Massachusetts commission objects to health system expansion

People generally think positively of a health system expanding health access by opening up clinics closer to its patients. However, Kaiser Health News reported on Massachusetts' Health Policy Commission, which released analysis that indicates that it believes otherwise in the case of a proposed expansion.

As background, the state's most expensive health system -- and the one best known for quality -- has sought to expand its footprint, including opening three ambulatory care centers. Previously, a number of state regulators had expressed concern over health systems expanding by acquiring or merging with other practices. Given the antitrust scrutiny, it appears that some health systems have been investing heavily in hopes of achieving organic growth. Critics say that this particular expansion will lead to the same eventual outcome as mergers: that a large health system will grow even bigger, to the detriment of its competitors.

The criticism seems plausible: a health system can expand, promising low prices with the same level of quality that everyone has come to expect. As patients switch doctors, other institutions might face deteriorating financial situations and some might even close their doors. The fear is that at that point, the large health system can freely raise its prices, knowing that it will be difficult for competitors to re-establish themselves. While the health system might couch the expansion as being able to better serve its patients, it is not hard to imagine the health system delaying the expansion if there were no possibility of additional profit.

Even if the critics are correct, however, the solution is not exactly clear. Some previous monopolies ended up being broken up to help engender competition. However, such a move could be disruptive to operations and will likely only be pursued rather unwillingly. Another approach would be to subject the health system to some sort of price controls (e.g. price increases must be approved by a regulatory body), but that likely comes with some market distortions of its own. Theoretically, if the health system raises prices too much, competitors will be able to grow their market share. However, barriers to entry might be rather high in terms of getting patients to switch their primary care physician, and there is likely a third-party payer problem, where the party making the decision (the patient when selecting which system to be treated at) is different from the party making the immediate payments (the insurance company). That disconnect might end up reinforcing the health system's market share.