and income has an effect on health, the hospital itself is a social determinant of health, says Frank. At UPMC, a nonprofit health system, wage inequity has become extreme. “If the people who work in the kitchen at UPMC started working during the Civil War, they would still have to work another century to make as much as the CEO made in a year,” said Frank.

Udit Thakur, research associate at the Open Markets Institute, concurred. As a nonprofit, UPMC is “an institution of public privileges but governed in a private manner,” he said. The hospital is “accountable to private board of governors, not accountable to the community around it.”