The news: The American Hospital Association (AHA) wrote a letter to the Department of Health and Human Services, Department of Justice (DOJ), and the Federal Trade Commission (FTC), arguing that hospital mergers don’t negatively affect quality of care or pricing and can actually result in cost savings and improve care quality.

For context, the AHA represents around 5,000 hospitals and health systems in the US.

The bigger picture: Healthcare M&As have been ramping up, especially as organizations look to build out their digital health capabilities—but it’s raising anti-competitive alarms.

Over the last year, there have been more and more mega-mergers in healthcare: e.g., Optum’s $13 billion acquisition of healthcare analytics co Change Healthcare and Teladoc’s $18.5 billion acquisition of digital therapeutics company Livongo.

• This has sparked a ton of scrutiny from provider networks and government officials worried about how consolidation will impact competition in healthcare: For example, Optum’s Change Healthcare deal was under investigation by the DOJ because it could diffuse competition for health IT services, considering Change Healthcare processes 1 in 3 of all healthcare claims in the US.
• And the Biden administration recently signed an executive order in July targeting anti-competition across industries, including hospital mergers.

The problem: Hospital consolidation isn’t just a concern of anti-competition—industry consolidation can also put a greater financial burden on patients.

Hospital execs think consolidation improves efficiency, access to care, quality of care, and opportunities for innovation.

• 28% of healthcare CFOs plan to pursue healthcare mergers, and 18% plan to pursue acquisitions to scale and capitalize on innovations.
• Combining provider networks can help cushion individually dwindling operating margins and present greater opportunities to invest in innovative digital health solutions.
• Around two-thirds (65.8%) of healthcare executives say increasing telemedicine and tech capabilities are top priorities at their organization, per HFMA’s March 2021 Outlook Survey—and many are already doing so via M&A deals.

But consumers end up with the short end of the stick as provider entities become bigger, all-encompassing entities: they can end up with higher costs. Consolidation gives hospitals more power to increase the prices of their healthcare services and procedures: e.g., they can ask insurance cos to pay more for services since they control a greater chunk of the healthcare consumer market. And that eventually results in higher copays and premiums for patients.