The New York Times reports on a new lawsuit brought against the University of Pittsburgh Medical Center (DISCLOSURE: I worked at UPMC Health Plan before I came to Duke). The theory of the case is simple — UPMC has massive labor market power and uses that to drive down wages and make working conditions worse for employees.
After a series of acquisitions, it is Pennsylvania’s largest private employer with more than 40 hospitals, 800 doctors’ offices and clinics, and a health plan. With operating revenue of $26 billion last year, it employs about 95,000 people.
While antitrust cases frequently address how powerful organizations can operate as monopolies and unfairly raise prices, a company can also be accused of operating as a monopsony in which it exerts unfair leverage over suppliers, including employees.
From a basic economics point of view, concentrated employers can and do leverage their market buying power against labor, especially labor that has industry specific skills that don’t transfer well, to capture more of the surplus generated and drive down total compensation. This means floor hospital workers like nurses are, under this theory, more likely to get squeezed than a generic business analyst who wrote SQL for six hours a day (which is what I did for years).
If this case goes to trial and the plaintiffs win, it creates a new and very powerful tool to challenge pre-existing health care consolidation.
Let’s keep an eye on this!
Janus Daniels
Let’s use the precise word. Monopsony, or oligopsony, not monopoly.
dictionary.com/browse/MONOPSONY
Roger Moore
We need to push much harder on monopsony as a restraint on trade. It’s not just employers doing it to employees. It’s also big companies squeezing their suppliers. Retailers like Walmart are notorious for this, but Big Ag is probably the worst. The Sherman Act was aimed as much at monopsony as monopoly, but recent economic “thinking” has tried to make the standard for anti-trust violations be exclusively about damage to consumers. That leaves monopsonies that crush suppliers free to operate, which we desperately need to change.
Raven
Piedmont Hospital is buying up hospitals all over Georgia. I have nurse friends who retired from what was Athens Regional and, when Piedmont bought them, they took away their health insurance because the agreement wasn’t with them.
cmorenc
Good luck squeezing hospital nurses on wages & benefits, unless the hospital-owning entity does truly have monopoly/monopsony power over a regional area wider than nurses can easily commute outside of. In most larger urban regions, the demand for nurses (especially with a couple of years clinical experience) has created a seller’s market for hospital nurses. While nursing school is not quite so difficult and long as medical school for doctors, it’s nonetheless still substantially challenging and difficult, and once graduated, the job involves 12-hour shifts dealing in a skillled fashion with sick/injured people oozing bodily fluids, while trying to maintain a friendly, supportive face to patients as you poke them in uncomfortable places. Hospitals that treat their nurses poorly are headed for a staffing crisis, unless they are the only game in town, so to speak. And even then, they may drive a significant portion of RNs to quitting the profession.
I can vicariously compare notes, since my older daughter is an MD and younger daughter is an RN, and I witnessed them each respectively grind through their professional schooling
David, since my younger daughter works in the Triangle as a hospital nurse for Wake Med, be interesting to hear if your impression / data re: nurses in this area is similar or different than my admittedly small sample of one (RN daughter) who is very satisfied with the conditions working for her employer.
glc
Interesting. In other news (namely, on the insurer side):
An insurer’s letter was sent directly to a newborn child denying coverage for his fourth day in a neonatal intensive-care unit. “You are drinking from a bottle,” the denial notification said, and “you are breathing on your own.”
I think I will go drink from a bottle.
BellyCat
Partner is a UPMC doctor. I was FLOORED when she told me she had to sign a non -compete when hired. This is another way UPMC controls the regional market and starves competitors of talent who wish to leave UPMC but stay in the Pittsburgh region.
Wondering if this even legal?
Zelma
UPMC is a behemoth. It is frankly too big. And too focused on making money, even though it’s a not for profit. It is no longer the cutting edge medical research institution it used to be. It has decreased its service to poorer communities. (Ask John Federman about the fate of Braddock Hospital and the impact of its closure on the community.)
I have two close relatives who are doctors at UPMC. I cannot overstate how much they hate the administration and complain about the decline in the standards of patient care. If I still lived in Pittsburgh, I would avoid UPMC if at all possible.
Zelma
gene108
@BellyCat:
It depends on state law and how it’s enforced.
***********
I feel like sucking as much money out of consumers as possible seems to be the overarching goal of the American healthcare system at all levels. Patients getting care seems secondary.
Roger Moore
@BellyCat:
Non-compete contracts are legal in most states. Looking it up, it sounds like only CA, OK, and ND ban them in most cases, and CO, IL, MD, ME, NH, OR, RI, and WA ban them for employees who earn less than some threshold. IA and KY ban them specifically for healthcare workers. FTC is currently in the process of writing a rule that would ban them nationwide with only a narrow carve-out for owners who sell their businesses, but it will certainly be challenged in court and thus take some time to come into practical effect.
ETA: Looking at some more details, it appears a fair number of states ban them specifically for physicians, but many fewer for other healthcare workers.
oatler
@Janus Daniels:
“Monopsony” is the name of my new thriller as soon as I copyright the title.
