Washington Post business columnist Steven Pearlstein was online to discuss the spate of hospital consolidations in the Washington region Wednesday, July 12 at 11 a.m. ET .

A transcript follows .

Read today's story: Va. Hospital's No-Good Deal Goes Unpunished .

About Pearlstein : Steven Pearlstein writes about business and the economy for The Washington Post. His journalism career includes editing roles at The Post and Inc. magazine. He was founding publisher and editor of The Boston Observer, a monthly journal of liberal opinion. He got his start in journalism reporting for two New Hampshire newspapers -- the Concord Monitor and the Foster's Daily Democrat. Pearlstein has also worked as a television news reporter and a congressional staffer.

His column archive is online here .

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Washington, D.C.: How do these mergers affect overall healthcare? Will there be a lag in patient care and services as a result of less competition?

Steven Pearlstein: That is actually a much harder question to answer than you think. My guess is that there is no strong correlation between size of hospital or hospital chain and quality of care, with the exception that larger hospitals obviously can handle more complex cases, which sometimes is a factor during a hospital stay when a small problem suddenly becomes a bigger one. As for competition, I think we can say that it does sharpen up a hospital's care. What's not clear, ironically, is whether competition automatically lowers prices. I'd like to think it does, but the evidence on that is not all that clear at the moment. The reason is the the health care market is a very idiocyncratic market, where the payors aren't always the customers and the prices paid are really the posted prices.

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Fairfax, Va.: Can you speculate what kinds of things may have been in the contract between Inova and Prince William that we should know about?

Steven Pearlstein: One might concern the financial details of the contract with the top officials at Prince William Hospital after Inova takes over. Another is the degree to which Prince William Hospital will be a feeder hospital to Fairfax. One would want to know, if one lived in Prince William, that the "profit" generated there would, to a large degree, be reinvested back in Prince William Service rather than, say, funding the takeover of Fauquier Hospital five years down the road. You might want to know if there is going to continue to be a local board, and what powers it would have versus the powers of the Inova Board. Or how many Prince William trustees will be added to the Inova board? One of the more complicated and important things is the physician relationships with the hospitals. Will there be automatic cross-admitting privileges. Will doctors who refer their patients to non-Inova hospitals or facilities be treated as well as doctors who do, in terms of services and scheduling? There may be subtle pricing issues that are dealt with that could have an effect on customers who pay their own bills. There could be labor issues for employees if the contract calls for Prince William policies to now conform to those of Inova's. What about Inova's commitment to the joint venture Prince William entered into with Fauquier Hospital for a new cancer treatment center that is just about finished.

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Kansas City, Mo.: Why aren't hospitals (life essential) price controlled like utilities? HCA is a big conglomerate in this area and their charges quadruple as soon as they take over a hospital. A CT scan that previously cost approx $600 will immediately be billed between $2,000 and $3,000 as soon as HCA takes over the business. This corporation is greedy beyong belief.

Steven Pearlstein: I have no idea whether that's common, or even true. It sounds implausible, at least as it relates to the charges bill to large insurers, Medicare and Medicaid, which make up the bulk of a hospital's revenue. Post prices, as I said, aren't where the action is.

Your question seems to be based on the premise that for-profit hospitals are profit maximizers who will charge as much as they can get away with (which is true as a general rule) but that non-profits are not. In fact, non-profits pretty much operate the same way for-profits do these days. The days of Sisters of Mercy are long gone. They operate in competitive environments, drive hard bargains with third party payers, try to collect as much money from paying patients as they can and use their "profits" to finance expansion of services and "competitive" salaries for top administrators. HCA is one of the more aggressive players in the country, the biggest, and they have got caught overbilling the government on more than one occasion. But I would also say that if they provided lousy services at exhorbitant prices everywhere at all times, they wouldn't still be in business. The health care market isn't that stupid, even as imperfect as the competition is.

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Washington, D.C.: The healthcare industry does NOT hold blanket exemption from the antitrust laws. Why are the FTC and DoJ permitting these mergers to take place? The only results are diminished service and increased prices.

Steven Pearlstein: This is the FTC's area, under agreement with Justice. The FTC at one point was pretty aggressive in this area, going to court to un-do a merger at one point. But the courts have not been that receptive, so they are loath to bring a close case that they might lose that would set a precedent giving a green light to even more mergers. At this point, however, if they don't go after mergers like this one, they mind as well hang out a sign and say that anything goes. The northern virginia situation is really ridiculous, it is right in the FTC's back yard and as good as Inova is (and it IS very good at providing health care services), that shouldn't mean they should be entitled to a monopoly. One of the key questions is: what is the relevant market. I think you and I would say that it is Northern Virginia, with sub-markets for less sophisticated services that might be offered by community hospitals. But Inova argues that the relevant market is the Washington metro area, which has a number of other large competitors, so not to worry. That, to me, doesn't reflect the reality of competition in the industry. People in Prince William aren't going to want to go into the District or to Bethesda to see a specialist or get their weekly cancer treatments.

