Transcript Document

Massachusetts Association of Health Plans
Provider Consolidation: Better Care or Higher Cost
Alexis James Gilman
Assistant Director
Mergers IV Division
Bureau of Competition
Federal Trade Commission
The views expressed are my own and do not necessarily reflect those
of the Commission or any individual Commissioner
Background

In 2002, FTC announces Hospital Merger
Retrospective Project

FTC Retrospective Study Results

Hospital mergers can result in substantially higher
prices


Revealed price increases up to 65%
One study of effect of a merger on quality: little
evidence that merger improved quality
2
ProMedica/St. Luke’s: Overview

Hospital merger in Toledo, OH area
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Post-merger market shares:
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
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Inpatient general acute care 58% (4-3)
Inpatient obstetrical services 81% (3-2)
Parties did not seriously argue the merger
would yield quality improvements
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ProMedica/St. Luke’s: Price Evidence

Presentation to St. Luke’s Board of Directors

Email from St. Luke’s CEO to Board of Directors
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Presentation by St. Luke’s CEO to Board
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ProMedica/St. Luke’s: Price Evidence

St. Luke’s Due Diligence Team Notes

St. Luke’s CEO Email
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St. Luke’s CEO Email
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ProMedica/St. Luke’s: Price Evidence
171
Market Share
45%
170
40%
160
35%
150
30%
140
25%
129
46.8%
20%
5%
130
120
113
15%
10%
• Hospitals with
higher market
shares get
higher rates
180
110
28.7%
100
11.5%
Price Level (St. Luke's = 100)
50%
100
13.0%
90
0%
80
St. Luke's
UTMC
Mercy
ProMedica
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ProMedica/St. Luke’s: Other Evidence

Price




Health plan declarations stated expectation of higher rates
FTC’s economic expert’s model predicted price increases
Even ProMedica’s expert predicted (smaller) price increases
Quality



St. Luke’s quality was generally higher than ProMedica’s
St. Luke’s: “Challenges [other hospital] systems to keep service
levels up”
St. Luke’s Due Diligence Team: “Some of ProMedica’s quality
outcomes/measures are not very good. Would not want them to
bring poor quality to St. Luke’s.”
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St. Luke’s/Saltzer: Overview

Acquisition of physician group in Nampa, ID

Combined share of 80% in adult PCPs

Parties claimed deal would achieve
efficiencies, including better, more integrated
care
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St. Luke’s/Saltzer: Price Evidence

St. Luke’s Board Member
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St. Luke’s document
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Chairman, Saltzer Contracts Committee
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St. Luke’s/Saltzer: Better Care?

St. Luke’s quality claims were unverified

No link between purported quality improvements and
physician acquisitions
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Claims of 40+ percent improvements not supported by
internal quality reports

No measurable benefits from St. Luke’s use of health
information technology – e.g., EMR
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Context re: Antitrust Enforcement

FTC has challenged ~1% of hospital mergers in the last decade
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Summary

Anticompetitive provider mergers generally lead
to higher prices


Provider mergers can – but don’t necessarily –
lead to better care



But most competitively benign, unchallenged
And parties must show their efficiencies are
“cognizable”
Evidence from health plans important
Antitrust is not a bar to provider mergers
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