Physician Patient

Minnesota hospital-clinic and healthplan mergers

Mergers are for Market Control, Not Competition

BY Robert W. Geist


Lee Schafer’s column “Sanford’s critics asked the wrong questions” (April 13), was both right and wrong. It missed the big picture regarding the latest massive merger proposed between two Midwest hospital corporations — Sanford of South Dakota and Fairview of Minnesota.

First, Schafer was right that Attorney General Lori Swanson’s hearing was partly political theater. That is one way to dramatize a merger proponent’s double-speak. They invariably claim that mergers will mean better care, better community health, and vast savings of money, all from the “synergy” in their newest “coordinated” big box “medical home.”

But Schafer is wrong to say that mergers arise because of “competitive pressures in health care delivery…” This is to believe in “new environment” wonk talk intended to cover-up what is really going on in the nation’s medical sector — frantic efforts to control costs by rationing care.


What does this big picture look like?

Cost control under the Affordable Care Act (ObamaCare) depends primarily on “Accountable Care Organizations” (ACOs), as noted in a recent New England Journal of Medicine article by Jonathan Oberlander, an ObamaCare advocate.

ACOs are commonly envisioned, as hospital and medical staffs united in mini-provider/insurance corporations. But they do not have insurance organization capabilities — a sales force, actuaries, or means to police use of corporate money. Importantly, they lack the ability to accumulate tax-free reserves. Of necessity, they must seek arrangements with, or be acquired by, a commercial HMO corporation.


How would this work?

ObamaCare transfers to these ACO providers the role of gatekeeper previously filled by the old mega “payer” gatekeepers (HMOs and government agencies). The mega “payers” will auction their client populations to ACOs, who will bid fixed annual capitation rates to service the insured. To avoid bankruptcy, the mini-ACO insurance corporation will have to find ways to restrict the utilization of the benefits it insures — called by some, “bedside rationing.”

To legalize ACO-partner collusive capitation bids and in-house distribution of “savings” from rationing care, whether in “non-profit” or for-profit corporate arrangements — the new ObamaCare “Patient Protection” law requires federal waivers from…patient protection laws (an irony that escapes the attention of all but the agenda ridden and cynics). In 2011, the Federal Trade Commission (FTC) granted waivers for ACO violations of anti-trust law (mergers of colluding providers, including in some cases with HMOs), and the Center for Medicare and Medicaid Services (CMS) granted waivers for violation of federal anti-self-referral laws and anti-fee-splitting laws (“gainsharing” ACO rationing profits with the “payers”).


This is the “new environment” to which merger makers allude.

Both the mega HMO and mini ACO corporations see self-preservation in a market controlled by a massively merged, federally protected cartel-like utility system being created with the implementation of ObamaCare. Cartel cost control involves the price fixing of insurance and services and franchising between insurance corporations and their ACO delivery “partners.” These are favored, because they are profit-driven to restrict use of “payer” money for patient care.

Some ACO developers see serial mergers and acquisitions over the next decade that will result in an oligopoly of four massive HMO-ACO “health services” controlling the nation’s entire medical sector — a frightening “too big to fail” scenario.


Public-private cartels are not competition. They are another more powerful gatekeeper scheme to control costs by rationing the supply of care. Our misfortune is that such managed care rationing has failed for decades.

That’s the big picture.

Robert W. Geist, a physician, lives in North Oaks.

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