Possible Effect of Changes in The Aca on The Market Power of Healthcare Providers

There has been a wave of health care consolidation after passage of Affordable Care Act (ACA). A splurge of mergers and acquisitions has been seen as pharmaceutical companies are participating largely in this splurge. To try to control costs and to increase advantage in health care contracting, physicians are merging into group practices.

Private medical practices are acquired by hospitals. Many health systems are connecting with Accountable Care Organizations (ACO) while some other small hospitals are acquired by larger hospitals. There have been lot of mergers in insurance market too. Costs are increasing due to consolidation of health care organizations is indicated in studies reported by Journal of American Medical Association which were released by public health policy departments of Stanford University and University of California, Berkley.

Although it does not have any consumer-focused reason to consolidate, it is hard for companies to survive on their own in the time of Affordable Care Act as well as it is difficult for new entrants in the market to go beyond the status quo and maintain themselves in the competition sue to government regulations and mandates; so they are consolidating. The possibility of more insurers withdrawing from the market will be increased if Affordable Care Act takes refuses to pass proposed health insurance mergers. Due to this law will crumple and everyone will have to go to private sector (which is not affordable to many). So it will call for a universal system for all like “Medicare for all” wherein the competition is eradicated by the government resulting in higher costs and reduction in care and access. Price increase are heavy in the markets where there exists a monopoly of hospital. as compared to the markets with four or more hospitals, the hospital prices in the monopoly market are 15. 3% higher.

The two proposed mergers are being viewed currently and if they are sanctioned, the number of top national health insurers will be decreased from five to three massive companies. There were 66 hospital mergers in 2010 and from then the rate of hospital mergers have increased by 70 percent.

Antitrust laws have been passed and organization like Federal Trade Commission has been established by the government of United States to avoid monopoly and to decrease anticompetitive behaviour. When the effect of mergers and acquisition might be to lower the competition or try to establish a monopoly, Section 7 of Clayton Act prohibits such mergers and acquisition. Horizontal mergers create the most important concern for antitrust. It blocks the merger that might lead to deteriorating effects on healthcare market and costs of care. Horizontal merger guidelines have been designed by Federal Trade Commission and Department of Justice.

The effects of the proposed merger can be scrutinized by antitrust agencies by the premerger notification of Hart-Scott-Radino act. The completed mergers that consequently seem to harm the customers are also investigated by antitrust agencies.