Questioning Traditional Antitrust Presumptions: Price and Non-Price Competition in Hospital Markets

Abstract

Hospital mergers challenge basic assumptions about the effects of market power in the health care industry. Antitrust courts have struggled with claims that hospital mergers may in fact reduce costs and lower prices. This Article assesses the validity of these economic claims in the context of an industry that has undergone radical transformations in recent years. The Article also explores how such arguments should be treated as a matter of antitrust doctrine in an area of the law that relies heavily on market share presumptions and rule-based decision making. The economics of hospital mergers directly challenge core antitrust beliefs: the belief that competition will efficiently allocate resources along price and non-price dimensions, and the belief that competition will lower prices. The resolution of these issues will have implications for antitrust law that extend far beyond the health care field. The Article contends that courts should employ a total welfare standard of merger review and attempt to directly assess the value of non-price competition. The Article further argues that courts should avoid focusing exclusively on consumer surplus and should reject hospital overtures to entertain a variety of non-economic justifications for merger.

JEL Classification: L40, I11, K21