Agenda for Joint FTC/DOJ Hearings
on Health Care and Competition Law and Policy
Wednesday April 9, 2003 2:00 p.m. – 5:00 p.m.
Title: Hospitals - Horizontal Networks and Vertical Arrangements
Hospitals are increasingly affiliating into horizontal networks and entering into vertical arrangements with other health care providers (e.g., physicians, nursing homes, home health agencies, and other entities). These arrangements, which occur against the backdrop of other laws and regulatory constraints, have paralleled several transformations in the nature of hospitals, from doctors' workshops, to the center of integrated delivery networks, to complicated networked affiliates and contractual partners with other entities. Ronald Coase's theory of the firm suggests that transactions can either be organized inter-firm (i.e., through the market) or intra-firm. The development of these arrangements is one example of the reconceptualization of the boundaries of a Coasean firm. What horizontal and vertical arrangements have emerged in the health care marketplace? What are the key drivers for this behavior, and do the type of arrangements that prevail vary across geographic markets? Do consumers prefer these arrangements? Do employers and insurance companies prefer these arrangements?
How do these arrangements change the competitive dynamics, including the relative bargaining power of hospitals and insurers? How do these arrangements affect the definition of the relevant product and geographic markets? How do these arrangements affect cost and quality? Are certain types of consumers particularly adversely affected? What are the pro-competitive and anti-competitive consequences of these arrangements? Are there efficiencies associated with particular arrangements? How should competition law and policy address such arrangements when networks seek to merge? Should the analysis be different when there are other hospitals in the area or there is no geographic overlap among the hospitals? What does economic theory have to say about the circumstances under which these arrangements emerge? Does traditional antitrust analysis, including but not limited to tying doctrine, adequately address the forms of anti-competitive conduct likely to emerge?
- Lawton Robert Burns, Wharton School of Business
- Robert J. Town, University of Minnesota
- Robert E. Hurley, Virginia Commonwealth University on behalf of the Center for Studying Health System Change
- James F. Burgess, Jr., Boston University School of Public Health
Thursday April 10, 2003, Morning Session 9:15 a.m. – 12:30 p.m.
Title: Hospitals - Non-profit Status
Nonprofit hospitals comprise approximately 60% of community hospitals in the United States. Nonprofit insurers comprise/administer a substantial proportion of total premium dollars spent on health care in the United States. Conversely, physicians, nursing homes, and many other health care providers are organized as for-profit operations. How does entity status affect performance? Are there systematic differences between the performance of nonprofit and for-profit entities? How do consumers perceive the performance of nonprofit and for-profit entities, with regard to cost, quality, and access? Do consumers know when they are receiving care from a nonprofit entity? How should competition law and policy address nonprofit status?
- William Lynk, Lexecon Inc.
- Eugene Anthony Fay, Province Healthcare Co.
- Gary J. Young, Boston University School of Public Health
- Cory S. Capps, [Document 2], Northwestern University
- Frank Sloan, Duke University
- Peter Jacobson, University of Michigan
- Dawn M. Touzin, Community Catalyst
Thursday April 10, 2003, Afternoon Session 2:00 p.m. – 5:00 p.m.
Title: Hospital Joint Ventures and Joint Operating Agreements
Hospital joint ventures and joint operating agreements ("JOAs") raise a number of distinct issues for competition law and policy. Because these arrangements fall short of full merger, such collaborations may, even when entered into between rivals, present fewer competitive concerns than a merger would. On the other hand, lack of complete integration may limit the prospect for substantial, pro-competitive efficiencies to be realized. Joint ventures are discussed in the 1996 Statements of Antitrust Enforcement Policy in Health Care jointly issued by the Federal Trade Commission and the Department of Justice ("Statements"), but JOAs are not. What are the advantages and disadvantages of joint ventures and JOAs? Under what circumstances are joint ventures, JOAs, and other forms of cooperation likely to be pro-competitive and under what circumstances are they likely to be anti-competitive? Can some types of joint ventures help limit costly "medical arms races?" If so, would the reduction in this form of rivalry represent merely a savings to the parties, or would it constitute a net benefit to consumers? What other types of efficiencies may result from joint ventures, and what does the available historical evidence indicate about these claims? Do administrative efficiencies, in the absence of clinical integration or efficiencies, constitute a "unity of interest" so as to merit single entity treatment under Copperweld Corp. v. Independence Tube Corp., 467 U.S. 762 (1984)?
- Jeff Miles, Ober Kaler, Grimes & Shriver
- Robert Taylor, Robert Taylor Associates
- Margaret Guerin-Calvert, Competition Policy
- William G. Kopit, Epstein, Becker & Green
- Robert L. Hubbard, New York Attorney General Office
- David Eisenstadt, Microeconomic Consulting and Research Associates, Inc.
- Robert Moses, Oxford Health Plan
Friday April 11, 2003, Morning Session 9:15 am – 12:15 pm
A Tale of Two Cities: Little Rock
In many geographic markets in the United States there has been a significant amount of market turbulence and varying degrees of consolidation among health care providers and insurers. Boston and Little Rock provide two points on the spectrum of market consolidation. To provide a frame of reference for the balance of the hearings, a day will be spent painting a comprehensive picture of current market conditions in Boston and Little Rock. The full range of competitive issues will be addressed, including the cost and quality of the care rendered, the degree of market concentration among providers and insurers, and the impact of market consolidation on the performance of the payor and provider markets. (The session on Little Rock was postponed until this date due to inclement weather.)
- Kevin W. Ryan, Arkansas Center for Health Improvement
- Joseph M. Meyer, [Document 2], ALLTEL, CorporationInc.
- Jonathan R. Bates, M.D., Arkansas Children’s Hospital
- Russell D. Harrington, Jr., Baptist Health
- James J. Kane, Jr., M.D., [Document 2 ( Addendum to Testimony)] Little Rock Cardiology Clinic, P.A. Arkansas Heart Hospital
- Robert L. Shoptaw, Arkansas Blue Cross and Blue Shield
- John Wilson, M.D., Arkansas Medical Society
Friday April 11, 2003, Afternoon Session 1:30 p.m. – 5:00 p.m.
Title: Hospitals - Post-Merger Conduct
Before a hospital merger is consummated, the parties routinely make representations about the pro-competitive benefits of the transaction. After a hospital merger, do the merged entities achieve the efficiencies they claim? Are the merged entities able to exert market power and raise prices? To what extent have hospitals actually combined administrative and/or clinical operations? Does patient flow data or "critical loss" computations accurately predict the post-merger behavior of hospitals in both the short and long-run? Do critical loss computations cast any light on the relative magnitude of post-merger price-increases, if any? How effective are payors at steering patients to alternative hospitals in response to post-merger price increases? What other strategies do payors have to resist demands for higher prices? How do state "sufficiency" requirements influence the bargaining power of hospital and insurers? What roles do patients, employers, insurance product design, and non-hospital facilities play? What is the significance of any excess capacity in the hands of rivals? How effective are "non-traditional remedies" (e.g., price freezes, indexed prices, community commitments, and the like) in addressing the market power that a merger may confer?
- Lawrence Wu, National Economic Research Associates, Inc.
- David Balto, White & Case
- Jacgueline D. Scott, Partner, Riddering, Schmidt & Howlett, LLP
- William G. Kopit, Epstein Becker & Green
- James Langenfeld, LECG, L.C.C.
- David A. Argue, Economists Incorporated
- Seth Sacher, Charles River Associates
- Robert Taylor, Robert Taylor Associates
- Kirby O. Smith, Susquehanna Health System
- Jamie E. Hopping, Ardent Health Services