Brent D Fulton’s research while affiliated with University of California, Berkeley and other places

Objective To examine the impact of “cross‐market” hospital mergers on prices and quality and the extent to which serial acquisitions contribute to any measured effects. Data Sources 2009–2017 commercial claims from the Health Care Cost Institute (HCCI) and quality measures from Hospital Compare. Study Design Event study models in which the treated group consisted of hospitals that acquired hospitals further than 50 miles, and the control group was hospitals that were not part of any merger activity (as a target or acquirer) during the study period. Data Extraction Methods We extracted data for 214 treated hospitals and 955 control hospitals. Principal Findings Six years after acquisition, cross‐market hospital mergers had increased acquirer prices by 12.9% (CI: 0.6%–26.6%) relative to control hospitals, but had no discernible impact on mortality and readmission rates for heart failure, heart attacks and pneumonia. For serial acquirers, the price effect increased to 16.3% (CI: 4.8%–29.1%). For all acquisitions, the price effect was 21.8% (CI: 4.6%–41.7%) when the target's market share was greater than the acquirer's market share versus 9.7% (CI: −0.5% to 20.9%) when the opposite was true. The magnitude of the price effect was similar for out‐of‐state and in‐state cross‐market mergers. Conclusions Additional evidence on the price and quality effects of cross‐market mergers is needed at a time when over half of recent hospital mergers have been cross‐market. To date, no hospital mergers have been challenged by the Federal Trade Commission on cross‐market grounds. Our study is the third to find a positive price effect associated with cross‐market mergers and the first to show no quality effect and how serial acquisitions contribute to the price effect. More research is needed to identify the mechanism behind the price effects we observe and analyze price effect heterogeneity.

Private equity (PE) firms have been acquiring physician practices at an increasing rate, raising concerns about such firms' penetration at the physician level into local markets and the impact on health care quality and prices. However, limited knowledge exists about the extent of PE firms' control in local markets. By linking data on PE acquisitions to physician data and using full-time-equivalent physicians as the base of assessment, we estimated the local market share of each PE firm within ten physician specialties at the Metropolitan Statistical Area (MSA) level. PE-acquired physician practice sites increased from 816 across 119 MSAs in 2012 to 5,779 across 307 MSAs in 2021. Single PE firms had significant market share, exceeding 30 percent in 108 MSA specialty markets and exceeding 50 percent in 50 of those markets. The findings raise concerns about competition and call for closer scrutiny by the Federal Trade Commission, state regulators, and policy makers.

Although hospital consolidation within markets has been well documented, consolidation across markets has not, even though economic theory predicts-and evidence is emerging-that cross-market hospital systems raise prices by exerting market power across markets when negotiating with common customers (primarily insurers). This study analyzes hospital systems using the American Hospital Association Annual Survey Database and defines hospital geographic markets as commuting zones that link workers to places of employment. The share of community hospitals in the US that were part of hospital systems increased from 10 percent in 1970 to 67 percent in 2019, resulting in 3,436 hospitals within 368 systems in 2019. Of these systems, 216 (59 percent) owned hospitals in multiple commuting zones, in part because 55 percent of the 1,500 hospitals targeted for a merger or acquisition between 2010 and 2019 were located in a different commuting zone than the acquirer. Based on market-power differences among hospitals in systems, the number of systems in urban commuting zones that could potentially exert enhanced cross-market power increased from thirty-seven systems in 2009 to fifty-seven systems in 2019, an increase of 54 percent. The increase in cross-market hospital systems warrants concern and scrutiny because of the potential anticompetitive impact of hospital systems exerting market power across markets in negotiations with common customers.

