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We’re Still Not Talking About Health Care’s ‘Elephant in the Room’

More than five years ago, Bob Berenson warned about an overlooked danger in health care: Health care providers were accumulating too much market power, and the Affordable Care Act would only make it worse.

He’s still worried.

Provider market power “has been the leading reason for the [rise] in health care spending” over the past 15 years, Berenson told California Healthline this week.

“And in conventional political circles,” he added, “it’s still being overlooked.”

Why the Focus on Provider Power Has Receded

Berenson’s spent years researching provider consolidation and the resulting economic effects in health care, including a close look at how California hospitals steadily accumulated leverage that helped them secure higher payments. He’s currently a senior fellow at the Urban Institute, having been an official at the White House and CMS.

“High prices and the distortions in markets resulting from differential pricing power have been the unacknowledged elephant in the policy room for decades, even as the policy community and policy makers have wrung their hands over what to do about rising health care costs,” Berenson wrote at Health Affairs last year.

But is his thesis right? Are high prices really the overlooked “elephant in the room”?

On the campaign trail, Democratic presidential candidate Hillary Clinton has spoken out about hospital and health insurer mergers. Congress has convened hearings on provider consolidation, most recently in September.

And within the industry, provider market power — and specifically, what it’s meant for health care costs and prices — has gotten lots of attention over the past few years. Author Steven Brill devoted two TIME magazine cover stories and an entire book to the problem of high prices. Regulators have ramped up their investigations into hospital consolidation.

But Berenson’s onto something: The focus on providers has receded in recent years, as other health care issues overshadowed them. For instance, hospitals’ byzantine pricing strategies have been eclipsed by the dust-up over pharmaceutical prices and one drug’s 5,000% markup this fall. Hospitals’ rampant dealmaking in 2015 has been dwarfed by two planned mega-mergers in the health insurance industry.

It’s not clear that all the scrutiny on price-setting has changed much for patients: Medical bills continue to be the leading cause of personal bankruptcy.

Is Market Power Really a Problem?

Not everyone thinks health care provider power is a problem. If anything, more mergers and alliances are necessary to ensure that providers can strategize around new care delivery models, argue advocates for hospitals.

The Affordable Care Act incents providers to form accountable care organizations, for instance, in order to take on more responsibility for “population health” — essentially, making sure patients stay healthy outside of the hospital — and providers say it takes deep pockets and large systems to pull that trick off.

“[C]oordination is exactly what consumers want and expect and what private and public payors demand,” writes Melinda Reid Hatton, the American Hospital Association’s general counsel.

And while health care prices continue to rise, there’s also evidence that they’ve significantly moderated in recent years. A November report from the Altarum Institute suggests that health care price growth has remained historically low, despite the rampant consolidation in the hospital industry.

Why Market Power Should Be a Priority Issue

For his part, Berenson believes that provider market power needs to stay on reformers’ agenda — maybe not all the way at the top, but certainly in the top tier. For instance, he points out that we don’t yet understand the effects of new models like accountable care organizations. But hundreds of hospitals are rushing to form them — even though savings and outcomes from ACOs remain unclear. That could lay the groundwork for future problems, he warns. Especially because lawmakers still lack clear strategies to address rising health care costs.

“We don’t make [provider market power] a priority because we don’t have a policy solution,” Berenson said. “Most states ignore the issue. They have this hope — which I don’t think is well-founded — that payment reform, like global payment, will somehow solve the problem.”

“I don’t think that’ll work,” he concludes. “If anything, I think it’ll make things worse by creating oligopolies.”

Around the nation

Here’s what else is making news on the road to reform.

Democrats are poised to deal a blow to the ACA. Congress is expected to delay the controversial “Cadillac tax” for two years, which could hamper the health law’s effects on reducing health spending growth, Jeffrey Young and Jonathan Cohn write at the Huffington Post.

Hillary Clinton continues to focus on drug prices. In a new campaign ad, Clinton reiterates her pledge to “crack down” on high drug prices if elected president next year — part of her ongoing focus on reining in drug costs, David Nather writes for STAT News.

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Road to Reform