More on Hospital Market Dominance, Enabled by Secret Pricing

This week two more articles appeared describing how large hospital systems use market dominance to charge more.  Naturally, both were in news publications, not scholarly health services research journals.

San Francisco

Kaiser Health News (via the Contra Costa [CA] Times) discussed hospital market dominance in the San Francisco area.  The article documented how particular systems can command higher prices. Consider the example of John Muir Health vs San Ramon Medical Center:

Often, a hospital's dominance in an area helps determine how much it can charge, experts say. Consider John Muir Health, a two-hospital nonprofit system in the East Bay. With campuses in Concord and Walnut Creek, John Muir has the biggest footprint in the local hospital market, accounting for 54 percent of all the acute care inpatient stays in 2009, more than any other hospital group, according to state data.

The hospital with the weakest market penetration is San Ramon Medical Center, a Tenet-owned, for-profit hospital, with 10 percent of the acute care inpatients.

The least the insurer Aetna paid John Muir for an outpatient colonoscopy was $3,185, according to Aetna's website, which tracks two years of payments. Aetna paid $1,483 to San Ramon Regional Medical Center for the same service. The least Aetna paid John Muir for an uncomplicated birth was $7,722, while its lowest price for a birth at San Ramon was $5,278.

Yet on broad quality measures, John Muir's hospitals generally score no better than San Ramon's, according to the California Hospitals and Reporting Taskforce, a nonprofit that produces hospital report cards published at Calhospitalcompare.org.

San Ramon ranks equal to John Muir's Walnut Creek campus in most major measures, including mortality rates in the intensive care units, overall patient satisfaction and maternity care. John Muir's Concord campus ranks below San Ramon on several measures, including mortality rate and patient experience, though John Muir was rated better in avoiding complications for patients on ventilators.

Then there is Sutter Health:

[Stanford University associate vice president for Benefits Les] Schlaegel says so many employees like to see doctors at the Palo Alto Medical Foundation, a doctors' organization affiliated with Sutter with a clinic near the Stanford campus, that the university feels obliged to keep offering insurance networks that include Sutter.

'Sutter basically has a stranglehold on Northern California,' says Schlaegel. 'They are strategically situated, both for hospitals and medical groups. They know purchasers need them. When you are strategically located, you can say 'this is our price and you can pay it.''

Secret Pricing
The ability of dominant hospitals to charge higher prices is facilitated by secrecy in which hospital pricing is cloaked

The hospitals haven't made it easy for consumers to comparison shop. State law requires hospitals to reveal their charges for specific services. But those charges don't reflect the lower negotiated rates insurers actually pay - rates hospitals usually insist be kept secret. The California Hospital Association has opposed legislation to ban such 'gag clauses'; the most recent of these bills died in the state Assembly in August.

Hospitals have also resisted a four-year campaign by the Pacific Business Group on Health, an employer coalition, and CalPERS to create a 'hospital value initiative' that would allow hospital comparison based on cost and quality of care.

Summary

In many cases, hospitals are able to keep raising prices beyond inflation because their sizes or reputations give them clout in negotiating rates with insurers, researchers say. Yet high prices don't always equate with superior care.

Quality measures for some of the Bay Area's most prestigious hospitals, including Stanford and John Muir, show that in some instances, less expensive competitors perform as well or better in their basic responsibilities, such as avoiding infections and high death rates for patients in intensive care.

'Some hospitals are able to charge higher prices than the market normally would bear, even without providing higher quality,' says Dr. R. Adams Dudley, a professor of medicine and health policy at the University of California, San Francisco. 'That means they're getting those higher prices without really offering more to patients or the rest of society.'

