John Hood: We Need More Hospital Competition
RALEIGH — North Carolina’s hospital sector has undergone lots of mergers and acquisitions over the past decade. Now the pace of change is, if anything, accelerating.
Guilford County’s largest hospital, Cone Memorial, has just been acquired by a charitable arm of Kaiser Permanente. Novant Health, also based in the Triad, operates hospitals in Winston-Salem, Charlotte, Wilmington, and more than a dozen other communities in North Carolina and beyond. Having clashed with the Federal Trade Commission over attempts to buy two hospitals in Iredell County, Novant has just shelved that plan but is competing with Asheville-based Mission Health to get a permission slip from the state for a new hospital in Buncombe.
Mission Health, once independent, was itself acquired in 2019 by HCA Healthcare, a Tennessee-based chain. Most North Carolina hospitals are either parts of sprawling networks or seem likely to become so in the coming years.
I’m greatly concerned about the growth in hospital concentration. You should be, too. Its relationship to the price of health care is well-supported by empirical evidence. But the problem isn’t so much the existence of multistate networks. It’s the existence, or absence, of competition.
That is to say, whether a given hospital is locally owned and operated matters less than whether it is, for all intents and purposes, your only choice. In Wake County, where I reside, three major systems operate hospitals, urgent cares, physician practices, and other facilities: UNC Health, Duke Health, and WakeMed. Two are based in neighboring counties. WakeMed is local, having converted decades ago from county to nonprofit ownership.
At various times, my family has been treated by all three systems. Indeed, when my wife faced a life-threatening illness, she was also treated at Duke University Hospital in Durham and Mayo Clinic in Minnesota. We cared little about ownership structure. We were trying to save her life — and, fortunately, we had the means and opportunity to choose accordingly.
Last year, the Health Care Cost Institute used a standard measure of market concentration to assess the extent of hospital competition in 183 metropolitan areas across the country. Within North Carolina, Wilmington had the highest index. Indeed, it ranked second in the entire country in hospital concentration! The Asheville, Greensboro, Winston-Salem, and Burlington MSAs also had above-average levels of concentration. The Hickory and Charlotte regions fared better. (Raleigh-Cary and Durham-Chapel Hill weren’t included in the study.)
Rather than fixate on local vs. national ownership, policymakers ought to focus on encouraging more competition among providers within metros and regions. Avik Roy, founder of the Foundation for Research on Equal Opportunity, offered some practical suggestions in a recent paper.
• Federal lawmakers should mandate more price and contract disclosure for institutions receiving Medicare and Medicaid dollars. They should also amend the Affordable Care Act to remove restrictions on physician-owned hospitals.
• State lawmakers should get rid of North Carolina’s certificate-of-need system, which explicitly creates and protects hospital monopolies in counties and regions. They should also loosen regulatory constraints on surgical centers, birthing centers, and telemedicine.
What about antitrust enforcement? Generally speaking, I think antitrust laws do more harm than good. The interests of consumers are supposed to be paramount, but all too often private firms use antitrust as a weapon against larger competitors with which they can’t effectively compete in the private market. What makes the hospital sector different is that it is already so heavily subsidized and regulated by federal and state governments. If any sector deserves more scrutiny from antitrust enforcers, it’s this one.
It’s essential that North Carolinians approach this issue with realistic expectations. Regardless of the policy environment, rural residents are going to have fewer choices nearby than urban and suburban residents do. That’s no conspiracy. It’s geography. Still, without robust competition among hospitals and other providers in our metropolitan areas — and practical, accessible ways to transport patients from remote areas to those competitive markets — North Carolinians will continue to pay too much for medical care, and to receive too little in return.
John Hood is a John Locke Foundation board member. His latest books, Mountain Folk and Forest Folk, combine epic fantasy with early American history (FolkloreCycle.com).
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