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Living in the Shadows of Inova in Annandale, Va.: Thanks for your column. I have always thought that there was a potential conflict of interest with elected officials serving on Inova's board. This was blatantly apparent a number of years back when a competitor wanted to open a new facility in Springfield, and the county board members on Inova's board opposed it.

From their respective Web sites, I gather that Fairfax County Supervisor Gerry Hyland and Alexandria Mayor Bill Euille sit on the board of Inova Health Systems. Penny Gross's bio indicates she's on the Inova Health Care Services Board.

In an age of corporate transparency and information dissemination, Inova is one of the most difficult companies to find out about. Their Web site lacks basic information, like their annual report and who is on the board of trustees.

Who are the members of Inova's board of trustees? Do the members of Inova's boards get compensated for their time and services? If so, how much?

Steven Pearlstein: You know, that used to be true. But Inova has a great new senior vice president for marketing and communication, Candace Quinn. And she has already had a good effect. You can, in fact, now get an annual report from Inova from its web site. Its a PDF file, which you get to by clicking on the "About Us" feature of the home page. And the report does list the trustees. It even has very sketchy financial statement, although you have to go to another data base to get its annual IRS report for more complete financial data, and even that is hard to sort through because Inova is really a collection of separate entities. As for having public officials as trustees, I suppose that cuts a number of ways. I probably agree with you that public officials should probably be in a more independent position, to serve as a check on the non-profit community hospitals.

Board members get very little compensation, by the way. That's not the issue. They put in lots of hours and don't get much for it, other than occasional criticism in the newspaper that probably makes them wonder why they do it in the first place.

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Fairfax, Va.: Over the years, a number of studies have been done with many reported in the press highlighting the difficulty in controlling no matter reducing hospital costs and fees. One area which has been mentioned often is the cost of "duplication of services" particularly 2 geographically close hospitals offering the same service using very expensive equipment. Is this helped or hurt by the consolidation you are highlighting? How are hospital staffs (pay, benefits, etc.) being effected by the consolidation? Did you know that about 2-3 years ago Inova reduced the number of allowed days off to many on its professional staff indicating that Inova was in the red and those days were never reinstated?

Steven Pearlstein: I'd like to avoid the specific employee relations issues, if you don't mind, since I learned long ago those are hornets nests outsiders probably want to avoid.

Duplication of services is a difficult area. Virginia and other states have processes to try to prevent duplication of services that drive up prices -- the so-called certificate of need process. This is a planned-economy model, not a competitive model. But it is probably necessary because the health care market is imperfectly price competitive, which is the usual antidote to overcapacity. So you have a situation in which you have one government agency that is supposed to be fostering competition (the FTC) among hospitals, and another (the Northern Virginia Health Systems Agency) whose job is to limit wasteful competition. Consolidation, as a general rule, rationalizes investment and resources (efficiency) but reduces competition, which can be efficiency-enducing in other ways. So these can be complicated questions.

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Northern Virginia: I'd like to point out that it wasn't just the big hospital chains such as Universal Health Services and HCA that are blocked out by this deal. Local vendors who have been serving Prince William Hospital are also being shoved aside to make room for Inova affiliated companies.

In December of last year Prince William Hospital decided to replace one of it's under performing vendors. My company and several others met with PWHS management and had several positive discussions. Then suddenly at the end of January all contact abruptly ended. No explanation was given and no (public) awarding of the contract.

After their previous agreement ended, they started using my company and several others in their place. We found it odd that they didn't award, or even further discuss, a contract, but we thought that perhaps they were using this time to evaluate the different vendors. Then suddenly and without notice an Inova affiliated vendor took over.

The irritating part is that this Inova vendor didn't meet their original prerequisites in several different areas, while my company and at least one other vendor did. Not only that, but we later learned that the Inova vendor was unable to provide service until 6 months after being awarded the contact which is why they were utilizing us (and using us) in the interval. In short, the vendors that met their prerequisites and stepped up to serve the hospital's patients on short notice were brushed aside for an Inova affiliate. Very disappointing.

Steven Pearlstein: Interesting.

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Front Royal, Va.: Did you know that in the wave of the Inova acquisitions you are highlighting that each year Inova reduces and/or makes more costly the benefit packages provided to its employees arguing a need to control costs? Isn't the price of an acquisition a cost?

