On Monday, Mass General Brigham emerged from an 18-month plan, forced by Massachusetts regulators, to lower its spending and prices. With no spending controls in place, regulators and consumers are worried that prices will surge in Massachusetts and New Hampshire.
Mass General Brigham is the largest health care provider in Massachusetts and owner of six community hospitals, including Wentworth Douglas Hospital in Dover. Its reorganization announced last year transfers top decision-making authority from community hospitals to system executives, even stripping hospital presidents of their CEO titles.
New Hampshire Insurance Commissioner D.J. Bettencourt told New Hampshire Journal in February he was “concerned” about the hospital system possibly raising prices after March.
Studies of health care pricing show why regulators are worried. A 2021 Pioneer Institute examination of rising Massachusetts health care costs concluded that the “largest driver is the increase in prices by health systems that have the clout to command higher payments and work to recruit more patients to their high-cost facilities.”
MGB is among the hospital systems in Massachusetts that the Pioneer Institute found “have a long history of charging significantly more for the same services than other hospitals” and “buying up physician practices, raising prices, and directing patients into their high-cost facilities.”
Mass General Brigham is not just Massachusetts’ largest health care provider. It’s the eighth-largest non-profit health system in the United States.
In most industries, when a home-grown company makes an industry top-ten list, state officials brag that it’s a sign of a healthy state economy. When this happens in health care, state officials usually react with alarm.
Why? A shortage of competition.
Mergers and consolidations among health care providers have a tendency to reduce competition and raise prices, researchers have been able to demonstrate.
That is not the case in all industries. But in health care, large providers often enjoy competitive advantages that their counterparts in many other economic sectors would envy.
Governments have erected enormous barriers to entry that make it hard for startup providers to disrupt the status quo. (For some New Hampshire examples, see here.)
Governments also regulate the industry so heavily that compliance breeds large administrative bureaucracies, which are harder for smaller organizations to fund and maintain. That encourages consolidation and weakens smaller players.
Insurance coverage mandates and the federal tax subsidy for employer-provided insurance disconnect consumers from prices, suppressing low-cost insurance options and consumers’ instinct to comparison shop.
An often overlooked factor is that Medicare, amazingly, pays higher reimbursement rates to doctors’ offices and outpatient facilities that are owned by hospitals. (The practice can be found in private insurance too.) This further encourages hospital systems to devour competitors. It’s not random that the number of self-employed physicians is shrinking.
In 2012, more than half of U.S. physicians were self-employed. By 2020, the figure was just 44 percent, having fallen almost 10 percentage points in only eight years, according to an American Medical Association analysis.
The subsidy for hospital-owned physician practices and outpatient facilities is a pernicious example of how bad policies distort markets and hurt consumers. Thankfully, it hasn’t escaped the notice of some members of Congress, including two from New Hampshire.
U.S. Rep. Annie Kuster and Sen. Maggie Hassan each has sponsored separate legislation to end the Medicare practice of reimbursing hospital-owned outpatient facilities and physician practices at higher rates than independent ones.
They deserve credit for proposing a policy that would discourage an anticompetitive practice that has promoted hospital system growth and higher prices.
Congress and states need to look for more policies like this that would make it easier for small, independent providers to compete with large health care systems.
The end of Mass General Brigham’s price-control plan would not have regulators so concerned if the health care marketplace weren’t rigged by government regulations to favor large providers and disfavor small startups.
Testifying to Congress in 2018, economist Martin Gaynor summarized the state of the U.S. health care market this way:
“Prices are high and rising, there are incomprehensible and egregious pricing practices, quality is suboptimal, and the sector is sluggish and unresponsive, in contrast to the innovation and dynamism which characterize much of the rest of our economy.”
The culprit?
“Lack of competition has a lot to do with these problems,” he said.
Too many policymakers view rising health care prices merely as a battle between large health care industry players and government. It’s primarily a story of bad government policies that encourage anti-competitive practices. Removing policies that encourage consolidation and make it harder for small players to compete is the best way state and federal lawmakers can help to lower prices and empower consumers.
Andrew Cline is president of the Josiah Bartlett Center for Public Policy, New Hampshire’s free-market think tank.