OBJECTIVE The Centers for Medicare and Medicaid Services State Innovation Models (SIM) initiative has invested more than $1 billion to test state-led delivery system and payment reforms that can affect diabetes care management. We examined whether SIM implementation between 2013 and 2017 was associated with diagnosed diabetes prevalence or with hospitalization or 30 day readmission rate among diagnosed adults. RESEARCH DESIGN AND METHODS The quasiexperimental design compared study outcomes before and after the SIM initiative in 12 SIM states versus five comparison states using difference-in-differences (DiD) regression models of 21,055,714 hospitalizations for adults age ≥18 years diagnosed with diabetes in 889 counties from 2010 to 2017 across the 17 states. For readmission analyses, comparative interrupted time series (CITS) models included 11,812,993 hospitalizations from a subset of nine states. RESULTS Diagnosed diabetes prevalence changes were not significantly different between SIM states and comparison states. Hospitalization rates were inconsistent across models, with DiD estimates ranging from −5.34 to −0.37 and from −13.16 to 0.92, respectively. CITS results indicate that SIM states had greater increases in odds of 30-day readmission during SIM implementation compared with comparison states (round 1: adjusted odds ratio [AOR] 1.07; 95% CI 1.04, 1.11; P < 0.001; round 2: AOR 1.06; 95% CI 1.03, 1.10; P = 0.001). CONCLUSIONS The SIM initiative was not sufficiently focused to have a population-level effect on diabetes detection or management. SIM states had greater increases in 30 day readmission for adults with diabetes than comparison states, highlighting potential unintended effects of engaging in the multipayer alignment efforts required of state-led delivery system and payment reforms.

Context: Dramatic increases in pharmaceutical merger and acquisition activity since 2010 suggest we are currently in the midst of a third wave of industry consolidation. Methods: Reviewing 168 economic, legal, medical, industry, and government sources, we examine the effects of consolidation on competition and innovation and explore how industry attributes complicate M&A regulation in a pharmaceutical context. Findings: We find that, in spite of certain metrics that might argue otherwise, consolidation consistently reduces innovation and harms the public good. We also find that several factors within the pharmaceutical industry impede proper evaluation of proposed mergers. Because consumer choice across substitutes is limited, pharmaceutical markets frustrate conventional methods of defining markets. Volume bargaining in the pharmaceutical supply chain and common ownership of pharmaceutical firms by asset managers further complicate the definitional process. Hence, the Herfindahl-Hirschman Index (HHI), one measure used by the Federal Trade Commission and Department of Justice to screen for concerning M&A activity, sometimes depends on faulty market definitions but also fails to capture the implications of consolidation on future market share. Conclusions: We describe ways to improve how pharmaceutical markets are defined, highlight quantitative alterations to HHI to account for common ownership, and propose areas requiring further research.

Policy Points Looking for a way to curtail market power abuses in health care and rein in prices, 20 states have restricted most-favored-nation (MFN) clauses in some health care contracts. Little is known as to whether restrictions on MFN clauses slow health care price growth. Banning MFN clauses between insurers and hospitals in highly concentrated insurer markets seems to improve competition and lead to lower hospital prices. Context: Most-favored-nation (MFN) contract clauses have recently garnered attention from both Congress and state legislatures looking for ways to curtail market power abuses in health care and rein in prices. In health care, a typical MFN contract clause is stipulated by the insurer and requires a health care provider to grant the insurer the lowest (i.e., the most-favored) price among the insurers it contracts with. As of August 2020, 20 states restrict the use of MFN clauses in health care contracts (19 states ban their use in at least some health care contracts), with 8 states prohibiting their use between 2010 and 2016. Methods: Using event study and difference-in-differences research designs, we compared prices for a standardized hospital admission in states that banned MFN clauses between 2010 and 2016 with standardized hospital admission prices in states without MFN bans. Findings: Our results show that bans on MFN clauses reduced hospital price growth in metropolitan statistical areas (MSAs) with highly concentrated insurer markets. Specifically, we found that mean hospital prices in MSAs with highly concentrated insurer markets would have been $472 (2.8$2.4 billion per year. Conclusions: Our empirical findings suggest banning MFN clauses between insurers and providers in highly concentrated insurer markets would improve competition and lead to lower prices and expenditures.

