The New York Times reports on a new lawsuit brought against the University of Pittsburgh Medical Center (DISCLOSURE: I worked at UPMC Health Plan before I came to Duke). The theory of the case is simple — UPMC has massive labor market power and uses that to drive down wages and make working conditions worse for employees.
After a series of acquisitions, it is Pennsylvania’s largest private employer with more than 40 hospitals, 800 doctors’ offices and clinics, and a health plan. With operating revenue of $26 billion last year, it employs about 95,000 people.
While antitrust cases frequently address how powerful organizations can operate as monopolies and unfairly raise prices, a company can also be accused of operating as a monopsony in which it exerts unfair leverage over suppliers, including employees.
From a basic economics point of view, concentrated employers can and do leverage their market buying power against labor, especially labor that has industry specific skills that don’t transfer well, to capture more of the surplus generated and drive down total compensation. This means floor hospital workers like nurses are, under this theory, more likely to get squeezed than a generic business analyst who wrote SQL for six hours a day (which is what I did for years).
If this case goes to trial and the plaintiffs win, it creates a new and very powerful tool to challenge pre-existing health care consolidation.
Let’s keep an eye on this!