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Hello, Rapp Up! Readers! Are you one of the many rural Virginians who must travel long distances to get healthcare? Are your medical bills increasingly expensive too? A root cause may be that healthcare companies are gobbling up the competition - and then increasing prices and cutting services. Across Virginia and nationwide, local hospitals and independent doctors are disappearing, vacuumed up by mega-corporations valued in the hundreds of billions of dollars. 

Of course, the Big Med lobby tries to tell us that “consolidation” makes healthcare more efficient. If that were true, however, why are our healthcare costs soaring to stratospheric levels?  And why are rural communities especially hard-hit with both higher costs and less accessible services? In this issue, we explore what's really driving consolidation — and what it means for rural areas. So read on!

In 1980, most American hospitals were independent and non-profit, and nearly half of American doctors practiced solo.  Yet today, most hospitals are part of a larger system while solo doctor practices are disappearing. In their place? Virtually out of nowhere, mega health care corporations have become dominant players in healthcare. For example, just one for-profit, HCA Healthcare, is by itself valued at over $67 billion.  

Rural communities have been especially hurt by healthcare consolidation in two ways. First, rural hospitals are often acquired by health systems based outside of their region (KFF). For example, Ohio-based Bon Secours Mercy Health, one of the largest health systems in the country, acquired three small Virginia hospitals in 2020 (Virginia Business). The result is that senior management may not know much (or care much) about local needs.  

Second, consolidation often leads to reduced services in rural areas — forcing rural patients to travel long distances even for the most common care. For example, in the Shenandoah Valley, there is no hospital between Winchester and Harrisonburg that delivers babies — a distance of 70 miles!

The Effects of Healthcare Consolidation: Cost Increases for the Same (or Worse) Services 

The mega-healthcare lobby wants us to believe that consolidation increases efficiency. So why are 88% of doctors concerned about hospital and healthcare practice consolidation (OpMed)? The physicians, now employed in record numbers by large health systems, have witnessed firsthand that acquisitions actually result in significantly increased costs for patients.

As a physician explained to Virginia Mercury, when a hospital buys a doctor’s office, costs for patients go up an average of 14% — and much more for some procedures: for example, the price of ultrasounds doubles, and the price of biopsies goes up five-fold, from $146 to $791 on average (Virginia Mercury)! These increased charges for the same services have serious consequences: people skip getting care when health care gets too expensive (KFF).

Another way in which consolidation harms healthcare access is through the manipulation of health insurance coverage. For example, Sentara healthcare, one of the largest health systems in Virginia, runs its own insurance plans, Optima and Virginia Premier.  This increasing trend towards vertical integration of healthcare gives a big provider  the ability to limit the other health plans it contracts or set financial terms that reduce insurer competition (Virginia Mercury). The result? Health systems can limit patients’ access to care outside of their own system. In fact, in 2021, Sentara attempted to terminate its contract with Anthem’s Medicaid and Medicare plans, the plans used by some 500,000 Virginia patients. 

The Effects of Healthcare Consolidation:  “Rolling Up” Private Practices

Hospital consolidation, however, is not the only way that private interests have found to extract big profits from healthcare.  Another major trend is the “rolling up” of specialized practices by private equity firms, like Blackstone, Apollo Global Management, and The Carlyle Group (where Youngkin was formerly CEO).  Having then cornered the market for a given medical service in a region, they raise prices.

There is easy money to be made here - in fact a recent study found a 32% increase in healthcare prices when private equity investors were in control. Which is why, in 2018 alone, private equity firms spent over $100 billion in healthcare services buyouts. Not surprisingly, rural communities, with limited provider options, are especially vulnerable to this kind of price-fixing.

The good news?  A re-energized Federal Trade Commission under the Biden administration is taking a hard line on roll-ups. In fact it recently brought a civil lawsuit against a private equity firm that had created a de facto monopoly in anesthesiology, significantly driving up prices.  

Corporate consolidation of course is not the only reason why American healthcare costs far exceed those of other developed countries. In future editions, we will explore both other aspects of the problem and what we as a community can do.

A basic reality, however, is that — without strong oversight — a prime driver of healthcare consolidation is the opportunity for big firms to make more money.  America spends a lot of money (18% of its GDP) on healthcare (almost twice as much as other developed countries). Capturing a share of that market — and then squeezing out competition — can drive a lot of profits.  And that may be one reason why, despite all of the supposed efficiencies from “consolidation”, medical costs and prices keep going up.  And healthcare availability in rural communities keeps going down.

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