Chain reaction: Hospital affiliations could drive up costs

By Jane Lerner, Journal News

Over the past year, community hospitals in the Lower Hudson Valley have been courted by large, out-of-town health care networks, with many marching down the aisle to cast their future with giant health systems.

But these mergers may not lead to relationships that satisfy everyone.

Hospitals tout the benefits of joining bigger health systems as better coordinated health care and efficiencies of scale resulting in lower costs.

They can bring new services to an area – even areas like Westchester and Rockland already served by plenty of well-equipped and well-staffed medical centers. The consolidations also put hospital systems in a better position to qualify for a chunk of the $8 billion in Medicaid redesign money the state is doling out.

And an infusion of cash from a bigger health system can save failing hospitals and jobs, as was the case when Montefiore Health System took over bankrupt facilities in New Rochelle and Mount Vernon.

But recent studies show that there are dangers for consumers – often in the form of higher costs and less say about a valuable community asset.

“One of the big drivers of high prices per service seems to be provider consolidations,” said Lynn Quincy, associate director for health reform policy for the Yonkers-based Consumer Union. “It is absolutely a concern for consumers.”

There’s plenty of evidence to back up that fear:

• An October study the Journal of the American Medical Association found that consolidation of physician groups owned by hospitals resulted in a patient cost increase of nearly 20 percent.
• A 2009 study of hospitals nationwide found that merging hospitals had 40 percent higher prices than other hospitals.
• A 2011study of hospital mergers in the Chicago area found that one of the merged hospitals had 20 percent higher prices.
• Prices went up between 28 and 44 percent at a merged hospital in the San Francisco

area, according to a 2011 study.

A main reason bigger hospital chains gobble up smaller ones is to gain leverage over insurance companies when negotiating rates.

Related: Mount Vernon, New Rochelle hospitals on the mend

“The hospitals can command higher reimbursement rates from the insurer when there is less competition,” said Susan Sherry, deputy director of Community Catalyst, a health care advocacy organization in Boston.

Insurers in turn pass those added expenses on to consumers in the form of higher premiums and more cost sharing, she said.

That could hardly happen at a worse time for people who are struggling to meet ever increasing health care costs.

“These deductibles are crazy … People just can’t afford to pay,” said Adria Goldman Gross, who runs MedWise Insurance Advocacy, a company that helps people challenge medical bills.

Deals that lead to hospital mergers are largely done behind closed doors by hospital boards of directors, with little input from the public. They are generally approved by state regulators with little discussion.

A state committee that met this month to consider New York-Presbyterian’s bid to take over Hudson Valley Hospital Center in Cortlandt approved it in less than five minutes with little discussion and no public comment.

That worries advocates.

“These things are rubber stamped by state regulators,” Quincy said. “They need to stop doing that and look at the evidence that they tend to raise prices for consumers.”

The state Department of Health takes into account the financial health of both institutions seeking to merge or affiliate – particularly the larger one.

But it asks for little in the way of proof that such deals will be good for consumers.

Increasingly, the Federal Trade Commission is getting involved. The federal agency stepped in in 2013 to prevent a big Idaho hospital merger on the grounds that it would stifle competition.

The decision was later upheld in federal court. The courts agreed with a similar FTC order this year regarding a proposed Ohio hospital merger, ruling that the deal was “anticompetitive and likely would lead to higher prices for consumers.”

Closer to home, the New York state Attorney General’s Office got involved when two Utica-area hospitals proposed a merger, fearing that such a move would reduce competition and raise prices.

The hospitals were allowed to merge last year after promising they would take steps to protect consumers.

Unless a regulator steps in, people who use hospitals have little say in the deal.

“It’s time for consumers to wake up and realize their health care system is changing,” said Lois Uttley, a professor in the health advocacy program at Sarah Lawrence College in Yonkers. “People need to ask good questions of their local hospital and their doctors. Among the questions is ‘Who is now in control?'”

Hospital mergers and consolidations generally remove the local control that independent community facilities had and transfer that power to the larger institution.

Hudson Valley Hospital Center, for example, will be governed by a 12-member board of directors. Nine of those members will be from New York-Presbyterian and only three from the Cortlandt hospital.

Big hospital systems are often vague about what they plan to do with the smaller hospitals they take into their system.

Sometimes affiliations don’t result in the new services that the smaller hospital wanted. When Nyack Hospital became an affiliate of New York-Presbyterian in 2004, it hoped that the deal would lead to a cardiac angioplasty program and was given the fast track toward approval by the state.

But the plan never materialized and Nyack eventually withdrew its application. Nyack is now in negotiations to change its affiliation to Montefiore.

New York-Presbyterian, which took over Lawrence Hospital in Bronxville last year, has received state permission to start a cardiac angioplasty program there. The hospital has not said when it will open.

Advocates say that regulators need to extract promises from merging health systems and make sure they keep them.

There’s a lot at stake.

“These aren’t theoretical concerns,” Sherry said. “Health care costs are real. Someone needs to be watching to see how this will affect the consumer.”