St. Louis\u2019 largest health system, BJC HealthCare, plans to merge with Kansas City\u2019s second-largest, Saint Luke\u2019s Health System, uniting more than 28 hospitals on both sides of Missouri by the end of this year.<\/p>\n

The merger, which would span markets 250 miles apart and include facilities in neighboring Kansas and Illinois, is just one of the latest in a quickly consolidating hospital industry. Cross-market deals accounted for more than half of all hospital mergers and acquisitions<\/a> during the last decade, according to a paper from experts on antitrust law. Today, nearly 60% of health systems operate multiple hospitals in different geographic markets.<\/p>\n

Not only are such deals more common, they can increase costs for patients. Merged hospitals in the same state but in different markets raised prices as much as 10%<\/a> compared with other hospitals, researchers found after analyzing past deals. A separate study found stand-alone hospitals raised prices 17%<\/a> after they were acquired by a hospital company in another market.<\/p>\n

But for some 50 years, federal regulators have not stepped in to prevent hospitals from merging with systems in other markets, according to antitrust law experts. Without federal intervention, states that have seen such megamergers, such as Michigan and California, are often left to wrestle with the complex question of how to respond, given the likelihood of higher prices for their residents.<\/p>\n

The Federal Trade Commission and the Justice Department are reviewing public comments on draft merger guidelines designed to crack down on mergers in multiple sectors, including health care. It\u2019s not yet clear if or how cross-market hospital mergers within a state could be affected. Still, the draft says consolidation should not \u201centrench or extend a dominant position\u201d by extending into \u201cnew markets.\u201d<\/p>\n

But such cross-market mergers aren\u2019t quite a textbook case of a monopoly. When hospitals have bought up local rivals, knocking out their competition, federal regulators have intervened to block these traditional mergers to protect patients from the resulting loss of competition. In recent years, they helped stop proposed mergers<\/a> in New Jersey, Utah, and Rhode Island. The thinking is that without local competition, prices increase and the quality of care decreases.<\/p>\n

It\u2019s harder to prove how cross-market mergers, like the one planned in Missouri, reduce competition if the hospitals do not operate within a single market, said Chris Garmon<\/a>, an assistant professor at the University of Missouri-Kansas City, who researches hospital mergers. Regulators would have to prove the mergers don\u2019t just raise prices but also run afoul of the law by suppressing competition.<\/p>\n

\u201cThat\u2019s why we haven\u2019t seen a cross-market merger challenge yet. It\u2019s because it\u2019s hard to tell the story of why this would be a problem,\u201d he said.<\/p>\n

