April 26, 2024
Dear Interested Readers,
Consolidations, Affiliations, Mergers and Culture
I have taken several weeks off from recounting the story of my journey toward what I have been calling my “medical moral sensibilities.” As you may remember, the attempt to tell my story was in part responsive to the current challenges from burnout in healthcare providers. Over the past few years, there have been some articles that have suggested that for many healthcare professionals burnout is a misdiagnosis. These articles make the case that the real issue for many is “moral injury.”
Moral injury in healthcare occurs in many ways. At a high level, it may occur when the “system” denies care or performs in a way that puts the healthcare provider in a situation where patients are treated in a sub-optimal way. A clinician may feel morally injured because they work in a system that tolerates or causes injuries to patients. The injury can occur in many ways. Some are subtle like inadequate staffing ratios in hospitals or emergency services. At times, the injury may be precipitated by denial of care that should have been covered.
What both burnout and moral injury suggest is that our system of care is defective. Our increasing workforce costs, staffing shortfalls, poor access to routine care, and often untimely access to emergency and specialty care must be causative factors in our sub-optimal outcomes, high costs, and low life expectancy statistics compared to other advanced economies. We have a very complex problem.
Looking at my personal feelings after a long healthcare career, I realize there were some moments, not many, when I felt that against my will the care that I could provide was compromised by some corporate, state, or national policy. It can be hard to avoid a sense of guilt associated with participating in a system without trying to do something to improve it.
We all know that a primary principle in the practice of medicine is primum non necere. Literally, it means: “First, do no harm.” I like to say that the principle boils down to:
“If you can’t make it better, don’t make it worse!”
When I look back on all the consolidations. mergers, and acquisitions in which I participated, I realize that many of the objectives we hoped to accomplish with our affiliations were not achieved. Perhaps in our attempts to make things better, we might have made them worse. I know for a fact that every consolidation, acquisition, or merger challenged the culture and mission of our practice.
The first merger I experienced occurred in the mid-80s when Harvard Community Health Plan acquired Multigroup Health Plan. Multigroup then became the “Groups’ Division” of HCHP and the health centers of HCHP became the “Health Centers Division.” I was not a part of the merger discussions, but as a member of the Physician Council of the Heath Centers, I was close enough to management to begin to have an opinion. I realized at the time that HCHP needed to expand its offerings to be a viable competitor to Blue Cross in an era when employers like Digital Equipment Corporation were attracted to the concept of working with one insurer that could offer access to almost all providers in the market. Indeed, at the same time, HCHP’s marketing tagline was “The cure for the Blues!”
Multigroup was a collection of suburban medical practices like Dedham Medical Associates, South Shore Medical Center, Chelmsford Medical Associates, and Acton Medical Group. Eventually, all of these groups except Acton joined Harvard Vanguard to become part of Atrius Heath in the early 2000s. The acquisition was a business decision that made sense, but in retrospect, it should have given us a clear picture of how difficult it is to create consistency in clinical programs between medical groups with different historical and cultural backgrounds. The doctors who chose to practice in small suburban groups have different attitudes and interests from the doctors who chose to work in a pilot program like HCHP which was affiliated with a medical school.
The next merger occurred for many of the same market reasons as the Multigtoup merger. Texas Instruments had an operation in Attleboro in southeastern Massachusetts with many of its employees living just across the state line in Rhode Island. At the time, RIGHA, Rhode Island Group Health, was engaged in a losing competition for business with Blue Cross of Rhode Island. RIGHA had many similarities in mission and culture to the original HCHP of Dr. Ebert, but that did not ensure the effective integration of its practices into HCHP’s network of care.
I was a member of the Harvard Community Health Plan board at the time of the RIGHA merger. I worked hard to create relationships with specific Rhode Island doctors. My wife’s family had been long-time members of RIGHA. After eight years of struggle, it did not end well for the RIGHA doctors. When Harvard Pilgrim was taken into receivership in 1999 after hundreds of millions of dollars of loss, some of it from Rhode Island, it abandoned the Rhode Island practices and those doctors were left to fend for themselves.
