January 26th, 2015
In this post, I want to focus on the key role economic analysis plays in the Federal Trade Commission (FTC)’s health care enforcement program. I use this lens to look first at how the FTC has become more successful in challenging hospital mergers, and then to rebut the notion that the Affordable Care Act is somehow a “free pass” for health care industry consolidation.
After the federal antitrust agencies successfully challenged a number of hospital mergers in the 1980s and early 1990s, we suffered a string of court losses in the mid- and late-1990s, even in cases involving highly concentrated hospital markets. In 2002, the FTC decided to take a step back and examine the reasons for our losses, and whether our analysis of hospital markets was correct.
We engaged in an in-depth retrospective study, used our authority to collect data from hospitals and insurance companies, and held workshops along with DOJ. (See here, here, here, and here.) Cory Capps of Bates and White, and other economists contributed significantly to our understanding as well. This intense period of reflection led to several important papers demonstrating that the consummated mergers stemming from the hospital merger challenges we lost—including those involving non-profits—resulted in anticompetitive effects, particularly increased prices. We also determined that our losses were due in part to the courts’ acceptance of faulty economic analysis of geographic and competitive effects. (See here, here, and here.)Read the rest of this entry »