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The Federal Trade Commission did not answer questions from KFF Health News on its broader strategy around such deals or the BJC-Saint Luke\u2019s merger. Whether an investigation is underway is not public information, said Mitchell Katz, an agency spokesperson.<\/p>\n
After the FTC didn\u2019t stop cross-market hospital mergers in California and Michigan, those states landed poles apart in handling the deals. California won concessions after challenging a deal, while Michigan did not intervene.<\/p>\n
The FTC did closely examine the 2020 deal in Michigan between Spectrum Health, based in Grand Rapids, and the Detroit area\u2019s Beaumont Health. Still, it ultimately didn\u2019t oppose the marriage that created the state\u2019s largest hospital chain, Corewell Health, with 22 hospitals in regions more than 150 miles apart.<\/p>\n
The lack of intervention frustrated some, including Bret Jackson<\/a>, CEO of the Economic Alliance for Michigan, a nonprofit that helps employers wrangle health costs. Spectrum was already the more expensive operator, said Jackson. He worries Beaumont prices will rise to match Spectrum\u2019s once the insurance contracts with the individual hospital systems expire.<\/p>\n
\u201cThey\u2019re not going to want to take a pay cut,\u201d Jackson said of Spectrum. \u201cWe\u2019re really concerned about it.\u201d<\/p>\n
Jackson said that he was already fed up with rising hospital prices and that so are the automotive companies and laborers he represents. Health costs consume about 10%<\/a> of a typical U.S. family\u2019s income.<\/p>\n
Ellen Bristol, a Corewell Health spokesperson, did not address KFF Health News\u2019 questions about patient costs but said that the collaboration is improving quality statewide and creating efficiencies that help the company navigate economic headwinds.<\/p>\n
Even though regulators did not step in, FTC staffers and Michigan\u2019s Department of the Attorney General volleyed emails back and forth for months, according to communications obtained by KFF Health News through a public records request from the state.<\/p>\n
The FTC asked the attorney general\u2019s office to connect its staffers to employers and state officials, plus provide information and data on the health care landscape in the state, the emails show. The FTC interviewed executives from BorgWarner, an automotive supplier, and CMS Energy, a utility company.<\/p>\n
Jackson said he, too, was interviewed by the FTC, which he said was less interested in his thoughts on the deal than in Michigan\u2019s market dynamics.<\/p>\n
It\u2019s hard to glean much from the FTC\u2019s assessment of the merger because many of the emails the state supplied to KFF Health News are redacted. But they do illustrate what information and which people the FTC consulted to reach a decision.<\/p>\n
The emails also suggest state officials were made aware of the FTC\u2019s findings. On the evening of Jan. 13, 2022, an assistant AG sent a lengthy email to Michigan Attorney General Dana Nessel about the FTC\u2019s review of possible antitrust implications, according to the subject line. In the version provided to KFF Health News, though, the entire email \u2014 except for the greeting and the signature \u2014 was blacked out.<\/p>\n
The next day, other emails show, hospital officials began discussing final language with the AG\u2019s office for a press release announcing the deal would soon close.<\/p>\n
Michigan did not move to block the deal or investigate further. Danny Wimmer, a spokesperson for Nessel, a Democrat, said the deal fell outside the authority of her office, further frustrating Jackson, of the Economic Alliance for Michigan.<\/p>\n
\u201cWe need to give state regulators the tools to at least assess mergers in the health care system,\u201d Jackson said.<\/p>\n
Nessel\u2019s position is not the attitude taken in all states. A 2020 merger agreement in California between Huntington Hospital in Pasadena and Cedars-Sinai Health System, with its flagship hospital in Los Angeles, attracted the attention of then-state Attorney General Xavier Becerra, who imposed conditions, such as price caps to protect consumers.<\/p>\n
Becerra, a Democrat who is now Health and Human Services secretary, had argued<\/a> the cross-market merger would lead to higher prices.<\/p>\n
Employers relied on having both Cedars-Sinai and Huntington Hospital in their networks to ensure adequate access to all employees scattered across the massive Los Angeles region \u2014 with a population larger than that of most states \u2014 which California officials said has several distinct markets serving patients. If the two were to combine, employers would have to accept price hikes to maintain access to both entities, according to an analysis the AG\u2019s office commissioned. Health systems can \u201cthreaten to create important holes in a health plan\u2019s provider network,\u201d the analysis said, by refusing to include all hospitals, giving the system greater leverage to extract higher prices from the health plan.<\/p>\n
Cedars-Sinai and Huntington sued the AG over the conditions imposed<\/a> on the merger.<\/p>\n
Ultimately, the parties settled on revised conditions<\/a>, which included a 10-year ban on all-or-nothing contracting with insurers and a cap on price increases for five years.<\/p>\n
The settlement allowed Cedars-Sinai to expand access while reflecting a shared goal of \u201ckeeping healthcare affordable,\u201d said Duke Helfand, a spokesperson for Cedars-Sinai. Still, it was considered a win for antitrust enforcers, with implications that could reverberate across the country, some health economists said.<\/p>\n
In Missouri, the key question is whether state officials will intervene. Attorney General Andrew Bailey, a Republican, is reviewing the merger, which requires his office\u2019s approval before it can close, said Madeline Sieren, a spokesperson for the AG.<\/p>\n
Neither BJC nor Saint Luke\u2019s answered questions from KFF Health News about potential price increases or plans to improve quality. The hospitals have estimated the merged system will generate annual revenue topping $10 billion.<\/p>\n
The Missouri systems ought to explain how this merger will benefit patients by lowering costs and improving quality, Garmon said.<\/p>\n
\u201cWhether they actually do them or not depends on whether they actually have the incentive to do them,\u201d Garmon said.<\/p>\n
This article was produced by <\/em>KFF Health News<\/em><\/a>, which publishes <\/em>California Healthline<\/em><\/a>, an editorially independent service of the <\/em>California Health Care Foundation<\/em><\/a>.<\/em>\u00a0<\/p>\n
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