Arnold Ventures Part 2 “Structure the Message Properly” – Healthcare Blog
Author: Jeff Goldsmith
In the first part of our look at Arnold Ventures, we explore its business model and generous support from health policy experts at elite universities to advance an ambitious health policy agenda. In Part Two we explore some of the issues raised by Arnold's radical approach.
Zack Cooper is an associate professor of economics and health policy at Yale University*. He is an academic researcher at the heart of so-called 1% Solutions, an Arnold Ventures-funded project that encompasses much of its health policy agenda. The core idea of the “1% Solution” is that while comprehensive health care reform (such as “Medicare for All”) may not be achievable, pursuing a set of policy goals at a smaller price can generate savings that can then be invested in policy improvements.
Cooper has been the subject of media scrutiny for receiving substantial underground funding from UnitedHealthcare for research efforts and for his key contributions to the enactment of the No Surprises Act of 2021, which seeks to rein in out-of-network health insurance billing. Manchester United is expected to be the single biggest beneficiary of the legislation. (The biggest “surprise” to come out of the No Surprises Act is that health care providers win 80% or more in independent mediations of these disputes, suggesting that it is the health insurance companies, not the health care providers, that are defrauding the public).
Cooper and his Yale policy arm, the Tobin Center for Economic Policy, received more than $5 million from 2018 to 2024, according to Arnold's 990s. $700,000 of that funding funded the 1% project itself, which includes more than a dozen papers published by academic colleagues on topics ranging from surprise billing to PBM reform to site-neutral outpatient payment to hospital market concentration.
As part of the project, Cooper and University of Chicago colleague Zarek Brot-Goldberg published a paper in early 2024 on the economic impact of hospital mergers: “Is There Too Little Antitrust Enforcement in the Hospital Sector?” The study found that 20% of hospital mergers had adverse economic impacts on their communities. Another off-message headline, “80% of Hospital Mergers Have No Adverse Economic Impact on Their Communities,” never appeared.
However, a follow-up article gained widespread circulation thanks to a June 2024 article wall street journal The article, which was shown to millions of readers, made no mention of Arnold Ventures' funding. The paper, originally published by the National Bureau of Economic Research (NBER is also funded by Arnold Ventures), uses an extremely complex multivariate econometric model. The paper links hospital mergers to widespread layoffs in the communities where they merged and subsequent waves of suicides and drug overdoses (!).
According to the study, Brot Goldberg and Cooper analyzed 307 hospital mergers between 2010 and 2015, which resulted in a 1.2% increase in hospitalization rates for commercial insurance companies. This sad exercise of so-called “monopoly power” (if you “own” the market, why not add 20-30%?) is not even enough to cover the cost of the merger? transaction costs (Legal, accounting and banking fees, consulting services, etc. typically account for 3-5% of combined business revenue), not to mention generating free cash flow for the combined entity.
The authors found that increases associated with hospital mergers increased health benefit costs by approximately 9% of total employment costs in their sample of employers. A 1.2% increase in premiums, which account for 9% of payroll, increases employer compensation costs less than one tenth.
However, according to their model, a one-percent increase in payroll costs triggers a wave of layoffs in the communities where the mergers take place. The mergers in the study occurred in the period after the Great Recession of 2008 (2010 to 2015), during which layoffs surged nationwide. It wasn’t until the end of 2017 that the unemployment rate returned to pre-financial crisis levels!
Econometric models such as the one in this study do not determine the direction of causality. Instead, they are inferred by correlating so-called independent factors. The study did not control for the impact of a catastrophic recession on affected (mostly urban) communities, nor did it consider the potential economic impact of the Great Recession. lead to Hospital mergers. Instead, by association, the study chose to blame the victim. There was no employer control group in communities that had not experienced hospital mergers or had no hospitals at all.
The author has no control other Employers often respond to increases in employment costs by raising prices, reducing costs other than wages, or, most importantly, increasing patient cost sharing. The number of employees with high-deductible health plans increased sixfold after the Great Recession, according to KFF.
Incredibly, merger-induced layoffs have been extrapolated to contribute to more than 10,000 deaths of despair (suicides and drug overdoses) in communities across the country where hospital mergers occurred. Nothing was done to control other underlying factors in these deaths—fentanyl entering communities, business closures, massive increases in patient cost-sharing, and the financial trauma of families caused by the recession.
Another key missing comparison group: communities where the hospital did not merge with an out-of-town health system but simply closed. Hospitals are often the largest employers in their communities. The layoffs resulting from hospital closings, whether hospital employees or vendors/contractors, dwarf any layoffs “resulting from” keeping hospitals open. Lack of hospital access will almost certainly have a measurable impact on mortality rates in surrounding communities as well.
As a sociologist and management consultant who has spent more than four decades trying to help hospitals stay independent, I can say that only an economist with an agenda could have constructed this fancy, neon-lit throughline from hospital mergers to layoffs to suicides and drug overdoses. Economist Uwe Reinhardt had a term for this kind of statistical manipulation. He called them “siffing,” which stood for “sstructured Iinformation fsubtly”.
What Arnold Ventures did in the study was fund a headline: “A new study finds hospital mergers lead to a wave of layoffs and deaths in communities.” These are not just four dangerous words. We found many examples of skewed results in other Arnold-funded studies.
With a foreign policy-oriented White House and a Republican-controlled Congress, Arnold Ventures' health policy agenda focused on price controls and tighter government regulation seems unlikely to be implemented in the next few years. However, with health care costs rising and elite university faculty conducting more than three years of academic research in the area, Arnold's health care policy agenda will be front and center in the next Democratic Congress or White House.
Arnold’s patient discipline, coupled with the efforts of his billions of dollars and sophisticated political action committees, will bring a new wave of technocratic policy solutions to our health care system, doctors, and patients. Whether the actual evidence supports this agenda is not that important!
Jeff Goldsmith is a veteran healthcare futurist, President of Health Futures Inc and regular THCB contributor. this comes from him Personal substack. Jeff is grateful to the American Hospital Association for its financial help in analyzing Goldberg and Cooper's situations Papers discussed above. (You can read a more detailed analysis of the study here ).
