Study Questions FTC’s Hospital Antitrust Enforcement

April 25, 2024
Researchers found that of 1,164 hospital mergers from 2000 to 2020, the FTC challenged only 13 of them

While the Federal Trade Commission is being criticized by some healthcare associations for being too assertive in banning noncompete agreements, a new study in the journal American Economic Review suggests that lax enforcement of antitrust laws by the FTC has led to reduced competition and higher prices for hospital care.

The study, co-authored by Yale University economist Zack Cooper, Ph.D., and conducted in collaboration with researchers at Harvard, the University of Chicago, and the University of Wisconsin-Madison, found that of 1,164 mergers among the nation’s approximately 5,000 acute-care hospitals that occurred in the United States from 2000 to 2020, the FTC challenged only 13 of them — an enforcement rate of about 1 percent.

The research suggests that the FTC, using standard screening tools available to the agency during that period, could have flagged 20 percent of the mergers — 238 transactions — as likely to cause reduced competition and increase prices.

Using data on the prices that hospitals negotiate with private insurers, the researchers found that mergers the FTC could have challenged as predictably anti-competitive between 2010 and 2015 eventually led to price increases of 5 percent or more.

“It is plainly clear that there has been under-enforcement of antitrust laws in the hospital sector,” said Cooper, an associate professor of health policy at the Yale School of Public Health and of economics in Yale’s Faculty of Arts and Sciences, in a statement. “We show that about 20 percent of hospital mergers from 2002 to 2020 could have been easily predicted to increase concentration, lessen competition, and raise prices.

“Since 2000, hospital prices have grown faster than prices in any other sector of the economy,” Cooper added. “The average price of an inpatient admission is now nearly $25,000. We need to be doing more to preserve competition in U.S. hospital markets.”

Another new study in the journal Health Services Research looked at the impacts of cross-market hospital mergers on commercial prices and measures of quality. Noting that the FTC has not challenged a cross-market hospital merger, the researchers found that six years after acquisition, cross-market hospital mergers had increased acquirer prices by 12.9 percent relative to control hospitals, but had no discernible impact on mortality and readmission rates for heart failure, heart attacks and pneumonia.  

The researchers said that additional evidence on the price and quality effects of cross-market mergers is needed at a time when over half of recent hospital mergers have been cross-market.

 

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