UNC Health Care, Carolinas HealthCare System merger need great scrutiny, opinion

UNC Health Care, the Triangle’s largest health care provider, and Charlotte-based Carolinas HealthCare want to enter into a partnership to increase their clout when they negotiate with insurance companies.

It won’t be a merger, both parties insist. Rather, as UNC Health Systems CEO William Roper said, “This is like a marriage … We just got engaged. The wedding is still several months away.”

Weddings are happy events, but the vows are often preceded by a request for any objections – “speak now … or forever hold your peace.” This proposed partnership will likely bring objections from health insurance companies who see it as a way for the combined systems to demand higher payments for their services. In that sense, this marriage will truly function as a union. And a big union it will be. The new system would run more than 50 hospitals and employ more than 90,000 people, making it one of the nation’s largest hospital chains.

Insurance companies are not the only ones that will pay more if this partnership is approved. Health care consumers likely will pay more in higher health insurance premiums.

Roper and Carolinas HealthCare System CEO Gene Woods downplay the potential premium impact. They say efficiencies of scale will enable the systems to enhance their revenues without pressure on rates. But some health care experts are skeptical.

“It’s clear that the merger of providers drives up costs in that market. They become more indispensable to insurers. That gives them a lot more bargaining clout and evidence from other markets is that they use that bargaining clout to extract higher prices,” said Robert Field, a professor of health management and policy at Drexel University’s School of Public Health.

Yevgeniy Feyman, an adjunct fellow at the Manhattan Institute and a senior research assistant in the Department of Health Policy and Management at the Harvard School of Public Health, wrote recently in the magazine National Affairs, “Horizontal consolidation among hospitals almost universally results in higher prices and worse (or unchanged) patient outcomes.”

Issues beyond costs

Potential – indeed likely – higher medical costs are not the only measure of whether regulators should approve a partnership between North Carolina’s two largest hospital systems. Quality of health care and access to it also matter. In these aspects, the partnership may well be justified.

The partnership would enable both systems to lower the cost of buying major medical equipment, better coordinate patient care and reduce re-admissions. That saves costs and improves outcomes, two goals encouraged and rewarded by Medicare and the Affordable Care Act.

Roper and Woods also promise that the partnership will allow both systems to expand access to health care in rural areas and add more behavioral health services, including more resources for treating mental illness and opioid addiction. Improvements in these areas are desperately needed. Any approval of the partnership should include provisions that ensure that those gains are realized.

Regulators will review

The proposed partnership will be reviewed by the Federal Trade Commission for compliance with antitrust laws and by the North Carolina Department of Justice, which will assess its impact on consumers. The North Carolina Department of Insurance should also play a role.

UNC Health Care and the Carolinas HealthCare System have served North Carolina well and developed themselves as respected brands. If they become one entity for purposes of bargaining with insurers, the two will become a huge entity that could gain savings through efficiencies or diminish the competitive pressure that restrains costs and improves quality of care.

Whether consumers are better served by the systems together or apart will become clearer as the systems make their case and insurers raise objections. But if the partnership is approved, it’s crucial that the approval ensure that the needs and interests of patients are protected and well served.

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