Not just an opinion: competition really is key to healthy health care markets

In a variety of industries, the FTC advocates for policies that promote competition. Why? Because studies show competition works, for our citizens and for our economy. Competition typically improves consumer welfare through lower prices, expanded output, better service and more innovation.

Yet, some stakeholders argue that health care markets are different. They claim that, to achieve better outcomes and lower costs, health care markets need more cooperation, not more competition. We disagree. While FTC staff fully support increased collaboration among health care providers to improve care delivery, we continue to believe that competition is good for health care consumers.

We highlighted some of this evidence in a recent FTC staff advocacy letter, which discussed the potential consequences of yet another proposal to grant antitrust immunity to certain kinds of information sharing and joint negotiations among competing health care providers. We cited to a significant and growing body of empirical economic research showing that increased consolidation and certain kinds of coordination among health care providers increase the risk of higher prices, without offsetting improvements in quality.

As these studies show, the evidence does not support reliance on cooperation, rather than competition, to improve the performance of health care markets. For instance, we cited a February 2015 study commissioned by the National Academy of Social Insurance, in which the authors concluded:

there is little evidence that integrating hospital and physician care has helped to promote quality or reduce costs. Indeed, there is growing evidence that hospital-physician integration has raised physician costs, hospital prices and per capita medical care spending. Similarly, hospital integration into health plan operations and capitated contracting was not associated either with clinical efficiency (e.g. shorter lengths of stay) or financial efficiency (e.g. lower charges per admission).

Competition and collaboration are not an either/or proposition, despite what some have claimed. Simply put: the antitrust laws permit procompetitive collaborations. As the Commission has urged time and time and time again, the antitrust laws are not a barrier to the formation of efficient health care collaboratives that benefit health care consumers. In fact, we rarely challenge mergers, joint ventures or other collaborations among health care providers on antitrust grounds. (Consider this statistic: In 2014, there were 752 transactions involving hospitals; the FTC challenged only two.) But when a merger or other form of collaboration may allow providers to demand higher fees through increased bargaining leverage, the antitrust laws are the appropriate mechanism for determining whether consolidation or collaboration, on balance, is more likely to result in higher costs without corresponding improvements in quality of care. And the risk of harm increases when integration or coordination involves a substantial portion of the competing providers in any particular service or specialty.

Current evidence does not support special antitrust rules for health care collaboratives, including those formed via Certificates of Public Advantage (COPAs). Unless or until the evidence takes a different direction, the FTC will continue to urge policymakers to trust in competition to foster the kinds of collaborations most likely to benefit consumers.

*Marina is the Director of the Office of Policy Planning, Francine is the Director of the Bureau of Economics, and Debbie is the Director of the Bureau of Competition. The views expressed are their own and do not necessarily reflect the opinion of the Commission or of any individual Commissioner.

 

Comments

We couldn't agree with you more. Thank you for getting the message out that the rules of economics apply to hospitals, too. At the Association of Independent Doctors, we work to help doctors stay independent, because we know that independent doctors help keep costs down, and access and quality of care up. We were singing your song when we sided with the FTC, which took part in the antitrust case in Idaho, where St. Luke's Health System acquired Saltzer Medical Group. The appeals course ruled that the merger had to be unwound. AID submitted an amicus brief citing all the points you mentioned. Collaboration can take place without consolidation.
Thank you,
Marni Jameson, executive director, The Association of Independent Doctors
www.aid-us.org.

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