Hospital and health system mergers have become rampant and are typically announced with glowing press releases promising greater access to better and more affordable health care. However, research into the results of consolidation exposes outcomes that run counter to these promises.

In 2022, healthcare mergers and acquisitions resulted in a record setting $45+ billion in total transacted revenue. Industry insiders expect even more activity in 2023 with Deloitte predicting that “after consolidation in the next decade, only 50 percent of current health systems will likely remain.”

The nonprofit, nonpartisan Kaiser Family Foundation (KFF) has studied the real impact of consolidation on American consumers, 54% of whom receive healthcare through employer-sponsored health plans. Their findings align with other studies showing the unmet promises and benefits promoted by hospital system aggregators.

Unrealized Quality

Results are mixed with the majority of studies concluding that health care quality is essentially unchanged or worsened. Research from The National Institute for Health Care Management (NIHCM) Foundation states that there is “no evidence that clinical processes or patient outcomes improved after an ownership change, but results point to modestly worsening quality from the patient experience perspective.” Findings from the New England Journal of Medicine show “modestly worse patient experiences” resulting from hospital mergers and acquisitions.

A Harvard review found that care quality was only slightly better at consolidated health systems than private practices. According to Nancy Beaulieu, study first author, “One of the key arguments for hospital mergers and practice acquisition was that health systems would deliver better-value care for patients. This study provides the most comprehensive evidence yet that this isn’t happening.”

Competition and Cost

Despite claims by the American Hospital Association (AHA) that consolidation reduces health care costs, mergers have shown to increase prices and reduce affordability even as profits increase.

Studies continue to show that consolidation and health care costs have a detrimental association. Less competition means fewer choices and more opportunities for health systems to monopolize a market and raise prices. This impact is nuanced in large, metropolitan areas and keenly felt in small and mid-sized markets where dominant providers emerge as the result of consolidation.

Trade association AHIP (America’s Health Insurance Plans) describes this connection rather succinctly:

“Everyday Americans bear the brunt of hospital consolidation. Hospitals in highly concentrated markets can charge higher prices for medical services and have greater leverage to negotiate higher prices from health insurance providers, leading to ever-increasing health care costs for individuals and families.”

Neutralizing the Impact of Consolidation

KFF calls for policymakers “to address any potential anti-competitive behavior in markets that are already consolidated.” And NIHCM declares, “In the face of ongoing hospital market consolidation and accompanying price increases, consumers deserve to experience measurable and meaningful quality [and cost] improvements… Merging hospitals must be held more accountable for achieving, not just promising, such benefits.”

Employers that maintain allegiance to legacy insurance carriers whose profits increase when hospital prices rise will feel the negative impact of health system consolidation in higher medical claim costs and insurance premiums. While there are plenty of excuses for sticking with the status quo, employers who choose a modern health plan administrator using advanced claims payment technology can limit the negative impacts of health system consolidation, and meet their fiduciary obligation to manage costs for their health plan participants.

Corporate boards have historically relegated employee and workforce concerns to management. In 2020, COVID-19’s dramatic impact on operations and employee health began changing that perspective in significant ways, leading to a more expansive approach to how boards fulfill their responsibilities.

In a recent publication, Deloitte’s Center for Board Effectiveness confirms that:

“Events related to the pandemic … have … thrust workforce management to the forefront of board agendas. In many cases an afterthought, a lagging consideration to the business and technology strategy, workforce management is now a leading priority, on an equal footing with other key areas of board focus.”

This much-needed emphasis is both timely and necessary. There is organizational risk for boards that do not press for better performance beyond the status quo. Enterprise risk programs should do more than “check the boxes” and boards must challenge those who insist they’re doing “everything they can” for employees as well as shareholders.

Mitigating Employee Health Plan Risk

ERISA, which ensures that both retirement and health plans are managed in the best interests of plan participants, tightened its regulations around retirement plans after rising numbers of class action suits resulted in billions of dollars in settlements. From imprudent investments and grossly high fees to mismanaging shared plan assets, employers were called to task for reduced earnings for employees.

As for healthcare benefits, boards can (and should) urge organizations to move away from legacy health plans that prioritize insurer and PBM profits over plan participants. This has fueled runaway employer costs, siphoned employee income, and burdened employees with medical debt when they need to use their health insurance.

Most employers and their employees are overspending on healthcare by 30% or more. This drain on corporate profits and employee income can be addressed by a modern health plan administrator with leading technology and a moral imperative to represent the best interests of employers and health plan participants.

