When Antitrust Fails: Public Health, Public Hospitals, and Public Values

Abstract

Current antitrust thinking is ill-equipped to resolve the conflict between consumer welfare and the well-being of the poor. In most markets, this conflict is analytically irrelevant: antitrust normally regards the poor as not "entitled" to most goods or services. But healthcare is different. Because antitrust enforcement policy ignores this difference, it mistakenly assumes that lower prices inevitably enhance social welfare. The economic principles that inform antitrust analysis are blind to the concerns of public hospitals. Moreover, institutional constraints, such as rules of standing and of evidence, along with traditional notions about the limits of judicial competence, foreclose antitrust: courts from undertaking the kinds of wide-ranging inquiries necessary to comprehend and remedy the competitive disadvantages of public hospitals. As a result, antitrust policy overlooks the "market" for public health, a shortcoming that marks not just a failure of antitrust policy, but a failure of unregulated competition in the market for hospital services.

This article first describes the great wave of mergers that has occurred in the hospital and managed care industries over the past few years. It then discusses the responses of antitrust courts to this dramatic increase in concentration. Finally, concluding that antitrust doctrine does not and cannot usefully consider the social implications of this concentration, it argues that renewed regulation of the hospital industry is both inevitable and necessary, not only because it is a moral imperative but also because unbridled competition in this area does not serve society well.