Antitrust's Healthcare Conundrum: Cross-Market Mergers and the Rise of System Power

91 Pages Posted: 11 Mar 2022 Last revised: 30 Jun 2022

See all articles by Jaime S. King

Jaime S. King

Faculty of Law, The University of Auckland

Alexandra D. Montague

UC Hastings Law

Daniel Arnold

University of California, Berkeley - School of Public Health

Thomas L. Greaney

UC Hastings Law

Date Written: February 10, 2022

Abstract

As healthcare markets continue to consolidate and prices continue to rise, economists, legal scholars, antitrust enforcers, and policymakers have the opportunity and obligation to examine how the dynamics of our healthcare markets have changed over time and how those changes affect consumers and competition. Although antitrust merger law is designed to arrest anticompetitive harms in their incipiency, it has failed to prevent anticompetitive consolidation in most sectors of the healthcare industry. Of particular concern is the inattention of antitrust enforcers to the growing market power of healthcare systems that span multiple local geographic markets. While more than half of all hospital mergers have occurred across geographic markets in the last decade, none have been challenged in federal court. Emerging economic data suggest that these mergers can result in price increases for hospitals throughout the newly merged systems, and a number of cases document the propensity of hospital systems to exercise post-merger market power. As economic knowledge develops, new analytic frameworks are sometimes needed. This article develops an initial framework for cross-market merger analysis, outlining the circumstances in which anticompetitive effects may result because the merger increases the likelihood of tying or enhances market power in a properly defined cluster market. Our hope is that this framework will encourage economists, legal scholars, and antitrust enforcers to work collaboratively to identify and restrict the growth of “system power” resulting from anticompetitive cross-market healthcare mergers.

Keywords: Antitrust, Healthcare, Mergers, Economics

Suggested Citation

King, Jaime S. and Montague, Alexandra and Arnold, Daniel and Greaney, Thomas L., Antitrust's Healthcare Conundrum: Cross-Market Mergers and the Rise of System Power (February 10, 2022). Hastings Law Journal, May 2023 Forthcoming, UC Hastings Research Paper Forthcoming, Available at SSRN: https://ssrn.com/abstract=4037747 or http://dx.doi.org/10.2139/ssrn.4037747

Jaime S. King (Contact Author)

Faculty of Law, The University of Auckland ( email )

Private Bag 92019
Auckland Mail Centre
Auckland, 1142
New Zealand

Alexandra Montague

UC Hastings Law

200 McAllister Street
San Francisco, CA 94102
United States

Daniel Arnold

University of California, Berkeley - School of Public Health ( email )

50 University Hall #7360
Berkeley, CA 94720-7360
United States

Thomas L. Greaney

UC Hastings Law ( email )

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

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