CMS Highlights Threat of Healthcare Consolidation

The Biden administration has unleashed a new weapon in its battle against hospital and health care system consolidation: Medicare financial data. On April 20, the Department of Health and Human Services (HHS) published previously confidential data relating to mergers, acquisitions, consolidations, and changes of ownership of hospitals and nursing homes enrolled in Medicare. Here’s a quick briefing on the data and why the government released it.

The Biden Agenda

Consolidation in the healthcare market has increased steadily, particularly over the past two years when hospitals, health networks, and corporate equity funds began swallowing up independent physicians’ practices at accelerated rates. The administration has expressed concern about what it sees as a threat to competition and, ultimately, health care availability and quality. On July 9, the president issued an executive order (EO) calling on the Department of Justice (DOJ), Federal Trade Commission (FTC), and other federal government agencies to vigorously enforce the antitrust laws across all markets, including health care. The EO identifies four segments of health care as priority areas for enforcement:

• Hospital consolidation;
• Prescription drugs;
• Health insurance consolidation; and
• Hearing aids.

The EO stresses that hospital mergers can be harmful to patients, especially in rural areas left underserved by consolidation. Thanks to “unchecked mergers,” the 10 largest health care systems now control a quarter of the market, the EO notes, adding that 138 rural hospitals have shuttered since 2010, including a high of 19 last year, in the middle of a healthcare crisis. Research shows that hospitals in consolidated markets charge far higher prices than hospitals in markets with several competitors. The EO thus recommends that the DOJ and FTC review and revise their merger guidelines and directs HHS to support existing hospital price transparency rules and finish implementing bipartisan federal legislation to address surprise hospital billing.

The CMS Data Publication Initiative

The new data publication initiative is designed to promote the administration’s anti-consolidation policy. The newly released dataset, which will be updated each quarter, tracks changes of ownership among hospitals and skilled nursing facilities (SNFs), dating back to 2016, based on information reported to CMS via the Provider Enrollment, Chain, and Ownership System (PECOS). “The data can help researchers, enforcers, and the public analyze trends and issues in health care markets, and more specifically, provide insight into how the ownership of health care providers impacts costs and outcomes of consumers,” according to the HHS press release. Translation: The data enables the public to see for itself the extent of the consolidation problem and why it needs to be reined in.

The Findings

According to the accompanying report analyzing the newly released data, there were 347 changes in ownership among hospitals and more than 3,000 among SNFs between 2016 and 2021. Key trends:

• Ownership changes were more common in SNFs than hospitals;
• A majority (62.3 percent) of SNFs that were acquired have a single organizational owner, 6.9 percent have multiple organizational owners, 18.2 percent have only individual owners, and 12.7 percent have both types of owners; and
• Where hospital ownership changes occurred, they most often involved medium and larger hospitals (as compared to small hospitals), hospitals with low profit margins (as compared to more profitable hospitals), and long-term care hospitals.

The report also finds that activity varied widely by state. For example, over the past six years, fewer than four percent of hospitals changed ownership in most states; however, in South Carolina 14 out of 73 (19 percent) of hospitals were sold during the period.

Next Steps

The administration plans to update the data every quarter. In the meantime, it hopes that researchers, state, and federal enforcement agencies and the public will use the data “to examine how mergers, acquisitions, consolidations, and changes of ownership impact access to care, care quality, and prices as a way to enable greater transparency and insight into the hospital and nursing home industries.”