Policy experts blame provider consolidation, lack of price transparency for skyrocketing medical costs

stethoscope on money
Hospital mergers and physician acquisitions have a “functional equivalent of a monopoly position," said Georgetown researcher David Hyman. (Getty/Maudib)

Lawmakers and experts agree: U.S. healthcare costs are way too high.

The solutions, however, aren’t as clear, even for the country’s foremost health policy experts.

“There’s nobody I know that has all the answers, and what we need is lot more experimentation,” Ashish Jha, M.D., director of the Harvard Global Health Institute and senior associate dean at the Harvard T.H. Chan School of Public Health, told the Senate Health Education Labor & Pensions (HELP) Committee on Wednesday during a hearing to address healthcare costs.

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“If something can’t continue forever, it won’t,” added David Hyman, M.D., a professor at Georgetown University Law Center, quoting economist Herbert Stein. “Maybe that’s the only good news is eventually we’ll muddle our way through to something other than where we are now.”

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Lawmakers noted that the current trajectory of healthcare costs is unsustainable, particularly compared to other developed countries. Sen. Lamar Alexander, R-Tenn., said families spend more than $1,000 per person on healthcare, not including insurance premiums, and “most people don’t even know what they’re paying because medical bills are so confusing.”

While the popular belief has been that Americans simply use more healthcare than other countries, Jha said “on average, we’re pretty average” when it comes to utilization. Higher costs, he added, are divvied up between administrative costs and the “800-pound gorilla” in the room: prices.

“Every single thing that happens in healthcare in America, we pay twice [or] three times more than what other countries are paying,” Jha said. “And that is a problem that we have not addressed.”

Greater price transparency could help, he argued, noting that an MRI at one hospital might cost twice as much as the one across the street. But he said price transparency alone won’t work without providing patients a way to understand what they are paying for.

“Without quality information, there’s reason to believe it will make things worse,” he said.

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The panel repeatedly pointed to hospital mergers as a driving force behind higher prices. Hyman said many health systems have created a “functional equivalent of a monopoly position” and that “collusion and other anticompetitive practices are a persistent problem.”

Sen. Bill Cassidy, R-La., noted that Jha previously worked at Partners Healthcare, which signed a definitive agreement to purchase Care New England last month. Sen. Cassidy argued that in some instances, provider mergers occur when more efficient systems purchase inefficient providers, a benefit to the system.

But Jha countered that most big cities could stand to have fewer hospitals.

“When those hospitals get bought up by large systems, they stay in business and the market power makes a real challenge of increasing prices,” he said. “Certainly there are areas where you have a critical hospital you need and a purchase keeps that hospital afloat, but I think that’s the exception, not the rule.”

Hyman, who worked at the Federal Trade Commission in the early 2000s, said early challenges to stop those system mergers were unsuccessful and that the FTC later looked for evidence of postmerger price increases to try and unwind some mergers.

But Hyman also said Congress plays a role in creating an environment in which providers have sought out acquisitions.

“Federal payment policy can also encourage consolidation, so you might want to look closer to home,” he told Cassidy.