New York City


Meanwhile, a long feature story in New York magazine about the demise of St Vincent's hospital (see our post here) also discussed the market power of its competitors as one factor in its decline:

The city’s largest and most powerful hospitals, which are crucial to an insurer’s customers, exert their leverage to secure deals that are believed to pay well above the average margin; smaller hospitals, which are often located in low-income neighborhoods, have little choice but to accept the dismal rates dictated by insurers if they want to remain in the insurers’ plans. 'When the big players take their cut, there are only scraps left for everyone else,' says the CEO of an outer-borough hospital. “'United HealthCare couldn’t care less about having my hospital in their network. They tell me to take it or leave it.

Secret Prices

Like in California, market dominance is enabled by secret pricing:

the rates negotiated between hospitals and insurance providers are withheld from public scrutiny—even state health and insurance regulators are denied the information

Free Markets?

Secret prices determined by market power hardly sound like characteristics of a free market. Yet in New York, at least, they seem partially to be the result of the free market ideology of previous political leaders:

Then George Pataki took office in 1995, determined to allow hospitals to test their mettle in the free market by negotiating their own terms with insurers. It turned out to be an exercise in shock-therapy capitalism. Inexperienced at the bargaining table, hospitals engaged in intramural rivalry with each other, cutting unfavorable deals with insurers in order to hold on to patients in the short term. With their already thin margins pared down further by deregulation, many hospitals soon built up paralyzing debt loads. Even the largest and seemingly least vulnerable facilities decided that their best hope for survival was to get bigger. A flurry of mergers and buyouts ensued, and by the end of the nineties, the hospital system began to assume its current bewildering patchwork of partnerships and affiliations. Columbia Presbyterian and New York Hospital, both attached to elite medical schools, joined forces. NYU and Mount Sinai forged a deal (it later came undone). On the eastern edge of the city, North Shore hospitals merged with nearby Long Island Jewish, staking out an enormous swath of the hospital market on Long Island, Queens, and Staten Island. Beth Israel and St. Luke’s–Roosevelt, debt-ridden and left on the sidelines by the major academic hospitals, decided to try making a go of it together. It was unclear if bigger was actually better—for patients or the bottom line—but size seemed to offer hospitals a buffer against collapse.

By 2005, less than a decade into its dalliance with free enterprise, the city’s hospital system had taken on something of a post-Soviet tinge, with winners ruling the roost like oligarchs and losers reduced to a state of grim dependency. A pecking order emerged, with elite academic centers at the top, well-regarded independent hospitals like Lenox Hill in the middle, and community hospitals on the bottom.

Summary

We have previously written (for example, here and here) about how increasing market dominance by large, sometimes strategically located, and sometimes politically well-connected (e.g., see here) hospital systems run by conflicted leaders. This seems like another unintended consequence of the "free markets solve all problems" ideology, possibly fueled by conflicts of interest that has done so badly in our financial arena (see here). What some of these free market enthusiasts seem to forget, their forgetfulness perhaps fueled by payments received from the large corporations that have profited from this movement, are that true free markets are hard to maintain. This is particularly so in health care, in which knowledge is asymetric, outcomes are uncertain, and sick and anxious patients have trouble making cool, rational choices (as per Arrow, see this post.)

But if the free market enthusiasts really believe in free markets, why have they not been out campaigning to prevent the "unfree" characteristics, like secret pricing, of current health care markets?  Of course, ending secret pricing might compromise the ability of their financial sponsors to keep earning their millions

More Examples of US Hospital Market Consolidation: Connecticut and Florida

Two recent stories from two different parts of the US continue the theme of ever increasing concentration of power in our health care system.

Connecticut

The Hartford Business Journal reported on growing interest in mergers among small Connecticut hospitals.

Rising costs and reductions in government reimbursements related to health care reform could lead to consolidation among the state’s 29 acute care hospitals in the coming months and years, industry experts said.

Indeed signs of consolidation in Connecticut are already taking shape. Danbury and New Milford hospitals, for example, recently signed an affiliation agreement that will put both organizations under the control of a single corporate parent.

Meanwhile, the Central Connecticut Health Alliance, which is the parent company of the Hospital of Central Connecticut, has signed a memorandum of understanding to affiliate with Hartford Healthcare. If that deal gets federal regulatory approval, the two organizations would be integrated under the Hartford Healthcare umbrella.

