GA Hospitals: A Monopoly of Monopolies

“If you want to keep your doctor, you can keep your doctor.”

We now know that was “lie of the year” quality material, but the reason that remains a lie goes much deeper than Washington politics. Many of the reasons are rooted right here at home, with a well funded group of established “non-profits” doing everything they can to protect their turf. The result is a system stuck in decades old regulatory structures, anti-competitive business practices that are both protected and encouraged by Georgia law, and a system that rewards the “haves” while the state continues to struggle with lifelines to prop up the “have-nots”.

Georgia has a system of laws that govern the our health care delivery system under the umbrella of “Certificate of Need”, or CON. It’s easy to devolve into healthcare jargon here, but for those of us not health care professionals or lawyers, it works approximately as follows:

A Certificate of Need is a state granted monopoly franchise for a hospital. The state has to determine there is a need for medical services not currently being served, and then the provider granted the certificate must agree to provide a specific bundle of services. Supporters of the status quo say that this ensures that the services a hospital provides that they are guaranteed to lose money on (i.e, emergency rooms where they must treat anyone regardless of ability to pay) are offset by more profitable areas (oncology, orthopedics…virtually any service you see advertised as providers seek to gain extra for-profit patients).

After years of discussion and infighting within the medical community, HB 198 was proposed to break down the monopoly barriers and significantly reduce the advantages of the entrenched “haves” while leaving in protections for the “have-nots”. You can read more about the motivation behind the bill here.

HB 198 failed prior to crossover day, with a vote of 72 (yes)-94 (no). Legislative leaders went into the morning believing they had threaded the needle of compromise between the many influential and well funded groups that lobby for medical services at the capitol. They ended the day with a major hospital system flipping their position to “no” and the bill failing by a wide margin. Leaders were not amused, but vowed to fight on with a scaled back approach.

Efforts remain to include transparency requirements and elimination of some anti-competitive practices by non-profit hospitals. They would include prominent listing of executive compensation and cash reserves on the hospital’s website. It would also prohibit non-profits from purchasing “medical use rights” from property owners near the hospital, so medical practices could not set up shop other than in hospital leased and controlled facilities.

What Georgia remains left with is a system where hospitals dictate where doctors can practice, what they are compensated, and a system where it is difficult to grow a practice without the express consent, approval, and direct or indirect partnership with a hospital holding a monopoly CON franchise.

There is a market function that sets basic parameters for this situation in rural Georgia, even before the CON restrictions are taken into account. A provider in rural Georgia can expect 80% of their patients to be on Medicaid, Medicare, or uninsured. They can expect to lose money on each, and don’t have enough margin on the remaining 20% to cover the losses from the majority of their patients. They need hospital privileges for their practices to survive.

But what strings do the monopoly hospitals then attach? The Wall Street Journal used Southwest Georgia’s Phoebe Putney system as an example of how hospitals use their monopoly power to have physicians refer patients back to them, rather than to stand alone specialty centers, which would often be at much lower cost to the patient.

Some general (non-Phoebe specific) stats contained in the article is that a chemotherapy treatment averages $612 in a hospital affiliated center, versus $247 in a doctors office. MRI’s are found to be 27% more at hospitals than at MRI specialty centers. A specific example from the article cited a Wisconsin based hospital group charging $529.85 for lab work, with the same screening costing $57.83.

Under CON laws in Georgia, hospitals have yet another upper hand over many specialty centers. A group of physicians can join together to operate a mobile surgery center independent of a hospital. If they then choose to sell that practice, they can’t sell to another mobile surgery center, as each must be independent. But, they can sell to a hospital. Thus, “non-profit” hospitals have another avenue to get bigger and control their competition, whereas doctors are left at the mercy once again of hospital systems for their livelihood or even their retirement plans.

It’s clear that CON’s give hospitals monopoly power their own markets, but what is less than transparent is the coordination among hospitals to protect their monopoly power over the network of providers, insurance companies, and ultimately the patients they serve.

Here is some transparency on that. The “haves” have a cartel that controls policy for both the “haves” and the “have-nots”.

What you will find at that link is an agreement between the Georgia Hospital Association and the Georgia Alliance of Community Hospitals. GHA claims to represent “100% of the for-profit and non-profit hospitals in Georgia”, per the agreement. The Alliance membership is dominated by the major “non-profits” of the state, including Phoebe, Northside, Piedmont, Wellstar, and Emory among others. The Alliance members are not usually the ones you see in the headlines facing closure. Most of Georgia’s smaller, struggling hospitals come under the association of Hometown Health.

This memorandum of understanding between GHA and the Georgia Alliance states that the two will be in lockstep on all lobbying efforts regarding their member organizations. It is a point by point memorandum of how the organizations will share draft legislative agendas, and communicate throughout the process to ensure no disagreement, public or private, will grow between them.

Thus, GHA while purporting to represent 100% of Georgia’s hospitals, has an agreement with the “haves” to support their agenda, and not to support an agenda not supported by the more successful “non-profits”. Those non-profits, having successfully fought back competitive measures, continue to fight basic financial and operational transparency.

Meanwhile, the “have nots” remain struggling, with an organization that claims to represent them having given an effective veto power to hospitals that have significantly different agendas over Georgia’s health care delivery system.

Yes, in Georgia, you can choose your doctor. As long as the hospital granted monopoly power over your area approves of them, their business practices, and allows them to treat you on the hospital’s terms. And this will remain the same, because Georgia’s hospital monopoly of monopolies appear to have won at the Gold Dome once again.

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