More on Hospital Monopolies
See previous posts here here, and here. This is Roy Avik at Forbes
While Romneycare is one large driver of rising costs in the Bay State, an equally large driver has been the 1993 merger between two eminent Harvard-affiliated hospitals, Massachusetts General Hospital and Brigham and Women’s Hospital. With the two most prestigious hospitals in the state locking arms, insurers were hosed. The new hospital monolith, Partners HealthCare, could deny access to the beneficiaries of any insurer who dared not accept whatever they wanted to charge. After all, who would want to be on an insurance plan that didn’t have access to the two most prestigious hospitals in Boston?
In 2008, the Boston Globe ran an important exposé on the “handshake that made healthcare history”: Partners’ secret agreement in 2000 with Blue Cross Blue Shield of Massachusetts, in which Blue Cross would give Partners more money, in exchange for Partners’ promise that they would demand the same rate increases from everyone else. The growth rate of individual insurance premiums in the state doubled.
And in 1994, Blue Cross and Blue Shield of Wisconsin brought suit against the Marshfield Clinic for allocating market, fixing prices, and blocking entry into health care in its geographic area. In December 1994, the U.S. District Court affirmed the jury decision that the Marshfield Clinic had violated the Sherman Act.
Unfortunately, The U.S. Court of Appeals of the 7th Circuit overruled the Court of Appeals in October 1995.
As long as one calls it “integrated care” monopolies are just peachy. Needless to say, insurance rates in the Marshfield Clinic area were higher than in areas with less integrated care and more competition.
In the late 1990s and 2000s the reason hospitals consolidated into regional health care systems is to gain leverage against insurers. Insurance is part of the financial industry. Insurers can operate from almost be anywhere from the standpoint they pay claims rather than provide a brick & mortar service. Hospitals, on the other hand, are the ultimate in brick & mortar. There are large barriers to entry in the hospital industry. Hospitals must have infrastructure and a medical staff. Hospitals that merged were able to create cartels which could raise fees — knowing half the hospitals could not be excluded from an insurers’ network. Independent hospitals had an incentive merge (or at least cede management control) since being the only independent hospital in an area dominated by large hospital systems would make it hard to compete.
This White House doesn’t believe in competition. That’s why they are promoting monopoly.
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