Daniel R. Arnold’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.

Importance: Empirical evidence is needed on how a capitated, risk-based county plan performs as a viable public option in the Affordable Care Act (ACA) Marketplace in California. Objective: To estimate whether LA Care-a capitated, county-based public option and California's largest public insurer-was associated with health insurance premium growth in the Los Angeles (LA) regions of Covered California (CC), the ACA exchange in California. Design, setting, and participants: This economic evaluation used ACA silver plan premium data within the 19 CC regions. Difference-in-differences and event study models used data on plan-level premiums from Health Insurance Exchange Compare for years 2014 to 2022 to estimate the association between LA Care and ACA premium growth in LA. Exposures: The intervention was LA Care becoming the lowest-cost health plan on the ACA exchange in 2018. The treatment group included the East and West LA regions, and the control group included the remaining 17 CC regions. Main outcomes and measures: The main outcome variable was annual premium growth of plans on CC from 2014 to 2022. Results: Using 504 plan-level observations for 2014 to 2022, ACA premium growth in LA declined by 4.8% after LA Care became the lowest-cost health plan on the exchange in 2018 (coefficient estimate, -0.048; SE, 0.022; 95% CI, -0.093 to -0.002). Savings due to lower premium growth from 2019 to 2022 were calculated to be $345 million, with approximately 70$242 million) going to the federal government. Conclusions and relevance: In this economic evaluation, LA Care was associated with lower premium growth of other health insurance plans in the LA regions of CC, with the majority of savings going to the federal government. California could have captured these savings if it had applied for and received a State Innovation Waiver under section 1332 of the ACA. LA Care may be a viable public option with the potential to be expanded across California through the state's 16 other county-based health plans.

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.

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.

Physician practices are increasingly being acquired by hospitals and health systems. Despite evidence that this type of vertical integration is profitable for hospitals, the association between these acquisitions and the incomes of physicians in the acquired practices is unknown. We combined national survey data on physician practice ownership with data on physician income to examine whether hospital or health system ownership of physician practices was associated with differences in physician income during 2014-18. During the study period, hospital and health system ownership of physician practices increased by 89.2 percent, from 24.1 percent to 45.6 percent of all physicians in our sample. Among physician practices overall, vertical integration with hospitals or health systems was associated with, on average, 0.8 percent lower income compared with independent physicians after multivariable adjustment. In analyses by physician specialty, vertical integration of physician practices with hospitals or health systems was associated with lower income for nonsurgical specialists, no difference in income for primary care physicians, and slightly higher income for surgical specialists. Although vertical integration of physician practices is a rapidly growing trend, physicians might not directly benefit financially.

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.

Brugha et al provide convincing evidence that Ireland stills need to overcome many hurdles, including poor training and working experiences in Irish hospitals, before it can significantly improve its record on doctor retention. The findings reported by Brugha et al are particularly disappointing in light of the fact that Ireland implemented a doctor retention strategy in early 2015. Ultimately, doctor retention is important because it can help alleviate the health workforce shortages that many countries face currently and that are projected to worsen over the next decade. The purpose of this commentary is to highlight two additional strategies for alleviating health workforce shortages – expanding medical education and task shifting.

Objective To assess whether differences in income between male and female physicians vary according to the sex composition of physician practices. Design Retrospective observational study. Setting US national survey of physician salaries, 2014-18. Participants 18 802 physicians from 9848 group practices (categorized according to proportion of male physicians ≤50%, >50-75%, >75-90%, and >90%). Main outcome measures Sex differences in physician income in relation to the sex composition of physician practices after multivariable adjustment for physician specialty, years of experience, hours worked, measures of clinical workload, practice type, and geography. Results Among 11 490 non-surgical specialists, the absolute adjusted sex difference in annual income (men versus women) was $36 604 (£29 663; €32 621) (95$24 903 to $48 306; 11.7$91 669 ($56 587 to$126 571; 19.9% relative difference) for practices with at least 90% of male physicians (P=0.03 for difference). Similar findings were observed among surgical specialists (n=3483), with absolute adjusted sex difference in annual income of $46 503 ($42 198 to $135 205; 10.2$149 460 ($86 040 to$212 880; 26.9% relative difference) for practices with at least 90% of male physicians (P=0.06 for difference). Among primary care physicians (n=3829), sex differences in income were not related to the proportion of male physicians in a practice. Conclusions Among both non-surgical and surgical specialists, sex differences in income were largest in practices with the highest proportion of male physicians, even after detailed adjustment for factors that might explain sex differences in income.