Kamala Harris’ Healthcare Fight in California Predicts Hospitals Will Have to Struggle If She Wins

When Kamala Harris was California’s top prosecutor, she worried that mergers between hospitals, physician groups and health insurers could stifle competition and lead to higher prices for patients. If she wins the presidential election in November, she will have a wide range of options to blunt monopolistic behavior across the country.

A Democratic vice president could influence the Federal Trade Commission and direct the Justice and Health and Human Services departments to prioritize antitrust enforcement and direct resources accordingly. The Biden administration has already taken an aggressive stance on mergers and acquisitions. In his first year in office, President Joe Biden issued an executive order to step up antitrust enforcement across a range of industries, including health care.

Under the Biden administration, the FTC and Justice Department have blocked more mergers than in decades, often targeting deals in the health care sector.

“Harris could set the tone for her to continue to focus on competition and health care pricing,” said Katie Gudiksen, a senior health policy researcher at the University of California, San Francisco, School of Law.

Harris’ campaign did not respond to a request for comment.

For decades, the health industry has been undergoing consolidation despite government efforts to keep competition in check. As health systems expand, adding hospitals and practices to their portfolios, they often gain enough of a share of the region’s health care resources to command higher prices from insurers. That results in higher premiums and other health care costs for consumers and employers, according to numerous studies.

Health insurers have also consolidated in recent decades, with the result that most markets are controlled by just a handful of players.

Health care analysts say Harris could slow the pace of consolidation by blocking future mergers that could lead to higher prices and lower quality care. But many agree that the consolidation that has already occurred is an inevitable feature of the U.S. health care landscape.

“It’s a hard pattern to break,” said Bob Town, an economics professor at the University of Texas.

The U.S. saw nearly 1,600 hospital mergers between 1998 and 2017, according to a KFF study, and 428 hospital-health system mergers between 2018 and 2023. The percentage of community hospitals that are part of a larger health system rose from 53 in 2005 to 68 in 2022. And in another sign of market concentration, more than three-quarters of the nation’s physicians were employed by hospitals or corporations in January, according to a report by Avalere Health.

Despite former President Donald Trump’s hostility to regulation as a candidate, his administration has been active in antitrust efforts — even allowing one of the largest health care mergers in U.S. history, between the pharmacy chain CVS Health and the insurer Aetna. Overall, Trump’s Justice Department has been more aggressive on mergers than previous Republican administrations.

Harris spearheaded health care investigations and enforcement efforts while serving as California attorney general from 2011 to 2017.

“She stood up to anti-competitive pricing practices,” said Rob Bonta, California’s current attorney general, who is a Democrat.

One of Harris’s most significant decisions was a 2012 investigation into whether consolidation of hospitals and physician practices had given health systems the power to charge higher prices. That investigation came to fruition six years later, after Harris’ successor, Xavier Becerra, filed a landmark lawsuit against Sutter Health, the giant hospital operator in Northern California, for anticompetitive conduct. Sutter settled with the state for $575 million.

In 2014, Harris was among 16 state attorneys general to join the FTC in a lawsuit seeking to dismantle a merger between one of Idaho’s largest hospital networks and its largest physician group. In 2016, Harris joined the U.S. Department of Justice and 11 other states in a successful lawsuit seeking to block a proposed $48.3 billion merger between the nation’s two largest health insurers, Cigna and Anthem.

Attempts to give the state attorney general the authority to block or impose conditions on a wide range of health care mergers have been met with fierce and successful opposition from California’s hospital sector. Most recently, the hospital sector persuaded state lawmakers to exempt for-profit hospitals from pending legislation that would subject private equity-backed health care deals to attorney general review.

A spokesman for the California Hospital Association declined to comment.

As California’s attorney general, Harris’ job would be made easier by the state’s deep blue political hue. If elected president, she could face a less hospitable political environment, especially if Republicans control one or both houses of Congress. She could also face opposition from powerful health care lobbyists.

Though it often gets a bad rap, consolidation in healthcare also has its benefits. Many doctors choose to join larger organizations because it frees them from the administrative headaches and financial burdens of running their own practices. And being absorbed into a large health system can be a lifeline for hospitals struggling with finances.

But a major reason health systems are expanding through acquisitions is to accumulate market power so they can match consolidation among insurers and negotiate higher payments with them. It’s an understandable response to the financial pressures hospitals are under, said James Robinson, a professor of health economics at the University of California-Berkeley.

Robinson noted that hospitals are required to treat anyone who comes to the emergency room, including the uninsured. Many hospitals have a large number of patients on Medicaid, which pays poorly. And in California, they must meet a series of regulatory requirements, including seismic retrofitting and minimum nurse staffing requirements, which are expensive. “How are they going to pay for that?” Robinson said.

At the federal level, any effort to blunt anticompetitive mergers would depend in part on how aggressively the FTC prosecutes the most egregious cases. FTC Chairwoman Lina Khan has pushed the FTC to become more proactive in that regard.

Last year, the FTC and DOJ jointly issued new merger guidance that suggested the federal government would scrutinize deals more closely and take a broader look at those that violate antitrust laws. In September, the FTC filed a lawsuit against an anesthesia group and its private equity investor, alleging they used anticompetitive practices in Texas to raise prices.

In January, the agency filed a lawsuit seeking to halt its $320 million takeover of a North Carolina hospital.

Still, many deals don’t catch the FTC’s attention because they’re worth less than the $119.5 million reporting threshold. And even if it were to learn of more deals, “it has very few resources and has to be very selective about which mergers it challenges,” said Paul Ginsburg, a professor of the practice of health policy at the Sol Price School of Public Policy at the University of Southern California.

Khan’s term ends in September 2024, and Harris, if elected, could seek to reappoint her, though that possibility could hinge on which party controls the Senate.

Harris could also promote regulations that discourage monopolistic behavior, such as “all-or-nothing” contracts, in which large health systems refuse to do business with insurance companies unless they agree to include all of their facilities in their networks, whether needed or not. This behavior was one of the central allegations in the Sutter case.

It could also demand that the Department of Health and Human Services, which administers the Medicare and Medicaid programs, implement policies that encourage competition.

Bonta, the current attorney general of California, said that while there are bad mergers, there are also good ones. “We always approve them,” he said. “And we approve them with conditions that address cost, access and quality.”

She expects that if Harris wins the election, she will have similar concerns about her presidency.

This article was written by KFF Health Newswho publishes California Healthlineeditorially independent service California Health Care Foundation.