Study raises red flags about proposed WVU/Independence merger
A study released this month by the Health Care Affordability Lab at Yale University is warning a proposed merger between Independence Health System and West Virginia University Health System could lead to a decrease in competition and an increase in health care costs if approved as planned.
The March 9 study closely examined six proposed health care mergers across the country and their potential impacts on competition in their area. Of those, the study determined the Independence/WVU Medicine merger caused the most severe potential impact on market concentration.
The Health Care Affordability Lab is a new initiative of Yale University aimed at guiding policymakers on making decisions toward curbing the costs of health care, with hospital consolidation one of its key focuses.
“We chose to look at this set of proposed mergers because they’ve received attention in news media coverage,” Mathilda Hill, of the Tobin Center for Economic Policy at Yale, said.
The study measures competition in a health care market based on the Herfindahl-Hirschman index, a metric which is often used in antitrust legislation.
“In layman’s terms, the Herfindahl-Hirschman Index tells us how concentrated a market is,” Hill said. “Two things can make a market’s HHI increase: the total number of firms competing in the market goes down or the largest firms within the market gain a greater market share.”
The study defines a “market” as an area within a 30-minute drive of a given hospital. Because there are no other hospitals within 30 minutes of Butler Memorial Hospital, its individual HHI score did not change, as the merger would not lead to the creation of any new hospitals or the demolition of any current ones.
The study also indicated the same is true for another Butler County based hospital, UPMC Passavant in Cranberry Township, which is uninvolved in the merger, but was noted as unaffected as a result of the merger.
However, according to an interactive forecast tool which accompanies the lab’s website, the HHI values of two other hospitals — Frick Hospital in Mount Pleasant and WVU-owned Uniontown Hospital — would increase, indicating their market has become less competitive with fewer surrounding players as a result of the merger.
The study noted that neither of the markets involved in the merger are particularly competitive as is. WVU Medicine owns eight hospitals in isolated markets with an HHI value of 10,000, which the study called a monopoly. Those existing values would not change in the event of a merger.
Latrobe Hospital, owned by Independence Health, has a value of 9,145, while Butler Memorial Hospital comes in at 5,798, both of which are considered “higher” concentration.
The Yale study indicates the community that would be most affected by the merger would be Connellsville in Fayette County, which is served by a hospital that isn’t part of either system. Penn Highlands Connellsville is part of the Penn Highlands Healthcare system, which consists of eight hospitals.
In the event of a merger, Connellsville’s HHI value would jump by 2,872 points to 7,667.
“In the case of the hospital in Connellsville … at least one of the hospitals acquired is within 30 minutes of it,” Hill said. “Independence Health and WVU Health each control significant shares of the market around the hospital in Connellsville. If they were to merge, WVU Health would control an even greater share of the market.”
Another of the six mergers profiled by Yale in its study, the planned acquisition of Ohio-based Trinity Health by UPMC, was deemed to have “no impact.”
Representatives from Independence Health System declined to comment on the results of the Yale study.