Note that this story suggests the rationale has everything to do with financial issues, and little to do with patient care issues.

In some cases, deals could be fueled by the needs of cash-strapped, independent hospitals to find larger, more stable partners. In other cases, independent hospitals that have remained financially stable may look to form partnerships to gain greater access to capital markets.

'There are a lot of hospitals that are struggling financially and I think the changes that health care reform is going to bring with reimbursements could be the straw that breaks the camel’s back,' said Vincent Capece, the senior vice president and chief operating officer of Middletown-based Middlesex Hospital, which has nearly 300 beds. 'It will force hospitals to either go out of business, or find a partner.'

Mergers or partnerships allow smaller, independent hospitals to leverage the purchasing power of larger institutions — especially with insurance companies — and consolidate backroom or administrative services, among other benefits.

Note also that the recent US attempt at health care reform, later characterized as health insurance reform, is seen as driving, not preventing mergers.

Hospital officials say talks of mergers, or other types of partnerships, are likely to continue as the economy remains on shaky ground and health reform changes the landscape of how the industry does business.

Officials say reform will lead to reduced Medicare reimbursements from the federal government and require significant capital investments as hospitals prepare for larger patient loads and acquire new technology to provide more efficient care.

Florida

The Orlando Sentinel reported on increasing merger hospital merger activity in central Florida.

In health-care circles, the summer of 2010 may be remembered as the end of small, independent hospitals in Central Florida. Three community facilities here have set their course toward consolidation by joining — or announcing plans to join — large systems.

This month, Health Central, the last independent hospital in Orange County, voiced its intention to partner with a hospital chain. In July, the Wuesthoff hospital system in Brevard County was purchased by a for-profit corporation in Naples that owns 60 hospitals across the country. And on July 1, a partnership between Bert Fish Medical Center and Florida Hospital took effect, giving the system the option to buy the New Smyrna Beach facility.

The latter case could apparently lead to quite a substantial local concentration of power:

In Orlando, two major hospital chains dominate: Orlando Health, which owns all or part of eight hospitals, and Florida Hospital, which owns or operates 13 hospitals in Central Florida and 18 throughout the state.

Both are likely suitors for Health Central, which operates a 171-bed hospital, a nursing home and other health-care services in west Orange County.

Officials from Orlando Health did not respond to requests for interviews.

Florida Hospital system already is involved in a partnership with Bert Fish Medical Center that could lead to a purchase of the facility in 2015. As part of the agreement, Florida Hospital, which is owned by Winter Park-based Adventist Health System, would provide $24 million in capital improvements for Bert Fish in the next five years, pay off the hospital's debt and prop up an underfunded pension plan. In addition, residents in the hospital's taxing district were told their tax rates would go down.

The partnership cements Florida Hospital's dominance in Volusia and Flagler counties, where it already owns hospitals in DeLand, Orange City, Daytona Beach, Ormond Beach and Palm Coast. Its sole remaining competitor is Halifax Health, which owns hospitals in Daytona Beach and Port Orange.

This story contained some protestations from hospital leaders that it is all about the patients:

Florida Hospital officials say their goal is not to create health-care monopolies.

'We're a church-sponsored, church-related organization,' said Florida Hospital Vice President Richard Morrison. 'It's our mission to serve people — and if we can come to other communities and bring what we think is a distinctive approach to health care, then we'll do that.'

On the other hand,

'Hospitals today are like mom-and-pop grocery stores were 40 years ago,' said Dr. Kevin Schulman of Duke University's Fuqua School of Business. Before there was a Publix in every neighborhood, there were small grocery stores. Today, like the grocers, hospitals are joining forces or selling out to regional chains.

For the hospitals, there's strength in numbers, Schulman said. A large hospital system has more leverage when negotiating with insurance companies. Likewise, there's power in purchasing.

But these widespread hospital mergers 'have led to more market power for hospitals. Another word for that is 'monopoly,'' Schulman said.

