Sunday, September 3, 2017

Health care continues to run amok: the UNC/Carolinas HealthCare merger

Health care continues to run amok:  the UNC/Carolinas HealthCare merger

For the past twenty years or more, hospitals, clinics, and medical practices have been merging.  Recently UNC Hospitals entered into an agreement to merge with Carolinas HealthCare System of Charlotte.[1]  The merger will create a health care behemoth in North Carolina. As with most of these announcements, health care executives are promising better and more comprehensive care as well as lower costs. UNC and Carolinas HealthCare already control dozens of hospitals and hundreds of specialists, so it’s hard to imagine that patients in either system will enjoy better care.  In my view, this transaction is yet another example of powerful institutions protecting their empires at the expense of consumers. 

I began my professional career in health care working for Paul Ginsburg, a health economist at Duke (now at the Brookings Institution) and Brian Biles, a policy analyst at the Department of Health Education and Welfare (now professor emeritus as George Washington University) working on health care costs.  While four decades have passed, their mission to contain health inflation has not been realized.  It is not for want of effort, analysis, or intellect.  Rather hospitals, pharmaceutical companies, medical device companies, and insurers have amassed the financial and political resources to defeat or undermine almost every effort to rein in costs.

In North Carolina reimbursement for health care services is largely driven by negotiations between Blue Cross Blue Shield (the only insurer in all North Carolina counties), Medicare/Medicaid, and about half a dozen huge health care providers, including UNC and Carolinas HealthCare.  Meanwhile only the largest employers have the power and scale to either self-insure or negotiate discounts for premiums, deductibles, and co-pays for their employees.  These negotiations do nothing to contain health care costs.  Rather they ensure that the brunt of health care inflation will fall on the most vulnerable consumers.  As the big providers like UNC and Carolinas HealthCare protect their fiefdoms and large employers guard their bottom lines, small businesses and individuals bear the brunt of escalating health care costs.

The proponents of the UNC/Carolinas Health Care merger claim that the deal will not affect competition because their respective markets don’t overlap.  This is a specious argument.  Even if the two health providers operated in overlapping markets, hospital services have never been driven by consumer competition.  More importantly as I’ve already discussed, those privileged institutions that have the biggest seats at the negotiating table will drive the economics of health care.  In our local market, UNC and Duke have already used their power over Blue Cross Blue Shield to force consumers to choose one or the other provider.

North Carolina’s legislature will have a chance to look at this deal since UNC is a public entity.  The Federal Trade Commission will also weigh in.  I expect a few legislators to raise concerns, but in the end our radical Republicans and the Trump Administration will probably bless this deal.  The big will get bigger, the rich will get richer, premiums will rise, and the average consumer will lose again.