Despite the fact that the U.S. healthcare system is a highly regulated industry, and the fact that there are numerous legal boundaries around the consolidation of provider organizations and other healthcare organizations, one legal expert believes that the time has come for federal policy leaders to reconsider the tools in their toolbox and apply some new combination of the enforcement of existing antitrust regulation and what he terms “creative regulatory interventions,” given that he believes that the current set of regulations and guidelines is not working.
In a Perspectives op-ed published online in The New England Journal of Medicine online on March 18, Jaime S. King, J.D., Ph.D., uses his article, “On Consolidation and Competition—The Triumphs of Health Care Antitrust Law,” to express his belief that antitrust law has failed healthcare consumers and policy leaders, by failing to curb intensifying consolidation among hospitals and health systems and other provider organizations and thus, failing to curb rising prices and the market power of consolidated healthcare business organizations. King is a professor in the Faculty of Law at the University of Auckland, in New Zealand.
King begins his “Perspectives” piece by noting that, “Historically, the United States has relied nearly entirely on market competition to control prices and promote quality in health care. Yet health care markets haven’t been healthy for some time. Over the past 30 years, health care consolidation has gone largely unchecked by federal and state antitrust enforcers, which has resulted in higher prices, stagnant quality of care, and limited access to care for patients. Similarly, consolidation has contributed to the availability of fewer employment options, limited wage growth, longer hours, and staff shortages for health care providers. Antitrust law is designed to prevent such harms, but its failure to evolve alongside the health care industry has led to pervasive consolidation, which now necessitates regulation in some markets to address market-power abuses that competitive forces can no longer govern.”
What’s more, he writes, “Health care consolidation has occurred among competitors and throughout health care sectors, including in the physician, hospital, health system, insurer, pharmacy benefit manager (PBM), and laboratory markets. For example, in the past decade, UnitedHealth Group has acquired 35 health care companies and now operates the largest U.S. health insurance company, as well as a network of 53,000 physicians in 15 states, a PBM that handles more than 1 billion prescriptions each year, a health care claims-processing company, and a health care data-analytics company. Throughout the industry, consolidation has occurred by means of horizontal, vertical, and cross-market transactions as well as private-equity investment.”
Not only have the current architecture of antitrust law not prevented massive consolidation, King notes; it has failed to deliver on the underlying promise of antitrust law, which is to prevent anti-competitive mergers and acquisitions that collectively result in ever-increasing costs and prices for the payers, purchasers, and consumers of healthcare in the U.S. Indeed, in spite of all the regulations on the books, he notes, “[T]he U.S. health care industry is the most consolidated it’s ever been. Consolidation has accelerated in large part because health care markets have evolved faster than antitrust enforcement has. In the 1990s and early 2000s, the FTC lost six consecutive horizontal hospital-merger cases. Federal agencies didn’t challenge another hospital merger for nearly a decade, which permitted substantial hospital-market consolidation nationwide. During this time, however, health economists made numerous advances in defining markets and modeling market behavior that have allowed the FTC [Federal Trade Commission] to more successfully block anticompetitive horizontal hospital mergers. Despite these successes, harmful effects of prior mergers persist.”
King does note that, “In July 2021, President Joe Biden issued an executive order emphasizing the importance of enforcing antitrust laws to address the harms associated with health care consolidation. Recent FTC action to investigate and block several hospital mergers reflects a commitment to reinvigorating antitrust law. At the state level, the California attorney general recently imposed conditions on Cedars–Sinai Health System’s cross-market acquisition of Huntington Memorial Hospital to guard against potential competitive harms. Yet even reinvigorated antitrust enforcement is unlikely to rectify the harms caused by health care consolidation,” he states. “Antitrust litigation is resource intensive and highly unpredictable. Antitrust enforcers can’t challenge every potentially anticompetitive transaction, and they haven’t successfully broken up dominant systems, insurance carriers, or large conglomerates. As a result, the consolidation that exists in health care is probably here to stay. In response, scholars and policymakers have begun recommending regulatory interventions — such as affordability standards (which permit state officials to reject insurance-premium increases exceeding certain thresholds), price caps on health care services, and hospital global budgets (prospectively determined annual limits on hospital revenue) — to help control prices and quality in markets with limited competition. These approaches must be carefully tailored to suit the political dynamics and structural features of a particular market.”
And that leaves King to conclude his op-ed thus: “Given the health care industry’s growing complexity, future oversight could involve a combination of more responsive antitrust enforcement and creative regulatory interventions. Combining competitive and regulatory forces may offer the only hope for controlling health care prices, restoring high-quality care, protecting health care workers, and preserving and expanding access to care.”
