American hospitals are fundamental to the well-being of many local communities and indeed, our entire nation. Unfortunately, they are facing the increasingly difficult task of balancing quality comprehensive care for all patients against the need to invest in up-to-date medical technology and systems while maintaining cost-effective operations. When a facility is unable to juggle these complex competing interests, it is forced to close, leaving many communities with an uncertain future. Halting this disturbing trend will require policy change.
In many communities, access to healthcare and the presence of healthcare facilities are a critical part of their overall economic vitality. Rural hospitals offer some of the best paying jobs available in these areas and are often a major driver of employment. Such facilities are often the first-, second-, or third-largest employer within their locality, and one study found that 14 percent of total employment in rural communities is in the healthcare sector.
The secondary economic effects are just as impactful. Research from the American Hospital Association found that every dollar spent by a hospital supports $2.30 of additional business activity. Not only that, but hospitals also attract companies and professionals to live and invest in the communities. As one expert put it, “If a company is looking where to expand … they look at the school system and healthcare system and want to have this available to attract and retain their employees.”
With remote work quickly expanding in the aftermath of the COVID-19 pandemic, access to healthcare is an important consideration for those considering relocating to rural areas as well.
Unfortunately, 59 hospitals closed their doors from 2015 to 2019. The COVID-19 pandemic has exacerbated this concerning trend, with 11 hospitals closing in 2020 alone. Many healthcare facilities that were on shaky financial ground before the pandemic have simply been unable to cope with the dual shocks of unexpected personal protective equipment and staffing costs as well as the loss of revenue from elective surgeries and outpatient treatments, and have finally reached their breaking point.
Such closures have drained many local communities and governments of their economic lifeblood. According to Carolyn Bruce of the Western Health Alliance after a hospital closure, “The rest of the community — health-wise and economically — can enter a downward spiral of decline.”
Beyond the direct job losses caused by hospital closures, for example, a depressed tax base within the community can put other public-sector services such as teachers, police and firefighters at risk, amplifying the negative effect of such closures.
To prevent any further loss of healthcare facilities, many hospitals and healthcare systems are turning to consolidation. Unfortunately, the Federal Trade Commission is actively interfering in this important industry reorganization. The FTC’s opposition is predicated upon its outdated model of “healthcare competition,” which holds that consolidation of hospitals and healthcare providers will foster monopolization, reducing competition and increasing costs. Such outmoded notions have no application in today’s healthcare environment.
More up-to-date analyses show that most mergers do not impede market competition or negatively affect patient outcomes. Recent legal scholarship argues that for hospital and healthcare providers, there is “a lack of an empirically grounded and reliable analytical framework tied to competition and market power and from questions about whether antitrust law is a remedy to the alleged harms. In other words, there is no relevant data to establish that competition between hospitals is being adversely affected by this wave of consolidation.
Research done by experts at Maryland’s Agency for Healthcare Research and Quality and IBM Watson Health in 2021, meanwhile, showed that mortality rates at consolidated rural hospitals decreased from 9.4 percent to 5 percent, demonstrating the importance of hospital mergers of reducing the “urban-rural disparities in quality of care.”
Furthermore, a 2021 study by Charles River Associates found that consolidations reduced the operating costs of the post-merger hospitals and led to significant improvements in key indicators of patient care quality, including readmission and mortality rates.
In today’s challenging public health environment, hospital consolidations are vital lifelines for healthcare providers to offer their patients the best possible care in the most accessible way. Streamlining processes and costs to expand services and invest in new technologies benefits the American patient. The real risk lies not in allowing such consolidations but obstructing them, to the detriment of local communities and governments that rely on these facilities as an economic as well as literal lifeline.
Policymakers and regulators should not stand in the way and must enable solutions instead of hindering progress.