Although it is unlikely that ERISA-driven regulatory changes around health plans are imminent, ERISA does expect organizations (and by extension, their boards) to manage health plan expenses. It is not difficult to envision employee health plan participants initiating legal action because employers and benefits consultants maintain plans with legacy insurance carriers that fail to demonstrate any cost control. Boards are encouraged to be more diligent and take proactive steps to mitigate the risk of such a scenario.

Board Responsibilities to Society

Deloitte cites the 2022 Edelman Trust Barometer, whose top ten findings reinforce the role business plays as the society’s most trusted institution. Respondents affirm that “societal leadership is now a core function of business” and that “business needs to step up on societal issues.”

There are few societal issues or obligations more critical than addressing the challenges of today’s healthcare system. As an integral part of this system, employer health plan sponsors have an enormous responsibility and cannot afford to be complacent actors. A greater emphasis on employee health and wellbeing is needed, as supported by Springer, which finds that some boards “view health as a business opportunity or even a moral obligation.”

Although 54% of the population receives health insurance through an employer health plan, 29% of those with employer coverage are functionally uninsured. Legacy health plans subject employees to immense financial distress and instability, often resulting in bankruptcy and crippling debt from which many struggle to recover.

Corporations and their boards have responsibilities to employees as well as shareholders and when it comes to employee health, those priorities are not mutually exclusive. Private sector employers need to embrace the growing workforce stewardship taken by many state and municipal government leaders as they root out unnecessary spending and seek more cost-effective, member-focused health plan alternatives.

Pharmaceutical companies insist that outrageous prices drive the development of innovative medicines. And industry groups claim that Medicare pricing reform and the Inflation Reduction Act of 2022 will send innovation “light years back into the dark ages of biomedical research.” Don’t believe them. Read More about Will Pricing Reform Stifle Rx Innovation? Nope… Not One Bit.

“In the mosaic floor of the opulent atrium of a house excavated at Pompeii is a slogan ironic for being buried under 16 feet of volcanic ash: Salve Lucrum, it reads, “Hail, Profit.” That mosaic would be a fitting decoration today in many of health care’s (corporate) atria.” Read More about How to Win Against the Greed that Threatens US Health Care

As healthcare costs continue to rise, many employer health plan sponsors struggle to cover their employees without breaking the bank. Unfortunately, many keep returning to the same old solutions: a monopoly of legacy insurance carriers with high-priced plans and suboptimal benefits and member support. Read More about The Top 5 Excuses Why Employers Don’t Drop Their Legacy Insurance Carrier

The Inflation Reduction Act is a great first step toward lowering prescription drug prices and out-of-pocket expenses for Americans covered by Medicare. What’s unknown is how this will impact future Rx costs for members of employer-sponsored plans. How can employers cut costs now without reducing care?

Recent commentary asserts that drug manufacturers will experience losses as a result of this new legislation and are likely to “shift some of the losses onto commercial payers, leading to higher drug costs for employer-sponsored plan members. We’ve already seen this scenario play out in health care, as Medicare pays considerably lower rates for the same service compared to commercial plans, with hospitals and providers often increasing charges for employer-sponsored plans to make up for the difference.”

The author recommends that employers work with their Pharmacy Benefit Manager (PBM) to better understand their pricing practices and terms of service. While all efforts to improve communication and transparency are commendable, the Federal Trade Commission has already exposed the controversial, self-serving practices of six of the largest PBMs whose sole purpose is to limit competition and increase profits.

Employers and plan sponsors need to go beyond understanding the machinations of this corruption and implement a contemporary pharmacy benefit plan that prioritizes patients over secret profits.

Pharmacy Administration without the Predation

According to the PBM Accountability Project, “It’s no coincidence that out-of-pocket drug costs are rising, while PBM profits are increasing. The process of pricing our medications is unknown to many Americans. The opacity and complexity of the drug pricing system undermines the possibility for dynamic, price competition between PBMs — putting consumers at a disadvantage.” 

Vitori Health’s lowest net-cost pharmacy administration offers employers the antithesis of predation and disadvantage. It includes unmatched technology-enabled contracting and built-in advocacy on behalf of members who are reliant on high-cost specialty medications. By securing member financial assistance from pharmaceutical manufacturers, Vitori also removes plan sponsor costs and adds value as cost cascading occurs in the market.

It’s time to stop letting the fox guard the hen house. Contact Vitori Health for information about our non-PBM VitoriRx plan that gives employers and members a clear advantage.

