Missouri – This month, two big health organizations, St. Luke’s Health System in Kansas City and BJC Health System in St. Louis, joined forces. They finished their deal on January 2nd. Now, they’re one of the biggest nonprofit health care groups in the U.S. They have 24 hospitals, about 44,000 people working for them, and make $10 billion a year.
Hospitals today face tough times with high costs, not enough doctors and nurses, and big insurance companies in control. So, hospitals think getting bigger is the way to keep going.
But, some experts in economics and people who fight for consumers are worried. They think this trend of hospitals getting bigger might end up being bad for patients. It could mean higher costs for people with regular insurance and fewer options for those with Medicare and Medicaid.
Studies also show that when health systems merge, they tend to give less free health care and pay their top bosses more money.
“If we look back, traditionally, mergers have been good for the entities that merge, but not as good for the public,” said Louise Probst, executive director of the St. Louis Area Business Health Coalition, a nonprofit organization that works to help employers bring down health care costs. “Maybe this (St. Luke’s-BJC merger) could be different, and if it is, that’s wonderful.”
The findings aren’t looking good.
A study that’s going to be in the February edition of The Journal of Law and Economics has found some worrying stuff. It turns out that in areas where hospitals have joined together, people with private insurance end up paying more. This is even when the hospitals that merged weren’t competing for the same patients before.
Hospitals say they need to get bigger to ask for more money from the big insurance companies. They argue this is because of their high running costs and increasing expenses.
Barbara J. Zabawa, a law professor at the University of Missouri-Kansas City School of Law, explains it like this: As there are fewer and bigger insurance companies, hospitals feel they need to grow too, to have any chance of negotiating well with these insurers.
Christopher Garmon, a professor at UMKC’s school of management, did a study that’s also coming out in February. He found that when hospitals merge, the prices for patients with private insurance tend to go up by about 5%. His study also looked at whether more attention to these mergers by antitrust authorities has changed things. The conclusion? The price increases from hospital mergers are still a big deal.
This isn’t new information, either. A 2018 study showed that when hospitals in the same state merge, even if they aren’t in the same area, prices can go up by as much as 10%.
“Empirical evidence suggests that a merger like this — and that doesn’t mean this one will — tend to increase prices for privately insured patients,” Garmon said. “Some of the emerging research could suggest that other patients could be affected as well.”
Last spring, St. Luke’s and BJC Health System talked about merging. They made it official in the fall and worked to get approval. St. Luke’s has been part of the BJC Collaborative for over a decade, which is a group that shares resources to save money.
Richard Liekweg, who was in charge of BJC before the merger and now leads the combined group, said in a press release that this merger will make patient care better and speed up medical discoveries.
The announcement also highlighted that the merger would offer more chances for clinical trials, research, innovation, and collaboration between doctors and researchers.
In Kansas City and its western region, the health system will keep using the St. Luke’s logo. Hospital officials say that patients won’t see any change in the care they receive or how things are run.
The St. Luke’s and BJC merger isn’t the only one happening. In the first three quarters of 2023 alone, there were 53 planned mergers of U.S. hospitals. As 2024 began, Missouri saw three mergers, including St. Luke’s and BJC. University of Missouri Health Care merged with Capital Region Medical Center in Jefferson City, and SoutheastHealth in Cape Girardeau joined with St. Louis-based Mercy.
There might be another merger in the Kansas City area this year. In November, Liberty Hospital and The University of Kansas Health System signed an agreement to partner, which they say will bring big investments to the smaller Liberty Hospital.
Missouri State Senator Greg Razer criticized this proposed partnership. He doesn’t think a hospital connected to the University of Kansas should be allowed to buy a hospital in Missouri, especially since Liberty Hospital is controlled by a publicly elected board of trustees.
“I don’t want to see a legal taxing entity within the state of Missouri sold to another state,” said Razer, a Jackson County Democrat who has introduced legislation to prevent the merger. “We can’t be invading each other’s states.”
But many health care executives see more industry consolidation as imperative. The American Hospital Association calls mergers and acquisitions “one of the most important tools that hospitals can use to increase access and quality of care and manage risk and financial pressures.”
Lawton Robert Burns, a professor of health care management at the University of Pennsylvania’s Wharton School, said the merging trend follows regulatory changes.