Agenda for Joint FTC/DOJ Hearings on Health Care and Competition Law and Policy

 

March, 2003

 

Wednesday March 26, 2003, Morning Session

Title: Defining Product Markets for Hospitals

The definition of the product market for hospitals has typically been at a high level of generality, with the product defined as "acute care inpatient hospital services" or "anchor hospitals." Health care is increasingly provided on an outpatient basis, and general inpatient hospitals face competition for the services they deliver from a range of providers. What, if any, are the impacts of these changes on the definition of a hospital product market? What, if any, are the impacts of these changes on competition for services provided by hospitals? What developments have there been in economic theory with regard to defining hospital product markets? How do payors (including employers) define product markets? How do patients and physicians define product markets? What data are available to assist in the formulation of an appropriate product market?

 

Wednesday March 26, 2003, Afternoon Session

Title: Defining Geographic Markets for Hospitals

The definition of the geographic market in hospital antitrust cases has been controversial. In several recent high-profile hospital merger cases, judges have rejected testimony from payors about their limited ability to steer patients to lower-cost providers in distant locations, and determined that the geographic market was quite broad. In most of these cases, the geographic market has been defined through the use of Elzinga-Hogarty patient flow criteria. Does the Elzinga-Hogarty model represent the best current tool for defining the relevant geographic market for hospital antitrust cases? What are the weaknesses of this model? What developments have there been in economic theory with regard to defining hospital geographic markets? What data are available to assist in the formulation of an appropriate geographic market? How do payors (including employers) define hospital geographic markets? How do patients and physicians define hospital geographic markets? Does the type of illness and the nature of the recommended treatment influence the size of the hospital geographic market? What is known about the actual size of geographic markets for hospital services?

 

Thursday March 27, 2003 Morning Session

Title: Single Specialty Hospitals

In recent years, single-specialty hospitals have emerged in various locations in the United States. Instead of offering a full-range of inpatient services, these hospitals focus on providing services relating to a single medical specialty or cluster of specialties (typically cardiology/cardiac surgery or orthopedic surgery). What factors have driven this unbundling of inpatient hospital services? What have been the effects of this unbundling? Has quality of care been enhanced as "focused factories" have emerged? Have costs and access increased or decreased? How has competition been affected for services provided by both the general inpatient hospital and the single-specialty hospital, and for services provided only by the general inpatient hospital? Is this development any different than the emergence of specialized hospitals for children, rehabilitation, and psychiatry? What actions have general inpatient hospitals taken in response to the emergence of competition from single-specialty hospitals? Do any of these actions involve anti-competitive conduct?

 

Thursday March 27, 2003, Afternoon Session

Title: Contracting Practices

In recent years, some providers have developed complex networks for the delivery of health care services. These networks frequently involve multiple geographic and product markets. In several instances, there have been complaints that such provider networks are requiring that payors that wish to contract with a "desirable" hospital in one product or geographic market, must also contract with all other hospitals offered by the network, and include all network hospitals in their "most favored" tier for purposes of co-payments and other financial incentives. Payors allege that these contracts restrict their ability to steer patients to lower-cost providers in particular geographic markets. How prevalent is such conduct? What does economic theory indicate about the circumstances under which such conduct is likely to emerge? When are such arrangements likely to be pro-competitive and when are they likely to be anti-competitive? Does traditional antitrust analysis, including but not limited to tying doctrine, adequately address the forms of anti-competitive conduct likely to emerge? Does the existence of such conduct have any implications for merger review?

 

Friday March 28, 2003, Morning Session

Title: Issues in Litigating Hospital Mergers

Prior to 1994, the Federal Trade Commission and the Department of Justice had considerable success in challenging hospital mergers. During the intervening eight years the Commission and the Department lost seven successive cases challenging hospital mergers. What explains this string of losses? Do these cases suggest that courts have become more skeptical of competition law and policy as applied to health care? What, if any, are the broader prospective implications of these losses? What strategies should enforcement authorities employ to ensure their efforts are targeted appropriately in the future?

 

April, 2003

 

Wednesday April 9, 2003

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?

 

Thursday April 10, 2003, Morning Session

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?

 

Thursday April 10, 2003, Afternoon Session

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)?

 

Friday April 11, 2003, Morning Session

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?