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Are Medical Monopolies Cause for Concern?

Just a few short years ago, the COVID-19 pandemic wreaked havoc across the globe, leaving economies in tatters, claiming millions of lives, and fundamentally altering the world as we knew it. 

Yet, scarcely after the dust settled from that crisis, virologists are now raising urgent concerns.

The specter of the bird flu looms large as it breaches the species barrier, with an alarming number of cows falling victim, and a recent human transmission case being confirmed.

With a nearly 50% mortality rate according to Yale Medicine, the bird flu is making global headlines.

In the face of these developments, the question begs: how concerned should we be?

Tune in to the latest episode of CareTalk, featuring discussions with David E. Williams and John Driscoll, alongside guest Rick Bright, Former Head of the Biomedical Advanced Research and Development Authority, as they delve into the escalating fears surrounding a potential new pandemic and the tangible threats posed by the bird flu.

Episode Transcript:

Are Medical Monopolies Cause for Concern?

David E. Williams: John sounds like a million dollars. Now, the thing is, a million dollars isn't what it once was. So certainly not in healthcare. Yeah. You know why? It's, we're both happy here. It's like a good, it's a good area of the country and you always like my, my lighting. I think acoustics are better in this room.

The two hospital systems in Terre Haute, Indiana are merging, creating a local monopoly.

Supporters say it's the best way to maintain the health of the local healthcare system, but opponents fear higher costs and reduced services. Who's right? Transcribed And what are the implications for the rest of the country?

Welcome to CareTalk, America's home for incisive debate about healthcare business and policy. I'm David Williams, President of Health Business Group.

Jon Driscoll: And I'm John Driscoll, Senior Advisor at Walgreens.

David E. Williams: Hey, come join the ever-growing CareTalk community on LinkedIn, where you can dig deep into healthcare business and policy topics, access CareTalk content, and interact with the hosts and some of our guests.

And please be sure to leave us a rating on Apple or Spotify while you're at it. David,

Jon Driscoll: Terre Haute, where is it? Why are we talking about a regional dispute about hospital beds?

David E. Williams: Well, John, it's in Indiana. I couldn't tell you really more where, where, I know where Indiana is, but I don't know where Terre Haute is within Indiana.

But it's a, it's a, it's a middle, it's a sort of a smaller city, John. It's gone to about 58, 000 people. The reason we're talking about it, there's two hospitals there. It's kind of a tale of one city, a tale of two hospitals in one city. Fairly typical. You've got Union Hospital. Ah,

Jon Driscoll: Dickensian reference.

David E. Williams: Well, I don't want to be too negative about it, but you've got two hospitals, and this place can only really support one, and so they're merging, and it's creating a crisis.

Story I read about it actually talked about how there's, you know, it's train tracks that goes down, big freight trains going through Terre Haute, and sometimes you've got to wait on one side of the track. Well, now you're going to have to wait on one side of the track, To get over to the, to the hospital.

So it's, it's that type of thing, John. And it's, I think typifies what is about the

Jon Driscoll: most, you know, kind of coastal deprecating comment about the great and powerful Midwest that I've heard, yeah, they cut like railroads and you have to stay on one side, like stop. The reason I think we're talking about this, and this is super important is because There's been a title, a series of slow, consistent waves where the tidal, tidal pull towards consolidation in hospitals, docks and, and ancillary services has led to potentially, it's supposed to have led to efficiency.

But it's definitely led to higher prices in general. And so now after 20 years of study, where every study has seemingly suggested that, or actually proven based on the facts that consolidation leads to higher prices and unclear impacts on quality, that now there's a regulatory burst of interest after I think it's 1500 hospital consolidations over the last 30 years.

Yeah. That's why I think this is topical regardless of which side of the railroad tracks you're on.

David E. Williams: Okay, John. I was going to stand right in the middle and stop that train from coming, but maybe not. It can't stop progress. John, it's interesting. You know, a healthcare is complicated, but think about this in terms of something else.

What if you were in a town and there were two grocery stores. And they were merging and one was closing be pretty clear It's pretty likely prices are going to go up and service is going to go down and the customer service manager is going to give Even less of a darn about what you may have to say than before So that is what I would expect in general with hospitals, too.


Jon Driscoll: Well, it's not just hospitals monopolies Historically are much more focused on increasing price than increasing value and the whole premise of the Federal Trade Commission And the and the and the in the you know You Anti trust Act, the Sherman Anti Trust Act, the trust, antitrust acts that were passed as part of the progressive movement in the early 20th century was to make the point that competition is good.