Furthermore, just as history tells us, monopoly may be good for monopolists but not for everyone else.

A single small hospital doesn't have much clout to bargain with insurance companies. On the other hand, a hospital system that dominates a market is more likely to be able to charge higher rates to insurers — and their customers, say experts.

'There may be some efficiencies in being larger,' said Dr. Robert Berenson, a health-policy expert at the Urban Institute, a think tank in Washington. 'More to the point, however, it gives a hospital much more leverage in negotiating with health plans.'

And although there are many forces driving hospitals to join larger systems, Berenson says the results have been clear to health-care economists.

'There's some theory that [consolidation] improves quality,' he said, 'but the reality is, it drives up prices.'

While at least the folk wisdom among doctors is that the federal authorities will jump on any two doctors who informally discuss their prices, in the laissez faire, let the good times roll era of the 1980s through 2000s, there seemed to be little governmental concern about hospital (or health care in general) consolidation of power:

'Because many hospitals are not-for-profit entities, we seem to have given them a lot more latitude from an antitrust perspective, [Dr Kevin] Schulman said. 'Yet they act like the worst of the for-profit monopolies.'

Summary

As we just noted, advocates of laissez faire commercialized health care often trumpet the advantages of competitive markets as a rationale for deregulation. While there are theoretic, and possibly empiric reasons to think that competitive markets are the optimal way to distribute goods and services, we recently discussed aspects of health care that make it extremely hard for health care markets to be ideally competitive.

In the 1960s, it became recognized that physicians' professionalism, hospitals' devotion to their missions, and sometimes even (gasp) government regulation might partially compensate for distortions in the health care market. However, as supposed free market advocates became more powerful, they pushed for the commercialization of medicine and hospitals, reducing professionalism and mission support, and the hollowing out government regulation. (However, why did the people who attacked medical societies' codes of ethics as monopolistic have no interest in attacking market domination by insurers or hospital systems? Inquiring minds want to know.)

As we said last time, true health care reform would help physicians and other health care professionals uphold their traditional values, including, as the AMA once stated, "the practice of medicine should not be commercialized, nor treated as a commodity in trade." True health care reform would put health care "delivery" back in the hands of mission-focused, not-for-profit organizations, which put patients' health, safety and welfare first.

How Oligopolists Rationalize Their Market Domination: the Examples of Sutter Health and the Carilion Clinic

Advocates of laissez faire commercialized health care often trumpet the advantages of competitive markets as a rationale for deregulation.  While there are theoretic, and possibly empiric reasons to think that competitive markets are the optimal way to distribute goods and services, we recently discussed aspects of health care that make it extremely hard for health care markets to be ideally competitive. 

Meanwhile, two news articles gave some case-based evidence about how current health care markets are hardly competitive.  

Sutter Health

A Bloomberg article focused on Sutter Health in northern and central California. Sutter Health commands a substantial part of a very large market:

Sutter Health Co., the nonprofit that owns Sutter Davis, has market power that commands prices 40 to 70 percent higher than its rivals per typical procedure -- and pacts with insurers that keep those prices secret.

Sutter can charge these prices because it has acquired more than a third of the market in the San Francisco-to-Sacramento region through more than 20 hospital takeovers in the last 30 years, according to executives of Aetna Inc., Health Net Inc. and Blue Shield of California, who asked not to be named because their agreements with Sutter ban disclosure of prices.

Also,

Operating as a nonprofit, it has $8.8 billion in revenues, 24 hospitals, 17 outpatient surgery clinics and a 3,500-doctor network, making it the largest health-care provider in an 11- county region -- from San Francisco Bay to the Sierra Nevada mountains -- where 10 million people live.

Sutter has 35 percent of the revenue and 36 percent of beds that compete for patients in the region, according to a state hospital database, including 100 percent of beds the state tracks in Placer and Amador counties east of Sacramento.

