Promoting Competition in Healthcare Enforcement and Policy: Framing an Active Competition Agenda

19 Pages Posted: 8 Dec 2018

See all articles by Thomas L. Greaney

Thomas L. Greaney

UC Hastings College of the Law

Barak D. Richman

Duke University, School of Law

Multiple version iconThere are 2 versions of this paper

Date Written: June 18, 2018

Abstract

The policy community, albeit belatedly, now fully recognizes the economic dangers of highly concentrated healthcare markets. The Federal Trade Commission (FTC) and states continue to closely scrutinize hospital mergers. Recent successes by the U.S. Department of Justice (DOJ) in challenging mergers of health insurers are additional indications of invigorated enforcement in the healthcare payment sector. In addition, the FTC, DOJ, and State Attorneys General (AGs) have appropriately dedicated substantial resources to healthcare antitrust enforcement and have achieved significant victories in litigation.

Part I of the AAI White Paper series Competition in the Delivery and Payment of Healthcare Services provided an in-depth examination of the competition concerns and priorities in provider and insurer consolidation — both horizontal and vertical–that is sweeping the industry. This Part II of the AAI White Paper Series advances the discussion to identify and define the policy responses needed to address extant market power and prospective issues raised by consolidated markets. These issues include employing antitrust and other measures to stem monopolistic provider practices, encouraging federal agencies to advocate in correcting anticompetitive state policies, and seeking alternative strategies to promote competition in healthcare provider and payer markets. We emphasize a growing need for advocacy in state policymaking, payment reform, and transparency, including issues such as scrutiny of state medical boards, state efforts to improve price and quality transparency, and encouraging precompetitive policies at the Center for Medicare & Medicaid Services (CMS). The final section concludes with policy recommendations.

America has chosen, wisely we think, to rely on competition to spur innovation, assure quality of care, and control costs in the healthcare sector. Where markets have been allowed to function under competitive conditions — free of anticompetitive regulations, cartels, and monopolies — competition has done its job. Much of the revolutionary change occurring today is designed to improve the function of healthcare markets and deal with problems of market failure and excessive regulation. In many areas however, problems persist. Many markets remain controlled by monopolies, constrained by outdated regulation, and foreclosed to new entrants and ideas from anticompetitive strategies from incumbents. We therefore believe the role of the federal antitrust agencies in making healthcare policy is a vital one, and they should be given the fullest support by Congress, the Executive branch and the States. In light of these observations, we offer a number of takeaways from the analysis that would help frame an active competition policy agenda that complements vigorous antitrust enforcement in healthcare. These include:

* Traditional antitrust measures can prevent the agglomeration of additional harmful market power. However, less traditional and more creative, farsighted, and proactive policies are necessary to police the harmful market power many healthcare entities have already amassed.

* COPA proceedings are unlikely to ascertain when consolidations will generate benefits that outweigh costs to competition. Given the weighty evidence that provider consolidations impose significant economic harm, COPA’s frequently amount to evasions of needed FTC scrutiny.

* To mitigate the anticompetitive consequences of bundling monopolized and unmonopolized hospital services, antitrust enforcers ought to require hospitals and other provider entities to unbundle, at a purchaser’s request, certain services so that the purchaser can negotiate prices. This offers a promising, proactive remedial approach to hospital mergers and would restore some lost competition from excessive consolidation.

* Contractual terms between providers and insurers such as MFNs and anti-steering provisions entrenches dominant providers and insurers, limiting competition and benefits to consumers. Antitrust rules can prohibit the use of such anticompetitive contractual terms and insurance regulators can bar such provisions wherever they threaten to preclude effective price competition.

* States should examine reducing barriers that prevent entry by upstart providers, from overly restrictive rules regarding facility licensure and CON. New outpatient surgery centers, retail clinics and urgent care facilities, and physicians are well positioned to offer alternatives to the traditional inpatient acute care facility.

* Insurance exchanges set up under the ACA offer a platform for effective price and quality comparisons across insurance products and are an important tool for combatting concentration in health insurance markets. While regulatory supervision is necessary in the health insurance markets, excessive regulation could undermine the viability of state insurance markets. The FTC and DOJ should monitor the development of these exchanges, help the states fine tune regulation, and encourage the promotion of pro-competitive regulatory strategies.

* The FTC and DOJ should invest in monitoring and advising state regulators regarding potential harms to competition arising from state regulations and policies. This includes advocating for liberalizing state licensure and scope-of-practice limitations. Where repeal is not feasible, states should consider clarifying standards for, and explicitly require consideration of the competitive impact of, CON determinations.

* State licensing boards dominated by market participants are prone to produce anticompetitive regulations. The FTC should take a proactive role in helping states craft regimes in which medical boards do not have inappropriate leeway without active state supervision. And because many states and Congress are considering how best to revise existing regulatory regimes, the FTC should monitor and guide how policymakers implement mechanisms to actively supervise their professional boards.

* The FTC and DOJ should monitor and support public and private initiatives to establish APCDs and similar databases that compile and disseminate healthcare quality and price data. Greater transparency in healthcare markets can enhance competition and expand informed consumer choice.

* Federal healthcare program regulation has a profound impact on competition. As such, we suggest that the Administration inaugurate an interagency health competition task force to advise CMS on policies that affect the competitiveness of provider and payer markets. The FTC and DOJ should use this task force and other opportunities to advocate and support policies affecting payment, conditions of participation, and quality measures for providers that promote entry and cost-effective delivery of care.

Suggested Citation

Greaney, Thomas L. and Richman, Barak D., Promoting Competition in Healthcare Enforcement and Policy: Framing an Active Competition Agenda (June 18, 2018). American Antitrust Institute, Competition in the Delivery and Payment of Healthcare Services, Economic Research Initiatives at Duke (ERID) Working Paper , Duke Law School Public Law & Legal Theory Series Paper No. 2019-7, Available at SSRN: https://ssrn.com/abstract=3267556 or http://dx.doi.org/10.2139/ssrn.3267556

Thomas L. Greaney

UC Hastings College of the Law ( email )

200 McAllister St
San Francisco, CA 94102
United States
314-496-2665 (Phone)

Barak D. Richman (Contact Author)

Duke University, School of Law ( email )

210 Science Drive
Box 90362
Durham, NC 27708
United States
919-613-7244 (Phone)
919-613-7231 (Fax)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
50
Abstract Views
447
PlumX Metrics