Managed Competition, Integrated Delivery Systems and Antitrust

Abstract:     
A central question confronting proponents of managed competition during the health reform debate in 1994 was whether competitive networks or integrated delivery systems would emerge. Under reformers’ vision, controlling costs depended on the emergence of a sufficient number of efficient and viable integrated delivery systems. Conversely, if one or a few integrated networks dominate the market for physician or hospital services, rivalry on the main issues of health care cost control would likely dissipate. This article argues that vigilant and sensible antitrust enforcement was also a prerequisite for the success of the managed competition model. Despite the considerable emphasis on economic analysis in antitrust commentary and litigation, neither commentators nor judges have carefully explored the implications of market failure for antitrust doctrine in health care cases. Market imperfections add significantly to the competitive risks posed by restraints of trade and other conduct policed by antitrust law. Moreover, these conditions diminish the likelihood that self-correcting market forces will ameliorate whatever dangers antitrust law misses. Economic evidence suggesting that a large part of the country can support only the bare minimum of efficiently-sized integrated systems adds to the challenge facing market based reform.

Number of Pages in PDF File: 39

Keywords: health care reform, antitrust, integrated delivery systems, HMOs, FTC, vertical integration, PHOs, PPOs, physicians, hospital competition, physician cartels, provider networks, exclusion

Accepted Paper Series