Hospital Round Table
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?
The definition of the geographic market in hospital antitrust cases has been controversial. In several 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?
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 2:00 pm - 5:00 pm
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?
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?