American healthcare has become a “conglomerate of monopolies,” where a few players control the board and newcomers struggle to find space. This week, at HLTH 2024 in Las Vegas, more than 12,000 leaders from across the healthcare ecosystem came together to tackle these and other major challenges facing the industry.
I had the privilege of speaking on a panel titled “Owning Healthcare’s Boardwalk,” alongside Elizabeth Jurinka, operating director of healthcare policy at The Vistria Group; Randi Seigel, partner at Manatt, Phelps & Phillips, LLP; and AJ Loiacono, CEO of Capital Rx.
Moderated by Seth Joseph, a fellow Forbes contributor and managing director at Summit Health Advisors, our discussion focused on the rules of competition in healthcare, the impact of antitrust regulation and what it will take to disrupt the status quo.
Why competition matters
With the deck stacked against innovative disruption, Seth opened the conversation around antitrust regulations and competitive tactics, posing a question about what types of competition should be encouraged in today’s healthcare market.
The message from the panel was clear: While success and scale are not inherently problematic in healthcare, the consolidation of power in the hands of a few has stifled competition, inhibited innovation and driven up costs for patients.
Each of us discussed the crucial role that policy has played in shaping this landscape. Over the years, policy decisions—from prohibitions on Medicare drug price negotiations to lax oversight of hospital mergers—have allowed for the dominance of a few powerful players. These policies, initially designed to protect the industry and encourage growth, have ended up curbing competition at the expense of patients.
Five monopolistic forces
I emphasized that while U.S. healthcare is not itself monopolistic, it is made up of multiple different monopolies that restrain trade and diminish competition. I highlighted five specific areas where monopolistic actions have hurt patients and limited innovation:
- Exorbitant drug prices: The United States pays nearly double what other developed nations do for identical medications. This problem stems from excessive patent protections, restrictions that previously prevented the government-run Medicare program from negotiating prices, and legal tactics that extend monopolistic pricing well beyond what was originally intended under the law. The result is unaffordable drugs, unaddressed medical problems and delayed access to life-saving treatments.
- Hospital consolidation: Research by Yale’s Zack Cooper has shown that in regions where hospital mergers have limited competition, prices are significantly higher without corresponding improvements in quality. While consolidation could, in theory, enhance efficiency and outcomes, the reality is that the majority of hospitals maintain overlapping and redundant services even when volume is insufficient to achieve better clinical results.
- PBM market control: Three large pharmacy benefit managers—each owned by major insurers—control 80% of decisions about which drugs are available to patients. Instead of using their leverage to lower drug costs, these PBMs accept rebates from manufacturers that incentivize the use of higher-priced medications even when less expensive (and equally effective) options are available.
- Private equity in healthcare: PE firms have increasingly entered healthcare, employing physicians and acquiring practices to dominate local markets. While these firms could use their power to improve efficiency, their focus on market consolidation is what drives up prices. The impact is particularly evident in specialties like anesthesiology, emergency medicine and other high-cost inpatient services.
- Electronic health record (EHR) companies: The EHR market is dominated by a handful of companies that make it difficult for providers to switch systems. By refusing to open their application programming interfaces (APIs) for data sharing, these companies create barriers that drive up costs and limit patients’ ability to access their own health information.
These monopolistic behaviors represent huge obstacles to innovation, efficiency and improved patient care. And while the HLTH conference highlighted the promise of new technologies in breaking down barriers, it’s clear that we also need systemic and policy changes to create a more level playing field.
Leadership and policy
To solve the problems of stifled innovation and anticompetitive practices, it’s clear that leadership—both from within the healthcare sector and from policymakers—will make the biggest difference. The government must play a role in enforcing transparency around PBM practices, setting limits on drug prices and ensuring that hospital mergers genuinely benefit patients.
When hospitals or private equity firms seek to consolidate, they should be required to demonstrate how their actions will improve clinical outcomes and reduce costs. In addition, the government should demand transparency in PBM rebates and place caps on how much drug manufacturers can charge for medications sold to Americans compared to other wealthy nations. Finally, EHR manufacturers must open their APIs or face federal penalties.
A call for change
In a competitive market, the best ideas should rise to the top. But when monopolies dominate, they create a climate of complacency that limits progress and harms patients. In these circumstances, it’s the government’s responsibility to act—preventing further consolidation and breaking up those monopolies that harm individuals, families and communities.
The discussions at HLTH 2024 reinforced a critical point for many in the audience. The time for complacency in healthcare is over. Monopolistic market control has led to rising costs and limited access. It has left the U.S. as the most expensive country in the world for healthcare, but one with life-expectancy that lags peer nations by five years. However, with the right mix of policy intervention, bold leadership and a focus on patient-centered care, we have a chance to rewrite the rules of the game and to once again make American medicine the best in the world.
I am grateful to HLTH for hosting such a thought-provoking event and to my fellow panelists for their insights. Together, I believe we can create a healthcare system that is truly built to serve those who matter most: the patients.
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Dr. Robert Pearl is the former CEO of The Permanente Medical Group, the nation’s largest physician group. He’s a Forbes contributor, bestselling author, Stanford University professor, and host of two healthcare podcasts. Check out Pearl’s newest book, ChatGPT, MD: How AI-Empowered Patients & Doctors Can Take Back Control of American Medicine with all profits going to Doctors Without Borders.