In defense of both mergers, I do belive there was a transfer and sharing of the foundational quality and safety work that was occurring within the Health Centers at the time. HPHC used a Rhode Island practice to test EPIC. The mergers probably also had some positive impact on the cost of health insurance as HCHP continued to be the “low-cost provider” and was better equipped to compete with Blue Cross. As was true with the Multigroup merger, there was never an effective merger of the clinical activities, and by the mid-nineties, HCHP existed as an entity with three clinical “silos.”
The final big merger that involved HCHP before the Health Centers exited as Harvard Vanguard in 1997-8 was the merger of Pilgrim Health Care and Harvard Community Health Plan to create Harvard Pilgrim Health Care in early 1995. Pilgrim was a very successful and rapidly growing IPA that had it origin in southeastern Massachusetts and had spread to the western suburbs of Boston through a merger. From its inception in 1969, a core principle of HCHP had been that the organization was founded as an innovation in clinical practice. We considered HCHP to be a “physician-led” practice first, and secondarily an insurance entity.
As the Chairman of the Physician Council, I controlled the real powers that the physicians of the Health Centers Division had retained through the previous mergers. We believed that we had never given up those influential powers in the two previous mergers. To defend this concept, I was very active in the merger talks and formed effective relationships with many of Pilgrim’s practitioners who were in its governance and had been involved in its creation. Working with Dr. Walter Murphy, a pediatrician who was the president of the Plymouth Medical Group, I insisted that the merger create a “Corporate Medical Council” that would give the practitioners of the newly merged entity some voice in corporate policy development and a continuing presence on the board of the newly formed corporation.
In retrospect, the idea failed because the new Corporate Medical Council was given a voice without real corporate power to influence the performance of its lay managers. That flaw in the merger agreement was the origin of the physician discontent that created Harvard Vanguard. In retrospect, there seems to be an “oil and water” relationship between practicing physicians and those who manage the insurance functions.
As the Chairman of Harvard Vanguard and Atrius even before becoming the CEO, I was very involved in a continuing process of consolidations, affiliations, and mergers which i will discuss in future letters to you. In retrospect, all of these efforts to gain market advantage and advance the original mission of HCHP stumbled because of cultural issues both within the practices and within the efforts to meld management teams. Those issues were refreshed in my mind this week when the Kaiser Family Foundation published an article entitled “Ten Things to Know About Consolidation in Health Care Provider Markets.” The article got me thinking about what I had learned in the many efforts to gain corporate advantage through consolidations, affiliations, and mergers during my long years of leadership in organizations that resonated with the principles that evolved into the Triple Aim. The article begins with an apt description of the moment and the objectives that are being pursued by efforts at consolidation.
National health spending totaled $4.5 trillion in 2022—17% of gross domestic product (GDP)—and is projected to grow faster than GDP through 2031, contributing to higher costs for families, employers, states, and the federal government. As policymakers consider a variety of strategies to make health care more affordable, they have been increasingly attentive to consolidation in health care markets—including mergers and acquisitions of health care providers—and the potential effects of consolidation on the cost and quality of care and other outcomes. Consolidation may allow providers to operate more efficiently, and could help struggling providers keep their doors open in underserved areas, but also often reduces competition. A substantial body of evidence has found that consolidation has led to higher prices, but the evidence on quality is unclear.
The article continues by referencing recent concerns by the FTC about the anticompetitive results of consolidations that negatively impact the cost of care. The motivation of the article is to discuss the potential benefits and liabilities of consolidations in healthcare. We live in a very heterogeneous environment. Consolidation may be beneficial in maintaining and improving medical services in one community or environment, but can easily harm competition and price in other environments like our metropolitan markets. The authors of the article identify ten things they think we should consider as we look at consolidations in healthcare. The article is particularly interesting to me because they are focusing on clinical consolidation and not the consolidation of insurance providers. They write:
This issue brief identifies ten things to know about consolidation in health care provider markets, touching on topics such as the different types of consolidation, trends, ways in which consolidation can be beneficial or harmful for patients and other consumers, some key findings from existing research, and policy options for increasing competition. This brief focuses on consolidation among health care providers, rather than health insurers, and builds on a 2020 KFF issue brief on provider consolidation. More recent research has not altered the key takeaways pulled from that brief.
