Hospital Consolidation

You may have heard about how the current health care market is all about “consolidation“. Consolidation can be a broad term, but it usually refers to hospitals acquiring other hospitals, physician practices, and even absorbing insurance companies. While some of this is in response to the Affordable Care Act, consolidation was already occurring before 2009. Big Companies have been a Big Thing for a while: agriculture, media, law, and other industries have been undergoing consolidation similar trends, perhaps in an effort to become more resistant to risk.*

http://www.forbes.com/sites/theapothecary/2015/01/12/what-60-minutes-didnt-tell-you-obamacare-will-drive-up-the-cost-of-hospital-care/#328f2bc4b3e4

Some people think of consolidation in a good way, kind of like bundled testing. In theory, it should be administratively simpler. Less hospital systems = less billing, recordkeeping, and bureaucratic burden because patients are less likely to be shifting between health systems when there are fewer of them. Administrative costs are a likely etiology of some of the health care spending growth in the United States in the last two decades.

Others think of consolidation more like… a pneumonia. You know, like when a lobe of your lung gets all fibrotic and stuff. One of the many things I have learned in medical school is that consolidated pneumonias are bad.

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Figure 1: A gross anatomical specimen consolidated lobar pneumonia. (Operative term here is “gross”).

Less hospitals = less competition = higher prices for the same services, whether that be for third party payers or patients themselves. There’s some evidence to show that price inflation is a common adverse effect of hospital mergers. And there is also evidence to suggest that high prices are bad for patients, too.

The Federal Trade Commission is the agency tasked with preventing enormous  hospital mergers from having this effect on the healthcare economy. They recently sued Penn State’s Hershey Medical Center when they attempted to merge with PinnacleHealth System. The FTC’s core assertion was that the merger of these two systems would limit care options for patients in the “Harrisburg area” and that the combination of these two systems would cover 65% of Southern Pennsylvania. The Pennsylvania Office of Attorney General agreed with the FTC, citing nearby UPMC’s similar grip on healthcare delivery in the Pittsburgh region as an example.

While these assertions may not sound all that impressive (especially if you, like most people, know very little about rural Pennsylvania) it was a big blow to the FTC’s recent track record of success when it came to knocking down huge hospital deals.

This decision has interesting implications for a newly minted large hospital system — Vanderbilt Health. Shedding its University trappings, the Vanderbilt Health System is now more poised to be more “agile” in a rapidly evolving healthcare market, ready to start forming “partnerships” and investing in “ventures” in the years to come. I interpret this to mean that they are set to absorb more hospitals, physician practices, and other entities. While improved coordination of care might be one outcome, based on consolidation and price trends for other regions, it also will mean higher prices.

Only time will tell if we are a consolidated pneumonia for Tennessee or not.

*Or maybe, they’re trying to become Too Big to Fail??

Primers on Consolidation:

Alex Tolbert, Health Care Consolidation: What Consumers Need to Know”, The Tennessean (March 8, 2016) http://www.tennessean.com/story/money/industries/health-care/2016/03/08/health-care-consolidation-what-consumers-need-know/81493602/

The Robert Wood Johnson Foundation, The Impact of Health Care Consolidation — Update, The Synthesis Project, June 2012  http://www.rwjf.org/content/dam/farm/reports/issue_briefs/2012/rwjf73261

Scalia’s Healthcare-Related Jurisprudence (and Mic Drops)

Aside from his reputation as a towering conservative legal mind, Antonin Scalia was probably best known for his zingy dissents and equally sassy majority opinions on virtually every legal matter brought before the Supreme Court of the United States. Unsurprisingly, on healthcare issues, Scalia remained staunchly committed to the kind of originalismtextualism, and gloves-off humor he was best known for.

antonin_scalia_2010

The most recent challenge to the Affordable Care Act, King vs. Burwell (2015), centered on the question of whether the ACA’s Exchanges, where subsidized health insurance would be sold, needed to be established “by the State” (as opposed to administered by the federal government) in order for purchasers to qualify for subsidies. If interpreted as written, the ACA would have been gutted of one of its central goals. But true to the text of the law, Scalia insisted that the ACA needed to be interpreted as it was written. “It is bad enough for a court to cross out ‘by the State’ once,” Scalia bemoaned, “But seven times?” While health policy wonks and economists were worried about the practical effects King could have on the viability of the ACA, Scalia worried about the future of the rule of law in a world where laws are conveniently reinterpreted to suit someone’s agenda: “Words no longer have meaning if an Exchange that is not established by a State is ‘established by the State.'”He  remained concerned about the precedent set by this style of interpretation, predicting that “The somersaults of statutory interpretation they have performed […] will be cited by litigants endlessly, to the confusion of honest jurisprudence.”

Scalia was no stranger to controversy, and this remained true on issues pertaining to healthcare, too. He wrote the majority opinion  in District of Columbia vs. Heller (2008), which supported the individual right to bear arms under the Second Amendment. In the face of revisionist arguments about the scope of what the Constitution could protect, Scalia admitted that while it was possible the Constitution could be outmoded, ultimately “[…] what is not debatable is that it is not the role of this court to pronounce the Second Amendment extinct.” Only the Legislature could do that.

In the world of patent law, Scalia also wrote a number of influential opinions that shaped the drug industry’s patent litigation strategies. In Commil v. Cisco (2015), most recently, the Court decided that believing in good faith that a patent was invalid is enough to absolve the defendant of infringing on the patent holder’s rights. Scalia defended that interpretation by writing that “Saying that infringement cannot exist without a valid patent does not ‘conflate the issues of infringement and validity’ any more than saying that water cannot exist without oxygen ‘conflates’ water and oxygen.” Understanding the intricacies of science necessary to making just determinations of law was a source of frustration for Scalia more than once. In Association of Molecular Pathology vs. Myriad Genetics (2013), where the Court needed to decide whether a company could patent a DNA sequence, he said “I am unable to affirm those details [of laboratory DNA synthesis] on my own knowledge or even my own belief. It suffices for me to affirm, having studied the opinions below and the expert briefs presented here, that the portion of DNA isolated from its natural state sought to be patented is identical to that portion of the DNA in its natural state; and that complementary DNA (cDNA) is a synthetic creation not normally present in nature.” Though Scalia probably never developed a coherent theory of intellectual property or patent law for that matter, his disdain for poor logic rang through the diverse opinions he penned in this field.

In an era of Congressional gridlock and dysfunction of the most dangerous branch of government, Scalia stood by his vision of lawmakers who actually wrote laws that made sense on their own terms, and that were true to the words they contained. He held himself to similarly high standards. If he could be faulted for occasional inaccuracies in his opinions and occasionally straying from his textualist roots, he was an inspirational leader when it came to being a vocal supporter of unpopular opinions at times. And perhaps — more importantly — a man who never let his robes disguise a wry sense of humor. He brought life and color to the dry legal battles that shape our rights, obligations, and opportunities as citizens — and healthcare professionals.

 

Other Resources:

  1. A summary of upcoming SCOTUS cases that may be affected by the loss of a well-known conservative thinker on the bench.
  2. SCOTUSBlog‘s coverage of Healthcare cases on the docket.
  3. A 60 Minutes Episode on Justice Scalia.
  4. The immediate impacts of Scalia’s death