Sutter care seems to cost a lot more than care from other doctors and hospitals:

After Mark Logsdon tore a ligament in his knee skiing at Lake Tahoe in March, he returned home to suburban Sacramento and had an MRI scan at Sutter Davis Hospital.

Sutter’s price for the knee scan was $1,271, payable by Logsdon and his insurer. Exactly the same MRI at one of the local imaging centers owned by Radiological Associates of Sacramento would have cost $696 -- 45 percent less.

A few other examples of Sutter's prices compared to others;

'Instead of leveraging its system to be more cost- effective, we’ve seen Sutter leveraging its system for monopoly pricing,' said Peter V. Lee, who in June became director of health-care delivery system reform for the U.S. Department of Health and Human Services. Lee was interviewed while he worked at the Pacific Business Group on Health, a coalition that includes Chevron Corp., Walt Disney Co., General Electric Co., and Wells Fargo & Co.

In San Francisco, Aetna pays Sutter’s California Pacific Medical Center in a range with a midpoint of $4,700 for an abdominal CT scan, compared to $3,200 at St. Francis Memorial Hospital, owned by Catholic Health Care West. For colonoscopies, Aetna’s midpoint price is $3,200 at Sutter’s flagship CPMC and $2,800 at St. Francis Memorial.

In Palo Alto, Aetna pays Sutter $349 per visit for new patients to see Manju Deshpande, a family doctor in Sutter’s Palo Alto Medical Foundation clinic. Three miles away, Paul Ford’s Stanford Medical Group receives $222. If the patient needs an immunization, Aetna pays Palo Alto Medical $85, and Stanford Medical, $16. Deshpande removes wax from the ear for $175. Ford scoops it out for $104.

Down the road in Silicon Valley, when obstetrician Sarah Azad, a solo practitioner, delivers a baby for a patient covered by Aetna, the insurer pays her $2,052. When Nicole Wilcox of Sutter’s Palo Alto Medical Foundation does the same job, Aetna pays Sutter $5,890.

The doctors practice blocks apart in Mountain View, California. Performance isn’t an issue -- Azad has Aetna’s top rating for quality of care and trained Wilcox during residency.

The Sutter CEO, of course, denies there is a problem:

Sutter operates in a competitive market, Chief Executive Officer Patrick Fry, 53, said in an interview. 'I don’t see Sutter Health as having market power, given the choices that employers can make,' Fry said. 'The market has a lot of room to make a lot of decisions.'

The people who most praise competitive markets often seem to be those who have done the most to reduce the competitiveness of these markets.  The CEO also trotted out another old saw, that his organization has grown not to charge more, but to be more efficient.

While Sutter may have higher 'unit' prices than its competitors, Fry said, it is not the most costly for patients over the long run because its integration of hospitals and doctor groups allows it to provide more efficient care, cutting down on the number of procedures.

'Our mission isn’t to maximize profits,' Fry added. 'Our mission, to the extent we can, is to optimize services.' Insurers and patients have many alternatives to Sutter, according to Fry.

That is a tune would-be monopolists have been singing at least since the days of the "robber barons" and their monopolies such as Standard Oil.

Of course, he is likely to defend a system that makes so much money and pays him and his buddies in top management so much, (and, contrary to his statement above, seems to have maximized profits):

Sutter, with 48,000 employees, was among the most profitable hospital groups in the U.S. in 2009, with income of $697 million, up more than three-fold from 2008 due to large investment gains, on revenue that grew 6 percent to $8.8 billion.

Its 5.2 percent operating margin -- or operating income as a percentage of revenue -- was 73 percent higher than the median for all nonprofit hospital systems in 2009, according to Standard & Poor’s.

As of Dec. 31, Sutter had a $2.63 billion investment portfolio. Sutter paid Fry $2.8 million in 2008, according to its latest Internal Revenue Service filing. His top 14 lieutenants made between $830,000 and $1.8 million each.

