DEPARTMENT OF JUSTICE
AND FEDERAL TRADE COMMISSION ISSUE REPORT ON COMPETITION AND HEALTH
CARE
Report Reviews the Role
of Competition, Provides Recommendations to Improve the Balance Between
Competition and Regulation in Health Care
WASHINGTON, D.C. The Department of Justice
(DOJ) and the Federal Trade Commission (FTC) today issued a joint report,
Improving Health Care: A Dose of Competition, to inform consumers,
businesses, and policy makers on a range of issues affecting the cost,
quality, and accessibility of health care. Culminating a two-year project,
the report reviews the role of competition and provides recommendations
to improve the balance between competition and regulation in health
care. The report provides significant recommendations and observations
on a variety of topics, including the availability of information regarding
the price and quality of health care services; cross-subsidies; physician
collective bargaining; insurance mandates; hospital merger analysis;
managed care organizations' bargaining power; and hospital group purchasing
organizations.
"Health care is a $1.6 trillion industry that accounted
for 14 percent of GDP in 2002. This report is the first comprehensive
review of how competition and antitrust enforcement can be enhanced
to produce the health care that consumers want," said R. Hewitt Pate,
Assistant Attorney General for the Department of Justice's Antitrust
Division. "Health care is an industry that can benefit from continued
vigorous enforcement of the antitrust laws."
The report is based on 27 days of DOJ/FTC Joint
Hearings on Health Care and Competition Law and Policy, held from February
through October 2003; an FTC-sponsored workshop in September 2002; and
independent research. The hearings gathered testimony and written comments
from more than 300 participants, including representatives of various
provider groups, insurers, employers, lawyers, patient advocates, and
leading scholars on subjects ranging from antitrust and economics to
health care quality and informed consent. Almost 6,000 pages of transcripts
of the hearings and workshop and all written submissions are available
on the DOJ's and FTC's website.
"Healthy competition equals healthy consumers.
Consumers want high-quality, affordable, accessible health care, and
the challenge of providing it requires new strategies," said FTC Chairman
Timothy J. Muris. "Vigorous competition promotes the delivery of high-quality,
cost-effective health care. This report provides guideposts for policy
makers who want to ensure access to quality care and help consumers
make informed choices."
The American free-market system is built on the
premise that open competition and consumer choice maximize consumer
welfare even when complex products and services such as health
care are involved. The DOJ and the FTC play an important role in safeguarding
the free-market system from anticompetitive conduct by bringing enforcement
actions against parties who violate antitrust and consumer protection
laws. The report notes, however, that competition cannot solve all of
the problems facing American health care. The report identifies prerequisites
to effective competition, and provides concrete recommendations to improve
the performance of the health care marketplace.
The recommendations in the report include the following:
- Private payors, governments,
and providers should continue experiments to improve incentives for
providers to lower costs and enhance quality and for consumers to seek
lower prices and better quality. Therefore, private payors, governments,
and providers should improve measures of price and quality, give consumers
more information on prices and quality in ways that they find useful
and relevant, give consumers greater incentives to use such information,
and align the interests of providers and consumers.
- States should consider the following steps to
decrease barriers to entry into provider markets:
- Reconsider whether Certificate of Need Programs
best serve their citizens' health care needs. On balance, the DOJ and
the FTC believe that such programs are not successful in containing
health care costs, and they pose serious anticompetitive risks that
usually outweigh their purported economic benefits;
- Consider broadening the membership of state
licensing boards, as boards with broader membership could be less likely
to limit competition; and
- Consider implementing uniform licensing standards
to reduce barriers to telemedicine and competition from out-of-state
providers.
- Governments should reexamine the role of subsidies
in health care markets in light of their inefficiencies and the potential
to distort competition. Health care markets have numerous
cross subsidies and indirect subsidies. Competitive markets compete
away the higher prices and profits needed to sustain such subsidies.
Competition cannot provide resources to those who lack them, and it
does not work well when providers are expected to use higher profits
in certain areas to cross-subsidize uncompensated care. In general,
it is more efficient to provide subsidies directly to those who should
receive them to ensure transparency.
- Governments should not enact
legislation to permit independent physicians to bargain collectively.
Physician collective bargaining leads to higher prices and is unlikely
to result in higher-quality care. There are numerous ways in which independent
physicians can work together to improve quality without violating the
antitrust laws.
- States should consider the potential costs and
benefits of regulating pharmacy benefit manager (PBM) transparency.
In general, vigorous competition, rather than regulation, in the marketplace
for PBMs is more likely to arrive at an optimal level of transparency.
Just as competitive forces encourage PBMs to offer their best price
and service combinations to health plan sponsors to gain access to subscribers,
competition should also encourage disclosure of the information that
health plan sponsors require to decide which PBM to contract.
- Governments should reconsider whether current
mandates best serve their citizens' health care needs. When deciding
whether to mandate particular benefits, governments should consider
that mandates are likely to reduce competition, restrict consumer choice,
raise the cost of health insurance, and increase the number of uninsured
Americans.
The report also offers the agencies' perspective
on a number of current antitrust enforcement issues in health care.
The agencies' observations include the following:
- Payment for performance (P4P) arrangements among
a group of physicians may constitute a form of financial risk-sharing.
(Chapter 2)
- The determination of whether a physician network
joint venture is clinically integrated depends on all the facts and
circumstances. This inquiry may be aided, in some circumstances, by
considering a number of questions, such as the goals of the joint venture,
the likelihood those goals will be met, and the nexus between joint
contracting and the attainment of those goals. (Chapter 2)
- The "hypothetical monopolist" test of the Merger
Guidelines should be used to define geographic markets in hospital merger
cases. To date, the agencies' experience and research indicate that
the Elzinga-Hogarty test is not valid or reliable in defining geographic
markets in hospital merger cases. The limitations and difficulties of
conducting a proper critical loss analysis should be considered fully
if this method is used to define a hospital geographic market. The types
of evidence used in all merger cases such as strategic planning
documents of the merging parties and customer testimony and documents
should be used by the courts to help delineate relevant geographic
markets in hospital merger cases. (Chapter 4)
- Hospital merger analysis should not be affected
by a hospital's institutional status (i.e. nonprofit v. for-profit).
(Chapter 4)
- The resolution of hospital merger challenges through
community commitments generally should be disfavored. (Chapter 4)
- The safety zone provision of Statement 7 of the
DOJ and FTC Statements of Antitrust Enforcement Policy in Health
Care does not protect anticompetitive contracting practices of
group purchasing organizations (GPOs). (Chapter 4)
- The available evidence does not indicate that there
is a monopsony power problem in most health care markets. In any event,
countervailing power is not an effective response to disparities in
bargaining power between payors and providers. (Chapter 6)
- Private parties should not engage in anticompetitive
conduct in responding to marketplace developments. (Chapters 2, 4, and
6)
The report addresses a wide range of topics, including
consumer-driven health care, hospital mergers, quality ratings of hospitals
and physicians, payment mechanisms for health care services, group purchasing
organizations, mandated benefits, certificate of need regulations, licensure,
allied health professionals, pharmaceutical pricing, pharmaceutical
benefit managers, single-specialty hospitals, buying power in health
care markets, and clinical and financial integration.
Copies of the report can be found on the Department
of Justice's website at: www.usdoj.gov/atr
Contacts:
DOJ Press Office: Gina Talamona, 202-514-2007
DOJ Staff: Mark Botti, 202-307-0001
FTC Press Office: Nancy Judy and Jen Schwartzman,
202-326-2180
FTC Staff: David Hyman, 202-326-2662
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