1. The Double-Edged Sword of Vertical Integration in Health Care: Consolidation & Cost Control ERIN C. FUSE BROWN, JD, MPH FAMILIES USA HEALTH ACTION CONFERENCE FEB. 5, 2016

2. Horizontal & Vertical Integration Vertical Integration Horizontal Integration 2

3. Price Utilization Two components of health care cost control 2. Constrain Prices 1. Reduce Overutilization 3

4. The double-edged sword of health care integration Risks: consolidation and threats to competition Benefits: improve care coordination, quality, reduce fragmentation 4

5. Data: Hospital Consolidation & Price Source: Gaynor M, Town R, The impact of hospital consolidation – update, Robert Wood Johnson Foundation, The Synthesis Project, ISSN 2155-3718 (June 2012). Hospital consolidation leads to significantly higher prices in concentrated markets. Estimated price increases: 20-40% Author/YearResult Dafny (2009)Merging hospitals had 40% higher prices than non- merging Haas-Wilson, Garmon (2011) Post-merger, Evanston NW hospital had 20% higher prices than controls Tenn (2011)Summit/Sutter prices increased 28% - 44% compared to controls 5

6. Data: Vertical Integration & Price Hospital ownership of physician orgs correlates with higher prices and spending. The greater the hospital market share, the greater the price increases. Author/YearResult Baker, Bundorf, Kessler (2014)Hospital ownership of physicians is associated with higher hospital prices and spending Robinson, Miller (2014)Hospital-owned physician orgs had 10-20% higher total expenditures/pt than physician- owned orgs Capps, Dranove, Ody (2015)Vertical integration associated with 13.7% increase in physician prices Neprash, et al. (2015)MSAs with increases phys/hospital integration experienced median price increases of $75 6

7. What about antitrust? 7

8. State Oversight Models Policy Option 1. All-Payer Claims Database 2. ACO Certification 3. Rate Oversight Commission 4. Caps on Private Rates 5. Provider Rate Regulation 8 More intervention

9. State Oversight Models Policy Option 1. All-Payer Claims Database 2. ACO Certification 3. Rate Oversight Commission 4. Caps on Private Rates 5. Rate Regulation 9

10. 1. All-Payer Claims Database 10 18 states have enacted APCD legislation 20 states are seriously considering APCDs

11. State Oversight Models Policy Option Example 1. All-Payer Claims Database 2. ACO CertificationMA, NY, TX 3. Rate Oversight Commission 4. Caps on Private Rates 5. Provider Rate Regulation 11

12. State Oversight Models Policy Option Example 1. All-Payer Claims Database 2. ACO Certification 3. Rate Oversight CommissionDE, MD, MA, NY, PA, WV, CO 4. Caps on Private Rates 5. Provider Rate Regulation 12

13. State Oversight Models Policy Option Example 1. All-Payer Claims Database 2. ACO Certification 3. Rate Oversight Commission 4. Caps on Private RatesRI 5. Provider Rate Regulation 13

14. State Oversight Models Policy Option Example 1. All-Payer Claims Database 2. ACO Certification 3. Rate Oversight Commission 4. Caps on Private Rates 5. Provider Rate RegulationMD, WV 14

15. Key Ingredients for State Oversight 15  Information – APCD or other way to get claim data  Independence – oversight body must be insulated from powerful providers they oversee  Regulatory authority – oversight body must have authority to limit providers’ prices when they get too high

16. Takeaways 16  To bend the health care cost curve, we must contain health care overutilization and prices.  Health care integration is a double-edged sword.  States are critical: there are few checks on growing pricing power of integrated health care providers.  To manage the double-edged sword of health care integration, encourage beneficial integration but pair it with price and quality oversight.

17. Thank you! Erin C. Fuse Brown, JD, MPH efusebrown@gsu.eduefusebrown@gsu.edu @efusebrown 17