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TRANSFORMING CARE

Making Health Care Consolidation Work for Patients: An Interview with Commonwealth Fund President David Blumenthal

Toplines
  • With U.S. health care markets becoming increasingly concentrated, the Commonwealth Fund’s David Blumenthal, M.D., considers the implications of this consolidation and how to ensure that mergers yield benefits for patients as well as investors

  • “We need to distinguish between succeeding as a business — getting a return for investors — and succeeding as a positive influence on our health care system,” says David Blumenthal, M.D., an expert on U.S. health system performance and costs

Toplines
  • With U.S. health care markets becoming increasingly concentrated, the Commonwealth Fund’s David Blumenthal, M.D., considers the implications of this consolidation and how to ensure that mergers yield benefits for patients as well as investors

  • “We need to distinguish between succeeding as a business — getting a return for investors — and succeeding as a positive influence on our health care system,” says David Blumenthal, M.D., an expert on U.S. health system performance and costs

David Blumenthal, M.D.

David Blumenthal, M.D., M.P.P., Commonwealth Fund president.

The U.S. health care marketplace has become increasingly concentrated — payers and providers have come together as “payviders,” pharmacies are merging with pharmacy benefit managers, and hospitals are buying up independent practices. We asked Commonwealth Fund president David Blumenthal, M.D., M.P.P., an expert on U.S. health system performance and costs, about the effects of market consolidation and what it might take to ensure that mergers yield benefits for patients as well as investors.

Transforming Care: It seems every week we read about another health care merger or acquisition. What do we know about how these affect costs and quality?

Blumenthal: We know that horizontal consolidation — that is, hospitals merging with other hospitals or physician practices merging with other practices — increases prices and it’s hard to find evidence of quality improvement. There’s less data on vertical integration though it seems to have the same effect. Vertical integration brings different types of providers together, such as hospitals acquiring physician practices, home health agencies, X-ray facilities, and rehabilitation clinics. It clearly facilitates some infrastructure development that improves care coordination, like a common electronic health record. And in theory, having multiple types of care under one roof should facilitate care coordination. However, some integration seems to be occurring not for the purpose of coordinating care, but for increasing leverage in the marketplace.

Transforming Care: Should policymakers intervene in those cases?

Blumenthal: It’s an open question whether they could do so. It’s easier to do with horizontal integration because you can more easily quantify the market share of an organization that has 80 percent of hospital beds than one that has 20 percent, but also a percentage of the cardiologists, and cardiac surgeons, and so on. It’s also one thing to talk about regulating a service that is a distinct commodity, like laptops. It’s very hard to regulate a service that has as many attributes as health care. Just consider the hundreds of DRG and CPT codes used to bill for hospital and physician services.

There may be ways in which regulation can create performance requirements to encourage merged organizations to improve. I’m thinking of the pressure that some state commissions are exerting on large health care systems to meet cost thresholds. They’re not telling them to disaggregate — to get rid of a cardiology practice here or a surgical center there. They’re saying, “You are what you are, and we are expecting to see the cost of care in your organization only go up at the rate of inflation. And we want you to report quality metrics along the way.”

Transforming Care: As part of the employer coalition Haven, Amazon tried and failed to disrupt health care markets. How might Amazon’s recent purchase of the primary care start-up One Medical play out?

Blumenthal: Amazon has shown us that it can turn many economic markets upside down, but its primary care venture faces challenges. Even with its subscription model, One Medical struggled because of the low payment rates for primary care. As I’ve described elsewhere, to wring greater value out of primary care, start-ups may need to take on financial risk for the specialty and hospital services that account for so much waste. But to date, employers — which comprise most of One Medical’s clients — have had little appetite for this. And, of course, if Amazon’s primary care venture does take on risk for the full spectrum of patient care, it will need to operate in hospital and specialty markets that are increasingly consolidated, which may limit its capacity to negotiate prices.

Transforming Care: What would it take for new start-ups to fundamentally change health care?

Blumenthal: We need to distinguish between succeeding as a business — getting a return for investors — and succeeding as a positive influence on our health care system. There’s no question many of these start-ups will make money. What I’m uncertain about is whether that will result in cheaper and better care for the population as a whole. They may be good at providing convenient care to relatively healthy people and maybe a fraction of the not-so-healthy people who have serious but not complicated illness. But I’m concerned about whether they will take care of people whose insurance is not desirable or patients who are very complex and hard to manage. Smaller start-ups have to give their investors a payback within three to five years. That’s what gives me pause, though I think some new market entrants are exciting and potentially positive.

Transforming Care: If you were to imagine a health care marketplace that delivers higher-quality care at lower costs and doesn’t leave people out, where would you find hope?

Blumenthal: As our population ages, a larger and larger proportion of health care will be consumed by Medicare beneficiaries. That will give government more and more leverage. While market advocates find this worrisome, I find it hopeful because of Medicare’s increasing interest — which enjoys bipartisan support — in value-based purchasing: using payment to encourage providers to prioritize quality, safety, and equity as well as monetary returns. We need lots of experience to figure out what works. But we’ve made a start. I hope that private purchasers will follow suit once Medicare has shown the way.

Publication Details

Date

Contact

Martha Hostetter, Consulting Writer and Editor, Pear Tree Communications

[email protected]

Citation

Martha Hostetter and Sarah Klein, “Making Health Care Consolidation Work for Patients: An Interview with Commonwealth Fund President David Blumenthal,” Transforming Care, Commonwealth Fund, Nov. 7, 2022. https://doi.org/10.26099/q48p-me17