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Montana hospital merger could bring more services, higher costs

 Billings Clinic in Billings
Billings Clinic is planning to merge with Kalispell-based Logan Health.

Two of Montana’s largest hospital systems recently announced they intend to merge.

Both Kalispell-based Logan Health and Billings Clinic say the merger will save money by keeping more patients in the state. But some experts worry the deal could increase health care costs for employers and workers.

Montana Public Radio’s Aaron Bolton talked about the proposed deal with Austin Amestoy.

Austin Amestoy: Aaron, what are Logan Health and Billings Clinic saying about why this merger is a good idea?

Aaron Bolton: The CEOs of both hospital systems said this deal will provide more options for specialty and emergency care in the state.

They say if Billings Clinic offers some kind of specialty care that Logan doesn’t, or vice versa, patients can get care all within one hospital system rather than traveling out of state. Dr. Craig Lambrecht is the CEO of Logan Health.

“At a high level, offering more services with high quality and access and keeping people in state is going to result in lower costs to patients,” Lambrecht said.

Billings Clinic CEO Dr. Clint Seger also mentioned that his hospital is expected to gain level one trauma status, meaning Billings Clinic would provide the highest level of emergency care. Currently, level one trauma patients are flown to Seattle, Salt Lake City or Denver. He says having one hospital system across the state with its own emergency flight and ambulance services to transport trauma patients to Billings will also keep health care costs down.

Logan Health and Billings Clinic are already among the largest health care providers in the state. Are there concerns about this kind of consolidation?

Yea, health economists and other experts I talked to say hospital mergers in general can be concerning because they reduce competition and that means hospital systems have more leverage to ask insurance companies to pay more money for care. Those costs can filter down to employers and eventually workers.

Here’s Montana health economist Bryce Ward.

“If you asked an economist about hospital mergers, the thing that is most clear in the literature is that you increase prices, but I don’t know if that’s obviously the case here because again, you’re not talking about increasing market concentration in a well-defined market,” Ward said.

Right, Logan Health and Billings Clinic are headquartered on opposite sides of the state. Why is that important to whether or not a merger leads to higher health care costs?

Say the hospitals were based in the same city and they merged, they have a lot of leverage to tell insurance companies they want more money because they are the only health care option for that market. Ward says even if this deal goes through, insurance companies still have the same options for hospital systems in both Kalispell and Billings as they did before, which may make it difficult to demand higher prices.

However, University of Pennsylvania professor of health care management Atul Gupta says other long-distance mergers paint a different picture.

“Even in those types of mergers, there have been price increases following the mergers,” Gupta said.

Gupta says how this plays out in Montana will depend a lot on employers. If employers have workers in both Billings and Kalispell they may look for an insurer who has in-network providers in both areas.

Okay, break that one down for me.

The bigger the pool of people looking to Billings Clinic and Logan for services, the more leverage they have with insurance companies to set prices. The new Logan-Billings Clinic system would also be the only level-one trauma provider in the state. That may also give the hospitals leverage if they ask for higher reimbursement rates from insurance companies.

“It truly depends on how well the insurers in Montana can negotiate with these systems, what leverage they have, what are their outside options,” Gupta said.

So, if this deal does lead to higher health care costs, how much of an increase are we talking about, and how will that impact your average worker in the state?

Gupta says according to studies, costs on average jump 5-10% following a long-distance merger like this one, where the merging hospitals come from different markets. But that can vary widely. He says those costs are generally passed on to employers through higher premiums and it’s up to them whether to ask workers to pay more for their coverage.

Obviously, this deal hasn’t gone through yet. What kind of timeline are we talking about and does anyone need to sign off on this before it can happen?

Both the Federal Trade Commission and the Montana Attorney General’s office will need to sign off on this deal before it can be finalized. The hospitals say they expect to start working through that regulatory process this spring and hope to have it finalized sometime this upcoming summer.

Both CEOs say they’re confident regulators will approve the deal because the deal isn’t concentrating control or creating a monopoly in a single health care market. They argue the deal will provide more health care options in the state, leading to lower costs for patients.

Copyright 2023 Montana Public Radio. To see more, visit Montana Public Radio.

Aaron is Montana Public Radio's Flathead reporter.