By JEFF GOLDSMITH
In it first part of our look at Arnold VenturesWe explore their business model and the generous support of the University’s elite health policy experts to advance an ambitious health policy agenda. In this second part, we will explore some of the issues raised by Arnold’s aggressive approach.
zack cooper He is an associate professor of Economics and Health Policy at Yale University*. It is the academic researcher at the heart of the call 1% solution, a project funded by Arnold Ventures that covers most of its health policy agenda. The core idea of the “1% solution” is that while comprehensive health reform (e.g., “Medicare for All”) may not be achievable, pursuing a set of policy goals with lower prices could generate savings that could be reinvested in policy improvements.
Cooper was the subject of unwanted press scrutiny for receiving extensive sub rosa United Healthcare financing for research and writing work instrumental in the promulgation of the Law without surprises in 2021, which aimed to control out-of-network health insurance billing. United was expected to be the largest single beneficiary of this legislation. (The biggest “surprise” that came out of the No Surprises Law was that suppliers are winning 80% or more of the independent mediations of these disputes, suggesting that it was the health insurers, not the providers, who went public).
According to Arnold’s 990s, Cooper and his Yale policy shop, the Tobin Center for Economic Policy, received more than $5 million between 2018 and 2024. Of this amount, $700,000 funded Project 1% itself, including more than a dozen articles by academic colleagues on topics ranging from surprise billing to PBM reforms to site-neutral outpatient payment to hospital market concentration.
As part of this project, Cooper and a 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? which found that 20% of hospital mergers had an adverse economic impact on their communities. The alternative, off-message headline, “80% of hospital mergers had no adverse economic effects on their communities” never appeared.
However, a follow the piece gained wide circulation thanks to a June 2024 Wall Street Journal articlewhich exposed him to millions of readers without any reference to Arnold Ventures’ funding. The paper, which presented a surprisingly complex multivariate econometric model, was originally published by the National Bureau of Economic Research (NBER is also funded by Arnold Ventures). This article linked hospital mergers to widespread layoffs in the communities where the mergers took place and a subsequent wave of suicides and drug overdoses (!).
According to this study, the 307 hospital mergers that Brot Goldberg and Cooper analyzed between 2010 and 2015 resulted in hospital rate increases for commercial insurers of 1.2%. This sad exercise of supposed “monopoly power” (why not a 20-30% increase if one “owned” the market?) was not even enough to cover a merger. transaction costs (legal, accounting and banking fees, consulting services, etc. typically represent 3% to 5% of the merged company’s revenue), let alone generate free cash flow for the merged entity.
The increases related to hospital mergers that the authors found added up to a health benefit expense that was about 9% of the total labor cost in their sample of employers. A 1.2% premium increase on an expense that represented 9% of payroll raised employers’ compensation costs by less than one tenth of a percent.
However, according to their model, this one-tenth percent increase in compensation cost somehow triggered a wave of layoffs in the community where the mergers took place. The mergers in the study took place during a period (2010-2015) immediately following the Great Recession of 2008, during which layoffs spiked across the country. Unemployment did not return to pre-crisis levels until end of 2017!
Econometric models like the one in this study do not establish the direction of causality. Rather, they infer it from supposedly independent correlated factors. The study did not control for the impact of the catastrophic economic crisis on the affected (mostly urban) communities nor did it take into account the potential role of the Great Recession in causing hospital mergers. Rather, by association, the study chose to blame the victims. There was no control group of employers in communities that did not experience a hospital merger or had no hospitals at all.
The authors also did not control the other ways employers typically respond to increases in labor costs, such as raising their prices, reducing non-payroll costs, or, most importantly, increasing patient cost sharing. Employees with high deductible health plans increase According to KFF, spending increased sixfold after the Great Recession.
Stretching credibility to the max, it was extrapolated that merger-induced layoffs had caused more than 10,000 deaths of despair (suicides and drug overdoses) nationally in the communities where the hospital mergers took place. No effort was made to control for other potential causal factors in those deaths: the arrival of fentanyl in the community, business closures, large increases in patient cost-sharing, and households’ mood of financial trauma due to the recession.
Another crucial control group missing: communities where, instead of merging with an out-of-town health system, the hospital simply closed. Hospitals are often the largest employers in their communities. Layoffs resulting from closing a hospital, both employees and suppliers/contractors, would have dwarfed any layoffs that “resulted” from keeping the hospital open. Lack of access to hospitals would almost certainly have had measurable effects on the mortality rate of the surrounding community as well.
As a sociologist and management consultant who spent more than forty years trying to help hospitals remain independent, I can say that only economists with an agenda could have constructed this flashy, neon-lit line from hospital mergers to layoffs to suicides to drug overdoses. The economist Uwe Reinhardt had a term for statistical manipulations of this child. He called them “siffing”, which means “yesstructuring Yoinformation Felicitly.”
What Arnold Ventures did with this study was fund a headline: “New study finds hospital mergers caused a wave of layoffs and deaths in their communities.” There are more than four dangerous words. We have found numerous examples of distorted findings in other studies funded by Arnold.
With a foreign policy-oriented Republican in the White House and a Republican-controlled Congress, an Arnold Ventures health policy agenda loaded with price controls and tighter government regulations appears unlikely to be implemented in the next two years. However, with health care costs rising and three more years of academic study from elite university professors flooding into the area, Arnold’s health policy agenda will be front and center in the next Democratic Congress or White House.
Arnold’s patient discipline, combined with his billions and sophisticated political action committee efforts, will unleash a new wave of technocratic policy solutions on our healthcare system, doctors and patients alike. It won’t matter much whether current evidence supports this agenda!
Jeff Goldsmith is a veteran healthcare futurist, president of Health Futures Inc and a regular contributor to THCB. This comes from your personal substack. Jeff acknowledges the financial assistance of the Federation of American Hospitals in the Goldberg and Cooper analysis. document discussed above. (You can read a more detailed analysis of that study here).
