Congress Considers Bill Targeting Hospital Consolidation

Published July 30, 2019

    Since its introduction in January, The Hospital Competition Act, introduced by U.S. Rep. Jim Banks (R-IN) this year, has gotten modest support. It picked up one co-sponsor, Rep. Bruce Westerman (R – AK)  an endorsement from the American Academy of Orthopedic Surgeons. 

     The bill would help slow the rise of hospital costs, says Banks. “Over the past few decades, fewer hospitals are controlling a greater share of the market,” Banks stated on his Facebook page, when he introduced the bill. “This has led to higher prices and higher insurance premiums for patients.”

     In 2017, Americans spent more than $1 trillion on hospital services, which is expected to rise to nearly $2 trillion by 2026.

‘Common-Sense Reforms’

Banks states in a press release the bill would bring “greater competition to the hospital sector” through “common-sense reforms.”

     The bill would expand staff at the Federal Trade Commission by 400 percent to monitor hospital market competition. It would require hospitals that dominate a market and want to participate in Medicare to charge commercial insurers the same rates that Medicare uses when it reimburses providers. The bill would repeal a ban on construction of new physician-owned hospitals, under section 6001 of the Affordable Care Act.

     Under the bill, the federal government would give grants to states that implement free market reforms to increase hospital competition. To bill specifies four criteria of eligibility, including a state not having a certificate of need law and  having in place, a scope of practice law that allows advanced practice providers such as nurse practitioners. 

     For outpatient care, the legislation would equalize reimbursement rates to independent physician practices. Currently, practices on hospital campuses can collect  more money because they can charge “facility fees’ under Medicare. Finally, it would require hospitals to publish the costs of their most 100 common services.

     “Americans are justifiably concerned about the staggering cost of health care,” Banks stated in his press release. “While northeast Indiana is blessed to have a competitive hospital system with high-quality care, many parts of the country are not so fortunate. We must take every opportunity available to us to lower health care costs for all Americans. My bill would do just that through common-sense reforms that introduce greater market competition in the hospital sector.”

‘More Harm Than Good’

Merrill Matthews, a resident scholar at the Institute for Policy Innovation, saysalthough Banks calls his bill a free market approach, it would increase bureaucracy and impose price controls.

     “The congressman rightly points out that large hospitals have been merging and buying out smaller ones and physician practices, especially since the passage of Obamacare, but that’s because of the incentives in the Obamacare legislation and the health care system in general,” said Matthews. “Banks does little to address the incentives. He just goes after the hospitals.”

     This bill is not free market, says Matthews. “He grows the Federal Trade Commission staff charged with monitoring hospital competition by 400 percent and appropriates $160 million to pay these new bureaucrats. 

     “He imposes Medicare’s price controls on private insurance payments to large hospitals  [if his new bureaucrats think certain hospitals are restricting competition,” said Matthews.

     There are a few good provisions in the bill, says Matthews. “He repeals the ban on physician-owned hospitals,” said Matthews. “But the bill is primarily a big-government solution to a problem caused by big government. Such approaches are almost never successful and usually cause more harm than good.”

Sees a Real Problem

Washington Policy Center health care policy analyst Roger Stark, M.D. says the bill does respond to a problem, as hospital consolidation is occurring throughout the United States.

     “The argument is that consolidation leads to cost savings and efficiencies of scale,” said Stark. “To date, there is no evidence that hospital consolidation saves money, but it does create monopolist pricing.”

     Patients are not price-sensitive because third-party payers largely remove them from the process, says Stark. “Consequently, hospital consolidation really doesn’t impact the average patient,” said Stark.

Mixed Bag

Banks’ bill is a mix of good and bad ideas, says Stark.

     “The good: repealing the ban on construction of new physician-owned hospitals,” said Stark. Other good provisions include “removing incentives to form ACOs [accountable care organizations],  equalizing reimbursements for similar inpatient and outpatient care, and price transparency,” said Stark.

     Unfortunately, the bill also includes measures expanding government’s already excessive intrusion in health care decision-making: “More money for the FTC, and government price-fixing at Medicare rates,” said Stark.

     “The good ideas would increase competition; the bad ideas would introduce more government control in our health care system,” said Stark.


Kenneth Artz ([email protected])writes from Dallas, Texas.


Internet Info:

Hospital Competition Act of 2019, January 11, 2019:

Official Connections:

Rep. Jim Banks, (R-Indiana):