As a free-market economist and a professor of finance at Stockton University, I always love seeing when the private sector comes to terms with solutions to the Garden State’s most pressing public policy concerns without the federal government’s help. That’s exactly what patients are soon poised to see occur across New Jersey’s hospitals. And prices will soon dramatically fall as a result.
It’s no secret that New Jersey has some of the nation’s highest hospital costs. Its health care prices continue to rise faster than total state spending as six in 10 residents grapple with escalating healthcare premiums.
Unscrupulous private equity companies are partially responsible for these ever-increasing healthcare bills.
Many of New Jersey’s healthcare facilities are in dire financial straits. More than 400 of them are already at risk of closing. Sensing opportunity, Wall Street hedge funds bought many of them outright and increased their prices far beyond what most would consider to be market value.
Like everyone else, Wall Street is allowed to make personal business decisions, but, in the free market, it takes two to tango. If one party doesn’t offer fair terms, the other side won’t manage to keep its existing deals or close new ones. It’s as simple as that. And by taking on the unfair practices of some of these private equity firms head-on, commendable, pro-consumer healthcare actors in the Garden State are proving it.
Take, for example, US Radiology, a Wall Street, investor-owned firm that owns South Jersey Radiology and Larchmont Medical.
These private equity interests recently pulled out of Horizon, their healthcare network, because it refused to honor the 32% price hike they demanded. This ultimatum, which the companies made despite already receiving the highest rates in South Jersey, would have raised costs on their customers by over $10 million annually.
The Wall Street suits may have thought they had a captive marketplace, but now, it’s clear that they don’t. Horizon finally said enough is enough and pulled the plug. This healthcare network recognized that it could get better deals elsewhere for its customers, who are already struggling with healthcare affordability and moved on.
Make no mistake: Horizon will be far from the last healthcare entity that stands for commonsense and reason for New Jersey’s hospital patients.
All throughout the state, New Jersey healthcare industry stakeholders have wizened up. After witnessing private equity firms spend nearly $1 trillion across thousands of healthcare deals, they now have clear, endless documented cases that demonstrate how many of these Wall Street fat cats’ promises of more efficiency and lower prices haven’t come to fruition — and they’re saying enough is enough.
As usual, the free market is proving more effective at solving this problem than the state government.
Gov. Phil Murphy tried rectifying this healthcare affordability crisis with the Health Care Affordability, Responsibility, and Transparency Program (HART), which included a cost-growth benchmark cap, but government agreements can only do so much. The most well-connected often manage to find loopholes and legislative carveouts for themselves.
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There are no loopholes in the deal-making world. Parties that offer unfair terms can’t force their customers to contract with them. They need to earn their trust and business every day, and many of the private equity firms in the New Jersey healthcare industry are now learning this lesson the hard way. Perhaps they now realize that they should abide by HART’s price increase limitations anyway to prevent their future deals from falling apart.
The Hippocratic Oath says that first, healthcare leaders must do no harm. By severing their ties with problem Wall Street actors, the courageous healthcare networks that are prioritizing patient affordability over convenience are singlehandedly ensuring that this moral mandate remains the guiding operational principle in the Garden State.
If that doesn’t give us all something to cheer about together, then I don’t know what will.Michael Busler is a professor of finance at Stockton University.
This article originally appeared on Asbury Park Press: New Jersey’s healthcare costs will soon plummet
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