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Medical costs and monopoly

idaho RANDY
STAPILUS
 
Idaho

The St. Luke’s Idaho Health System web site lists “facilities” – mainly meaning hospitals – at locations around Idaho including Boise (two hospitals there), Nampa, Caldwell, Eagle, Fruitland, Mountain Home, Jerome, Twin Falls, McCall, Meridian and Ketchum.

That’s some major reach. The main barrier keeping St. Luke’s from monopoly status is the St. Alphonsus organization, with hospitals in Boise and Nampa, an emergency room as well in Eagle, and other facilities in Caldwell.

These are not unusual cases: Nationally, health care is seeing major consolidations. The day of the independent, more or less, local hospital is at twilight, and more health businesses and non-profits (the differences between them can be subtle in some cases) are becoming Wal-Mart behemoths. And where will that take health care?

This question was peripheral – though it did relate – to the 9th Circuit Court decision handed down last week upholding Idaho District Judge Lynn Winmill in his order that St. Luke’s divest itself of the Saltzer Medical Group. The court described Saltzer as “the largest independent multi-specialty physician group in Idaho, [which] had thirty-four physicians practicing at its offices in Nampa.”

There’s a sense among many health providers that moving toward integrated systems, unifying the networks of physicians and health care organizations, is the best avenue toward controlling and maybe reducing health care costs. There’s some logic to this. The efforts underway to some extent nationally and to a larger degree in some states (Oregon and Washington for two) toward coordinated care are aimed at focusing on better health results for patients and a reduction of the pay-per-service approach, and systems that routinely bring people into the system via emergency rooms, which between them help drive up many costs. These efforts rely on bringing broad networks of health providers together to seek out efficiencies, rather than pit everyone individually to grub as much money out of the system as they can.

The 9th Circuit noted that “Saltzer had long had the goal of moving toward integrated patient care and risk-based reimbursement. After unsuccessfully attempting several informal affiliations, including one with St. Luke’s, Saltzer sought a formal partnership with a large health care system.” That turned out to be St. Luke’s. And leadership at St .Luke’s has mentioned as well the idea of more cooperative systems as a way to control health costs and improve results.

There’s some tension here between that possible improvement and concerns about monopoly. From the 9th Circuit decision again: “The district court expressly noted the troubled state of the U.S. health care system, found that St. Luke’s and Saltzer genuinely intended to move toward a better health care system, and expressed its belief that the merger would “improve patient outcomes” if left intact. Nonetheless, the court found that the “huge market share” of the post-merger entity “creates a substantial risk of anticompetitive price increases” in the Nampa adult PCP [primary care physician] market. Rejecting an argument by St. Luke’s that anticipated post-merger efficiencies excused the potential anticompetitive price effects, the district court ordered divestiture.”

There’s some sense here that the tension is between the opportunity for reasonable cost control on one hand, and monopoly (with all its attendant problems) on the other. Something like this happened a century ago with the electric power industry, which led to a compromise which generally has worked since – a series of profitable monopoly businesses that have been tightly regulated.

The time may be coming when we need to look at health care providers in a new way. Maybe that way.

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