WASHINGTON, DC - The Subcommittee on Oversight and Investigations, chaired by Rep. Gregg Harper (R-MS) today held a hearing reviewing consolidation trends in the health care sector, the reasons behind those trends, and the effects they have on the cost and quality of care.
#SubOversight Chairman Harper kicked off the hearing by highlighting the soaring cost of care in our health care system, stating, “In 2016, U.S. health care spending was estimated to be around $3.3 trillion, and the gross domestic product related to health care spending was 17.9 percent, an increase from 17.7 percent just the year before. Data shows that the increasing costs of health care are ultimately passed along to American workers and families. … While there are numerous factors contributing to the rising costs of health care, reports and studies show consolidation is a contributing factor."
Dr. Leemore S. Dafny, Bruce V. Rauner Professor of Business Administration, Harvard Business School, said, “There is a substantial academic literature that finds horizontal mergers of competing health care providers tends to raise prices, and very limited evidence to suggest there are offsetting benefits to patients in the form of improved quality. …We have less extensive evidence on non-horizontal mergers in health care, that is mergers across providers or firms in different geographies or service categories, but the evidence we have to date also finds systematic price and spending increases … In a nutshell, research to date suggests that consolidation in the health care industry, on average, has not yielded benefits to consumers."
Dr. Martin S. Gaynor, E.J. Barone University Professor of Economics and Health Policy, Heinz College, Carnegie Mellon University, echoed Dr. Dafny’s comments, stating, “One of the reasons for this is lack of competition. The research evidence shows that hospitals and doctors who face less competition charge higher prices to private payers, without accompanying gains in efficiency or quality. Research shows the same for insurance markets. Insurers who face less competition charger higher premiums, and may pay lower prices to providers. Moreover, the evidence also shows that lack of competition can use serious harm to the quality of care received by patients."
Dr. Kevin A. Schulman, Visiting Scholar, Harvard Business School, and Associate Director, Duke Clinical Research Institute, testified, “the lack of disruptive innovation is a critical shortfall in the healthcare market. Not only could disruptive innovation drive development of novel clinical services for patients, emphasizing care at the lowest possible cost, but it could also serve as a significant catalyst to spur existing hospitals and systems within a market to more fully embrace an innovation agenda."
Multiple subcommittee members asked about how the 340B Drug Pricing Program plays into the conversation.
#FullCmte Chairman Greg Walden (R-OR) touched on the committee’s recent report on the 340B Program in his opening remarks, stating, “During this work, we found that the 340B program creates an incentive for hospitals to acquire independent physician offices that are not eligible for the 340B discount-especially in the oncology space. One report showed that there was a 172 percent increase in the consolidation of community oncology practices since 2008. A recent article in the New England Journal of Medicine found among other things that the 340B program has been associated with hospital consolidation in hematology-oncology."
You can view a copy of the committee’s report here.
