Health Care Monopolies Strike Back

Three ways big health care systems are fighting new rules and antitrust scrutiny.

Photo credit: Juanky Pamies Alcubilla

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A few months ago I wrote about the national, bipartisan loathing of hospital monopolies, as legislators in states across the political spectrum — from deep red to deep blue, as they say — worked to grapple with out of control hospital systems that were raising costs, cornering labor markets, and shutting down key facilities. Bills in a bunch of states during this year’s legislative sessions, beyond just those I mentioned, would regulate hospital prices, rein in mergers, and protect workers from the excesses of corporate power.

Of course, such a flurry of activity was bound to draw a reaction from the health care industry, the leaders of which are not at all interested in seeing their monopoly power reduced. And they’re using a variety of tactics to slow, delay, or defeat needed reforms. Below, I’ll break down three that health care industry titans have used recently to try to entrench their power and head off legislative action that might cut into their monopoly profits, to varying degrees of success. I’m hoping this can be a guide to legislators, staff, and normal residents for what to watch out for and anticipate when grappling with big health care players.

Fight Reform With Bureaucracy: Indiana has some of the highest hospital costs in the nation due to the monopoly power of its biggest systems, and legislators came into 2023 having met with hospital administrators several times in an attempt to find common ground on cost-reductions, and were, I’ve heard repeatedly, told to take a hike. So they proposed a new system of price caps pegged to 260 percent of Medicare. Hospitals that went over that cap would have to pay penalties.

A cap attached to an easy-to-understand number is a clean solution that is also simple to administer, in the grand scheme of things. But the health care lobbying machine went to work, and the final legislation that was passed into law didn’t include a clean cap, or any direct mechanism, really, to control hospital prices. Instead, it creates a task force to study those prices and propose possible policy solutions to reducing health care costs.

The benefits to the industry of this are two-fold: First, it delays any new reforms, because the task force needs to go through its own workflow, and second, it sets up a process that the industry can capture either by working to appoint allies to the task force or by lobbying to ensure that anything it produces is weak sauce that is industry approved. Janky, bureaucratic processes almost always work in favor of those with the time, money, and know-how to engage in them.

We’ll see, of course, where it ends up, but strict, bright-line rules are generally preferable to reform via long bureaucratic mechanisms that are mostly influenced by insiders.

Threaten To Move Elsewhere: Minnesota is moving a bunch of pieces of health-care-related legislation forward. One of the most high profile is called the Keeping Nurses at the Bedside Act, which would add the state to the list of those that require minimum nurse staffing ratios — which is the ratio of nurses to patients, to make sure there are enough staff to adequately handle the patient load. Those ratios would be worked out by staff committees at each health care facility, giving workers a direct say in their working conditions.

The Mayo Clinic, perhaps the most well-known of Minnesota health care titans, weighed in last week, very much in the negative. Its leadership said that, if the bill passes, they’ll cancel $1 billion in investments they’ve planed in the state and move those dollars, and therefore new facilities, elsewhere. Mayo also objects to a separate bill creating a health care cost affordability board.

For those who have followed corporate subsidy debates, this is a very common tactic: Hold investments, and implicitly or explicitly job creation, hostage to certain policy changes. It’s also similar to a tactic big tech firms have used in recent years, such as Apple threatening to shut down its app store in North Dakota or Facebook and Google threatening to cut entire countries off from news if legislation to boost local journalism becomes law. As the Minnesota Nurses Association called it, these are “blackmail tactics,” coming from an entity that’s already received more than half a billion in public funding from Minnesota taxpayers.

It’s unclear how this will end, but Mayo has certainly gotten significant attention on its complaints with this tactic. So far, the sponsors of the original legislation seem intent on not changing the bill or carving Mayo out of it, which was one of Mayo’s asks. Which actually brings us to the next section.

Demand Exemptions and Immunity: Mayo wants an exemption for itself from nurse staffing ratios: In North Carolina, the hospital system UNC Health, which is attached to the University of North Carolina, wants an exemption from any form of antitrust scrutiny, and seems to be on the path to getting it. Already, the state senate there passed a bill, unanimously, to free UNC Health from any antitrust violations, no matter what it does, which is about as clear a signal as one can make that consolidation is the explicit goal of the legislature.

Lawmakers there, in favor of exempting UNC Health from both state and federal antitrust scrutiny, are repeating the canard that mergers are necessary to save rural hospitals and other health care facilities. But as my colleague Sara Sirota explained in a policy brief, that line of argument is unconvincing, as rural hospitals actually receive tons of benefits that bolster their bottom line. In fact, she explained, “many of the hospitals closing in rural areas today are not independent, and their floundering state is caused by financial extraction by private equity rather than unavoidable circumstances.”

Already, North Carolina is dealing with a significant hospital consolidation problem, with HCA Health, the largest hospital chain in the nation, facing private antitrust scrutiny, which the attorney general is supporting. The state treasurer there is pushing for even more attention to consolidation issues. So to give one of the state’s largest hospitals what is essentially an antitrust waiver is throwing gasoline on a fire most agree is already raging out of control. It looks to me like a case of UNC Health is reading the writing on the wall and trying to get ahead of either court cases that could harm its future power.

As I said, some of these tactics will wind up more effectual than others. It’s always possible that some of the more aggressive cause a blowback that makes legislative action more likely, not less. But what’s clear is that big health care systems are worried and are moving now to entrench their power and profit.

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BUDGET AND BREWS: I’ll be speaking at the first ever Budget and Brews event hosted by New Jersey Policy Perspective in Trenton, New Jersey, on June 1. We’ll be talking about corporate tax cuts and the New Jersey budget. Having grown up in New Jersey, I’m super excited for this one. Come if you’re in the area! You can register here.

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— Pat Garofalo