Health systems, physician groups and payers are merging into increasingly large and complex corporate structures, KFF Health News reported Nov. 10.
This has been a significant factor in the ever-increasing price of healthcare for consumers and created an “era of high-deductible health plans, narrow insurance networks and 20% cost sharing,” according to the report. Barak Richman, a professor of business law at George Washington University in Washington, D.C., told the publication that these news mergers are “mutually enforced monopolization.”
“It’s not a competition. It’s more like collusion. They don’t care about price,” he said. For example, a dose of the antiviral Paxlovid administered in a hospital costs $4,500, and joint replacements can cost $100,000, according to KFF.
At the same time, the burden of healthcare costs has been a significant talking point for President Donald Trump both during his campaign and in the first year of his administration. However, regulators under his purview have vocalized a looser approach to overseeing and regulating corporate deals in healthcare than the previous administration.
Unraveling existing regulation
In August, Mr. Trump revoked Executive Order 14026, a directive put in place by former president Joe Biden to scrutinize consolidation across industries, including healthcare, marking a significant departure away from Mr. Biden’s “more expansive interpretation of health law” according to KFF.
Upon taking office, Mr. Trump appointed Andrew Ferguson to take over the Federal Trade Commission, who then blasted his predecessor Lina Khan over what Mr. Ferguson described as an overstep of the agency’s legal authority. He also criticized her rhetoric and focus on the growing presence of private equity in healthcare.
The FTC’s exact direction remains unclear
Daniel Guarnera, the director of the FTC’s Bureau of Competition, told KFF that the leadership within the FTC and Justice Department has endorsed guidelines issued by the Biden administration, which he characterized as a “framing device” for companies contemplating a larger merger.
Mr. Biden’s expanded merger guidelines “focused for the first time on a wide variety of new types of anti-competitive practices that had become common in healthcare,” including private equity ownership of physician practices and payer-owned pharmacies and medical facilities.
Mr. Guarnera told KFF that regulators’ strongest enforcement tool is convincing a judge that a merger violates the Clayton Antitrust Act, a statute that is the foundation of antitrust law. However, administrations can interpret this statute differently, KFF reports, and the plain language of the law alone does not provide much insight into how the Trump administration’s FTC will evaluate healthcare mergers and acquisitions.
“The Biden administration tried to be more innovative,” Erin Fuse Brown, a professor of health services, policy, and practice at Brown University told KFF. “The Trump administration has signaled a more traditional approach — that it’s unwilling to push the envelope.”
Fighting for the biggest piece of the pie
Payers, physicians and health systems all “insist” they that must grow bigger in order to influence negotiations that determine the price of healthcare services.
“But evidence shows the prices that make sense in industry-level dealmaking have little to do with the actual value of the services involved,” KFF reported. “Instread, they’re merely a data point in large-scale calculations that, at best, reflect the power balance between opposing parties.”
Under Mr. Trump the FTC has already sued to block two different mergers between medical device makers and, according to KFF, has continued the Biden administration’s challenges to individual drug patents.
“Helping improve the health care system though ensuring that there is more and better competition are very, very high priorities for us at the FTC,” Guarnera said, noting that health care has “enormous effects on both Americans’ pocketbooks as well as well-being.”
While merger activity did see a dip earlier this year as companies scrambled to prepare for the potential impact of new Trump-era tariffs, consolidation remains a significant concern for stakeholders across healthcare. Many healthcare giants continue to add to grow their portfolios by racking up smaller, less detectable deals that fall below regulatory thresholds.
UnitedHealth Group, for example, now owns health insurance plans, physician practices, data and analytics services, payment processors, a pharmacy benefits manager and other organizations across the spectrum of healthcare in the U.S. The company now employs or contracts with 90,000 physicians nationwide, or approximately 10% of the physician workforce.
“Economic theory says it could be innocuous, like a suit manufacturer opening a store, even though studies show in health care it’s dangerous — higher prices, poorer quality, less choice,” Mr. Richman told KFF. But other experts, including Ms. Fuse Brown, say that new laws are needed to regulate this increasingly complex environment.
“The old laws,” she said, “are just not calibrated to the complexity and novel types of mergers.”
