Viewpoint

What we can learn from the near merger of Atrium and UNC Health Care

Atrium CEO Gene Woods, left, and UNC Health Care CEO William Roper had planned to merge. Those talks have stalled, giving North Carolina the chance to reflect on what consolidation is doing to health care.
Atrium CEO Gene Woods, left, and UNC Health Care CEO William Roper had planned to merge. Those talks have stalled, giving North Carolina the chance to reflect on what consolidation is doing to health care. ehyman@newsobserver.com

Last week saw an announcement that a proposed merger between UNC Healthcare System and Carolinas Healthcare System (now Atrium) seems unlikely to proceed. So while we should take some comfort that we did not experience even further consolidation of the health care market in the state, we need to learn from this experience.

Across the country, hospital consolidation has proceeded to the point where 90 percent of markets are now considered highly concentrated. The physician market is not much better – 65 percent of markets for specialist physicians and 39 percent of markets for primary care physicians are highly concentrated. Consolidation has increased health care costs through the blunt exercise of market power. Over the past two decades, more than 50 percent of the real increase in health care costs has come from price increases and increases in service intensity – just the pattern that one would expect to see from an exercise of market power in price negotiations and a shift in the site of care from free-standing physician practices to hospital-based practices.

Consolidation affects not only the cost of health care, but the way in which it is delivered. It’s hard for large, bureaucratic organizations to be the nimblest platform for the development of new models of care. Across the country, our research group has documented some of the challenges faced pursuing innovation in large health care systems.

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Kevin A. Schulman

In the end, both State Treasurer Dale Folwell and Blue Cross Blue Shield CEO Patrick Conway publically objected to the proposed merger. They both expressed concerns about the impact of further consolidation on the cost of health care.

We can’t let this averted crisis go to waste. On the positive side, we saw the beginning of an overdue discussion of very real issues about a crisis in health care in our state’s rural areas. But we also learned that no state agency is overseeing both the public and private health care markets from both the payer and provider perspective.

Gov. Roy Cooper should call for a one-year moratorium on hospital mergers, and on further acquisition of physician practices by hospitals. He should then convene a commission to examine how health care providers and insurers can best serve the people. All options should be on the table including whether we should remove our current Certificate of Need restrictions, whether we need additional efforts to reduce the market power of consolidated providers (for example, having a magistrate set prices for out of network and uninsured patients), and whether we need a new state agency to oversee the entire market.

North Carolina could be a model of how to provide the highest-quality, affordable health care to the entire population. We should use this vision to spur investment in new types of care delivery models, new types of technology and new approaches to care for our vulnerable populations. Not only would such an approach create new high-paying jobs in the health sector, but it would allow the state to be even more competitive to attract the interest of large employers such as Amazon.

Schulman, MD, is a professor of medicine at Duke University and a visiting scholar at Harvard Business School. Email: Kevin.Schulman@Duke.edu

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