Officials Should Oppose Health Care Merger

Could someone please explain how the pending merger of the Advocate Aurora Health (AAH) of Chicago and Milwaukee and Atrium Health of Charlotte, North Carolina helps patients and employers in Wisconsin?

That fundamental question needs deep examination by federal and state regulators and legislators. These are non-profit health systems that enjoy state and local tax exemptions because of purported community benefits.

One of the scariest economic threats facing the country, the state, companies and households is the out-of-control annual rise in health care costs, and the mergers have proven only to increase costs. An analysis by Kaiser Family Foundation in 2001 showed that prices rise 20% after a hospital corporation conglomeration.

As far as I can figure, the winners from the mergers are not the general public.

The guys in the C-Suite end up with lucrative pay increases and exit packages if they don’t go forward with the new organization after the merger. Jim Skogsbergh, the CEO of AAH, made total compensation of $11.7 million in 2017. Eugene Woods, Atrium CEO, made $9.8 million last year. Their pay levels will rise sharply after the merger, if the merger is completed. Skogsbergh will ride off to a golden sunset 18 months after the deal closes. The deal lawyers and investment bankers also make out like bandits. None of the deal hotshots give much thought to the consumers or employers who, in the end, pay all the bills for the nation’s medical costs.

The average health costs per employee have been rising for the last two decades at about 8% per year. Those horrendous increases have accumulated to a cost of more than $22,000 per family per year. Good grief! That trend happened before general inflation kicked into high gear several months ago.

The Medical Industrial Complex of providers and insurers has not laid a glove on the trend.

All that time, hospital consolidations have been the order of the day. Aurora Health just merged with Advocate in 2018. AAH had a failed merger with Beaumont Health, the largest health system in Michigan, in 2020, and now we have another one?

The dealmakers always come up with stories about synergies, the benefits of integration, the greater range of services, greater community service, job creation. Blah, blah, blah. They never promise to bring down prices, despite the inevitable staff reductions and alleged synergies.

The merger spin-meisters said the only necessary governmental approval is with the Federal Trade Commission, which has 30 days to act.

But that’s not quite right.

AAH, for example, has ownership “control” of Quartz, the biggest health maintenance organization (HMO) in Wisconsin that it achieved through two low-ball purchases from UW Health.

A further change in control, which this merger would bring, requires approval from the Wisconsin Insurance Commissioner. That would be a useful forum for assessing the impact on Wisconsin consumers. Consumers and Wisconsin employers, who, in the end, pay all medical bills.

Wisconsin Attorney General Josh Kaul also has the power to review the acquisition of Wisconsin hospitals by out-of-state firms to assess the community benefits.

Last year, President Biden expressed interest in oversight of the economic damage caused by rampant health consolidations.

Key legislators could have a voice and oversight. Just call a hearing and get all the wins and losses on the table.

Doctors, nurses, and staff members also have a powerful voice. So can donors. They all helped to kill an AAH merger with Beaumont Health.

Three Michigan lawmakers also threw wrenches in the works on behalf of concerned staff members.

Even Gov. Tony Evers may want to weigh in, because Wisconsin will lose half of a corporate headquarters to Charlotte. That’s never a good outcome despite AAH leader Skogsbergh’s blather to the contrary.

This is far from a done deal if Wisconsin stakeholders press for a deeper look.

Final thought: Both AAH and Atrium, among the largest health organizations in the country, have exhausted the economies of scale from their size. How much synergy can there be when the two systems are 850 miles apart?

John Torinus is the chairman of Serigraph Inc. and a former Milwaukee Sentinel business editor who blogs regularly at johntorinus.com.