The article on Sutter emphasized how the strategic use of secrecy has helped Sutter maintain its remunerative ways:

Sutter doesn’t allow its prices to be disclosed on insurers’ websites because it believes the information is often misleading and doesn’t reflect the variables of each patient’s case, [Sutter spokesman William] Gleeson said.

Of course, keeping prices secret just makes the market even less like an ideally competitive one:

As Sutter’s confidentiality terms show, the actual prices that hospitals receive are often kept secret by insurers. Patients in need of hospital care, especially in emergencies, often can’t travel very far, restricting competition. And if they have health insurance, they have little incentive to price shop.

Finally, the article reminds us that the latest fad from health policy and health management circles (which seem increasingly to overlap), "accountable care organizations," may just be a pretext for even more market consolidation:

The federal Patient Protection and Affordable Care Act is looking for $500 billion in savings over the next decade to help pay for extending coverage to 32 million uninsured Americans. Yet it doesn’t address the problem of market concentration -- and may make it worse, said Robert Berenson, a physician and policy analyst at the Urban Institute in Washington D.C.

The 'unchecked' clout of hospital and physician groups in California is a 'cautionary tale for national health reform,' Berenson said in a February article in the journal Health Affairs. He warned that incentives in the new legislation to improve treatment by promoting doctor-hospital alliances -- called 'accountable care organizations' -- could backfire by strengthening providers’ bargaining leverage.

Carilion Clinic
A Washington Post article discussed the example of Carilion Clinic in Virginia, whose increasing market power we had blogged about in 2008:

Railroads put this city on the map, but the king of the domain is now health care -- or rather, the Carilion Clinic.

Carilion owns the two hospitals in town and six others in the region, employs 550 doctors and has set off a bitter local debate: Is its dominance a new model for health care or a blatant attempt to corner the market?

The Carilion story emphasized again how the "accountable care organization" meme is being used to justify market consolidation, allowing health care oligopolies to appear politically correct:

Carilion says it represents an ideal envisioned by the nation's new health-care law: a network that increases efficiency by bringing more doctors and hospitals onto one team, integrating care from the doctor's office to the operating room. The name for such networks, which the new law strongly promotes with pilot programs, is accountable care organizations, or ACOs -- providers joining together to be 'accountable' for the total care of patients, with incentives from insurers to keep people healthy and costs down.

Note that this political correctness is also used to justify further consolidation of power by limiting outside referrals:

Independent doctors say Carilion is urging its employees to refer patients only to providers within the Carilion network, cloaking its expansion in the lingo of health-care reform.

Of course, the Carilion CEO also denies anything but the most altruistic intent, but he too is making a lot of money from the current system:

[Edward] Murphy, Carilion's chief executive who earned $2.3 million in 2008, acknowledges that providers holding excessive leverage over insurers is cause for concern but argues that ACOs can be a corrective.

Summary

We noted earlier this week that multiple kinds of uncertainty (e.g., about diagnosis, prognosis, and the effects of treatment), and information asymmetry make it theoretically difficult for the health care market to be truly competitive. Meanwhile, there is increasing evidence that the market is actually uncompetitive. Although there are many hospitals and health insurers across the US, in many areas there are very few insurers and very few hospitals or hospital systems from which to choose. We have previously blogged about how market dominant hospital systems seem to be able to charge more than any others.

In the 1960s, it became recognized that physicians' professionalism, hospitals' devotion to their missions, and sometimes even (gasp) government regulation might partially compensate for distortions in the health care market. However, as supposed free market advocates became more powerful, they pushed for the commercialization of medicine and hospitals, reducing professionalism and mission support, and the hollowing out government regulation. (However, why did the people who attacked medical societies' codes of ethics as monopolistic have no interest in attacking market domination by insurers or hospital systems?  Inquiring minds want to know.)

As we said last time, true health care reform would help physicians and other health care professionals uphold their traditional values, including, as the AMA once stated, "the practice of medicine should not be commercialized, nor treated as a commodity in trade." True health care reform would put health care "delivery" back in the hands of mission-focused, not-for-profit organizations, which put patients' health, safety and welfare first.