Mai Naem mobile
@cmorenc: that’s true right now but I would bet you within a few years foreign trained nurses will come in to make up for the shortage. On that front, physicians and therapists protect their professions much better than nurses.
Suzanne
@Zelma:
I hate to be the cynic, but this is true of really almost every health system. If you read Becker’s Hospital Review on the regular, the picture is very clear…. rural and low-income facilities are not really financially sustainable.
If you think of the money side of healthcare like a grocery store, it makes more sense. Some kinds of healthcare are cost centers (emergency care, psychiatric, etc.), but other kinds of healthcare bring in a lot of money and cover the losses (surgery, imaging, etc.). So that business model favors scale.
taumaturgo
There’s lots of money to be transferred from the bottom to the top, the same top that has convinced the bottom that having a universal healthcare system could be the end of human life as we know it. This is the new gilded era and healthcare is the crown jewel.
Suzanne
I need an open thread so we can dunk on Josh Hawley’s stupid book.
Goku (aka Amerikan Baka)
@Suzanne:
Do you mean this from a for-profit standpoint?
Baud
@Suzanne:
Everybody
poopsflees?Suzanne
@Goku (aka Amerikan Baka): Even a break-even standpoint. Rural hospitals and hospitals in many lower-income areas really struggle to even pencil out. They don’t have a big enough catchment area or enough surgeons to make a surgical department work, they don’t have enough money for modern imaging equipment and so they have to send patients elsewhere….. but the community wants the stuff that loses money (an emergency room, maternity, primary care).
This is why healthcare really consolidates in urban areas. Specialties make money, but they aren’t profitable unless you have a large patient base.
Misamericanthrope
I really do need to follow this story pretty closely. One of my brothers who I am estranged from since our mother’s death in 2010 was until recently an Executive Vice President at UPMC (for David: his initials are G.P, to narrow it down for you) and more than likely one of the prime villains in this story. One of the many reasons that we have zero contact.
Adam Lang
…a generic business analyst who wrote SQL for six hours a day (which is what I did for years)…
I’m so, so sorry.
Have you fully recovered, or does your eyelid still twitch uncontrollably any time someone says the word ‘SELECT’?
Roger Moore
@Suzanne:
This is why it’s insane to run healthcare as a for-profit business rather than as a public service. You wind up with a mix of services that’s best calculated to make money rather than one well calculated to produce a healthy populace. It’s exactly why the US spends the most money and gets the worst results of any developed country.
Suzanne
@Roger Moore: I agree with you.
If people genuinely understood the market forces, they would see that the private healthcare providers will never be able or willing to provide what they need. Literally, the only way to have rural healthcare is to have the government pay for it. There is no financial incentive to do so.
David Anderson
@Adam Lang: I like writing SQL — I prefer it over STATA and I like SAS because I can PROC SQL the big data pulls
David Anderson
@Zelma: 2 quick questions — in Pittsburgh, what is your next best alternative to UPMC? Allegheny Health Network… and then we get into a comparative beauty contest with Heritage Valley and Excela taking the role of Moldova and Croatia in Eurovision 2023 for that battle….
And speaking as someone who owned a house and lived in Swissvale for 12 years (inclusive of the time that UPMC Braddock was closing while UPMC built UPMC East in Monroeville) the business case for a hospital in Braddock was (and still is) hideous.
Betty
@David Anderson: I was interested in seeing that Kaiser has taken over Geisinger, the one alternative left to UPMC in north central Pennsylvania.
David Anderson
@Betty: Kaisenger is going to be interesting … I think Kaiser is looking to grab another half dozen mid-size payer-providers throughout the US and set up local verticals that can go head to head against big local payer-providers (the UPMCs of the world) while trying to steal the lunch money of fragmented, non-vertically integrated hospitals and insurers.
Suzanne
@David Anderson: SuzMom broke her hip six weeks ago (we live in Brookline, just south of Mt. Washington), and I took her to UPMC Presby. There is a small system and community hospital, St. Clair Health, that is nearby in Mt. Lebanon. But they don’t have strong orthopedics.
David Anderson
@Suzanne: Yep, St. Clair is fine, actually more than fine, but anything complicated is not staying at St. Clair.
Zelma
@David Anderson:
When I was in Pittsburgh, I went to St. Clair Hospital which remains stubbornly independent, much to UPMC’s chagrin. The only UPMC hospital I ever used was Magee-Women’s.
I know that Braddock Hospital was not the greatest, but it did have an important community presence and UPMC “promised” to sustain medical care in the community when they took it over. I don’t think they kept that promise.
Were I still in Pittsburgh and needed special care, I would probably use UPMC. But only after checking with my son-in-law. It helps to have someone in the business.
BellyCat
Presbyterian Hospital is UPMC’s flagship treatment center, in case any folks are wondering.
BellyCat
@Misamericanthrope: G.P. Is not currently listed as such. Some leadership changes last year may be the reason?
Misamericanthrope
@BellyCat: Yes. He has retired (not sure of exact date). The last time that I googled him the first thing that came up was a mention of him making an egregious statement to the NYT that it wasn’t realistic to expect UPMC to pay its workers a living wage. I instantly regretted that googling, but it re-affirmed my decision to cut contact!