And the reason that the, the, the only reason to justify. Significant consolidation, is because it would deliver a lower price for the consumer and that's the whole premise of why We've alleged we've tolerated these monopolies in technology because they have created lower and lower prices, although that's a totally different issue

David E. Williams: Yeah,

Jon Driscoll: but right now it across cities in America 90 percent of all of the cities have substantial if not complete consolidation of hospitals and what that means is those hospitals

You Control pricing power, and they use that potentially to keep prices higher than the otherwise would be if the hospitals would have to compete.

So, David, why, why would we allow any hospitals to consolidate or merge, if you will, if history of the last 20 years. We got plenty of evidence. Yeah. Is the cost to

David E. Williams: stay up or go up? So people are worried about whether the hospitals can be viable and also hospitals are powerful local economic interests or statewide interests.

In this case, there's a couple of things that you know, raise some flags that the journalists from Kaiser Health News have done a good job of collecting. So one, there's a quote from the union hospital that's driving the merger saying it's time to move. quote unquote beyond competition for the sake of the region.

It's also notable that they are the authors really of this law called COPA, which stands for certificate of Public Advantage Law. They're the authors of the law. This gets to your question, John, about why would we allow hospitals to merge? So FTC says, look, It's clear from the progressive era, as you said, from, you know, back in your early adulthood when they, when this progressive era was occurring that competition is good and monopolies are not very good, but they'll say, well, if we go beyond competition to say it, you know, what, where can we find things where you can, despite what the FTC says, you're going to have clear improvement in outcomes, access and quality, and if you convince people that that on the state level, then we allow it.

Jon Driscoll: Wait, wait, wait, wait. We have 20 years of experience here where there's been no increase, measurable increase in quality, but you raise it, you ran over your point, David, typically the, the most, I think, salient argument for the, on the part of the hospitals is we don't really have a good model for how to keep and grow our hospitals in America.

Now to hold for the moment, whether we should Do that and I'm sure you're going to take a pot shot or two at the hospital. No doubt hospitals are where tertiary care the most extensive care happens is where our Students actually get educated And it's where all the medical school needs a hospital It's where it's the clearest place in the country where there's a public health mandate You know hospitals have to serve anybody who walks in their doors

And so from a hospital CEO's perspective beyond the dreams of growth, they also have a really hard time making money or making a positive margin, which is the only way they stay in business.

So I think that the other challenge you've got is these essential And they were clearly essential during COVID. Public institutions don't have a clear public private way to succeed.

David E. Williams: Yeah. No, it's fair, John. I'll, I'll resist taking pot shots at the hospitals for the moment. This one has some interesting characteristics to it, John, as well, which is that a not for profit hospital in this case, Union, is taking over Terre Haute Regional Hospital, which is for profit.

Terre Haute Regional Hospital actually paid. Just over half a million dollars in county taxes in 2023. And so they become a nonprofit. Then theoretically those taxes go away. Now we'll go from COPA to, you know, pilot, like some sort of payment in lieu of taxes, nonetheless, those are more of a voluntary or negotiated kind of thing.

Jon Driscoll: That's a more, I think let's, let's, let's start, get out of the small ball, like who pays what taxes and like, so David, do you, I mean, this is a massive. Transition for hospitals and healthcare in general. I think we've gone from about 40 percent of all doctors being employed by hospitals to north of 60.

Now, we've got 90 again, almost every city has a consolidated hospital system. Including, including your own, the People's Republic of Massachusetts. Thank you, John. The, the, the, the, all of this transition has happened over the last, you know, 30 years. And it's really changed healthcare. I think it's changed healthcare.

It's changed the hospital and healthcare system profoundly. Do you see any benefits in all this consolidation?

David E. Williams: I'm not a big fan of consolidation, John. So there's a, there's a couple of things to look at. So one is the provider market consolidation is just grabbing. Most places just have, you know, one dominant hospital system, maybe, maybe two, then there's the other side of the coin who's looking into that.

Well, the biggest customers are the federal government and certainly they were prepared, you know, through Medicare in particular, to be able to hold their own against the hospitals.

But then there's the insurance side and you've got these the commercial insurance market. A lot of the. Insurance markets are consolidated too.

So as the insurers have bulked up, the hospitals have bulked up and you've just got you know, kind of a monopoly almost on both sides. So that's, that's not wonderful. I don't think that's great. I think what we need to look for though, is what are the options to increase the competitiveness of markets?

Because you see it, John, you're saying that, okay, in the tech markets as an example, you've got these big companies and they, they're dominant, but there's also the potential for startups. This is a healthy market for new, new companies to get into the market and do something innovative, which is usually where you see the innovation happen.

