Lawmakers ask MedPAC to investigate how hospital consolidation impacts Medicare and vice versa

Washington, D.C. National Capitol Building
Three congressmen are asking for a review of provider consolidation following a year in which there were 115 hospital mergers. (Getty/tupungato)

For better or worse, hospital consolidation has increased steadily over the last decade. Now, lawmakers are worried about how those mergers impact Medicare—and they're turning to a federal commission to investigate.

Writing to the Medicare Payment Advisory Commission (MedPAC), three congressmen on the House Committee on Energy and Commerce expressed concern about whether consolidation would lead to higher costs for Medicare beneficiaries. They asked the commission to begin researching the matter.

The lawmakers noted that Medicare payment policies may be advancing hospital consolidation, but experts are hardly in agreement on the issue. The 340B program, in particular, "appears to be having an unintended secondary effect in encouraging consolidation."

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“Bipartisan concern over the degree to which Medicare payment policy may be accelerating hospital consolidation and negatively impacting the Medicare program has been present in Congress for some time,” wrote Reps. Greg Walden, R-Ore., Michael C. Burgess, M.D., R-Texas, and Gregg Harper, R-Miss., in the letter to MedPAC (PDF). “Through its public hearings, the Committee has heard differing views from experts on the extent to which consolidation is a cost driver in the Medicare program and the degree to which payment policies of the Medicare program encourage such consolidation.”

And it’s not just a question of scale. The impact of hospitals buying up physician groups—a trend many experts say is driven by federal payment policies—is particularly concerning.

The congressmen noted that one 2016 report found consolidation could reduce costs by 15%-30%. But other reports have found that consolidation can increase costs by as much as 20%—and one particularly concerning study found that merging hospitals had 40% higher prices than nonmerging hospitals.

RELATED: Healthcare consolidation doesn't pay off for patients, experts tell lawmakers at hearing

Because policymakers have such a murky picture of the effect of hospital consolidation, it’s understandable that the committee is looking for additional research on the matter. Especially considering the rate at which consolidation is already happening.

2017 contained 115 hospital mergers, an increase of 13% from 2016. And that trend shows no signs of slowing down.

Many of the arguments in favor of consolidation depend on the increased interoperability those health systems could realize. But recent research has questioned the degree to which interoperability really improves after a consolidation.

RELATED: Hospital mergers jumped 13% in 2017; M&A momentum shows no signs of slowing down

“It’s not like hospital systems that buy each other up just start sharing data after that,” A Jay Holmgren, a doctoral student at Harvard Business School and the lead author of the research, previously told FierceHealthcare.

Now it will fall to MedPAC to come up with a more concrete answer. Specifically, the regulators asked MedPAC to examine:

  1. The degree to which current federal policies accelerate consolidation.
  2. The implications of consolidation on costs for hospitals and patients.
  3. How markets with high levels of consolidation compare to markets with lower rates.
  4. How integration of physicians and hospitals affects Medicare payments for physician services.
  5. The effect of 340B drug discounts on the price of drugs hospitals purchase.