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Tag: St. Luke’s Health System

An Open Letter to the FTC on Hospitals and Providers

Screen Shot 2014-10-08 at 8.26.56 AMThe role of the United States’ antitrust laws are to ensure competition, not to prescribe or favor any particular organizational structure.  Yet recent Federal Trade Commission (“FTC”) enforcement actions in the health care provider merger arena have done just that – dictated that if provider groups want to integrate, they can only do so through contractual means, not by merging their businesses.  Everyone accepts the proposition that health care integration is essential to improving health care and bending the cost curve.  Yet often the FTC has been a roadblock to provider consolidation arguing that any efficiencies can be achieved through separate contracting.[1]  But this regulatory second guessing is inconsistent with sound health care and competition policy.

Health care provider consolidation poses some of the most challenging antitrust issues.  Particularly challenging are efforts by hospitals to acquire or integrate with physician practices.  There is clearly tremendous pressure from both the demand and supply side for greater integration between hospital and physicians.  And arrangements between firms in a vertical relationship are treated solicitously by the antitrust laws, because they are typically procompetitive and efficient.  Where competitive concerns arise from a merger or alliance, the FTC will ask if there are efficiencies from the relationship and, if so, whether there are less restrictive alternatives to achieve the efficiencies.  If there is a less restrictive alternative, the FTC will claim the efficiencies should not be credited.  So for example, if the FTC believes that contractual arrangements between doctors and hospitals can achieve comparable efficiencies, the FTC will reject the merging parties’ claimed efficiencies.

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