Steven Pearlstein: No, that's probably not the explanation. In this regard, Inova is behaving the way nearly every private employer has behaved when faced with skyrocketing health insurance premiums. The irony in this case, of course, is that Inova is both a victim of rising health care costs, and, to a degree, a beneficiary.

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D.C. 20010: How important is branding in this highly competitive hospital market?

Steven Pearlstein: Prince William officials obviously think it is important, because they have cited it to me as one benefit of going with Inova, which is a strong brand in the region. Where its importance is probably greatest is in negotiating rates with health insurance plans. Because if the insurers know that they MUST have a particular hospital or chain in their preferred network, then the hospital can demand the highest reimbursement rates and the most favorable terms, including demanding that competitive hospitals are NOT included in the network.

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Burke, Va.: One issue I see with Inova's dominance in Northern Virginia is "the Family" of doctors. At Fairfax Childrens there is one GI group who refers to one Pulmonologist group who refers to one surgical group. And they ALL think the same... It is incredibly hard to get a "REAL" second opinion. So those of us with "medically complicated kids" have to go to D.C. or Baltimore to get a second opinion that isn't Inova's party line.

It is so sad that Prince William went this route, especially since the birthing center at Prince William was praised for how wonderfully different it was... not the baby mill that Fairfax is. Move along ladies, get that baby out or we will.

Steven Pearlstein: Diversity is said to be important in natural ecosystems. And it turns out it is important in economic ecosystems as well. Otherwise, the system tends toward stasis because it pushes out divergent ideas or ways of doing bussiness, which never get a chance to get tested and develop.

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Fairfax County, Va.: Does the planned merger of Prince William Hospital with Inova require approvals from Virginia (Health Planning), and clearance from Federal antitrust?

Steven Pearlstein: It requires clearance of the FTC and the Virginia Attorney General's office, which, frankly, is a non-player when it comes to antitrust generally, and hospital mergers in particular. The health planning agency does not get involved unless asked for an opinion. It tells you how unserious the attorney general's office has been that when Inova was trying to take over Loudoun Hospital, nobody from the AG's office even bothered to put a telephone call into the health system planning agency in northern virginia.

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Falls Church, Va.: Did you know that Inova disguises "cost benefits" in its health insurance coverage by requiring that procedures be performed by doctors at Inova facilities? This is true even if the doctor participates in the health insurance plan and prefers another hospital to perform a designated procedure. It costs Inova employees more under these plans for procedures performed in other than Inova facilities.

Steven Pearlstein: Didn't know that, no.

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Lovettsville, Va.: Your story today seemed to have been "inspired" by Universal, whose for-profit model was previously rejected by the Prince William community. Community leaders and doctors are very comfortable with the Inova meger. Louis Dominguez, whom you quote, does not represent the views of the community. Overall, as a business writer, you seem to see this simply as a business story. If you had done more research, you would have discovered that more is involved in providing for future health care needs of a community than simply dollars and cents. The for-profits have the biggest war chests, but we don't want them in Northern Virginia, for the very reason that profit is their primary goal. Your piece was very unfair to the trustees of Prince William -- which, by any measure, is one of the finest, most caring community hospitals in the region. I speak as a former patient.

Steven Pearlstein: I have no reason to believe Prince William is anything but the caring hospital you describe. My column was "inspired" by Universal's offer, that the Prince William trustees refused even to consider. They claim they couldn't because they were in "exclusive" negotiations with Inova. But who decided to tie their hands by agreeing that those negotiations had to be exclusive? It was the Prince William trustees themselves! That, to me, was just dumb on their part, and I criticize them for that. I don't question their motives, but I do question their judgment. And let me assure you that people in Prince William wouldn't ever have even known about the Universal offer if I hadn't written the column, because the Prince William trustees don't think you need to know about such things. So much for transparency of non-profits.

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Arlington, Va.: I worked at the Arlington Hospital during the Columbia HCA acquisition in the 1990s. The experience was horrible. HCA's primary objective was to turn a profit ASAP.

Almost all IT and accounting functions were transferred to centralized off-site locations - causing local personnel to be terminated. The nursing staff was also cut drastically. Patient care was noticeably diminished.

The resultant cost "savings" were largely distributed as bonuses to executives.

The old concept of community hospitals has been replaced by that of a very large profit-making healthcare industry. I recently had a parent who was hospitalized for several weeks. In order to secure the care she needed, I had to be physically there every day to act as her advocate. The system isn't very patient friendly on any level.

Steven Pearlstein: Your experience was not uncommon, from what I heard. And HCA should be held to account for such things. By whom? By you and other consumers who demand the right to go to hospitals that provide better service.

