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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

Jul 14, 2021 - Health

What to watch for during health care's Q2 earnings

Illustration: Sarah Grillo/Axios

Corporate America is expecting big jumps in profits in the second quarter. That's especially the case in health care, an industry that hasn't really lost a lot of financial momentum throughout the coronavirus pandemic.

The bottom line: Health care spending is basically back to pre-COVID levels. Expect big numbers across the board.

NWA COVID-19 surge threatens to strain health care system

Data: Northwest Arkansas health care providers. Chart: Axios Visuals

Pictures sometimes tell the stories words can't.

Why it matters: As cases rise, so will the strain on the local health care system.

Details: These numbers are representative of Arkansas Children's Northwest, Community Clinic, Mercy Northwest Arkansas, Northwest Health, UAMS Northwest, Veterans Health Care System of the Ozarks and Washington Regional Medical Center.

Zoom out: COVID-19 cases statewide were up by 1,875 on Tuesday, the largest one-day increase in more than five months, the Arkansas Democrat-Gazette reported.

  • The number of people hospitalized in Arkansas Tuesday was 815, the highest since February.
  • There were 313 patients in intensive care and 131 on ventilators.

Cam Patterson, UAMS chancellor, told the Associated Press that the increases are straining hospital resources.

The bottom line: Arkansas still has the highest COVID-19 case rate in the U.S., at 36 per 100,000 residents.

Of note: Gov. Asa Hutchinson extended his road trips and next week will travel to Mountain Home, Dumas, Heber Springs and Siloam Springs to try to convince the vaccine hesitant to get the shot.

Go deeper: Axios' national team continues to cover the issue from every angle:

Updated 23 mins ago - Politics & Policy

Pelosi appoints GOP Rep. Kinzinger to Jan. 6 committee

House Speaker Nancy Pelosi (D-Calif.) announced Sunday that she has appointed Rep. Adam Kinzinger (R-Ill.) to serve on the House select committee investigating the Jan 6. Capitol riot.

Why it matters: Pelosi's announcement comes after she rejected two of the five Republican appointments offered by House Minority Leader Kevin McCarthy (R-Calif.).