Why a new report says Springfield has something close to a health care monopoly
- What's a monopoly? Exclusive control of the supply or sale of a good or service, or a lack of competition.
- Less competition usually promotes higher prices.
- But Springfield's health care prices are 6 percent cheaper than average.
A new nationwide study measuring 112 U.S. metropolitan areas for the degree of concentration in their hospital markets ranked Springfield the most concentrated of them all.
That doesn't mean there's an actual monopoly in the Queen City. Springfield is home to a pair of big health care systems: CoxHealth and Mercy. Both extend far outside city limits. Cox has branches dotted through at least 25 counties in southwestern Missouri and northwestern Arkansas, while Mercy is headquartered in a St. Louis suburb and has operations in four states. That setup means market competition exists, said Dave Dillon, vice-president for public relations with the Missouri Hospital Association.
But that competition is limited, according to the Health Care Cost Institute in Washington, D.C. Using a metric called the Herfindahl-Hirschman Index — a range in which a 0 rating represents a perfectly competitive market, while a 1 would represent perfect monopoly control — institute researchers clocked Springfield with an HHI of .7795, as of 2016.
That score was up since 2012, the first year measured by the study. At that time, Springfield scored .6210.
The study, released late last week, is intended to provide a "snapshot" for the public to understand various factors driving health care costs, said Kevin Kennedy, an institute researcher who helped write the study.
"We want people to understand what's going on their area," Kennedy told the News-Leader Tuesday afternoon. "We hope people can take the 'what' that we're displaying here and dive into the 'whys' of what's going on in their area."
The study used commercial insurance data that isn't widely available elsewhere, Kennedy said. Four big insurance companies provide data and funding to the institute, according to its website.
Study authors wrote that "one frequently cited factor for the continued rise in health care prices is that health care provider markets have become increasingly concentrated over time, and therefore less competitive." They cited multiple articles in peer-reviewed academic journals to buttress this claim.
In general, American hospitals are consolidating. Springfield wasn't the only market with more concentration at the end of the study period than it had at the beginning: 74 other metros could say the same.
The vast majority of the markets surveyed were rated "highly" or "very highly" concentrated, with only a very few markets scoring "unconcentrated." Generally, the most competitive markets were found in the very biggest cities, like New York and Chicago.
Among the more-concentrated hospital markets, the HHI meter ticked up a median increase of .0391.
As increases go, that's considered a lot: When the U.S. Department of Justice reviews healthcare mergers, an HHI increase of .02 is thought to be a "sufficiently large enough" step toward monopoly to warrant more investigation.
The Springfield market's increase was almost eight times greater than the "sufficiently large enough" threshold used by the Justice Department — and four times greater than the median uptick in those 75 markets where hospitals consolidated.
'Surprised but not surprised'
"I’m surprised but not surprised," said Mark Rushefsky, a retired Missouri State University political science professor whose focus includes health care policy. "I was sort of surprised that we were No. 1."
The increase of concentration has a lot to do with health care systems buying up smaller doctors' offices, Rushefsky said. "What you have is fewer independent practitioners," he said, "therefore you have less competition."
Often, Rushefsky said, a doctor with an independent practice who sells the practice to a big health system ends up charging more for services after the merger.
"If they're bought up, and you go to the doctor for the same thing you had done the year before, you'll find the cost has gone up," Rushefsky said. "Same doctor, same staff, same building — the only thing that's different is it's owned by the system. What they're doing is charging you systems costs."
Systems costs are just a part of American health care, Rushefsky said.
"One of the things about our system compared to other countries is we have a much more complex and fragmented system," he said. "If you look at Canada, France, England, Taiwan — whatever the country is — there’s some point where they sat down and said 'This is what we want our healthcare system to look like.'"
The Organization for Economic Cooperation and Development, a group of 34 rich countries, recently reported that U.S. health spending is the highest among its members, at 17.1 percent of the economy. The average OECD country's spending was 8.8 percent. Italy and Spain are examples of countries that hit close to that health spending average.
Rushefsky said, "There’s much more price regulation in other countries in terms of insurance companies and providers than we have in the United States. I don't know that we have the political culture that would allow that. I don't know that we have the political culture that would say, 'Let's spend more on taxes so maybe health care would cost less.' Our prices are higher mainly because we don’t control them."
