A New Challenge for Antitrust

Posted by Harvard Magazin

By Marina N. Bolotnikova

A New Challenge for Antitrust

In the last few years, a new type of financial consolidation has caught the attention of antitrust regulators. Institutional investors—big companies like Fidelity and BlackRock—today own 70 percent of publicly traded stocks, according to some estimates, which means that one big investor could own significant shares of the companies that nominally compete within the same industry. Two 2016 studies found that this relationship may have had a causal effect that produced higher prices for consumers in the airline and banking industries. Now a new analysis published in Health Affairs finds that this type of informal consolidation among investor-owners has nearly doubled in at least one sector of the healthcare industry during the last decade. Between 2005 and 2015, the percentage of acute-care hospitals that share significant ownership with post-acute facilities and hospices grew from 24.6 to 48.9 percent.

Earlier studies of consolidation in healthcare, says lead author Annabelle Fowler, a Ph.D. candidate in health policy at Harvard Medical School (HMS), have focused on formal mergers—what people typically imagine when they think of companies exercising monopoly power. “We wanted to peel away that layer and see who the underlying investors are, and [ask if] there are any ties across these sectors that we might not be able to immediately see, but that might have implications for the care people receive.” The team focused on common ownership of acute and post-acute facilities, Fowler explains, because post-acute care is the source of a lot of variation in Medicare spending; financial consolidation, the researchers speculated, might be a potential explanation.

The group (including co-authors David Grabowski and Haiden Huskamp, professors of health care policy at HMS, and Robert Gambrel and David Stevenson of Vanderbilt) pulled their data from the Provider Enrollment, Chain, and Ownership System (PECOS): a database of every medical provider in Medicare, with granular information about every investor owning a 5 percent or greater share in each provider (though it doesn’t show how large a share the investors hold—only that it’s at least 5 percent). “What’s really novel about this paper is the use of this dataset,” Fowler notes.

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