The proposed merger between two of Missouri’s largest health care systems could result in higher prices for patients, according to researchers and health economists.
St. Louis-based BJC Healthcare and Kansas City-based St. Luke’s Health System announced the merger earlier this year but plan to maintain their own headquarters, location and branding. The Federal Trade Commission will need to approve the $10 billion merger for it to go through.
Officials from the two health systems said in statements they expected the merger to “enhance the affordability of patient care.” But health analysts who study health care mergers said such deals have a record of raising prices for patients.
“[In] cross-market mergers within the same state like this, the empirical research shows that, on average, they lead to higher prices,” said Chris Garmon, a health administration professor at University of Missouri-Kansas City who studies health company mergers. “And on balance — although the evidence is mixed — quality, if anything, seems to go down after a merger of competing hospitals. But it could improve with this particular merger.”
The proposed integrated health system is an example of a merger across markets between systems that don’t compete for patients. In the past, Garmon said, hospitals would frequently consolidate or buy out hospitals within their own region. In the past decade, though, they’ve been merging across geographic regions.
There’s not as much research about the results of these types of mergers as there is for mergers within regions, he said. Limited evidence shows that deals among systems within the same state, like the proposed BJC-St. Luke’s merger, usually results in higher prices.
Analysts say that’s because when hospital systems have a larger market share, they can negotiate rates with health insurance companies.
“Hospitals know that they can charge more,” said Tim Greaney, a law professor at the UC Law San Francisco who has been following the developments of the two Missouri systems. “And that's the story of leverage.”
If an insurer has to pay higher prices, it will pass those costs on to patients in the form of higher premiums and copays for procedures, he said.
“The idea is that these higher prices have to be paid, because the insurer has to pay the piper, essentially,” said Greaney, who also has served as assistant chief in charge of antitrust matters in health care for the Antitrust Division of the U.S. Department of Justice.
Officials for both hospital systems have said the merger would result in better health outcomes for patients, in part because increased revenue and cooperation would result in more innovative treatments and technology.
Greaney is skeptical of those claims.
“It's difficult to imagine the quantity of increase would be so sufficient that it would offset a major increase in price,” he said.
A huge academic health system could result in more government grants for research and treatment, Garmon said. It’s also possible hospital officials, with the COVID-19 pandemic still fresh in their minds, are thinking about ways to scale up during an emergency to be able to handle more patients within their own systems, he said.
BJC officials declined to discuss the merger in detail, but cited a report from the American Hospital Associationto the U.S. Senate Finance Committee that noted some studies have shown mergers in certain cases have resulted in lower readmission and mortality rates.
The June 2023 report concluded that hospitals have faced unprecedented financial struggles since the pandemic and mergers are a way for systems to save money and negotiate with insurers, which use their market power to raise costs.
“In nearly half of all markets, a single health insurer controls at least 50% of the commercial market. Health insurers can use this market power to implement policies that compromise patient safety and raise cost,” the report's authors wrote.
BJC CEO Richard Liekweg, who will serve as the consolidated system’s top official if the deal goes through, told Becker’s Hospital Review that the larger scale will help the two hospitals innovate and share best practices with each other.
Representatives from St. Luke's did not respond to a request for an interview.
The two systems have for more than a decade been members of the BJC Collaborative, a group of the region’s hospitals that share expertise. The collaborative’s group purchasing of equipment has saved members hundreds of millions of dollars, according to BJC.
The Federal Trade Commission is expected to weigh in on the decision later this year. The agency could rule that the merger violates antitrust laws designed to prevent a loss of competition. But it would be a big deal for the FTC to turn down a cross-market merger, the likes of which has never been challenged in court, Garmon said.
“Is this going to lead to increased prices, reduced quality, reduced access to care?” he said. “That's the big question that the FTC will be investigating.”
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