Thread by @nxpatel

With all the buzz about @ewarren's proposal to break up big tech, let's go behind the scenes at what's happening in the health care industry: An interweave of legacy legislation, perverse incentives, corporate collusion, monopoly pricing power by hospitals, and local politics. 1/

First, some legacy legislation: The 2003 MMA traded votes for increased reimbursement to their district's hospitals. Those rates went up y/o/y. Hospitals invested margin in payroll, capex (buildings, tech), bonuses, and lobbying. Via @zackcooperYale:
nber.org/papers/w23748

Second, the 2009 Affordable Care Act incentivized the creation of larger hospital systems - healthcare M&A doubled the year after the law went into effect. Via @LeemoreDafny: nejm.org/doi/full/10.10…

This has made some health systems *massive*, often the largest employer in their congressional district. In 2016, 90% of MSAs were highly concentrated for hospitals. 57% were highly concentrated for insurers. healthaffairs.org/doi/abs/10.137….

This combination of labor spend and horizontal consolidation created hospital monopolies that spiked prices y/o/y. Via @MartinSGaynor: nber.org/papers/w21815.

Perverse Incentives: MLR requirements mean insurers don't have an incentive to fight for prices. Higher hospital prices means costs get passed down in the form of higher premiums and insurers pocket more revenue for SG&A.
propublica.org/article/why-yo…

Corporate Collusion: Backroom hospital-insurer contracts selectively privilege hospital giants at the expense of competitors, akin to Standard Oil and the railroads.
wsj.com/articles/behin…

Hospitals argue that M&A leads to operational efficiency and better outcomes. But bigger doesn't equal better:

1. More job growth directly *increases* healthcare prices (higher cost of 'inputs'), but doesn't improve outcomes. Via @amitabh_chandra2: nejm.org/doi/full/10.10…

2. M&A doesn't increase operational efficiency, but DEFINITELY increases bargaining power and lets hospitals squeeze suppliers. Via @stuartcraig: faculty.wharton.upenn.edu/wp-content/upl…

3. 'Integration' of care doesn't necessarily come from consolidation, and large systems may keep data isolated. Interop/integration more likely from @ONC_HealthIT mandate or tipping point from 3rd parties (SMART/FHIR, Apple, PatientPing). Via @ashishkjha: jamanetwork.com/journals/jama/…

4. More CapEx doesn't increase productivity, i.e. number of services provided. Investments in technology (MFP) have resulted in negative growth in health care, per @McKinsey 2019 report. mckinsey.com/~/media/McKins…

Yet, it's politically untenable for anyone to fight for *fewer* hc jobs in their district. politico.com/agenda/story/2…

That's the difference between big tech & big health - health care institutions are not only huge employers, but their brands (e.g. Cleveland, Mayo) are revered.

Even if we look at antitrust through Robert Bork's consumer welfare standard alone, the evidence argues that more competitive markets are better for patient care.
ncbi.nlm.nih.gov/pmc/articles/P…

What we need:
-promote competition (e.g. independent primary care startups, retail and UC, high volume centers for specialized procedures)
-restrict anticompetitive behaviors, e.g. BI/Lahey merger (modernhealthcare.com/article/201811…).
-invest in technology that reduces admin labor spend

Finally, this doesn't touch the vertical consolidation going on with insurers, PBMs, and independent practices, surgical centers, urgent care, retail clinics, and MSOs (e.g. UHG/Optum/DaVita/MedExpress, CVS Caremark/Aetna, Cigna/Express Scripts). More on that another day. /END