Marshall Steinbaum: Hospital sales would put Utah’s health care in jeopardy

Steward Healthcare takeover by HCA threatens higher costs, lower quality of care.

(Leah Hogsten | The Salt Lake Tribune) Jordan Valley Medical Center

Americans’ experience with the health care system — the purpose of which is, after all, to keep us healthy — is dystopian: high prices, poor quality of care, indifferent service from corporate bureaucrats and the potential for life-destroying debt if the wrong doctor happens to provide care that hasn’t been pre-approved behind the scenes.

Overall, Americans are much less healthy than we “should” be, given the amount of money we spend on health care every year. If the recently announced purchase of five Steward Healthcare hospitals by the largest for-profit hospital chain in the country, Tennessee-based Hospital Corporation of America (HCA), is allowed to go through in Utah, that will all get worse.

As an economist who has studied monopolies and market power extensively, HCA’s attempted takeover of Steward Healthcare should be a major cause of concern for everyone in our state — patients, insurers, employers and frontline health care workers.

Utah hospital markets are already highly concentrated, an issue the proposed merger would exacerbate to the detriment of Utah patients. If permitted, HCA’s purchase of Jordan Valley Medical Center, Mountain Point Medical Center, Salt Lake Regional Medical Center and Davis Hospital would leave only three hospital systems in the Salt Lake City market, and two in the Ogden market.

Research has shown that reducing the number of health care providers in each market does not lead to an increase in care quality. In fact, patients usually see an increase in prices for the care they rely on as competition is eliminated. Skyrocketing prices for lifesaving hospital care harms patients and communities, exacerbating existing economic inequities and health care injustice.

Health provider consolidation has already been having drastic effects on health care costs in our state. According to the Kaiser Family Foundation, health care spending per person in Utah has tripled since 1991.

Salt Lake City patients are already paying the price for hospital consolidation as the cost of standard procedures has ballooned in recent years. Taking a colonoscopy as an example of a standard procedure, the hospitals with the most expensive negotiated rates charged patients nearly four times more than the least expensive ones. The average price of the procedure rose to more than $1,000 for privately insured patients in 2008-2011, and it’s probably even higher now.

In other words, HCA’s proposed merger would only worsen a trend that has been hurting the people of Utah for a long time.

HCA is already the most profitable acute-care system in the country. They racked up more than $5.1 billion in profits in just the first nine months of 2021. HCA’s hospitals in Utah charge between four and almost seven times the cost of providing care, consistently above and in some instances nearly double the statewide averages of prices for the same services. These high charges spell increased costs for the public with no benefits in return, except for HCA’s shareholders and corporate executives in Nashville, Tennessee.

Increased costs to patients are not the only threat if this deal goes through. The consolidation this purchase would bring would likely harm patient care standards and reduce wages for health care workers. A recent study of a similar for-profit hospital acquisition found that promises of improved care and economics did not materialize for the regions affected.

On top of that, after HCA completed its $1.5 billion acquisition of western North Carolina’s Mission Health in 2019, at least 16 doctors fled the hospital and a group of doctors and patients sued, claiming that the promises HCA made to get the transaction approved were discarded as soon as they got what they wanted — a hospital monopoly.

The concern with this acquisition is not merely that HCA’s market power will grow, but that HCA would trigger a race to the bottom by putting pressure on its Utah rivals to cut costs instead of prices to compete, thereby worsening the quality of care we receive. All of this would be done while HCA simultaneously passes more of its costs along to consumers, insurers, employers, health care workers, and taxpayers.

This merger does not bode well for the people of Utah. Every one of us, at one time or another, will visit a hospital. If this transaction is permitted to go forward, Utahns will pay the price and HCA’s shareholders will profit.

Marshall Steinbaum

Marshall Steinbaum is an assistant professor of economics at the University of Utah and a senior fellow in Higher Education Finance at Jain Family Institute.