By Andrew Cline
On Monday, Mass General Brigham emerged from an 18-month plan, forced by Massachusetts regulators, to lower its spending and prices. With no spending controls in place, regulators and consumers are worried that prices will surge in Massachusetts and New Hampshire.
Mass General Brigham is the largest health care provider in Massachusetts and owner of six community hospitals, including Wentworth Douglas Hospital in Dover. Its reorganization announced last year transfers top decision-making authority from community hospitals to system executives, even stripping hospital presidents of their CEO titles.
New Hampshire Insurance Commissioner D.J. Bettencourt told New Hampshire Journal in February that he was “concerned” about the hospital system possibly raising prices after March.
Studies of health care pricing show why regulators are worried. A 2021 Pioneer Institute examination of rising Massachusetts health care costs concluded that the “largest driver is the increase in prices by health systems that have the clout to command higher payments and work to recruit more patients to their high-cost facilities.”
MGB is among the hospital systems in Massachusetts that the Pioneer Institute found “have a long history of charging significantly more for the same services than other hospitals” and “buying up physician practices, raising prices, and directing patients into their high-cost facilities.”
Mass General Brigham is not just Massachusetts’ largest health care provider. It’s the eighth-largest non-profit health system in the United States.
In most industries, when a home-grown company makes an industry top-ten list, state officials brag that it’s a sign of a healthy state economy. When this happens in health care, state officials usually react with alarm.
Why? A shortage of competition.
Mergers and consolidations among health care providers have a tendency to reduce competition and raise prices, researchers have been able to demonstrate.
That is not the case in all industries. But in health care, large providers often enjoy competitive advantages that their counterparts in many other economic sectors would envy.
Governments have erected enormous barriers to entry that make it hard for startup providers to disrupt the status quo. (For some New Hampshire examples, see here.)
Governments also regulate the industry so heavily that compliance breeds large administrative bureaucracies, which are harder for smaller organizations to fund and maintain. That encourages consolidation and weakens smaller players.
Insurance coverage mandates and the federal tax subsidy for employer-provided insurance disconnect consumers from prices, suppressing low-cost insurance options and consumers’ instinct to comparison shop.
An often overlooked factor is that Medicare, amazingly, pays higher reimbursement rates to doctors’ offices and outpatient facilities that are owned by hospitals. (The practice can be found in private insurance too.) This further encourages hospital systems to devour competitors. It’s not random that the number of self-employed physicians is shrinking.
In 2012, more than half of U.S. physicians were self-employed. By 2020, the figure was just 44%, having fallen almost 10 percentage points in only eight years, according to an American Medical Association analysis.
The subsidy for hospital-owned physician practices and outpatient facilities is a pernicious example of how bad policies distort markets and hurt consumers. Thankfully, it hasn’t escaped the notice of some members of Congress, including two from New Hampshire.
U.S. Rep. Annie Kuster and Sen. Maggie Hassan each has sponsored separate legislation to end the Medicare practice of reimbursing hospital-owned outpatient facilities and physician practices at higher rates than independent ones.
They deserve credit for proposing a policy that would discourage an anticompetitive practice that has promoted hospital system growth and higher prices.
Congress and states need to look for more policies like this that would make it easier for small, independent providers to compete with large health care systems.
The end of Mass General Brigham’s price-control plan would not have regulators so concerned if the health care marketplace weren’t rigged by government regulations to favor large providers and disfavor small startups.
Testifying to Congress in 2018, economist Martin Gaynor summarized the state of the U.S. health care market this way:
“Prices are high and rising, there are incomprehensible and egregious pricing practices, quality is suboptimal, and the sector is sluggish and unresponsive, in contrast to the innovation and dynamism which characterize much of the rest of our economy.”
The culprit?
“Lack of competition has a lot to do with these problems,” he said.
Too many policymakers view rising health care prices merely as a battle between large health care industry players and government. It’s primarily a story of bad government policies that encourage anti-competitive practices. Removing policies that encourage consolidation and make it harder for small players to compete is the best way state and federal lawmakers can help to lower prices and empower consumers.
