Health Care Competition Drives Prices Up Not Down

“Competition” in health care is supposed to drive prices down. That’s the way the media-anointed economists have been explaining it for the past 30 years or so. That’s part of the reason we have Obamacare, with its Accountable Care Organizations and hospitals now gobbling up doctors practices all over the country.

San Antonio has always been at the forefront of “free market reform. “ This is where Humana Chairman and former CEO Mike McCallister cut his teeth teaching doctors how managed care worked.

And this is where Physicians Who Care was founded to try to educate patients about how corporate health care worked.

So, it was with interest that I read two things this week that are related, but maybe not obviously so.

One was an article in San Antonio’s only newspaper, the Express News, a long time doctor bashing screed, unless it’s the University Health Science Center and its physicians, who can do no wrong.

Their brand of “competition” is financed by tax dollars, but that’s another story.

The page 1 article Wednesday, September 3, 2014 was about “Small firms feel pinch in Bexar.” Bexar (pronounced BEAR) is the county where San Antonio is located. The article told how small businesses in the San Antonio area have been “closing their doors at a higher rate than their peers in Texas and the nation – especially medical doctors…”

The Express News goes on to speculate that the Affordable Care Act, otherwise known as Obamacare, has caused doctors to go to larger medical groups. And hospitals in San Antonio have acquired many medical solo practices and medical groups, especially in high revenue generating specialties like cardiology.

Now here is where “competition” comes in. As all media must do, the Express News trots out an expert, in this case, the interim dean of the business school of Trinity University. He explains that doctors in private practice are finding it harder to survive. So far so good. Then, the Express News trots out “Federal Reserve economic policy advisor Keith Phillips to opine that “As new businesses are established, increased competition drives some businesses into the ground.”

While not directly referring to medical offices, Phillips’ and Butler’s comments taken together provide an interesting insight into the kind of competition in health care that is actually driving up prices to patients – er medical consumers – rather than lower such prices.

You get that insight from another public document filed in what many would call an obscure legal case in Idaho pertaining to the Federal Trade Commission’s attempt to stop a large hospital system from acquiring a large medical group. A trial in federal court led to a ruling that the hospital could not acquire the medical group because it would be anti-competitive. It would give the hospital and medical group a near monopoly in that section of Idaho and eastern Oregon.  The hospital has appealed the trial court ruling to the Ninth Federal Circuit Court of Appeals.

In response to that appeal, attorneys general from 16 states – Texas is not one of them – filed a truly remarkable legal brief. On page 4 of that brief, the 16 AGs state:

“Even among not-for-profit health care providers, the growth in economic power through acquisitions leads to price increases – sued to fund salary increases for the board or management, or yet more acquisitions – rather than more affordable patient care or an expansion of the charitable reach of that care.”            

Wow! There is the best explanation yet of how all these high falutin’ theories of health care “competition” actually work in the real world of overpaid hospital administrators with their boards of car dealers, home builders, and Junior Leaguers.

I don’t have a PhD in economics or a title from a fancy Ivy League college, but I do know much about history – especially the history of predatory practices of hospitals here in San Antonio and the corporate greed of managed care entities.

This kind of “competition” by owned doctors is leading more procedures at higher prices. Hospital owned doctors bill with added facility charges. And the doctors are expected to earn their high guaranteed salaries.

Dr. Steve Cohen and I have been trying to tell the media about what was coming since 1985. But the Express News and their colleagues in other forms of media didn’t want to hear about it. We were just rich greedy doctors who feared competition.

So, now I say to the reporters and editors at the Express News: Don’t take it from me. Read it in a brief filed in federal court by the attorneys general of California, Washington, Pennsylvania, Connecticut, Delaware, Illinois, Iowa, Kentucky, Maine, Maryland, Mississippi, Montana, Nevada, New Mexico, Oregon, and Tennessee.

We’ve got competition right here in River City, but it’s fixin’ to have the opposite effect of what the gurus have predicted. Who would have thunk that?

So, the Express News got their way: doctors abandoning private practice and going under the control of hospital administrators. But prices will go up. Is that an intended or unintended result?


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