This isn't a new idea, Rushefsky said. In 2003, a health policy expert wrote a journal article titled "It's the Prices, Stupid."
Yet while the Health Care Cost Institute study authors noted that greater health care consolidation is linked to higher health care prices, they also noted that Springfield's prices are relatively low — 6 percent less than the national median, according to a separate study on health care prices and use levels published by the same group of researchers.
And local patients use less health care than patients elsewhere, the institute's price-and-use study showed. Springfield's level of use is 11 percent below the national median.
Rushefsky said that Springfield's lower health care prices might be a matter of Springfield's generally low wages and overall cost of living. The Census Bureau's cost of living index rates Springfield at 88, compared to a national index of 100.
What can individuals do?
Rushefsky noted that even proposals from Democratic presidential candidates to completely get rid of private health insurance in favor of "Medicare for All" would address the payment side of healthcare, not hospital consolidation. Same goes for the debate about Medicaid expansion under the Affordable Care Act of 2010: "It's not related to consolidation," he said.
For individuals hoping to lower health costs, there are few options, Rushefsky said, but some shopping around is possible.
"Is there something that a single person can do to kind of lower their costs? The answer is not really," Rushefsky said. "It’s a big system, it’s a complex system, and we’re kind of at the mercy of the system."
He said that patients may have the opportunity to shop around by comparing insurance plans if their employer offers options or if they buy insurance from the Affordable Care Act exchanges.
People who need a treatment like a knee replacement surgery or another procedure that's not "absolutely critical" can shop around for prices charged by specialists and clinics, Rushefsky said.
"There are suggestions that you can go to other countries (for health procedures) and it could be cheaper to do that," he said.
Dillon, with the Missouri Hospital Association, said that individuals may not have much power to influence insurance companies or clinical costs. But the best way for individuals to keep down their health costs is "prevention, a healthy lifestyle and focus on primary care."
The hospitals' point of view
Rushefsky, the health policy expert with Missouri State, said that from the hospitals' point of view, consolidation can be a good thing in terms of delivering better outcomes for patients.
"One thing I've seen personally is that there's a kind of continuity of care. If you see doctors in the same system — I use Mercy, it's probably the same at Cox — they know you've seen this doctor, what conditions you have, what medications. There's some quality issues. The hospitals would say they're doing it for quality purposes, by creating an integrated system."
"And there's something to be said for that," Rushefsky added.
Steven Edwards, Cox president and CEO, echoed those comments in an interview with the News-Leader on Thursday morning. Both Cox and Mercy do well on quality rankings when media outlets like U.S. News & World Report publish them, he said. And the ability of "fully integrated" health systems to coordinate their efforts has a real effect on actual treatment for patients.
"At Mercy or Cox, if you have a brand-new cancer diagnosis, you’re not being shuttled off to four different organizations for care," Edwards said. "I think there’s inherently better coordination of care."
Coordination may be especially relevant when the conversation is about the specific health needs of patients in the Missouri Ozarks.
"We are serving a population base that is much sicker than the national average," Edwards said. "If you look at Missouri, we tend to be in the bottom 10 states for what I'd consider lifestyle health problems."
Smoking, obesity and other factors for chronic disease are prevalent here, Edwards said.
"That makes it a tougher population to serve," he explained. "These fully integrated health systems can coordinate care better because every piece of our network is following the same mission."
More coordinated care can equate to less unnecessary use of health services and lower costs, Edwards said.
"We actually think this article is very positive for our market and our region," he added. Edwards said that the very big cities dubbed "unconcentrated" markets by the Health Care Cost Institute's study are also markets in which many health care competitors — and their investors — may be watching out for short-term profits at the expense of patient outcomes.
The not-for-profit Cox system, he said, only reaps a profit margin of around 2 percent, which it reinvests back into the community through services.
Meanwhile, Edwards said there are multiple types of concentration in the realm of health care.
"When they talk about the concentration of power in health care," he said, "there may be some concentration of the delivery network, but in terms of the managed-care companies we negotiate with, they have hundreds of billions of dollars in economic power."
In the grand scheme, local systems like Cox or Mercy are "very small in comparison to the concentrated financial powers of entities like United Healthcare, who are expected to see revenues in the range of $275 billion," Edwards said.