The Hospital Monopoly Extortion Playbook

If you want to understand exactly how the American healthcare system actively bleeds employers and patients dry, head over to the fabulous Stacey Richter and her excellent interview with Brennan Bilberry in episode 513 of the Relentless Health Value podcast. Bilberry is a founding partner at Fairmark Partners. His firm drags dominant hospital chains into court for antitrust violations. The conversation is a masterclass in exposing the sheer audacity of consolidated hospital systems and the financial waste they generate.

What becomes immediately apparent is that behavior completely normalized in healthcare would trigger federal indictments in any other sector of the economy. Hospital chains consolidate under the guise of improving patient care. Then they immediately use their newly acquired market power to extort higher commercial rates from plan sponsors. Sometimes they even put these intentions right in their press releases. Their brazenness underscores just how bulletproof monopolistic chains believe themselves to be.

Bilberry outlines the exact contractual mechanisms hospital systems use to lock up local geographies and kill competition. Delivering better medicine? Ha, hardly. This is about maximizing revenue and extracting every possible dollar from the community to fund administrative bloat.

Here are four specific contract terms hospitals demand.

1. All or Nothing. The hospital tells the employer or insurer that if they want access to the one necessary facility in the region they must include every single facility in the health system network. And they must include them at astronomically inflated prices. You cannot buy actual healthcare. You have to buy their entire system, and inevitably, there will be one, two or more hospitals in that system that charge horrifically inflated rates.

2. Antisteering and Antitiering Clauses. These are provisions that completely block plan sponsors from guiding their members to higher quality and lower cost care. The hospital system legally forbids you from telling your own employees where to get a better deal. They ensure you cannot design a benefit plan that avoids their price gouging.

3. Price Gag Clauses. Despite federal transparency rules, hospital systems force contracts that limit the disclosure of negotiated rates. They keep the math hidden because the math is grotesque. Where there’s mystery, there’s margin, as Richter likes to reiterate.

4. The Systematic Suffocation of Independent Practices. Dominant systems pressure local independent physicians to either sell their practices or align their pricing with the inflated rates of the hospital chain. They systematically kill off the cheaper competition to maintain their local monopoly. How do they do this, you might be wondering?

   1. They weaponize admitting privileges. A local independent doctor still needs to be able to admit their patients to the local hospital when serious interventions are required. The massive health systems use this as a bludgeon. If you do not play ball with the dominant hospital chain, they can threaten your admitting privileges.

   2. They manipulate the referral networks. The hospital systems control the flow of patients. They ensure that their employed primary care doctors only refer patients to specialists within their own bloated system. They build a walled garden, completely starving independent specialists of the new patients they need to keep their doors open.

   3. They lock physicians down with aggressive noncompete agreements. When they eventually do swallow up a local practice, they make sure the doctors sign ironclad noncompetes. This means that if a doctor gets fed up with the bureaucratic nightmare of the hospital system and wants to break away to start a direct primary care clinic, they cannot do it without uprooting their entire family and moving out of the region.

You might wonder why the Federal Trade Commission (FTC) doesn’t just shut this down. The problem is jurisdiction. The FTC has incredibly limited power over organizations registered as nonprofits. Many of these massive hospital conglomerates operate as nonprofits. They rake in tax-free revenue while behaving like the most ruthless corporate monopolies on planet earth. They use their tax-exempt status to crush the free market.

This regulatory void leaves private litigation as one of the only viable weapons. Firms like Fairmark Partners are stepping into the gap. They are doing the grueling work of holding these hospital executives accountable in court.

If you are a fiduciary or an employer funding a health plan, you need to understand this playbook. Particularly if you are using a national insurer’s network, you are paying for the waste and the fraud. The eight-hundred-pound hospital gorillas are not going to stop themselves. It is up to employers to stop accepting these terms and to demand real reform in how healthcare is purchased.

And yes, because it’s me, you know you are going to hear it: there is no better way to do this than with an open-access, partially self-funded health plan making use of cash payment options, direct primary care, and backed by reference-based pricing.

You can listen to the full episode here or read the transcript right here.