The authors also deal with the variable distribution of clinical assets from market to market. To be explicit the issue of consolidation of practices and hospitals in a small rural state may deserve distinction from the same process in metropolitan New York or Chicago. They imply that consolidation is not the only way to address the cost issues.
Efforts to promote more competitive provider markets could help address health spending and affordability issues, but also entail a number of challenges, given that many markets are already highly concentrated and that some regions cannot support competitive markets. Some have considered more direct regulation of prices and spending, and the two approaches could play complimentary roles when address rising health care costs, such as by encouraging providers to compete on quality when prices are regulated.
What follows is an overview of their ten considerations. I hope that many of my readers will go to the original article for a more in-depth understanding than I can offer here. My primary objective is to point out that the proposed benefits of consolidation are often not achieved and may undermine, not promote, the overall achievement of cost control and the enhancement of quality with an increase in appropriate access and quality. In the worst case possibilities, consolations could lead to monopolies that value profitability over quality, safety, and access. In my summary of their analysis, I am omitting most of the examples they present to support their conclusions. Again, I hope you read the whole article. Their list is:
- Consolidation in health care markets can take many forms and involve various types of providers.
Health care consolidation often refers to scenarios where hospitals and other health care entities join together under common ownership through either a merger or acquisition (referred to as “mergers” in this brief). There are three main types of mergers:
- Horizontal mergers occur when there is consolidation between entities that offer the same or similar services, such as when a health system acquires a hospital or when two physician practices that provide overlapping services merge…
- Vertical mergers occur when there is consolidation between entities that offer different services along the same supply chain, such as when a hospital or health plan acquires a physician practice.
- Cross-market mergers occur when there is consolidation between two providers that operate in different geographic markets for patient care. For example, in March 2024, Kaiser Permanente closed its merger with Geisinger Health through a new organization called Risant…
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There are some clarifying statements about the various types of affiliations that can occur.
Aside from merging, healthcare entities can form other types of affiliations without necessarily changing ownership, which may also have implications for patient care. Examples include the creation of accountable care organizations (i.e., groups of doctors, hospitals, and other providers who form partnerships to collaborate and share accountability for the cost and quality of care delivered to their patients) and joint ventures…
- There has been a large amount of consolidation in provider markets over the past 30 years
… there were 1,573 hospital mergers from 1998 to 2017 and another 428 hospital and health system mergers announced from 2018 to 2023. The share of community hospitals that are part of a larger health system also increased from 53% in 2005 to 68% in 2022…Relatedly, the share of physicians working for a hospital or in a practice owned at least partially by a hospital or health system increased from 29% in 2012 to 41% in 2022.
They point out that consolidation has created huge entities.
Consolidation has also contributed to the emergence of large health systems. For example, the ten largest health systems (see Table 1) accounted for about one in five (22%) of nonfederal general acute care hospital beds in 2022. These systems are the size of large corporations. For example, HCA Healthcare, which operates the largest number of nonfederal general acute care hospital beds in the country, had greater operating revenues than each of Netflix, Uber, and Starbucks in 2023. AdventHealth, the smallest of the ten largest health systems in terms of beds, had greater operating revenues than Zoom and Lyft combined in 2023 (as did Community Health Systems, the smallest of the ten largest systems in terms of operating revenues). Consolidation, which often occurs between providers based in the same region, has also contributed to highly concentrated markets where patients have limited options among large provider organizations.
3. Corporations such as CVS, Amazon, and UnitedHealth and private equity firms have recently acquired many physician practices
In addition to hospitals and health systems, other types of entities have also been involved in a large number of acquisitions in recent years:
- Corporate buyers. Corporations that have not traditionally specialized in the provision of health care services—including large national companies such as CVS, Amazon, and UnitedHealth—have acquired many physician practices in recent years.
This point comes very close to my ongoing story about the legacy organizations of Harvard Community Health Plan because Optum, a division of UnitedHealthcare now owns Atrius Health and Reliant Health in Massachusetts. They write:
- … Optum, a division of the insurer UnitedHealth, now employs or is affiliated with about 10% of all practicing physicians. Some policymakers have expressed concern about the role that large corporate buyers could have in increasing consolidation and reducing competition, which could lead to higher costs and reduced quality, although evidence is not yet available on this trend.