States can challenge proposed hospital mergers by using antitrust laws to prevent anticompetitive harms. This observational study examined additional state laws-principally charitable trust, nonprofit corporation, health and safety, and certificate-of-need laws-that can serve as complements and substitutes for antitrust laws by empowering states to be notified of, review, and challenge proposed hospital mergers through administrative processes. During the period 2010-19, 862 hospital mergers were proposed, but only forty-two (4.9 percent) were challenged by states, including thirty-five by states without federal involvement, of which twenty-five (71.4 percent) originated in the eight states with the most robust merger review authority. The twenty-five challenges resulted in two mergers being blocked; three being abandoned; and twenty being approved with conditions, including seven with competitive-impact conditions. Hospital market concentration and prices increased at similar rates in these eight states versus other states, potentially because most challenges allowed mergers to proceed with conditions that did not adequately address competitive concerns. Although these findings do not reveal an optimal state framework, elements of advanced state merger review authority may have the potential to improve poorly functioning hospital markets.

This study assessed the relationship between hospital ownership of physician organizations (known as hospital-physician vertical integration) and facility fees billed to commercial insurers and physician service prices. Healthcare claims came from the IBM® MarketScan® Commercial Database (2012-2016, N = 30,716,800 office visit claims [CPT codes 99211-99215]), and hospital-physician vertical integration measures were from SK&A Office Based Physicians Database provided by IQVIA. Multi-variate, fixed-effect models were used to regress prices on market-level hospital-physician vertical integration; models included geographic market and year fixed effects, claim-level variables, and time-varying market-level variables. Analyses did not find that market-level hospital-physician vertical integration was associated with the billing of facility fees for office visits. However, vertical integration was associated with office visit physician prices for some specialties. A 10-percentage-point increase in vertical integration was associated with a 1.0% price increase for primary care, a 0.6% increase for orthopedics, and a 0.5% increase for cardiology; no such association was found for obstetrics/gynecology or oncology. When comparing metropolitan statistical areas (MSAs) in the bottom quartile of changes in vertical integration from 2012 to 2016 to MSAs in the top quartile, we found the following relative price increases based on predicted values for claims in the top quartile: $1.64 (1.9$2.30 (3.1%) for orthopedics to $3.13 (3.4$45.8 million in additional expenditure on primary care office visits in the top quartile of MSAs in 2016. In summary, market-level hospital-physician vertical integration was positively associated with physician prices for select specialties, but was not associated with changes in the use of facility-fee billing. More evidence on the quality effects of hospital-physician vertical integration is needed, as price increases that are not accompanied by measurable quality improvements should be part of any regulatory review.

Purpose Although much research has been done on accountable care organizations (ACOs), little is known about their impact on rural hospitals. We examine the association between rural hospitals’ participation in an ACO and their performance on utilization and financial measures. Methods This quasi‐experimental study estimates the relationship between voluntary ACO participation and hospital metrics using propensity score‐matched, longitudinal regression models with year and hospital fixed effects. Regression models controlled for secular trends and time‐varying hospital and county characteristics. Hospital measures were from the American Hospital Association, RAND Hospital Data, and Leavitt Partners. The initial population comprises 643 rural hospitals that participated in an ACO for at least one year during the 2011 to 2018 study period and 1,541 rural hospitals that did not participate in an ACO. From this population we created a sample of propensity score‐matched hospitals consisting of 525 ACO‐participating and 525 comparable non‐ACO hospitals. Results Rural hospitals’ participation in an ACO is not associated with changes in hospital utilization or financial measures, nor is there an association between these performance metrics and whether another within‐county hospital participated in an ACO. A secondary analysis limited to Critical Access Hospitals provides some evidence that inpatient utilization increases in the second year of ACO participation, though the increases are not significant in year 3 and beyond. Conclusion We find no evidence that rural hospitals experience substantive changes in outpatient visits, inpatient utilization, or operating margin in the years immediately after joining an ACO.