FTC and DOJ 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
The Federal Trade Commission and Department of Justice 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.
“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 report is based on 27 days of FTC/DOJ 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 FTC's Web site.
“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, DOJ Assistant Attorney
General, Antitrust. “Health care is an industry that can benefit from
continued vigorous enforcement of the antitrust laws.”
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 FTC and
the DOJ play an important role in safeguarding the free-market system from
anticompetitive conduct by bringing enforcement actions against parties that
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:
a.
Reconsider whether Certificate of Need Programs best serve their
citizens' health-care needs. On balance, the FTC and DOJ 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;
b. Consider broadening the membership of state licensing boards, as
boards with broader membership could be less likely to limit
competition; and
c. 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 - 2 - 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.
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 also 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, GPOs, 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.
The Commission vote to issue the report was 5-0. Copies of the report are
available on the FTC's Web site, www.ftc.gov.
FTC MEDIA CONTACT:
Office of Public Affairs
202-326-2180
FTC STAFF CONTACT:
David Hyman
Office of the General Counsel
202-326-2622
DOJ MEDIA CONTACT:
Gina Talamona
Office of Public Affairs
202-514-2007