- Private equity firms. Private equity is a form of corporate ownership that often entails relying on loans to acquire a business, taking it private (if not so already), and attempting to increase its value with the goal of selling it at a profit in three to seven years. One common strategy is to consolidate providers through a series of mergers and acquisitions…Some policymakers have expressed concern about the role of private equity in consolidation and the effect of the short-term profit motive of private equity firms on the prices, quality, and financial standing of acquired providers.
4. A substantial body of evidence shows that consolidation has led to higher prices, but the evidence on quality is unclear
Under this point, the authors present the reality of mixed outcomes from consolidations. In some situations platforms and corporate business functions can be consolidated to produce savings. It is not clear that those savings flow to consumers. They write:
Consolidation could in principle benefit consumers in some instances and be harmful in others. On the one hand, consolidation could allow providers to operate more efficiently, such as by obtaining supplies at steeper discounts (by purchasing them in greater volume); sharing resources (such as medical imaging equipment); and achieving the scale necessary to participate in value-based payment programs. These potential efficiencies could in turn benefit patients, for example, if they lead to higher quality care or reduced costs (e.g., if providers share savings through lower prices), and the latter could benefit health plan enrollees more generally to the extent that it leads to lower plan spending and premiums. On the other hand, consolidation often reduces market competition and therefore the pressure on providers to lower prices or invest in quality improvement. Critics have also questioned the extent to which mergers allow providers to operate more efficiently. Efficiencies may depend, in part, on the degree to which providers integrate their operations, which can be complex and may or may not be a priority.
Under this heading the authors make some definitive statements:
A substantial body of research shows that consolidation has led to higher health care prices…
Relatedly, studies have typically found that consolidation leads to higher health care spending, which could increase costs for families, employers, states, and public programs, like Medicare and Medicaid…
The evidence on the effect of provider consolidation on the quality of patient care is unclear.
…it is likely that the effects of consolidation vary based on the extent to which providers have integrated their operations and across different patient populations.
5. Mergers between hospitals and health systems can lead to higher prices even when entities operate in different markets
6. The impact of consolidation on the availability of health care services for rural and other underserved patients is unclear
This point raises some of the observations and concerns that I have developed both as a board member of a rural system of care (Guthrie Health) and as a consumer of care from an essentially rural and small-town system (Dartmouth Health). They write:
Consolidation could in principle have mixed implications for access to care. For example, it is conceivable that the acquisition of a small, financially struggling, rural hospital by a large health system based in another region could increase the availability of services in the community in some instances and reduce it in others. On the one hand, being acquired could benefit the hospital financially—such as by providing access to a wide range of resources, managerial expertise, and capital—which could help the hospital keep its doors open and maintain or expand the services it offers. On the other hand, the system that acquires the rural hospital may be less responsive to the needs of the local community, such as when deciding whether to close the hospital or to stop offering certain services, such as maternity care (an outcome supported by some research, as described below)…
7. Hospital consolidation can lead to lower wages for some skilled workers, such as nurses, but the broader evidence on employment and compensation effects is limited
8. The FTC, the DOJ, and state antitrust agencies each play a role in challenging consolidation and other potentially anticompetitive practices
In many places “the horse may have already escaped the barn.” The authors write:
- It is difficult to break up mergers after they have already occurred, and many provider markets are already highly concentrated.
- Some regions cannot support competitive provider markets. For instance, rural communities may not have enough residents to support several providers that offer the same service.
- Antitrust litigation can be complex and expensive. Without adequate funding, it may be impractical to challenge a large number of provider business practices that raise anticompetitive concerns.
- Antitrust agencies may have difficulty staying ahead of market trends.
- The benefits of competitive provider markets for individuals with health insurance will depend in part on the competitiveness of health insurance markets.
The last two points in the article speak to the future and potential ways to manage consolidations going forward.
9. Site-neutral payment reforms, if enacted, could reduce incentives for vertical consolidation by lowering the rates at which acquired providers bill Medicare
10. Policymakers have considered a number of options to increase the competitiveness of provider markets.
Several policies have been proposed to rein in provider consolidation or increase the competitiveness of provider markets in other ways:
- Strengthen antitrust enforcement.
- Reduce incentives for health care providers to consolidate.
- Increase price transparency.
- Allow more providers to enter the market.