Meanwhile, these latest stories about market dominating hospital systems suggest some additional lessons.

Secrecy is the would-be monopolist's best friend. However, it is hard to think of very many kinds of information that hospitals really ought to be able to keep as proprietary secrets. As usual, sunshine is the best disinfectant.

There seems to be a strange and increasing alliance between politically- correct academic theorists and proponents of raw economic power. The theorists' notion of "accountable care organizations" seems to have become a great foil for would-be monopolists, yet the theorists have done nothing to show how their creation would really bring "power to the people." Meanwhile, maybe "ACO" should stand for "aggressive care oligopoly." Meanwhile, be extremely skeptical of the latest health care fad, especially when it is supported both by academics and CEOs.

Slouching, or "Moving Towards ... Oligopoly"

A report by Bloomberg on a prediction that the US attempt at health care reform will lead to more concentration of power among health insurance companies.

U.S. health insurers are 'moving towards an oligopoly,' a process that this year’s health-care overhaul will accelerate, the investor-relations chief at WellPoint Inc. said today.

New regulations on administrative spending and premium increases will push some independent insurers out of business or into deals with bigger rivals, said Michael Kleinman, vice president for investor relations, at a Wells Fargo & Co. conference in Boston.

In addition,

The insurance market is becoming an oligopoly, a market where supply and pricing are dominated by a few companies, 'and health-care reform is going to move us in that direction more quickly,' Kleinman said. 'There are going to be smaller insurers that are not going to be able to survive in this marketplace.'

Wellpoint is not likely to suffer from a move to fewer, larger insurance companies:

Led by WellPoint, 12 health plans cover two-thirds of the enrollment in the U.S. commercial-insurance market, said Ana Gupte, a Sanford C. Bernstein & Co. analyst....

So, it is not that Mr Kleinman has any regrets about this. Far from it:

Indianapolis-based WellPoint, the country’s biggest health plan with 33.8 million members, has the scale to prosper from the overhaul, which is expected to add another 34 million to the ranks of the insured, he said.

Mr Kleinman might argue that WellPoint's increasing size and prospects for market domination are good for society as well as the company, and its top executives.  We have heard endless arguments in the last 30 years that larger hospital systems and larger insurance companies lead to more efficiency and lower costs.  However, the evidence is in the other direction.  There is plenty of reason to worry that increasingly dominant companies will extract higher prices, and the money they make will benefit their top leaders first, maybe their stockholders second, and patients and ordinary employees a very distant third, if at all.  So look for WellPoint CEO Angela Braly to make even more than $13 million a year in the future.

So it would have  been more reassuring if the response from the US executive branch included some opposition to the notion of a more concentrated market.  Instead,

Asked to comment today, Nicholas Papas, a spokesman for President Barack Obama, referred in an e-mail to the president’s remarks on June 22 touting the health-care overhaul.

The law 'will put an end to some of the worst practices in the insurance industry,' such as canceling policies when patients get sick or imposing lifetime limits on coverage, Obama, a Democrat, said at a White House ceremony.

The changes 'will make America’s health-care system more consumer-driven and more cost-effective and give Americans the peace of mind that their insurance will be there when they need it,' Obama said. 'Insurance companies should see this reform as an opportunity to improve care and increase competition.'

And rather than worrying about the government's response,

Angela Braly, WellPoint’s chairman and chief executive officer, was among a group of insurance chiefs who met Obama June 22. While Democrats have attacked the company for its premium increases, the relationship is improving, Kleinman said.

'The Obama administration understands that we need to work in partnership, that in order to make health-care reform work, the carriers need to be able to charge appropriate rates and make an appropriate margin,' he said. 'Hopefully, a lot of that bad rhetoric is behind us.'

If the increasing concentration of power in health insurance does not meet a more effective challenge, we will need a lot more than rhetoric, good or bad, to save health care.

Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity.

The Second Coming (Slouching Towards Bethlehem), by W B Yeats