Researchers are exploring potential antitrust responses to the growing consolidation among healthcare providers.

What size is too big?

This issue has plagued health care regulators for decades. Over the past two decades, the US healthcare system has seen rapid consolidation in the hospital, physician, and insurance markets. With the expected increase in mergers and acquisitions, it may be time to reinvent antitrust laws in the healthcare context.

Since 2010, more than a thousand US hospital mergers have been completed, causing a high concentration of the vast majority of hospital markets. In some cities, like Boston and Pittsburgh, only one or two hospital systems dominate the overall market. At the same time, hospitals have also acquired more and more medical practices, with more than a third of all doctors now employed by hospitals. In 2018, the percentage of physicians employed by another entity exceeded the percentage of physicians who own their own practice.

These consolidations can have a significant impact on patients. Although some proponents argue that hospital acquisitions can reduce costs and improve coordination of care, numerous studies have shown that hospital and physician consolidations have led to higher prices, higher insurance premiums. and a decline in the quality of care. As healthcare systems develop larger market shares, they may charge higher prices when negotiating with insurers.

In recent years, the Federal Trade Commission (FTC) has attempted to curb the number and impact of hospital-physician mergers. Between 2000 and 2018, nearly half of all FTC merger enforcement actions were in the healthcare industry.

Some experts, however, argue that current federal enforcement tools are inadequate to deal with the rampant consolidation. For example, the majority of physician office mergers go unreported to the FTC because they fall below the $ 92 million reporting threshold. Additionally, current antitrust enforcement guidelines make it difficult to regulate cross-market mergers, an increasingly common practice involving the merging of healthcare entities that do not compete on the same market. geographic or product markets.

Consolidation among vendors could accelerate as a result of financial hardship caused by the pandemic. With the Biden administration set to step up law enforcement efforts, health care mergers and acquisitions could be turned upside down.

In this week’s Saturday seminar, experts discuss how different antitrust approaches can increase competition in healthcare markets.

  • In a report with the Hamilton Project, Martin Gaynor of the Heinz College of Information Systems and Public Policy at Carnegie Mellon University describes three policies aimed at improving competition in healthcare markets. First, Gaynor recommends eliminating regulations that unintentionally encourage consolidation. For example, Medicare currently pays more for the same medical service if it is owned by a hospital. Second, Gaynor calls for increased funding for antitrust enforcement and revised guidelines that protect small transactions from regulatory oversight. Finally, Gaynor advocates for the creation of a new federal agency that can both monitor prices, costs and quality in healthcare markets and notify the FTC when a potential violation of antitrust laws occurs.
  • In an article published in the Journal of the University of Saint Louis on Health Law and Policy, Jaime S. King of the University of New Zealand in Auckland and Erin C. Fuse Brown of Georgia State University College of Law argue that modern healthcare mergers complicate traditional antitrust analysis because they often involve integrations of horizontal, vertical and inter-market suppliers. Additionally, they warn that cross-market mergers could lead to increased market power and higher prices for healthcare. King and Brown recommend that antitrust regulators and policy analysts begin to analyze the legal and economic implications of acquisitions in multiple markets in light of their anti-competitive potential.
  • State enforcement of antitrust laws can play an important role in preventing consolidation in the healthcare industry, argue Alexandra D. Montague and Katherine L. Gudiksen of The Source on Healthcare Price and Competition and Jamie S. King in a background note for the Milbank Memorial Fund. By comparing merger review practices across the 50 states, Montague, Gudiksen, and King identify the key elements of an effective antitrust framework. They argue that notification requirements, pre-transaction review, the ability to approve and block conditional transactions, and oversight of conditionally approved transactions can help state legislatures address more nuanced forms of consolidation. .
  • In an article by UCLA Law JournalAllison Hoffman of the University of Pennsylvania Law School challenges the assumption underlying modern antitrust analysis that competition will improve health care options. Hoffman explains that the unique structure of healthcare – in which insurers and employers act as intermediaries between patient and provider – makes it difficult to identify the “hypothetical end consumer” in antitrust analysis. Hoffman argues that the repeated “technocratic tinkering” that seeks to correct antitrust analysis of healthcare has created a costly “market bureaucracy”, which diverts resources from alternative policies that might actually solve systemic problems.
  • Nonprofit hospitals should be granted an exemption from antitrust laws, argues lawyer Chad Nelson in an article by Health Matrix: Journal of Law-Medicine at Case Western Reserve University Law School. Nelson posits that the principles of the McCarran-Ferguson Act, which provides an antitrust exception limited to health insurance companies, would be better applied to nonprofit hospitals. Analogous to nonprofit hospitals to utility companies, Nelson argues that nonprofit hospitals are already heavily regulated to protect patients from deceptive marketing practices. This existing regulatory regime meets the policy objectives of consumer protection that typically underpin antitrust regulations. Nelson explains that an antitrust exception would give nonprofit hospitals more freedom to make decisions and alleviate the budgetary problems these institutions face.
  • In an article published in the Chicago Loyola University Law Journal, Spencer Weber Waller of Loyola University Chicago School of Law argues that the legal system should either revert to a traditional antitrust approach to healthcare or create a “more industry-specific healthcare antitrust policy with a deliberate mixture of regulation and competition ”. Waller suggests that the latter approach would involve passing legislation that draws on industry-specific guidelines and deliberately subordinates competition. Doing so, Waller said, would cement “health-care law antitrust” as a defined area and reduce reliance on US Supreme Court precedents that apply to other industries.