Democrats Are Ignoring the Power of the Hospital Industry

Paul Beaty/AP Photo

Patients wait in the emergency room at Cook County Hospital in Chicago. Americans pay the highest prices for health care in the world, and concentrated hospital networks, not insurers, are largely to blame.

We have now endured roughly nine hours of Democratic debates for president, a significant chunk of which covered health care. That’s mostly because it’s the issue which engenders the most infighting among Democrats, though it also reflects what base voters have identified as the most pressing issue facing them and their families.

But Democrats are actually united on health care in one respect, from Joe Biden to Bernie Sanders. All of them lack the courage to name the one major obstacle to getting any meaningful reform done: the hospitals and medical providers who create the most costs in the system by a wide margin.

Watching the debates, I got the feeling that there was a swear jar offstage, and candidates would be fined $10,000 if they said the word “hospitals.” The calculation has been made to choose insurance companies and pharmaceutical manufacturers as the core villains. The candidates have put shackles on themselves, content to debate whether to eliminate private insurance or how much the respective plans will cost. The price of health care, not insurance, was nowhere to be found, even though we pay the highest prices in the world, and concentrated hospital networks, not insurers, are largely to blame.

Meanwhile, during commercial breaks of the CNN debate, viewers heard from the Partnership for America’s Health Care Future, the main corporate coalition opposed to major reforms to the health-care system. And while America’s Health Insurance Plans, the lead trade group for insurers, is among the funders of this initiative, so is the American Hospital Association, the American Medical Association, hospital network Ardent Health Services, Catholic hospital network Ascension, Fortune 500 giant Community Health Systems, The Federation of American Hospitals, Bill Frist’s old hospital network HCA, outpatient group Tenet Healthcare, and hospital management company UHS.

Simply put, if candidates fail to talk about the companies primed to strangle any health-care reform before it gets started, nothing will happen.

The health-care problem in America is actually very simple. Hospitals, medical device companies, doctors, outpatient clinics, and every other middleman in the system make a lot of money. The cost of routine services vary wildly from place to place and nobody knows what they’re actually paying, a recipe for price gouging and inflation.

The public only gets glimpses of this, like when they make the mistake of walking into the emergency room and get hit with $238 charges for eyedrops. Or they have the pleasure of being uninsured, and suffer with charges ten times the cost of care.

Or they learn that the anesthesiologist at the hospital in their insurance network was randomly out of network, and now they have to pay a surprise bill.

Hospital administration has swelled, and administrators earn more in America than any other country. Much of the windfall in health care goes into the waiting arms of middleman executives at large hospital networks. And these networks have consolidated, with 1,667 hospital mergers from 1998 to 2018, over 540 of them just since 2013. By 2016, 90 percent of all metropolitan areas experienced high concentration in the hospital market, according to research published by Cal-Berkeley’s Brent Fulton. In Boston, if you’re going to the doctor, you’re almost certainly going to see Partners HealthCare; in Pittsburgh, it’s UPMC; in San Francisco, it’s Sutter Health.

And unsurprisingly, powerful actors with leverage use it. The most comprehensive study on this, from 2010 in Massachusetts, found that price variations at hospitals were entirely attributable “to market leverage as measured by the relative market position of the hospital or provider group compared with other hospitals or provider groups within a geographic region.” If you could get away with price increases because patients had no alternative, you did.

I understand completely why Democrats have made the calculation to ignore all this. The public interacts with health care in two ways. Their doctor heals them, and their insurance company hassles them. They visit their doctor and pay their insurer. Their doctor wants to make them well, and their insurance company wants to restrict the care they receive. “Why is the spotlight on the intermediary in this industry when they’re a small fraction in terms of the revenues?” asks Leemore Dafny of Harvard Business School, referring to the insurance industry. “And it’s what you think it is. It’s really easy to hate the intermediary.”

But in the absence of political leaders telling the truth about who charges the prices and who gouges patients, the public has no alternative story. They’ll keep loving their doctor, and seek out other villains. That cuts against this truth: Nobody has resisted changes to the broken health-care system more than the hospital industry.

Take “surprise billing,” as mentioned before one of the most outrageous scams in health care. Unknown to them, patients get out-of-network services from ambulance companies or radiologists or anesthesiologists, and are on the hook for tens of thousands of dollars in charges. You won’t be, well, surprised to learn that surprise billing is being driven by the private equity industry, which has recently upped its investments in hospitals

In California, the bluest state in the nation, an effort was made to end surprise billing, off the strength of articles about Zuckerberg San Francisco General Hospital charging 12 times what Medicare charges for ER services. Then the hospital CEOs got personally involved, and the bill died, tabled for a year while patients continue to be gouged. “Moneyed opposition proved insurmountable at this time,” said the two lawmakers who authored the bill. If you can’t stop surprise billing in California, where do you think you can stop it?

A federal crackdown on surprise billing has been watered down into nothing, moves surprise billing to an arbitration process that benchmarks to an exorbitantly high rate patients would be responsible for paying. Needless to say, provider groups have coalesced around it. Meanwhile, a Trump administration plan to force disclosure of negotiated rates between hospitals and insurance companies has been met with outrage from the hospital industry, who are crying about trade secrets (which is absurd: the price of a service is not a trade secret in any sense of the term). Keep in mind that the fine for not disclosing billing practices is a grand total of $300 a day.

If hospitals fight this hard to avoid a $300/day charge, do you think they’ll roll over for a public option or Medicare for All, both of which are designed to lower costs throughout the system? Medical providers in the U.S. earn more than any other medical providers on Earth, and that drives all the other problems in health care. They appreciate the status quo because it funnels wads of cash to them at everyone’s expense.

It’s a very strange situation for the leaders of reforming health care in America are too cowardly to talk about what’s wrong with health care in America. We know from experience that trying to play a savvy game and keeping the hospital industry on the sidelines won’t work. The hospital industry cut a deal with President Obama to eliminate the public option last time around. They’re already funding the effort to destroy reform this time. Why won’t anyone say this out loud?

Health care in America costs too much. We’re having a debate over how to fix it that renders invisible the very actors who charge the prices. That’s a recipe for disaster. Someone must show a modicum of guts and describe this system as it is, before it consumes us all. So far, guts are not in evidence.

You may also like