Vitori Health has been recognized as a Market-Shaping Enterprise (MSE) by Catalyst for Payment Reform (CPR). Independent and influential, CPR’s thought leaders empower health care purchasers to proactively improve today’s dysfunctional healthcare market. Vitori is proud to advance this mission.

CPR has published a white paper that examines the evolution, mechanisms, and strategy behind MSE solutions. It also explores the most important questions health care purchasers should consider when evaluating an MSE vendor.

Paying healthcare claims should be transparent, less costly, and stress free but for many plan sponsors, it is anything but. Insurance company discounts off price-blind billing fuel rising costs, and referenced based pricing (RBP) antagonizes providers and members alike. A better approach is Fair Market Payment™ (FMP). Read More about Fair Market Payment™: Big Savings, Less Friction than BUCA or RBP Plans

America… the land of the free and the home of the world’s highest health care costs and lowest life expectancy. While you may be familiar with such global comparisons, you may be surprised by the wide disparities in health care quality, affordability, and access, between and even within our states.

The State of Our Health Care

A recent WalletHub study ranked the best and worst states for health care based on these and other criteria including infant mortality rate, doctors and dentists per capita, and the number of adults who have not seen a doctor or dentist in two years. The results are alarming, and the challenge is daunting.

The study includes an interactive table that can be sorted by rank, cost, access, and outcomes. The top two performers are Minnesota and Rhode Island, which are among the top 10 in all four categories. In three out of four categories are Colorado, Connecticut, Maryland, Massachusetts, and Vermont.

Results at the other end of the spectrum are more nuanced. Massachusetts, for example, has high costs but ranks #1 in access and outcomes. Others, like Alabama, Alaska, Louisiana, Oklahoma, and Texas, rate the most poorly in three out of four categories.

Shrinking Access to Maternity Care

While the WalletHub study focused on health care in general, the March of Dimes dug deeper into maternity care. This is especially important because in poorly rated states, there is a direct relationship to high infant mortality rates.

The March of Dimes study identified what it calls “maternity care deserts.” These locations are defined as “any county without a hospital or birth center offering obstetric care and without any obstetric providers.” Obstetric providers include obstetrician-gynecologists, certified nurse midwives, and certified midwives.

It’s hard to imagine that nearly 7 million American women of childbearing age now live in a county with limited or no maternity care services. One-third of U.S. counties, more than half of which are rural, are now maternity deserts. And that number is growing as local and regional hospitals get gobbled up by large hospital systems.

Employers can take an active role in mitigating the nation’s healthcare mess, at the local and individual levels, by choosing an integrated employee health plan with national coverage. It’s best to seek out a next-generation health plan designed specifically to reduce overspending while improving access to quality health care, regardless of location.

Given the difficulty navigating our broken healthcare system, a preferred employee health plan should also include high levels of member support. From answering questions to locating qualified providers, members deserve personalized assistance to get the best care at the lowest cost.

A new study shows that 71% of US employers expect moderate to significant increases in healthcare costs over the next three years, including a 6% rise in 2023. While the need to manage costs is clear, it’s shocking that 1-in-4 employers plans to shift costs to employees through higher contributions.

As quoted in the WTW study, “Employers must focus on changes that go beyond addressing their employees’ needs to also support efforts to attract and retain talent during a tight labor market.”

Increasing premium contributions effectively reduces employee income and quality of life, and is contrary to a growing focus on making employee benefits more affordable. It’s certainly not the best way to win the war for talent and boost employee satisfaction and retention.

In addition to higher payroll deductions, 23% of employers surveyed have further eroded employee earnings and freedom of choice by increasing out-of-pocket costs for non-preferred labs, providers, and facilities. Another 19% expect to do so by 2024. Boxing employees into narrow networks is never popular and does little to effectively balance cost management with health care affordability.

Doing the Right Thing for Employees

Employers have a fiduciary responsibility under ERISA to manage plan expenses on behalf of plan participants. At the same time, they need to seek competitive advantages and avoid future risk. A next-generation health plan is a strategic tool for meeting these goals by countering inflationary pressures and making health care affordable without reducing benefits.

While 27% of respondents currently use programs to combat fraud and waste, such capabilities can be fully integrated into a modern health plan to ensure sustainable savings and help prevent such abuse from happening in the first place.

The same is true for concierge support services, which help employees navigate the healthcare system and get more value from their health plan. A key driver of employee satisfaction, this essential service is currently only offered by 21% of respondents, with another 25% expecting to do so by 2024.

Employers willing to let go of their “devil you know” mindset can deliver better, more affordable health care for their employees and successfully fight the rising costs and low transparency of legacy health plans.