FOR RELEASE:  JUNE 24, 1992

     ANTITRUST ENFORCEMENT HELPS CONTROL HEALTH CARE COSTS,
                FTC TELLS CONGRESSIONAL COMMITTEE

     Although brought to bear in the health care industry only
since the mid-1970s, antitrust enforcement has promoted major
reforms -- including the development of a variety of "managed
care" health plans -- that have boosted competition and helped
contain costs, a senior attorney at the Federal Trade Commission
told a Congressional panel this morning.  The FTC added that
competition improves the performance of hospitals under the
current health care system and that antitrust enforcement will
continue to play a role in ensuring such competition in the
foreseeable future.

     The FTC's testimony was delivered by James C. Egan, Jr., a
Director for Litigation in the FTC's Bureau of Competition, at a
hearing of the U.S. Congress Joint Economic Committee's Subcom-
mittee on Investment, Jobs, and Prices.  The topic was the
structure of the hospital industry in the 21st century.

     While health care markets differ in many respects from
textbook competitive markets -- for example, some have cited a
relative lack of access to information for patients, and third-
party payers blunt the impact of price on patient purchasing
decisions -- market forces still play a valuable role in the
industry, according to the Commission testimony.  Indeed, Egan
said, the growing demand from both patients and payers for more
information and more cost-effective care has led to a more
competitive environment and, in turn, market responses such as
health maintenance organizations and preferred provider
organizations.

                            - more -
Hospital Testimony--06/24/92)

     Competitive market forces also are needed to help make hos-
pitals work well, according to the FTC.  The "clearest benefit"
of competition in the hospital industry is the opportunity it
offers third party payers to contain costs through managed care
price competition, Egan said.  This kind of competition is
becoming increasingly widespread, he added, noting that many
health care reform plans would rely more heavily on it.  "The
Commission places particular importance in its hospital merger
enforcement activities on the preservation of the hospital
alternatives needed to make managed care work," Egan said. 

     Even so, according to the Commission testimony, most mergers
and joint ventures are likely to help consumers, as evidenced by
the fact that "only a handful" of the 50-100 hospital mergers and
similar transactions are investigated -- let alone challenged --
by the two federal antitrust authorities each year.  Moreover,
Egan added, neither has ever challenged a hospital joint venture. 
In fact, according to the FTC testimony, when they have chal-
lenged mergers, both the FTC and the Department of Justice often
have found joint ventures "desirable alternatives for hospitals
to achieve efficiencies to improve specific services without
sacrificing the larger benefits of price and quality competition
by merging their entire operations."

     In conclusion, Egan pointed to the considerable federal
effort to publicize hospital merger enforcement policies "so as
not to discourage legal, beneficial transactions." 

     Copies of the Commission testimony are available from the
FTC's Public Reference Branch, Room 130, 6th Street and Pennsyl-
vania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY
1-866-653-4261.

                              # # #

MEDIA CONTACT:      Bonnie Jansen, Office of Public Affairs
                    202-326-2161

STAFF CONTACT:      James C. Egan, Jr., Bureau of Competition
                    202-326-2886

(hosptest)