Medical mergers stir new health-overhaul worries

— When Congress passed the healthcare law, it envisioned doctors and hospitals joining forces, coordinating care and holding down costs, with the prospect of earning government bonuses for controlling costs.

Now, eight months into the new law there is a growing frenzy of mergers involving hospitals, clinics and doctor groups eager to share costs and savings, and cash in on the incentives.

They, in turn, have deployed a small army of lawyers and lobbyists trying to persuade the Obama administration to relax or waive a body of older laws intended to thwart health-care monopolies and to protect against shoddy care and fraudulent billing of patients or Medicare.

Consumer advocates fear that the health-care law could worsen some of the very problems it was meant to solve - by reducing competition, driving up costs and creating incentives for doctors and hospitals to stint on care to retain their cost-saving bonuses.

“The new law is already encouraging a wave of mergers, joint ventures and alliances in the health-care industry,” said Thomas Greaney, an expert on health and antitrust law at St. Louis University. “The risk that dominant providers and dominant insurers may exercise their market power, individually or jointly, has never been greater.”

Lobbyists and industry groups are bearing down on the Federal Trade Commission and the Justice Department, which enforce the antitrust laws, and the inspector general’s office at the Department of Health and Human Services, which ferrets out Medicare fraud.

Those agencies are writing regulations to govern the new entities, known as accountable-care organizations.

They face a delicate task: balancing the potential benefits of clinical cooperation with the need to enforce fraud, abuse and antitrust laws.

“If accountable-care organizations end up stifling rather than unleashing competition,” said Jon Leibowitz, the chairman of the trade commission, “we will have let one of the great opportunities for health-care reform slip away.”

Congress’ purpose was to foster cooperation in a health-care system that is notoriously fragmented. The hope was that the new law would push doctors, hospitals and other health-care providers to come together and jointly take responsibility for the cost and quality of care of patients, especially Medicare beneficiaries.

Experts say patients can benefit from a network of care and greater coordination between doctors and hospitals.

On Tuesday, the Obama administration established a Center for Medicare and Medicaid Innovation to test new ways of coordinating and paying for services, in addition to the accountablecare organizations.

Hospitals have taken the lead in forming these new entities.

Johns Hopkins Medicine, which already operates a top rated hospital in Baltimore and 25 primary-care clinics in Maryland, has just acquired Sibley Memorial Hospital in Washington, 16 months after acquiring Suburban Hospitalin Bethesda, Md.

“This is being driven largely by health-care reform, which demands an integrated regional network,” said Gary Stephenson, a spokesman for Johns Hopkins.

In Kentucky, three of the largest hospital networks are negotiating a merger, prompted in part by the new law.

In upstate New York, three regional health-care systems are seeking federal permission to merge their operations, which include hospitals, clinics and nursing homes in Albany and surrounding counties.

With potential efficiencies come incentives for doctors and hospitals to control costs, and a potential for abuse. Judith Stein, director of the Center for Medicare Advocacy, a nonprofit group, said she was concerned that some care organizations would try to hold down costs by “cherry-picking healthier patients and denying care when it’s needed.”

Under the law, Medicare can penalize organizations that avoid high-risk, highcost patients.

Doctors and hospitals say the promise of these organizations cannot be fully realized unless they receive broad waivers and exemptions from the government.

The American Medical Association has urged federal officials to “provide explicit exceptions to the antitrust laws” for doctors who participate in the new entities. The FTC has accused doctors in many parts of the country of trying to fix prices by collectively negotiating fees - even though the doctors do not share financial risk and are supposedly competing with one another.

Hospitals and doctors have also asked the administration to waive laws intended to prevent fraud and abuse in Medicare.

In a recent letter to federal officials, Charles Kahn III, president of the Federation of American Hospitals, a trade group, said, “To provide a fertile field to develop truly innovative, coordinated-care models, the fraud and abuse laws should be waived altogether.”

These laws are an impediment and, in some cases, “a total barrier” to creation of accountable-care organizations, Kahn said.

The laws make it difficult for hospitals to reward doctors for cutting costs or following best practices, he said.

Donald Berwick, the administrator of the Centers for Medicare and Medicaid Services, hails the benefits of “integrated care.”

But, Berwick said, “we need to assure both patients and society at large that destructive, exploitative and costly forms of collusion and monopolistic behaviors do not emerge and thrive, disguised as cooperation.”

Front Section, Pages 5 on 11/21/2010

Upcoming Events