Commentary: Hospital mergers are why we don’t have enough beds

By Andrea Flynn and Ron Knox / Special to The Washington Post

The United States is on the brink of a hospital capacity crisis. It has fewer than 1 million hospital beds nationally, far below the predictions of what will be needed to treat those who become seriously ill from the novel coronavirus outbreak. There are many reasons the U.S. health-care system is so ill-equipped to handle a crisis of this magnitude. One of them is the decades-long trend of hospital mergers and closures that have reduced access to care in communities across the nation.

According to data from the Centers for Disease Control and Prevention, when the rush of patients sick from Covid-19 peaks later this month, the United States will need about 36,000 more hospital beds than what is currently available. Some communities will be hit much harder than others. Massachusetts, for example, could be more than 8,000 beds short. Intensive care units, in particular, are in short supply. More than half of U.S. counties are facing this crisis with no ICU beds at all, while others have nowhere near what will be needed. Louisville has one ICU bed for every 442 people aged 60 or older. Dakota County, in the Minneapolis suburbs, has just 12 ICU beds. More than 75,000 residents there are over 60.

America’s now-disastrous lack of hospital capacity is no accident. It is, in part, the result of hospital mergers over the past 30 years that concentrated our health-care system in wealthy cities and suburbs where the prevalence of expensive health-insurance plans allowed consolidated health systems to rake in profit. There have been more than 680 hospital mergers over the past decade. This wave of consolidation, which is ongoing and likely to accelerate in the coming years, is characterized both by mergers between hospital systems and by large hospital conglomerates taking over rural hospitals, physician offices, ambulatory surgical centers and other outpatient clinics.

According to a Clinton-era rule, the Federal Trade Commission, which since the mid-1970s has been in charge of policing the health-care industry, will not challenge a merger in which either hospital group has fewer than 100 beds, sidelining the agency when big hospital groups snap up smaller rural hospitals and physician practices. Edith Ramirez, the head of the FTC during the Obama administration, proudly said the agency challenged just 1 percent of all hospital deals.

The wave of takeovers the FTC oversaw has contributed to the loss of rural hospitals and a reduction in the number of beds around the country. Today, there are over 10 percent fewer community hospitals in the United States than in the mid-1970s; since 2010, around a dozen merged rural hospitals have shuttered. The impact of hospital consolidation is particularly painful in the context of the current crisis: Hospital mergers and closures have contributed to the reduction in the number of hospital beds in the United States, from around 1.5 million in 1975 to just more than 900,000 in 2017.

Further exacerbating the effects of these mergers, at least 120 rural hospitals have shuttered over the past decade. The loss of providers is the result of a number of factors, including shrinking populations in rural areas. But consolidation has played a part. The Affordable Care Act increased the pace of consolidation, and the hospital industry is now considered to be highly concentrated in 90 percent of all U.S. cities, according to a Commonwealth Fund study. These mergers and rural closures have moved decision-making farther and farther away from the communities most affected.

Rural hospitals in particular have struggled for myriad reasons, including the decision of many Southern and Midwestern states to not expand Medicaid under the Affordable Care Act. In fact, none of the six states with the greatest number of hospital closures since 2010 (Texas, Tennessee, Georgia, Alabama, Mississippi and North Carolina) expanded Medicaid, resulting in a health landscape in which patients are in worse health and have fewer providers to treat them.

Recent studies have shown that even before Covid-19 began to strain rural health systems, 1 of every 5 rural hospitals were at risk of closing because of financial pressure. Part of this pressure comes from sicker patient populations that are more likely to rely on Medicare or Medicaid, which have lower reimbursement rates than private insurance. That has made for an underlying health crisis upon which the Covid-19 pandemic is now layered. If hospitals had not undergone such sweeping consolidation over the past decades, our health-care system probably would be better equipped for the crisis now.

“It is definitely a piece of the overall puzzle,” says Dunc Williams, who researched rural hospital mergers and closures at the University of North Carolina at Chapel Hill.

The corporate concentration that has swept through the U.S. health system is just one example of the increase in corporate power that has increasingly characterized the economy over the past few decades. The same shareholder-driven motives are apparent in what is the most expensive health-care system on Earth. Consolidation has contributed to a shortage of hospital beds; it also hurt patient care and drove up patient and insurer costs; which means more cash for already-wealthy hospital conglomerates and the executives who run them.

The latest hospital merger wave has been fueled in large part by the financial sector’s outsize presence and influence in the health sector. Investors have pressured hospitals to cut costs, buy their rivals and then drive up profits by imposing a largely outpatient health-care model throughout their system. Hospital beds have been lost in this broad shift to outpatient health care, which hospitals and their investors see as a driver of profits. Outpatient hospital prices have grown four times faster than what doctors charge; a trend that both reduced beds and fueled hospitals’ frenzied takeover of independent physician groups. Between 2016 and 2018, hospitals acquired more than 8,000 doctors groups.

The immediate answer to our bed shortage is unclear. Navy hospital ships have arrived in New York City and Los Angeles, each with 1,000 beds, as hospitals quickly fill with coronavirus patients. There has been some discussion of enlisting the military to rapidly build hospitals. The New York National Guard and the U.S. Army Corps of Engineers are transforming New York City’s Javits Center into a 1,200-bed hospital.

The challenge for policymakers is to meet these short-term needs while also ensuring that the country never again finds itself with more sick and dying patients than our hospitals can treat. As we emerge from the present, the FTC must take hospital mergers more seriously, reviewing proposals carefully while prioritizing patients and the stability of our health-care system as a whole.

A broader lesson we should take from this moment is that public health is — as most other countries in the world believe — a public good, and public goods require broad public investments. Hospitals should not be about corporate-style efficiencies in which they must operate at near-full capacity to satisfy investors. Rather, hospitals should be able to exist while ensuring that they have the capacity required to care for their communities should the worst occur. This crisis makes that clear.

Now is the time to deeply invest in rural communities — in hospitals, in practitioners, in public coverage options such as Medicaid and Medicare — and to do so in a way that will address the immediate crisis and establish a strong public-health foundation for the future. Corporate profits have no place in public health decision-making; when they do, we all suffer greatly. We deserve, and must demand, so much better.

Andrea Flynn is a fellow at the Roosevelt Institute. Ron Knox is the senior researcher and writer at the Institute for Local Self-Reliance.