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Illustration: Sarah Grillo/Axios

President Biden’s recent executive order instructing agencies to develop policies to promote competition in the economy hasn’t received much attention.

  • But it could lead to new efforts to control health costs if his administration and Congress respond with measures to stem consolidation in the health care industry and promote competition to drive down prices.

The research is clear that consolidation in the hospital industry drives up costs, in some cases by as much as 50%. Consolidation generally does not improve the quality of care.

  • Insurers and employers are not in a position to bargain for lower prices with hospitals or to establish narrower networks they believe deliver greater value when one or two hospital systems are the only games in town and own most of the medical practices.
  • Mergers led to more consolidation even before COVID hit, with two-thirds of hospitals in a system, and most metropolitan areas already deemed highly concentrated hospital markets.

Private equity firms were behind many of the mergers. The pace of mergers is likely to pick up with the bigger fish eating the smaller ones as COVID has made smaller and rural hospitals and smaller medical practices more fragile.

Bottom line: With the cat out of the bag on market consolidation, there isn’t a lot of time to waste. 

State of play: The FTC and the DOJ’s Anti-Trust Division lack the staff to examine most mergers and in some cases, the authority needed to ensure that markets remain competitive.

  • While they can review mergers, they do not generally have the authority to intervene, for example, to stop non-competitive practices by non-profit hospital systems.  
  • Fifty seven percent of all hospitals are technically non-profit, including some of the largest health systems in many parts of the country.
  • The FTC also lacks the authority to monitor the hospital acquisitions of large numbers of smaller practices which individually fall under the threshold for requiring notification of the FTC. States face a similar array of limitations to their authority.

The executive order establishes a White House Competition Council, but it's vague on what actions might follow in health.

What to watch: Either it or a private effort could productively review FTC, DOJ and state authority and capacity and make recommendations for administrative and legislative actions.

  • HHS Secretary Xavier Becerra made his name in health, in part, by going after Sutter Health for its anti-competitive pricing practices as Attorney General in California and could play a central role in such an effort. 

Of course, the hospital industry would fiercely resist any effort to beef up anti-trust action and promote competition to drive down prices.

  • Hospitals have been sitting on the sidelines happily watching policymakers go after drug costs. But drugs represent 10% of health spending while hospitals represent 34%.
  • A more aggressive policy aimed at anti-competitive mergers and consolidation in the hospital industry would aim right at high hospital prices that drive up health spending.
  • And while the industry would resist it, it might appeal to both to democrats who favor regulation and republicans who favor competitive markets.

Thought bubble: Depending on follow-through, the Biden executive order could be a sleeper health cost policy.

Go deeper

Minnesota National Guard to assist with hospital staffing shortages

Minnesota Gov. Tim Walz on April 19. Photo: Stephen Maturen/Getty Images

Gov. Tim Walz (D) announced Friday that he'll put the Minnesota National Guard on alert to help ease staffing shortages at hospitals and care facilities due to the rise in COVID-19 cases among unvaccinated residents in the state.

Driving the news: Over 400 Minnesota patients are currently waiting for beds to open up at other care centers as hospitals across the state have reported that they're at or close to reaching capacity, AP reports.

12 mins ago - Sports

Gonzaga University revokes NBA great John Stockton's tickets over mask stance

Former Utah Jazz player John Stockton during a 2017 press conference in Salt Lake City, Utah. Photo: Melissa Majchrzak/NBAE via Getty Images

Gonzaga University suspend the season tickets of notable alumni John Stockton after the NBA Hall of Famer failed to comply with the school's basketball games mask mandate, the Spokesman-Review first reported.

Driving the news: "Basically, it came down to, they were asking me to wear a mask to the games and being a public figure, someone a little bit more visible, I stuck out in the crowd a little bit," the former Utah Jazz point guard told the outlet in an interview Saturday.

Updated 2 hours ago - World

State Department orders evacuation of U.S. diplomats' families from Ukraine

From left, Under Secretary for Political Affairs Victoria Nuland, Secretary of State Antony Blinken and U.S. Chargés d'Affaires in Ukraine Kristina Kvien during a meeting with Prime Minister of Ukraine Denys Shmyhal in Kyiv. Photo: Yevhen Liubimov/ Ukrinform/Barcroft Media via Getty Images

The State Department will begin evacuating families and non-essential staff from the U.S. Embassy in Kyiv this week, according to a travel advisory published Sunday evening.

Why it matters: The move underscores U.S. fears that a Russian invasion could destabilize Ukraine and threaten embassy's ability to assist Americans.