Consumers and healthcare companies should be wary of a proposed mega merger between two major healthcare systems in Minnesota and South Dakota.
Fairview Health Services of Minneapolis and Sanford Health of Sioux Falls announced plans to merge in November, citing, as always, efficiency and improved patient care. But experts who study the economics of health care disagree, according to a Star Tribune article.
They say health care mergers like this almost never benefit consumers and studies have shown that they actually increase costs and prices for companies and patients.
The two systems operate in different areas, with Fairview serving the Twin Cities and Sanford serving South Dakota and greater Minnesota, where it has 19 hospitals and 70 clinics. It has nine clinics in southwestern Minnesota; the closest to Mankato is at Mountain Lake. The combined organization would control 50 hospitals, include 78,000 employees and be run from Sioux Falls.
Gov. Tim Walz recently said he was more receptive to hearing about the merger compared to 2013 when the state and Gov. Mark Dayton frowned on the idea, and lawmakers even came forward with proposals to stop it. as they opposed an outside entity taking control of the University. of the Fairview-owned Minnesota Training Hospital.
The need to maintain and stabilize rural health care appears to be of interest to Walz and Attorney General Keith Ellison, who plans to hold rural hearings on the proposed merger. The state can’t stop the merger with anything but legislation, but Sanford pulled out of the 2013 deal saying it didn’t want to go where it wasn’t. desired.
Rural health care is a legitimate concern. There are several examples, including in Albert Lea, of large health care providers pulling services from small towns.
But health care economics experts say the main reason for these mergers is to increase health care providers’ bargaining power with insurance companies. Fewer providers leave insurers less leverage in negotiations, as they must provide some kind of insurance to their customers.
This desire for bargaining power is driving these mergers “at every level,” according to the RAND Corp health economist. Michael Whaley, speaking to the Star Tribune.
Research on healthcare mergers shows they drive up prices without increasing quality, U of M healthcare economist Bryan Dowd told the Star Tribune.
Health systems chief executives dismissed the idea in an earlier interview with the Star Tribune, saying they weren’t trying to gain market power, but primarily to make care more affordable. Consumers and political leaders should take this statement with a shaker full of salt.
Merging companies may cause changes in staffing and efficiency, but it doesn’t really change the motive for having a healthy bottom line. In fact, it can increase the pressure on cost containment and the profit incentive.
Healthcare is not Walmart. Businesses and consumers cannot easily switch providers or turn to Target when their health care becomes unaffordable or their insurance company removes a clinic from its list of approved providers.
Health care is a community good, and if prices rise beyond affordability, it creates all sorts of other costs, including the safety net costs of government health care programs.
And employers should also be wary of this merger. Any increase in health care costs for employees will only exacerbate the existing pressure for higher wages in a tight labor market.
Of course, insurance companies don’t have a white knight track record, and Minnesota should do everything possible to expand competition between insurance companies and health care providers.
Supporting rural health care has merit, but we should never create a situation where health care can only be bought from a few vendors.
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