Some bad news from Chicago regarding anti-trust law:
Two large Chicago-area hospital systems will be allowed to move forward with a merger despite the Federal Trade Commission’s opposition.
After a six-day hearing in April, a federal court judge in Chicago ruled Tuesday in favor of Advocate Health Care and NorthShore University HealthSystem in the legal fight over health care competition…
Executives at Advocate and NorthShore argued the FTC chose the boundaries of the market it considered to favor its position and failed to account for the fact that more patients are treated outside hospitals and for the role insurer Blue Cross and Blue Shield of Illinois plays in setting prices….
This case is similar to another FTC loss in Pennsylvania where the judge determined that the FTC used a market definition that was too narrow and too small. I perosnally disagree with the judge’s logic as he was looking at where the patients came to a regional high end medical center and determined that was the relevant market instead of determining where the people who lived near the hospitals could reasonably go for services.
The FTC anti-trust power is critical to administrative actions to reduce the healthcare cost curve. It is a political and judicial question as to how aggressive the FTC can be as I noted last December:
Cutler and Morton in 2014 found the following regarding hospital concentration:
More populous areas are less concentrated on average. Even still, concentration is pervasive. Nearly half (n = 150) of hospital markets in the United States are highly concentrated, another third (n = 98) are moderately concentrated, and the remaining one-sixth (n = 58) are unconcentrated. No hospital markets are considered highly competitive.[my emphasis]
The FTC can be a significant cost control lever. An aggressive FTC that cracks down on almost all hospital mergers as a default response would increase competition…. The question is whether or not the FTC in 2017 will have high level political support to engage in default opposition to most insurer and provider mergers in most market segments?
That is the political question. I am not too optimistic about that answer as hospitals and more importantly doctors are some of the most trusted individuals and entities in the American public discourse. A doctor crying on camera that a merger disapproval will not let her treat her patients as well as she wants to is a powerful image that half a dozen policy nerds can’t credibly counter-act… Yet, an aggressive FTC is one of the few “easy” or at least non-legislative routes to containing healthcare costs.
The judicial levers of power that can create slightly better functioning markets are being pulled away so the FTC is less likely to act as a deterrent to consolidation for market power reasons than we could have hoped for last fall.