Perhaps, what I have accomplished by bringing this article and the issues it raises to your attention is to underline what you know already. Healthcare is complex and will be increasingly difficult to regulate in ways that steer it toward the ultimate objectives of the Triple Aim or the potential for the organization of care along the lines of the thoughtful view of the future presented in Crossing The Quality Chasm.
My personal experience suggests that “market forces” alone are inadequate to develop and foster an equitable system of care. I am not naive. We continue down a road that will be very difficult to exit. I fear physicians have been complicit in delivering us to where we now find ourselves. Is a collective “moral injury” an etiological factor in our collective passivity in the face of the forces of consolidation that foster these broad changes in our system of care? This moment may be a reality of a tendency within our physician culture to want to be only focused on the patient that is right in front of us and be unwilling to learn from our own failed efforts for improvement through consolidation.
I feel that the generalized lack of energy to participate in making the real changes that would foster healthcare equity and bring our costs and outcomes into a position of leadership among other advanced economies will await the resolution of other deeper tensions that have produced the deep divides that currently characterize this political moment. The election of individuals committed to policies that will lead to continuous improvement of healthcare equity is a necessary first step.
Earth Day 2024
I hope that it did not go unnoticed by you, but Monday was Earth Day. It may have gone unnoticed by you, but Earth Day has been celebrated on April 22 every year since 1970. As you will note if you follow the previous link, Earth Day began as a teach-in. It is celebrated in 193 countires. The official theme for this year is “Planet versus Plastics.”
To be honest, before this year I had not paid much attention to Earth Day. This year one of my neighbors on the lake, the same woman who invited us to an “eclipse party” less than three weeks ago, invited us to an Earth Day celebration. Monday was a very clear day with bright sun, but a surprisingly low temp that felt even colder because of a breeze. As you can see in the picture in today’s header, we sat in a circle and were each offered a drum or something else to shake or rattle in time with the music. It felt primal. The high point of the experience was the singing of “Earth Anthem” which was a unique experience. It is sung to the tune of our national anthem, the Star Spangled Banner. Interestingly, Francis Scott Key did not write the melody. It was a popular English melody, “To Anacreon in Heaven”. As the link says, “Anacreon was an ancient Greek poet noted for his praise of love and wine.”
Earth Anthem
O say can we see
By the one light in all
Our earth to embrace
At the call of all nations
Where our children can play
In a world without war
Where we stand hand in hand
In the grace of creation
Where the rivers run clean
Through forests of green
Where the cities stand tall
In the clear skies of freedom
O say do our hearts sing
for harmony and love forever
on the planet of our birth
blessed with peace on Earth
Words by Stephen Longfellow Fiske, 2002
Sung to the tune of the “Star Spangle Banner”
I fear that even though for the last 54 years we have had Earth Day, our abuse of the Earth continues. The focus on plastics this year is appropriate given the fact that attempts to recycle plastics have not kept up with their production and microparticles of plastics in seawater are a new threat to our health through the food chain. It’s another “inconvenient truth” about how we have damaged our shared home and threatened our collective health. We are not ignorant of the dangers of global warming and the various forms of pollution that our lifestyle of convenience generates. What we lack is the collective resolve to do what is necessary to heal our planet.
Here in New Hampshire, we are still in the midst of an “on again, off again” spring. Most of our nighttime temps this week have been below 30. Our daytime temperatures have varied from 40 to 65. I can live with those numbers, but the long-range forecast from NOAA is for a very hot and perhaps wetter than “normal” summer here in the Northeast.
Perhaps the anthem for Earth Day should be Pete Seager’s 1955 song “Where Have All The Flowers Gone?” with its very appropriate last two lines:
Oh, when will they ever learn?
Oh, when will they ever learn?
Earth Day should be both a celebration and a time of reflective consideration followed by collective action. I did not know until I looked into Earth Day that the Paris Climate Agreement of 2016 was open for signing at the UN on April 22, 2016, Earth Day.
I hope that you will be out and about enjoying good weather this weekend. Just don’t take what we now enjoy as something that we will be able to enjoy forever. In healthcare and in the realm of the environment there is a huge gap between what we could and should be doing and what we currently tolerate. When will we ever learn?
Be well,
Gene