I would love to see it so that it's a little easier to get into the markets or maybe some other kinds of players besides the, you know, two big hospitals in this case and Terre Haute can actually participate. So you want

Jon Driscoll: an imaginary system where magically you're going to create some form of new hospital.

Is that what you're, I mean, that just sounds kind of like a, you know,

David E. Williams: I think, John, if we, I can't use this word on a family podcast. If I could have a, if I could have a magic wand sure. I would like to do that. What I am thinking about, there are some other, absent,

Jon Driscoll: absent the magic wand. Mr. Magician, what, what?

Take your top hat off and tell me what you do tomorrow.

David E. Williams: So. I would acknowledge that there are some other players, other kinds of players that are out there. So the insurers themselves have been getting into the provider business. So instead of saying, Hey, I'm just going to wait and pay for whatever I get charged.

So I can actually do this better. And so Optum would be an example, a unit of United. And Signal also has already has,

Jon Driscoll: I think, north of 50,000 doctors.

David E. Williams: So they, so that's one player that even if maybe Terre Haute can't support two big hospital systems, but Optum can certainly have a role there. You know, the own your own company that you advise Walgreens and others.

CVS notably have been getting involved. And if you think about competition, there's certainly a lot of competition among retailers, and they tend to be, you know, customer focused private equity firms. Dare I say the word when Senator Warren might be looking over me? I've also been playing a role in trying to get, you know, into the system.

So I think it's not just hospitals. There's a broader health system, and you can have other players besides those in the local market. I'd like to see some of those players.

Jon Driscoll: So, yeah, I think, I think you raise a really interesting point because if 60 plus percent of doctors are now employed by hospitals, maybe the way we actually can encourage competition is through value-based budgeting and then having the doctors compete, I think from my perspective, where the regulators have completely fallen down.

Is is on holding the merged or larger entities to any expectations on quality. So I guess my question, David, is do you think we could create a reimbursement system? You can't on on on unwind the clock here around consolidation. You can't fire the doctors or break up the hospitals, particularly given the fragile and somewhat uncertain financing environment for hospitals.

But could you see a healthcare reimbursement system? David. That'd be performance-oriented so that the hospital start competing on performance, lower readmissions, better HEDIS scores, or they get paid less.

David E. Williams: Yeah, it's hard to measure quality effectively in hospitals, which is one of the reasons when, when the researchers try to examine the impact of mergers on quality.

It's not so definite. You know, one way or the other on quality and cost. It is definite that the costs are higher. There are some things that could be done, though, that would make it so that you don't have to merge in order to be successful. As you said, it's hard to run a hospital. So if it makes sense to merge in order to, you know, have a financial return, then you'll do it.

There's some things like what we call site-neutralIndiana-specific payments. So you're paying for something to be done or an outcome rather than, hey, I pay more if it's at a hospital or a hospital. Yeah, just so folks understand,

Jon Driscoll: if you charge for the same procedure or be under Indiana-specific an outpatient, Doc office versus a, something that's affiliate or owned by the hospital, the prices can be 30 to a hundred percent more.

David E. Williams: Yeah.

Jon Driscoll: So site neutral would equalize that. But David, I think you're burying the lead. And do you really think it's that hard to measure? We've got all these quality measures, you know, the things like PETAS, which is about adherence to protocol. We could look at, you know, whether people are actually getting beta blockers post Yeah.

Surgery. We could l We could look at whether into dialysis. I mean, th That we could hold hospital, potentially hospitals and docs for, I mean, would that, you don't think that would somehow, we have a 4. 5 trillion, 4. 7, I guess, trillion dollar healthcare market where inflation is likely to go down everywhere else in American society, apparently, and it's still running hotter in healthcare than other areas.

Can't can't we see if we can at least get more from what we're paying?

David E. Williams: John, my concern as it relates to mergers that you're still going to have the situation where you've got these these two hospitals And they're sort of holding it over the head of the the mayor who's 27 years old, by the way Which I think is the age of your grandchildren and they say look hey, we can't we can't go it along alone So it's hard to stop the momentum for merger once it's done It's hard.

You can't undo it as you said and the accountability. Sure. It's good to try to do things But I think it's more kind of around around the margin. It is interesting, John, with these COPPA rules, this Certificate of Public Advantage, when they've allowed a merger that shouldn't have happened. Is

Jon Driscoll: that an Indiana specific thing?

Or is it?

David E. Williams: a Massachusetts thing? No, John. No, it's not a Massachusetts thing. It's, it's, it's, there's some other states that have it. North Carolina, Tennessee are a couple of examples that have had it and then have ended up, you know in the case of Tennessee actually repealed it. So in, so in Tennessee, what happened is they had COPA and they tried to put these restrictions in.

