Guest Post: How U.S. Healthcare Mega-Mergers Hurt Patients

Wednesday, March 14th, 2018
This post was written by Robert E. Grant, Founder/CEO, CONCIERGE KEY Health

From the National Economic Council to the healthcare public policy experts at Harvard University, leading medical advisors and economists alike continue to invoke the words of Adam Smith, the eighteenth century British political economist and author of The Wealth of Nations who stated some 300 years ago, “Seldom do businessmen (companies) of the same trade get together but that it results in some detriment to the general public.”

Take the colossal U.S. financial collapse in 2008, for example, which followed an all-time mergers-and-acquisitions (M&A) high of $4.3 trillion in deals. Not more than five years passed before companies were willing to hedge their bets again—especially in the healthcare sector—but with markedly higher stakes. The same year the Journal of the American Medical Association released a thoughtful examination of hospital consolidation, penned by leading medical authorities from the Harvard School of Public Health who opposed the notion of mega-mergers, Teva Pharmaceuticals announced its plan to acquire Allergan’s generics business, Actavis Generics, for $66 billion.

According to data from the financial information firm Dealogic, that was just the tip of the iceberg. The close of 2017 bore witness to the consolidation of private practices, private equity funds and pharmaceutical companies at the current and future expense of the American healthcare patient, who in turn, experiences fewer choices and a decreased quality of care—all for a higher price.

Healthcare’s Merger Epidemic

In 2015, global M&As skyrocketed and set new records by exceeding $5 trillion. It was no surprise that the healthcare sector emerged a frontrunner, leading the charge that year with a total of $723.7 billion in deals. Gaining even more momentum with Abbott Laboratories announcing its definitive agreement to acquire St. Jude Medical for $25 billion in 2016, and a 2017 announcement by CVS to acquire the health insurance giant, Aetna, for roughly $70 billion, the industry innocuously sent a clear message that there was no longer a sky—or an effective governing body—to set any limits.

As the world heads toward the fourth industrial revolution, where artificial intelligence and automation are taking organizations to new heights, health systems and hospitals are falling in line to compete and retain a market share. In 2017 alone, consulting firm Kaufman Hall and Associates reported 115 hospital and health system mergers, which represented a 13 percent increase from 2016. Many experts believe part of the consolidation epidemic stems from the enactment of the Affordable Care Act (Obamacare) in 2010. Even Bob Kocher—the only medical doctor on the National Economic Council advising President Obama—recanted his support of consolidating hospitals, health systems and doctors into larger groups in an effort he believed could drastically improve the delivery of patient care. In 2016, he laid bare his soul in a Wall Street Journal op-ed titled, How I Was Wrong About ObamaCare.

But it’s not just the architects of Obamacare that have failed to heed the words of economists who, like Adam Smith, understand how fewer market participants and less competition are very likely to result in higher prices for consumers, without an improvement in quality.

Not All Mergers are Alike

It is important to note that not all mergers are considered equal. Consolidation driven by organic and natural forces of the market can undoubtedly decrease costs for consumers while improving the quality of a product or service. But if escalating healthcare costs and insurance premiums—along with a flawed system where seeing a specialist requires a referral protocol that can delay a visit by weeks or months—are any indication of the manic consolidations taking place today, it should be proof enough that we are headed for a reckoning.

Demanding More for Less

Even in a growing on-demand, digital economy where consumers can influence the decisions of others through multiple channels and social media platforms, the patient experience has yet to be addressed. In addition to soaring healthcare insurance premiums, in just three years the average new patient doctor appointment wait times in the U.S. increased by 30 percent, according to a 2017 Merritt Hawkins survey. In large markets, the average wait time to see a doctor was 24.1 days (up 30 percent from 2014), with average wait times to see a family medicine doctor up 50 percent. That may not mean much to a healthy individual relocating and searching for a new doctor, but for someone facing a potentially life-threatening illness, it could become a matter of life and death. Furthermore, prior studies such as the 2004 analysis of the 1996 Aetna acquisition of U.S. Healthcare put forth by University of California, Berkeley health economist, James C. Robinson, offer solid evidence that hospital and insurance mergers, in particular, almost always lead to higher costs, less efficiency and less innovation. Why? Because, as Adam Smith warned, mergers reduce competition, which is the driving factor of a free market.

Perhaps the greatest irony in all of human healthcare is that organizations came into existence for the very purpose of helping people get and stay well, yet it seems the survival of the organization has taken priority over the patient and obscured who the consumer actually is. Never before have health consumers been asked to pay so much for so little. It’s time to allow the invisible hand of the U.S. economy to operate as intended. It’s time to look past the bottom line and look to new business models that put patients at the center of the healthcare experience.

Robert E. Grant, Founder/CEO of CONCIERGE KEY Health

About the Author: Robert E. Grant is founder and chief executive officer of CONCIERGE KEY Health, the world’s first mobile app for on-demand access to elite doctors, including specialists and care facilities. An entrepreneur, inventor and investor, he has played a pivotal role for more than 20 years in successful technology and business development in pharmaceutical, medical device and healthcare markets. In addition to founding CONCIERGE KEY, Grant is founder and vice chairman of ALPHAEON Corporation, as well as founder, chairman and managing partner of its parent company, Strathspey Crown Holdings, LLC.

Most recently, Grant was CEO and president of Bausch+Lomb Surgical, leading the significant growth of its product portfolio. From 2006 to 2010, he served as president of Allergan Medical; Grant also served as director, board chairman, CEO, president, COO and CFO of Biolase Technology from 2003 to 2006.

HIN Disclaimer: The opinions, representations and statements made within this guest article are those of the author and not of the Healthcare Intelligence Network as a whole. Any copyright remains with the author and any liability with regard to infringement of intellectual property rights remains with them. The company accepts no liability for any errors, omissions or representations.

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