Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Commissioner Brill discusses competition in U.S. health care markets, (Jun 10, 2014)

By Greg Hammond, J.D.

FTC Commissioner Julie Brill provided the keynote address to the 2014 Hal White Antitrust Conference in Washington, D.C., discussing competition in U.S. health care markets. Her address covered the history of the FTC’s hospital merger program and how the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) has affected competition and enforcement within the country.

Hospital merger program. According to Brill, the FTC and other federal antitrust agencies faced a string of hospital merger court losses in the 1990s that resulted in anticompetitive effects and increased health care costs. Further investigations discovered that the agencies’ court losses were partially caused by the courts’ acceptance of faulty economic analysis of geographic markets and competitive effects, she noted. Consequently, the FTC developed the bargaining and “willingness-to-pay” model, which it believes more accurately reflects how hospitals compete by focusing on health care providers’ leverage with health plans. Brill noted that the new framework has led to an “impressive string of victories,” including the U.S. Court of Appeals in Cincinnati’s decision in ProMedica Health System, Inc. v FTC.

In ProMedica, the appellate court adopted the FTC’s use of the bargaining modeling and “willingness-to-pay” theory and found that ProMedica would have greatly enhanced bargaining leverage post-merger. Specifically, the court determined that health plans would not be able to offer a competitive product without including either ProMedica or the hospital it was acquiring in their hospital network.

“I am proud to have authored the Commission’s decision in ProMedica,” stated Commissioner Brill. “And I give enormous credit to former FTC Chairman Tim Muris and Mike Vita from our Bureau of Economics who recognized fifteen years ago that our hospital merger work had hit an iceberg, and worked very hard to right our health care enforcement ship.”

ACA and competition enforcement. Commissioner Brill also discussed how some people believe the ACA is at odds with antitrust enforcement. “I do not believe that is the case,” said Brill, “because the FTC’s work and the ACA share the common goals of promoting high quality and cost-effective health care.”

Specifically, Brill noted that the creation of state-based health insurance marketplaces, or “exchanges,” encourages greater competition in local insurance markets, which drives premiums down. In addition, the ACA’s health care financing provisions and Medicare Shared Savings Program largely depend on competitive markets in order to provide intended benefits to consumers; and providers are still required to compete in their own markets, particularly on quality and access to care.

Nevertheless, the implementation of the ACA has led to an increase of mergers among providers, physicians, and hospitals. Brill acknowledged that some providers feel that the Medicare program encourages providers to come together to create organizations that will better enable collaboration, but they feel antitrust agencies will nevertheless challenge them. “These contentions are creative, but misguided,” she said. Instead, Brill noted that the ACA does not encourage or require mergers, but simply encourages providers to establish entities that coordinate patient care services. In addition, she asserted that antitrust aligns naturally with the goals of Accountable Care Organizations and the ACA does not express or encourage consolidation among competing entities.

News: Antitrust FederalTradeCommissionNews