They said, okay, here's a merger and we'll, we'll have these requirements. But then guess what? Then they, they got rid of COPA. And so now the surviving entity doesn't actually have any requirements because there's no nobody to enforce it. So COPA is bad according to the FTC. I would agree. Well, the, the

Jon Driscoll: problem with COPA is that there's this federal state.

Conflict there where the federal government thinks that the state-basedpotshot rules on this that they've seen as the mandate or the responsibility The federal government to do it. So

David, I mean, are you struck by how? Extraordinarily bad the results are in terms of reducing costs. I mean Whether it's vertical mergers, where the hospitals are moving towards, let's say, by docks, or horizontal mergers, where they're kind of two hospitals, like in Terre Haute, are merging in the same city, basically do the same things.

And, you know, again, two, two hospitals doing the same things with two different administrative infrastructures can't seem to find a way, at least historically. Yeah. Even though they're, they've got, there's a lot of duplication at reducing costs. Even, you know, mergers across state lines appear to raise costs.

I mean, I think we're missing the point here.

David E. Williams: Yeah. John, have I been a good boy and I can take a potshot at hospitals now? Go for it. All right. So I think that part of the problem is just that we, you know, we're looking at hospitals as, as a, as a good thing. And we're, you know, whereas I consider that if, if you spend time in a hospital in general, it's, it's a failure and you want to prevent going to the hospital.

We're talking about prevention, wellness, prevention of readmissions. That's what we're talking about. And it would be better in a community if they can invest less in hospitals and more in health care. Prevention, wellness, and that includes things like taking, you know, an unused train track and making it into a bike path, better diet, exercise, education, primary care.

Who's going to pay

Jon Driscoll: for that? I mean, is it, are the merged hospitals going to pay for that? I mean, here you are saying, you know, people should, you know, Brush twice a day and eat their vegetables. I mean, like, who's going to pay for all these wonderful

David E. Williams: things? See, the thing, John, is that we are paying for it, but we're paying for it at the wrong end.

So primary care, which I think people agree makes sense, and they think about that as the healthcare system. It's like, you know, the fingers of one hand in terms of the percentage of spending. It's gone down, if anything. It's, it's actually literally gone down as a percentage.

So it went from five fingers

Jon Driscoll: to four,

David E. Williams: you know.

Jon Driscoll: The one thing that everyone agrees on. wishy-washy Spending on, on, on primary care as a percentage of the total healthcare dollars has gone down where everything else appears to have gone up.

David E. Williams: Yeah. So if you have, so let's just take a breath for a second and say, okay, these two hospitals, instead of worrying, okay, one's going to fail or whatever, just say, okay, No, you can't merge.

We're going to actually restructure the system, and we're going to take whatever billions of dollars that are spent, probably right in Terre Haute, even though it's a small city, and we're going to make primary care, instead of be three percent, we're going to make it five or six percent. And we're going to close some I like that. Yeah. Finally, a better

Jon Driscoll: A new idea.

David E. Williams: There we go. We're going to close some wing of a hospital. We're going to get rid of a duplicate service. Let's say we're going to have some requirement for quality. And try to restructure the system. Don't just use these, this demand for this kind of need for merger to say, okay, let's make the hospital-based systems more powerful. Let's empower some other players that are more on the wellness side. And it's not just wishy-washy stuff, John, it will pay off. So you're going to let

Jon Driscoll: him get big, but make him do the right thing.

David E. Williams: No, I'm going to say, you know, cut off half your arm and the hospital, figuratively. And actually, you know, put it, take the hand part of it and put some new primary care in place. Let's actually convert one hospital to not a hospital, make it primary care center. Metaphor

Jon Driscoll: is suffering, but I kind of, I

David E. Williams: like,

Jon Driscoll: finally we have a good

David E. Williams: idea. Use it as a forcing function, John. Don't just allow mergers. Make it so that they have to be restructuring.

Jon Driscoll: when it happens. I, I think, I think we're there, David, because I don't think, I don't think we're going to stop them, but you've now created a framework where maybe we could actually hold other consolidated systems to that same requirement.

David E. Williams: Sounds good, John. Well, that's it for yet another episode of CareTalk. We've been talking about Terre Haute, Indiana and the impossibility of stopping the freight train of hospital mergers, even if we, even if we could. I'm David Williams, president of Health Business Group.

Jon Driscoll: And I'm John Driscoll, senior advisor at Walgreens.

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Watch the full episode on YouTube:



CareTalk is the only healthcare podcast that tells it like it is. Join hosts John Driscoll (Senior Advisor, Walgreens Health) and David Williams (President, Health Business Group) as they provide an incisive, no B.S. view of the US healthcare industry.



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