We are beginning the end game of healthcare consolidation. Over the past decade, we’ve seen a burst of activity in healthcare mergers. At this point, most of the smaller, attractive provider organizations have been acquired by the bigger players. The current landscape is dominated by larger healthcare delivery entities, and in their search for acquisitions they are coming up with other large players. Last year, we saw more billion dollar plus deals than in the last six years.

The remaining players are now looking for partners that will complement their business, that also won’t provoke pushback from the Department of Justice (DOJ) and the Federal Trade Commission (FTC)—federal agencies with jurisdiction over antitrust matters.

One of the biggest mergers before us involves Advocate Aurora Health (Aurora) and Atrium Health (Atrium) who have planned to merge into a six-state, 67-hospital nonprofit system with estimated revenues of over $27 billion, and nearly 150,000 employees.

It appears both Aurora and Atrium have learned from hard experience what flies under the radar for antitrust regulators. This merger, what’s called “cross market,” is assuredly a safe move in their view. A cross market merger stitches together often adjacent and non-competitive geographies under one managing organization.

This continuing consolidation is leading us to a scenario I predicted over a decade ago. That is, an oligopoly of healthcare provider organizations (HCPs) that control, through their very size and geographic reach, the majority of care in the country. That is the end game of healthcare consolidation, unless the FTC changes the way it looks at such mergers.

The lens through which regulators evaluate a potential merger focuses mostly on the potential for monopoly. That’s why the FTC is most likely to challenge a merger in which both parties control share in the same market. The result of such a merger is to leave the merged entity with a majority share in a market with limited competition – an invitation to raise prices for consumers with limited choices. For that same reason, mergers in which the merging parties do business in geographically separate, non-overlapping markets typically fly below the FTC’s radar.

The FTC has never taken legal action to block a merger between hospital systems that operate in distinct markets, known as a cross-market merger. That simple fact explains why Aurora and Atrium have advanced a deal of this magnitude.

DOJ merger guidelines acknowledge the fact that consolidation of buyers – as between scrap metal buyers for example – can create adverse effects comparable to enhancement of market power by sellers, called monopsony. Yet these agencies seem to miss the point that healthcare systems are both sellers and buyers. It’s possible to avoid a seller monopoly, and still wind up with a buyer monopsony.

Consolidated healthcare systems – even cross market systems – don’t have to raise their prices to have anticompetitive effects. They can leverage their size by using the volume of their purchases to extract discounts and other concessions from payers, national suppliers, and from labor pools.

National payers that cross state lines and deal with these merged super systems are then under the gun to deliver discounts and other contractual concessions that would otherwise pass through to consumers as savings. Instead, these incremental revenues pass to the system as bottom-line margin.

Both Aurora and Atrium have separately faced class action suits in the past, accused of suppressing competition through anticompetitive behavior. They’ve been accused of forcing commercial employers’ plans to include all or none of their respective facilities and networks; of blocking insurers and employers from steering patients to lower cost/higher quality options; and suppressing innovative insurance products that would reduce costs for employers. These practices can occur without overtly raising prices for consumers, and yet they wind up paying more than they otherwise would have.

Another clue that these deals need a different level of scrutiny comes directly from the rhetoric these companies use to describe the benefits the new merged entity will bring. Their public statements are illuminating. Company press releases expand at length on how many patients they’ll serve, how many sites they’ll operate, job growth, how much economic benefit the merger will bring to affected communities—but next to nothing about the important things: lowering the cost of care or raising the quality of care, delivering more value for consumers, or creating a better patient experience. That these issues are unaddressed speaks volumes.

The Advocate-Aurora deal signals a decision point for the FTC. These organizations have successfully exploited a loophole in the FTC’s operational definition of anti-competitive impact, which focuses too narrowly on prices set by sellers. What has flown under their radar is the monopsony power to extract price concessions as buyers that healthcare systems wield, even in cross-market deals. Both merging organizations have used this strategy on a smaller scale to get to their respective values today.

So, the question becomes: does the FTC draw a line in the sand here, or do they open the door to the final act of healthcare consolidation that creates a national oligopoly of providers that perhaps even challenges the power of CMS? At what point do we say, enough? If not here, then where?

The FTC needs to take a different perspective and develop ways to push back on these mergers. If not, then there’s no reason to push back on any cross-market merger. And it’s just a matter of time before the existing healthcare systems work out a puzzle piece approach to getting bigger and bigger without having overlapping or competitive markets. On this trajectory, the number of major systems will winnow down to just a handful, leaving employers, patients and consumers facing a nearly monolithic healthcare system that is too big to fail, and too big to care.

If the goal is to protect the interest of consumers, then the FTC needs to take a fresh look at their regulatory framework for evaluating healthcare mergers, because the current approach has left consumers down.

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