Healthcare costs have become consistently unaffordable for many Washingtonians, according to two new reports that identify consolidation as a primary cause.
The Office of the Attorney General (AG) and the Office of the Insurance Commissioner (OIC) each released preliminary reports—OIC’s was prepared by Health Management Associates (HMA)—that were requested by lawmakers in the 2023 legislature in order to evaluate policy options to improve healthcare affordability.
Challenges with healthcare affordability are not limited to individuals with lower incomes or those without insurance. A survey of 1,300 Washingtonians found that 62 percent of respondents had experienced at least one healthcare affordability burden in the past year (including rationing medication, delaying or going without care, and depleting their savings) and that 81 percent worried about affording healthcare in the future.
Healthcare expenditures now account for over 20 percent of Washington’s general fund budget, according to the OIC report. Patient Coalition of Washington Executive Director Jim Freeburg discussed the reports with State of Reform.
“There are several things lawmakers can do this session to support the affordability crisis,” Freeburg said. “The findings indicate what other states have done and what Washington could do to address out-of-control spending with consolidation and a lack of accountability for spending.”
The AG report states that consolidation is prevalent in the healthcare industry, and is linked to increased patient prices without improvements in quality of care. OIC Senior Health Policy Advisor Jane Beyer discussed the reports during a Universal Health Care Commission meeting last week.
“We thought it was important after our conversations with legislators to say, ‘Here’s what healthcare looks like in Washington right now.’ So a big portion of the report focuses on that. The AG’s office is really focusing on healthcare competition and policy options related to trying to strengthen competition in healthcare.”
— Beyer
The OIC report includes specific information about consolidation in the state, and shows that 40 of Washington’s 101 hospitals are affiliated with the five largest hospital systems: Providence/Swedish, MultiCare, Virginia Mason Franciscan Health, UW Medicine, and PeaceHealth.
Eight multi-hospital systems have more than 90 percent of the state’s licensed—and more than 65 percent of staffed—hospital beds in the state. Eight multi-hospital systems employ 65 percent of the state’s hospital physicians and physician assistants.
“With more consolidation there’s less competition and less pressure to lower costs,” Freeburg said. “We need to reorient this system toward patient-centered care rather than profits and growth.”
Health insurers have purchased—either directly or through their holding companies—physician practices and other parts of the healthcare delivery system as well. United HealthGroup (through its Optum subsidiary) is the largest employer or physicians in the country, with more than 70,000 employed or aligned physicians across more than 2,200 locations, according to the OIC report.
“Insurers are actively purchasing physician groups and clinics,” Beyer said. “Optum now employs 90,000 physicians nationally. These insurers are involved in a lot of actual care delivery in the state.”
Washington’s healthcare system has also seen a growing number of private equity transactions. There is far less public information available about the status of private equity acquisitions, as there are fewer reporting requirements compared to publicly-held companies, Beyer said.
“It is really difficult to get information about private equity acquisitions, but the folks at HMA were able to get some information on private equity acquisition in Washington. And there’s a pretty specific business model that private equity uses when they come into an industry, including healthcare.”
— Beyer
A recent review of 55 studies found that private equity ownership was most consistently associated with increased cost to patients or payers, with mixed-to-harmful impacts on quality of care.
Final reports from the agencies are due on Aug. 1st, 2024, and will include actuarial analysis and economic modeling to project the likely impact of adopting policies to address healthcare affordability.
Freeburg would like to see lawmakers put forward a framework that strengthens the state’s oversight of healthcare spending and gives more tools to regulators that are in the best interest of patients.
“I think legislators need to acknowledge that the biggest healthcare issue is affordability, and 400,000 people in our state have medical debt, so they need to ask some hard questions,” Freeburg said. “Why do we keep paying more and more, yet getting less and less from the system every year? I think we’ll see some action this session. The legislators get it, they’re wrapping their heads around it. We spend a lot of money on procedures that don’t help anyone. There’s a roadmap if we choose to use it.”