The Affordable Care Act (ACA), colloquially called “Obamacare,” has drastically changed the American healthcare landscape: providing a safety net to millions of uninsured people, creating more robust mechanisms for improving the quality of healthcare delivery, and essentially changing the way that hospitals operate.
Although the effect of the ACA upon the number of uninsured people and quality improvement strategies has been thoroughly studied and found to have led to its desired outcome, the ACA has led to a situation that was not predicted: hospital monopolies.
The number of hospital mergers and acquisitions has increased substantially over the past few years, especially in the form of large healthcare conglomerates acquiring smaller community hospitals, which has resulted in regional monopolies. Partners HealthCare in Massachusetts, Inova Health System in Virginia, and St. Luke’s Health System in Idaho are some important examples.
These multi-hospital mergers result in a slashing of the much needed competition in the healthcare market and will, eventually, command market price. Last year, the Massachusetts Superior Court blocked the acquisition of three smaller community hospitals by Partners HealthCare, noting that the settlement negotiated by Partners and the state’s former attorney general “did not provide sufficient protections to keep Partners’ market power in check—and thus help control healthcare costs for Massachusetts consumers in the years ahead.”
These changes are unintended consequences of two aspects of the ACA: firstly, the ACA encourages a narrow network of healthcare providers—hospitals and specialists deemed to be of higher cost are excluded from many insurance plans under the ACA and, consequently, the network of providers becomes narrower. Secondly, the act established the idea of accountable care organizations (ACOs), an integrated healthcare delivery system that rewards efficient use of resources to reduce unnecessary spending.
Taking advantage of the ACO framework, hospitals are able to form large groups that allow them to use Medicare’s payment system by spreading the risk of high cost patients over a larger population and making savings (by sharing human and medical infrastructure resources). In an ideal world, and the reason this provision was added to the ACA, this would boost patient satisfaction and save millions of dollars in healthcare spending. However, this policy loophole has the potential to cause massive increases in healthcare expenditure, with a recent regional study reporting hospital owned organizations billing up to 20% more to patients, compared to physician owned organizations.
These kinds of hospital monopolies could damage the highly volatile healthcare setup in the United States. They risk driving up cost, as these monopolies can not only dictate prices but also create immense barriers to entry for any new players, damaging the competitiveness of the healthcare market, which could stifle innovative ways of dealing with the current crisis in health economics.
It could also result in damage to the complex clinical approach used in patient care by physicians, creating untoward pathways where physicians end up choosing treatments based on hospital standardizations rather than recommended clinical protocols. Monopolies also severely limit the options available to patients in seeking care, as the competitive market is, essentially, eliminated.
As health policy analysts, our work does not end at the implementation of new policies, but rather involves continually going back and looking for gaps and deficiencies that could not be identified at policy formulation. To deliver high quality, cost effective care, we need to encourage positive market dynamics, not impede them.
The political landscape in Washington, DC, will likely witness a shift in healthcare policy after the results of last week’s elections. The ACA has come under increased scrutiny over the past few years, with critics demanding the ACA be scrapped entirely. That may not be an ideal solution.
While the ACA has certain limitations, it has also resulted in immense benefit to several groups: those that were previously unable to afford insurance, and those with pre-existing conditions. This analysis highlights how different market players can adapt to changes in legislation. Future governments should build upon the strengths of the ACA, improve coverage as well as the quality of services provided, and adapt legislation to rapid market changes.
Junaid Nabi is a physician, non-profit executive, and a student of global health policy at Harvard University, USA. He is the 2016-17 writing fellow at the Voices in Leadership series at Harvard University.
Competing interests: None to declare.