For me, the system works best when there is not only competition between hospitals, but competition among different hospital models (profit, non-profit, independents, chains, community, specialty). The problem with building everything around on-profit community hospitals is that they demand that there be no competition -- not from for profits, not from specialty hospitals, not from independent clinics and imaging centers. When those arrive, they complain that they will skim off the cream. They want to be monopolies. Unfortunately, what we know about monopolies is that they tend to be resistent to change and new ideas and they tend to get arrogant and non-responsive over time because the one thing they believe in above all else is their own competance and benevolence.

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Falls Church, Va.: Inova now has an extension campus of VCU medical school. Is there an independent medical school in the future of Virginia? Is Inova going to expand its market into the Richmond area, or become a statewide entity? Thank you.

Steven Pearlstein: Yes, they now have an established residency program with VCU, although for the moment they also take residents from Georgetown and some other medical schools. Will they move to Richmond? Not sure. Inova doesn't really like to go into competitive markets. They prefer the monopoly community hospital model.

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Fairfax, Va.: Do you think the FTC gives companies like Inova a free-pass when it comes to competition concerns because they are so-called non-profits? Also, my understanding is that it was local officials in Loudoun who blocked HCA's entry into that market. Why do you think a local official would not want additional health care services in their community?

Steven Pearlstein: There is no exemption for non-profits, although I suspect they wind up getting an easier go of it. The Loudoun situation is complicated, but at this point it is Inova, through its lawsuit, that is blocking the construction of a new HCA hospital that now has approval from state health care regulators, who found there was a need for another facility. As to your last question of why any local officials wouldn't want another facility, two answers. One, they might fear that excess capacity would render both hospitals financially weak. Or two, they may be part of a local establishment that runs the existing hospital and, like any entity, doesn't want competition because it believes, above all, in its own competance and benevolence.

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Washington, D.C.: Ah, Yes - competition, monopoly and antitrust you say!

Our health care system exists in an environment with unique market forces making it difficult to compare it to free market industries and the impact of competition. There is little comparison shopping for hospital services. Purchase decisions are primarily based on insurance plans, copays and the ability to pay or not pay. Other factors are: services offered, doctor affiliation, proximity to hospital, quality of care and others.

Most insured Americans have a combination of insurance coverage - government or commercial or both. Hi enrollee insurance plans can influence hospital pricing.

Hospital ownership comes in several forms including government owned and operated; not for profit; and for profit owners.

Hospital interest as expressed in their written and public statements often express sentiments which on their face value appear true but which often mask or obfuscate underlying interests: "nothing but smoke and mirrors" is a phrase sometimes used to describe these expressions.

How are we to form reasonable positions on the competing hospital interests?

Personal experience offers a good starting point for me. An elder familly member was recently admitted for cardiac care on two occasions to 'for profit' hospitals in a Virginia city owned and operated by a national for profit chain. The two hospitals have a dominant market position in the region my family member lives. There was full insurance coverage - a combination of Medicare and private insurance. The medical/clinical care was superlative - her life was saved. Housekeeping and nursing floor support was abysmal - almost non existent. I suspect the floor unit staffing ratios were so lean that the quality of care suffered.

This, for me, is a key difference in reviewing competing hospital interests. Are they 'not for profit' or 'for profit' As mentioned in your article, are they chartered to operate for the benefit of the public or to maximize shareholder interest? Prince William Hospital's alternatives appear to have been to affiliate with or be acquired by one of two national for profit chains.

The not for profit Inova Health System operates excellent facilities in northern Virginia and we benefit from the services its healthcare workers provide. When all is said and done we should be glad a Prince William Hospital path to For Profit status was reversed.

Steven Pearlstein: Thanks for that. Just one question: If a hospital chain like Inova, a non-profit, is so uninterested in enhancing profits and market share and all those other bad things, why exactly has it been gobbling up every hospital in Northern Virginia, which is exactly just how HCA would behave if it was in a similar position?

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Washington, D.C.: How do you see this acquisition affecting the other community hospitals? Virginia Hospital Center (Arlington) seems to be thriving among Inova's monopoly.

Steven Pearlstein: Not sure the import of your question. Just because there is a community hospital thriving in Arlington doesn't mean that Inova doesn't have monopoly market power, to whatever degree it wants to exercise it. But what you would want, in a competitive market, is for Virginia Hospital Center to be able to expand and compete head to head with Inova in some other places in Northern Virginia, bringing its winning formula to other patients. But there is no way Inova is going to let that happen without using all the means at its disposal to prevent it.

The fact is that as long as community hospitals have a dominnant position in their communities for the kinds of services community hospitals provide, they can coexist with the Inovas of the world. But they may also find that, over time, their competitive position deteriorates as Inova uses subtle tactics to divert away as much volume, and as many referring doctors, as it can. In this way, it behaves like a for-profit even if is a non-profit.

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Steven Pearlstein: That's it for today folks. See you next week.

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