Antitrust laws and competition in the health care market

Antitrust Laws and Competition in the Health Care Market

The objective of this work is to examine Antitrust laws and Competition in the health care market and specifically as this relates to 'best practices', regulated vs. non-regulated control, cost saving or alternatively cost increasing of health care services and goods as well as benchmarking.

The Federal HMO Act of 1973 is the legislation stated to have "introduced the principle of competition to the national health policy debate." (Sage, Hyman and Greenberg, 2003, p.1) Sage, Hyman and Greenberg state that competition law, including both antitrust and consumer protection) is the forgotten stepchild of health care quality." (2003, p.1) in 1975 the U.S. Supreme Court ruled in the case of Goldfarb v. Virginia State Bar that "the professions were subject to the same rules of competition -- the federal antirust laws -- as were other trades and businesses. Health policy has not followed a linear path since those watershed events." (Sage, Hyman and Greenberg, 2003, p.1)

III. Competition Law and Policy

Competition law and policy are stated to "encompass two discrete bodies of doctrine: antitrust and consumer protection. Economic analysis lies at the heart of competition law. Its core assumption is that competitive markets are efficient." (Sage, Hyman and Greenberg, 2003, p.1) an efficient market is characterized by sellers producing the goods and services that are in demand by buyers in the market and doing so in the manner that is least costly, and in which "prices approximate marginal costs, and resources are allocated to their most valued ends." (Sage, Hyman and Greenberg, 2003, p.1) Competition is stated to be primarily "price-driven in some markets, in others it occurs along both price and nonprice dimensions (such as quality)." (Sage, Hyman and Greenberg, 2003, p.1) the proper operation of health care markets are characterized by competition determining the prices that are appropriate for medical services and "the appropriate organizational forms for health care financing and delivery, and the appropriate range and availability of cost/quality/service trade-offs." (Sage, Hyman and Greenberg, 2003, p.1, p.3) Competition law is stated in the work of Sage, Hyman and Greenberg (2003) to be "cast in expansive terms" in that the judiciary "has had considerable freedom to elaborate its own understanding of the broad statutory language enacted by Congress." (Sage, Hyman and Greenberg, 2003, p.1)

IV. Enforcement of Antitrust Laws

Antitrust enforcement is stated in the work of Sage, Hyman and Greenberg (2003) to be such that the U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC) "are the primary antitrust enforcement authorities, although state attorneys general can also bring suit. The criminal provisions of the Sherman Act, like all federal criminal laws, are enforced solely by the DOJ." (Sage, Hyman and Greenberg, 2003, p.3)

The civil provisions of both the Sherman and Clayton Acts enable private parties to file suits in which treble damages may be awarded if the suit is successful. The FTC enforces the FTC Act and this is stated to be "both administratively and through the courts." (Sage, Hyman and Greenberg, 2003, p.1) as well the FTC may also seek to prosecute violations of the Sherman and Clayton Acts and this may be cone directly or through declaring the conduct an 'unfair method of competition'." (Sage, Hyman and Greenberg, 2003, p.1) Both the DOJ and FTC have "issued joint statements of antitrust enforcement policy for health care. These statements specify various 'safety zones' for hospital mergers, hospital and physician joint ventures, physician's provision of information to purchasers, multiprovider networks and provider's joint purchasing arrangements." (Sage, Hyman and Greenberg, 2003, p.1)

V. State of the Health Care Market

Health care in the 20th century is stated in the work of Sage, Hyman and Greenberg to have been characterized by "physician's prerogatives, patient's deference to physicians, and price-insensitive insurance payments." (Sage, Hyman and Greenberg, 2003, p.1 However, in the 1980s this pattern in which professionals dominated the health care system was broken and the forces of competition expanded in the health care markets. Competition still transforms the methods of medical practice in today's health care market in the U.S. States. Competition laws are stated to have stood in defense of price competition in health care successfully and as well there has been some progress by the courts in the incorporation of quality as a competitive dimension yet the changes that have so rapidly converted the health care system "to market governance places greater demands on competition law. In order that market processes are comprised by the "appropriate mix of cost, quality and output, competition law must be proactive" and allow consumers the opportunity to "weight both price and nonprice characteristics of health care." (Sage, Hyman, and Greenberg, 2003, p.1)

VI. Competition Increase a Proposed Remedy

The work entitled: "Legislative Proposals to Immunize Providers from Antitrust Law" states that across the years there have been various proposals stated that would serve to "curtail antitrust laws' applicability to the health care industry, only a few, relatively minor, adjustments have been enacted." (Health Affairs, 2002, p.1) it is related however that congress and the U.S. states have recently focused attention on actions which would serve to legalize independent physicians and physician group's collective bargaining and that this proposed federal legislation would effectively "extend an antitrust exemption applicable to labor unions to cover independent physicians..." (Health Affairs, 2002, p.1) it is stated however, that an important distinction is stated as follows:

"...the bill did not require any regulatory supervision of physician unions or their collective bargaining activities by the National Labor Relations Board as is required of all other unions. Such legislative initiatives are in part a reaction to legal decisions concluding that existing law prohibits collective bargaining by "independent contractors," essentially allowing only physicians who are employees of HMOs or hospitals to jointly negotiate." (Health Affairs, 2002, p.1)

VII. Collective Bargaining -- Immunization of Physicians from Attach Via Antitrust Laws

It is related that H.R. 1304 "at the federal level" would have served to immunize the collective bargaining of physicians from antitrust law attacks and while it won approval of the House in 2000 and overwhelmingly so, the bill failed to reach the floor of the Senate. Those who supported the bill state that "market concentration among health plans and the growing public dissatisfaction with their operations necessitate "leveling the playing field" to permit physicians to respond collectively. Free to bargain as a union, they argue, physician groups would negotiate to obtain contractual commitments and reimbursement levels adequate to assure better quality of care." (Health Affairs, 2002, p.1) Those who opposed the bill note the economic studies that estimate "...that the legislation may raise annual medical costs by as much as $29-$141 billion over a five-year period as a result of higher physician fees, changes in practice patterns, and the ripple effect on government program costs." (Health Affairs, 2002, p.1)