Minnesota can resist healthcare monopolization and the higher prices that come with it

Northern Californians pay 70% more for inpatient care than Southern Californians, according to a 2018 study by the University of California, Berkeley School of Health.

A key reason: The market power of companies like Sutter Health — the massive health conglomerate that has come to dominate Northern California through a steady diet of mergers and acquisitions. 

During a 2020 CBS interview regarding an antitrust lawsuit he had filed against Sutter, then-California Attorney General Xavier Becerra said, “Sutter got big enough that it could use its market power to dominate, to dictate.”

That health system now wants to come to Minnesota — aiming to acquire Minnesota-based Allina Health system — and continue what economist Glenn Melnick called a “model of reducing competition to raise prices.” 

Sutter is not alone. Sanford Health in South Dakota — fresh off a failed attempt to acquire Fairview — wants to purchase North Memorial. This has been the trend in Minnesota, particularly among hospitals. In 2000, the state had 68 independent hospitals compared to 67 affiliated with a larger system. Today just 29% are independent. In exchange, hospital prices have nearly tripled, outpacing other headline-grabbing healthcare cost increases like prescription drugs according to the Tobin Center for Economic Policy at Yale. Hospital prices have also risen faster than college tuition, childcare and food.

Allina to be acquired by large California health system

This hospital merger wave — 35 mergers in Minnesota between 2000 and 2022 — might seem inevitable, but in 2023 state lawmakers took an important step to push back against the monopolization of our healthcare system, passing a new law that establishes a comprehensive framework for analyzing and evaluating healthcare mergers, including hospital takeovers.

This often-overlooked law includes a more robust pre-merger notification requirement that ensures the Office of Minnesota Attorney General has the information necessary to evaluate and potentially challenge transactions.

While that notice is critical for enforcement, the real genius of the law was establishing a public interest standard for use in evaluating mergers. This serves as a complement to state and federal antitrust laws, which have been weakened by lax enforcement and bad case law, allowing monopolies to stampede across our economy. This is particularly true in mergers between hospitals and health systems that operate in different regions (known as a cross-market merger), such as Sutter and Sanford’s proposed acquisitions. The Federal Trade Commission has never challenged a cross-market merger despite large price increases associated with such transactions.

This new public interest standard requires the attorney general to determine whether a transaction is in the public’s interest, using a broad range of factors, including a transaction’s potential impact on the wages, working conditions or collective bargaining agreements for healthcare workers; public health; access to quality care; costs for patients, and broader healthcare costs. This is a strong tool for addressing high healthcare costs, reduced services in vulnerable communities and the squeeze put on the essential healthcare workforce we have relied on in times of crisis.

Passage of the law reflected the broad concerns Minnesotans have over soaring costs, stagnant real wages and the consolidation of economic power. Working alongside Attorney General Keith Ellison, a unique coalition of farmers, healthcare workers and patient advocates came together to develop the new law and push a bipartisan set of lawmakers to pass it. Passage of the law is just the first step though, as its true power lies in enforcement; and that is where Ellison now has a chance to buck the trend seen in many other parts of the country.

A 2024 study by the Tobin Center for Economic Policy at Yale found that of over 1,000 hospital mergers between 2002 and 2020, the FTC challenged only 13 transactions despite nearly 20% of those mergers meeting the agency’s criteria as likely to lessen competition and raise prices. States have been no better. A 2021 HealthAffairs study found that just 42 of 862 hospital mergers proposed between 2010 and 2019 were challenged by states. Even when challenged, a significant number resulted in merger approvals with conditions that did not limit growth in hospital prices.

With Sutter and Sanford seeking to continue their push to monopolize, now is an opportunity for Ellison to lead and use the powerful tools lawmakers provided him to ensure that our healthcare system truly operates in the interest of all Minnesotans.