Hospitals as Kings of Health Care Mountain

In my reading today, I ran across Doctor Marty Markay’s April 19 WSJ article “The ObamaCare Effect: Hospital Monopolies.” with a subtitle of “Last year saw 95 hospital mergers and acquisitions, a frenzy encouraged by the Affordable Care Act.”

Marty Markay, MD, is a surgeon at Johns Hopkins Hospital and professor of health policy at the Johns Hopkins Bloomberg School of Public Health. He is the author of Unaccountable: What Hospitals Won’t Tell You and How Transparency Can Revolutionize Health Care“(Bloomsbury Press, 2013).

Dr. Markay argues that when you are a hospital monopoly and the only game in town, you can charge whatever you want because every town has to have a hospital, and you can negotiate the price that suits you.

“Today’s frenzy of hospital mergers and physician practice acquisitions is giving hospital systems even greater leverage to inflate opaque “charge-master” medical bills that even hospitals are sometimes unable to itemize sensibly. With no mechanism to allow free-market forces to keep prices in check, this translates into higher health-insurance deductibles and copays for insured Americans, and in the case of Medicare and Medicaid, higher taxes. “

This is not new news. Avik Roy, of the American Enterprise Institute, made be same case back in 2011 in Forbes Magazine in “Hospital Monopolies: The Biggest Drive of Hospital Costs That Nobody Talks About.” And before that, Regina Herzlinger of Harvard Business School in Who Killed Health Care (MaGraw-Hill 2007). More recently, in 2012, Steven Brill, complained bitterly and acidly about how hospitals were soaking the public with his epic book, America’s Bitter Pill: Money, Politics, Back Room Deals, and the Fight to Fix Our Broken Health System.”

And even me, yours truly, has been engaged in portraying hospitals as kings of the community health care mountain. In the 1990s, seized by the naive notion that hospitals and doctors could work together harmoniously as equal partners, I formed a national organization The National Association of Physician Hospital Organizations, later renamed the National Association of Integrated Health Organizations. Both floundered because of lack of interest by hospitals and physicians and lack of capital. I even served at chairman of a community PHO, and with James Hawkins. a hospital administrator, wrote a book on Hospital-Physician Relationships, Sailing the Seven “Cs” of Hospital-Physician Relationships: Competence, Convenience, Clarity Continuity, Competition, Control Cash, Finally, I written a series of Medinnovation and Health Reform blogs on the subject : February 22, 2013, “Why the Medical-Industrial Complex Is Killing Us, March 26, 2013, “Hospital Malfeasance: Fees for Services, Fees for Items, Fees for Facilities, and Fees for Physicians” and January 8, 2015, “Quotes from America’s Bitter Pill”.

All to no avail. Hospitals are going their merry monetary way, dominating 80% of metropolitan markets, hiring tens of thousands of physician employees, charging high opaque chargemaster fees, doubling physician fees in practices they own, squashing competition, negotiating higher fees from health plans. Not that I blame them. Obamacare is forcing them to form Accountable Care Organization, paying lower fees for government plans; and penalizing them for re-admissions.

But never mind. Hospitals are the visible beating heart of most communities, have the organizational structure and capital to centralize high technologies, maintain 24 hour emergency rooms, equip their facilities with high-tech wonders, are reaching out with free standing facilities and owned physicians into the communities, are the largest employers in those communities, and have the political clout to block or neutralized competing physician-owned facilities.

Hospitals are kings of the health care mountain, or if you prefer the 800 pound gorillas, in most communities and larger cities, while physicians are stray cats looking for homes in which they can feel secure.