The FTC, Antitrust

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The FTC, Antitrust Health Care Market Trends
Markus H. Meier Deputy Assistant Director
2004 Health Care Forecast Conference
February 20, 2004
This presentation was prepared from public
sources. The views expressed herein are solely
those of the speaker and do not necessarily
reflect the views of the Federal Trade Commission
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How the FTC Operates

• Law Enforcement
• Formal Guidance
• 3. Research, Studies Hearings
• 4. Competition Advocacy
• 5. Informal Guidance

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The Purpose of Antitrust Law

• Prevent private business practices that
  unreasonably restrain competition.
• For the benefit of consumers
• Lower prices
• Better quality
• Increased choice, selection, convenience, and
  innovation

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Primary Antitrust Concernsin Health Care
Provider Markets

• Cartels
• Agreements among competitors on price, or other
  terms of dealing, without meaningful integration
  of members activities.
• Monopolization
• Single firm, but with substantial market power.

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Some Recent Trends

• More hospital consolidations
• Larger physician groups
• Growth of physician-hospital alliances
• Increasing reliance on consultants

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Hospital Consolidations

• The Trends
• Health care costs rising at an accelerating rate
• Hospital prices are a growing portion of this
  rise
• Hospital consolidations are increasing
• The Issue
• To what extent are hospital price increases the
  result of illegal monopoly power?

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Hospital Consolidations

• Confounding Variables
• Cost increases for hospital inputs reductions
  in government reimbursement
• Increased demand reductions in excess capacity
• Managed care backlash less selective
  contracting looser utilization management
• FTC/DOJ Record in Merger Challenges
• Struck out last 7 times at bat
• No challenges since 1998

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Whats the FTC Doing About It?

• Hospital Merger Retrospective Study
• Looks at markets where FTC lost or case never
  brought
• FTC Health Care Hearings Report
• Competition Advocacy
• Comments on Tenets proposed acquisition of
  Slidell Memorial (Louisiana)
• Challenge Consummated Hospital Mergers
• Evanston (Illinois)

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Physician Cases

• The Trends
• Still primarily solo small practice groups
• Some formation of relatively large
  single-specialty groups
• IPAs and PHOs transitioning from risk to non-risk
  contracting
• The Issue
• Under what conditions is it permissible for
  otherwise competing providers to engage in
  collective negotiations with health plans?

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The ProblemArizona v. Maricopa County Medical
Society (1982)

• Supreme Court made clear that physicians in
  independent practices are supposed to compete.
• When they dont by collectively setting the
  prices at which they sell their individual
  physician services they can be guilty of
  illegal price fixing.

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Whats the FTC Doing About It?

• FTC Health Care Hearings Report
• Competition Advocacy
• Comments on state and federal laws intended to
  give providers antitrust exemptions
• Law Enforcement Actions
• Brought thirteen provider price-fixing cases in
  2003 five in 2002

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Thirteen Health Care Provider Price-Fixing Cases
in 2003

• Multi-Provider Physician Organizations Brown
  Toland Carlsbad Physicians North Texas
  Specialists SPA Health Organization
• Physician-Hospital Organizations Super PHOs
  Maine Memorial Hermann Piedmont South Georgia
• Physician-Medical School Organization
  Washington U. Physicians
• Practice Group Merger Yakima Surgeons
• Hospital-Based Physicians Anesthesia Services
  Medical Group
• Hospitals Tenet Healthcare Corp. Maine South
  Georgia
• Non-Physician Consultant Physician Network
  Consulting Carlsbad

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The Real Challenge

• Controlling health care costs or determining
  whos going to pay!
• What role, if any, should competition and market
  forces thus antitrust play in resolving these
  issues?