Federal antitrust merger enforcement standards: a good fit for the hospital industry?

Medicare Advantage: A Disadvantage for Complex Cancer Surgery Patients

PURPOSE

Nearly half of all Medicare beneficiaries are enrolled in privatized Medicare insurance plans (Medicare Advantage [MA]). Little comparative information is available about access, outcomes, and cost of inpatient cancer surgery between MA and Traditional Medicare (TM) beneficiaries. We set out to assess and compare access, postoperative outcomes, and estimated cost of inpatient cancer surgery among MA and TM beneficiaries.

METHODS

Retrospective cohort analysis of MA or TM beneficiaries undergoing elective inpatient cancer surgery (for cancers located in lung, esophagus, stomach, pancreas, liver, colon, or rectum) was performed using the Office of Statewide Health Planning Inpatient Database linked to California Cancer Registry from 2000 to 2020. For each cancer site, risk-standardized access to high-volume hospitals, postoperative 30-day mortality, complications, failure to rescue, and surgery-specific estimated costs were compared between MA and TM beneficiaries.

RESULTS

This analysis of 76,655 Medicare beneficiaries (median age 74 years, 51% female, 39% MA) included 31,913 colectomies, 10,358 proctectomies, 4,604 hepatectomies, 2,895 pancreatectomies, 3,639 gastrectomies, 1,555 esophagectomies, and 21,691 lung resections. Except for colon surgery, MA beneficiaries were less likely to receive care at a high-volume hospital. Mortality was significantly higher among MA beneficiaries (v TM) for gastrectomy (adjusted risk difference [ARD], 1.5%; 95% CI, 0.01 to 2.9; P = .036), pancreatectomy (ARD, 2.0%; CI, 0.80 to 3.3; P = .002), and hepatectomy (ARD, 1.4%; 95% CI, 0.1 to 2.9; P = .04). By contrast, compared with TM, MA beneficiaries incurred lower estimated hospital costs.

CONCLUSION

Enrollment in MA plan is associated with lower estimated hospital costs. However, compared with TM, MA beneficiaries had lower access to high-volume hospitals and increased 30-day mortality for stomach, pancreas, or liver surgery.

Pricing of surgeries for colon cancer: patient severity and market factors

BACKGROUND

This study examined effects of health maintenance organization (HMO) penetration, hospital competition, and patient severity on the uptake of laparoscopic colectomy and its price relative to open surgery for colon cancer.

METHODS

The MarketScan Database (data from 2002-2007) was used to identify admissions for privately insured colorectal cancer patients undergoing laparoscopic or open partial colectomy (n = 1035 and n = 6389, respectively). Patient and health plan characteristics were retrieved from these data; HMO market penetration rates and an index of hospital market concentration, the Herfindahl-Hirschman index (HHI), were derived from national databases. Logistic and logarithmic regressions were used to examine the odds of having laparoscopic colectomy, effect of covariates on colectomy prices, and the differential price of laparoscopy.

RESULTS

Adoption of laparoscopy was highly sensitive to market forces, with a 10% increase in HMO penetration leading to a 10.9% increase in the likelihood of undergoing laparoscopic colectomy (adjusted odds ratio = 1.109; 95% confidence interval [CI] = 1.062, 1.158) and a 10% increase in HHI resulting in 6.6% lower likelihood (adjusted odds ratio = 0.936; 95% CI = 0.880, 0.996). Price models indicated that the price of laparoscopy was 7.6% lower than that of open surgery (transformed coefficient = 0.927; 95% CI = 0.895, 0.960). A 10% increase in HMO penetration was associated with 1.6% lower price (transformed coefficient = 0.985; 95% CI = 0.977, 0.992), whereas a 10% increase in HHI was associated with 1.6% higher price (transformed coefficient = 1.016; 95% CI = 1.006, 1.027; P < .001 for all comparisons).

CONCLUSIONS

Laparoscopy was significantly associated with lower hospital prices. Moreover, laparoscopic surgery may result in cost savings, while market pressures contribute to its adoption.

Trends in hospital consolidation: the formation of local systems

During the past decade the hospital industry has made profound organizational changes, including the extensive consolidation of hospitals through merger and the formation of hospital systems. Although the rate of hospital system acquisitions may be slowing, the local presence of hospital systems is growing. Locally concentrated systems have been formed by both for-profit and nonprofit hospitals. Researchers have tended to ignore acquisitions or have portrayed system formation as primarily an issue of hospital ownership conversion, thereby focusing on the expansion of national, for-profit systems. This has left a large gap in policymakers' understanding of how locally concentrated systems may affect patient care and competition.

Market restructuring and pricing in the hospital industry

This paper examines the diagnosis related group-level (DRG) price effects of recent hospital mergers and acquisitions that occurred in Ohio and California. Empirical results indicate that hospital mergers and acquisitions increase prices at the DRG level. Further, price increases are greater in DRGs where the merging hospitals gained substantial market share compared to DRGs where the merging hospitals did not gain significant market share. These results suggest that DRG specific market share plays an important role in a hospital's post-merger pricing strategy.

Horizontal mergers in the United States health field: some practical realities

During the past decade, 'merger mania' has been a striking trend in the US health field as a strategy to improve the integration of services, to reduce expenses, and to increase the ability of providers to manage risk-based payment. However, during the past quarter of a century limited operational and fiscal evidence has been published in both the health and general management literature that strongly supports the efficacy of horizontal mergers. This article further argues that a likely scenario over the next decade, in spite of disappointments among these mergers in effecting significant cost reductions, is for the US health networks to continue acquiring additional providers and insurers. After these alliances gain significant market penetration, they are expected to behave as oligopolists. For these mergers to eventually achieve their earlier projected savings, the health field's leadership will be forced to implement cost-cutting measures such as: more vigorously coordinating the network's key clinical services to reduce competition for revenues among the partners within an alliance, closing superfluous hospitals and centralizing expensive tertiary services, encouraging surplus physicians to relocate to under-served areas, and providing direction to carefully integrate the best elements of what the competitive and regulatory strategies are able to offer to improve access, social equity, quality of care, and to reduce total health expenditures.

Rural hospital mergers, antitrust policy, and the Ukiah case

This article examines the antitrust issues in rural hospital mergers by focusing on an important antitrust case involving the merger of two small hospitals in Ukiah, California. A key issue in this matter was whether the geographic market served by the merger included a nearby larger city. The economic efficiency of small rural hospitals and the competitive implications of their mergers are examined in the context of the Ukiah case. Economies of scale are shown to be important for small rural hospitals and should mitigate any increase in price. The efficiencies defense is shown to be difficult to make even when economies of scale make the likelihood of efficiencies high. The financial difficulties of many rural hospitals, especially in areas where too many exist, mean that mergers such as this one in Ukiah often are an efficient way to keep these hospitals financially sound and accessible. The Ukiah case suggests the desirability of the merger guidelines that permit most mergers of small rural hospitals.

State health services commissions German style

After the health networks tied to HMOs are organized into oligopolies, and eventually fail to provide adequate access, social equity, and cost containment, public pressures will demand that state health services commissions be established to regulate market share, the scope of health services, reimbursement rates, and allowable profits. The German health system is multipayer, multitier, decentralized, self-governing, and allows providers and insurers to negotiate reimbursement rates without direct government involvement. Such a model would offer more competition among providers and less government regulation.