On November 17, 2023, the Federal Trade Commission (FTC) brought forward an antitrust lawsuit to challenge John Muir Health’s proposed $142.5 million acquisition of San Ramon Regional Medical Center, both of which are healthcare entities in California’s Bay Area. The FTC alleges that in acquiring San Ramon Regional, John Muir will “substantially lessen competition for critical healthcare services” along I-680 corridor where the hospitals operate, ultimately leading to higher costs for patients. John Muir, the largest general acute care provider in the region and one of the most expensive providers nationwide, already holds 49% of non-controlling interest in San Ramon Regional, and the FTC argues that acquisition of the 123-bed hospital would allow the combined entity to increase its bargaining power with insurers, a cost that will ultimately be passed off to patients in the form higher premiums, co-pays, deductibles, or other out-of-pocket costs or reduced benefits. [1]
The John Muir Health/San Ramon Regional case is just one in a series of recent hospital acquisition cases. In recent years, the FTC has increased crackdowns on alleged antitrust law violations in healthcare. Earlier in 2023, the FTC requested $160 million for its 2024 budget to fund investigations healthcare market monopolization. [2] In July 2023, the FTC and Department of Justice’s (DOJ’s) antitrust division released a draft of their updated merger guidelines, which suggest that the agencies will be watching mergers closely going forward. Among proposed policy changes are an expansion of the definition of “highly concentrated markets” and a reduced threshold for identifying large changes in market concentration. [3]
In response, organizations like the American Hospitals Association (the AHA) have urged for less “hostility” toward mergers, arguing that “strategic combination” is the “only way to keep their doors open” in the face of rising health costs.4 However, some scholars state that this seeming paradox — economic losses leading to hospital closures amidst a growth in the overall market value — is in fact the result of the reduced competition that comes with hospital mergers.[5,6,7] Today, 10 health systems own a sixth of all hospitals in the United States.6 Studies have shown that hospital competition tends to lead to lower prices and may also lead to higher quality care under an administered pricing system like the Medicare system,7 though evidence is mixed. [7,8]
In contrast to the AHA, the American Medical Association (AMA) commended the FTC and DOJ draft guidelines. [9] The AMA has expressed support for competition among healthcare facilities, with the caveat that antitrust laws should be flexible, “to allow physicians to engage in clinically integrated delivery models.” [10] Furthermore, the AMA praised proposed policies in the DOJ/FTC guidelines that may increase competition in the insurance marketplace. [9] Approximately 73 percent of health insurance markets in the United States’ metropolitan statistical areas (MSAs) are highly concentrated, with at least one insurer possessing a market share of 30 percent or greater in 91 percent of MSA-level markets in 2020. [11]
Reduced competition between insurers has been shown to increase premiums and reduce physician earnings, based on a study of the 1999 merger of Prudential and Aetna, one of the largest recent mergers. [12] While concentrated insurers may promote lower hospital prices in some cases, these savings are usually not passed on to consumers in the form of lower premiums. [13,14] These arguments and others undergirded the DOJ’s 2017 blocking of Anthem’s proposed $54 billion acquisition of Cigna, which would have been the largest merger in the history of the health insurance industry. The court argued that the acquisition would “substantially lessen competition, harming millions of American consumers, as well as doctors and hospitals.” [15]
Ultimately, at the heart of antitrust lawsuits in healthcare lies the question of which entities should have the most leverage in decision-making when it comes to healthcare provision: hospitals or large healthcare systems, insurance companies, patients, physicians, policymakers or other stakeholders. With ongoing antitrust suits, the courts will participate in determining with whom this power lies.
References
1. Khan LM, Slaughter RK, Bedoya AM, Health JM. United States of America before the federal trade commission commissioners. Ftc.gov. https://www.ftc.gov/system/files/ftc_gov/pdf/d09421jmhtenetpart3administrativecomplaintpublic.pdf
2. Condon A. Health system antitrust cases pick up steam. Beckershospitalreview.com. Published November 30, 2023. https://www.beckershospitalreview.com/hospital-transactions-and-valuation/health-system-antitrust-cases-pick-up-steam.html
3. FTC and DOJ seek comment on draft merger guidelines. Federal Trade Commission. Published July 18, 2023. https://www.ftc.gov/news-events/news/press-releases/2023/07/ftc-doj-seek-comment-draft-merger-guidelines
4. Hatton M. Re: FTC-2023-0043: Draft Merger Guidelines. Aha.org. Published September 13, 2023. https://www.aha.org/system/files/media/file/2023/09/AHA-Letter-to-the-Attorney-General-and-FTC-on-Draft-Merger-Guidelines.pdf
5. Gale AH. Bigger but not better: hospital mergers increase costs and do not improve quality. Mo Med. 2015;112(1):4-5.
6. Robert P. U.S. healthcare: A conglomerate of monopolies. Forbes. Published January 16, 2023. https://www.forbes.com/sites/robertpearl/2023/01/16/us-healthcare-a-conglomerate-of-monopolies/?sh=3a6492972e4d
7. Gaynor M, Robert Wood Johnson Foundation. The impact of hospital consolidation – update. Published online 2012. doi:10.13140/RG.2.1.4294.0882
8. Mariani M, Sisti LG, Isonne C, et al. Impact of hospital mergers: a systematic review focusing on healthcare quality measures. Eur J Public Health. 2022;32(2):191-199. doi:10.1093/eurpub/ckac002
9. Madara J, American Medical Association. Re: AMA Comments on Draft Merger Guidelines. Published September 18, 2023. https://searchlf.ama-assn.org/letter/documentDownload?uri=%2Funstructured%2Fbinary%2Fletter%2FLETTERS%2Flfftc.zip%2F2023-9-18-Letter-to-Khan-and-Kanter-re-FTC-Merger-Rules-Comment-v5.pdf
10. American Medical Association. Hospital Consolidation. Ama-assn.org. Published 2023. https://www.ama-assn.org/system/files/issue-brief-hospital-consolidation.pdf
11. American Medical Association Division of Economic and Health Policy Research. Competition in Health Insurance: A Comprehensive Study of U.S. Markets. American Medical Association. Published 2020. https://www.ama-assn.org/system/files/competition-health-insurance-us-markets.pdf
12. Dafny L, Duggan M, Ramanarayanan S. Paying a premium on your premium? Consolidation in the US health insurance industry. Am Econ Rev. 2012;102(2):1161-1185. doi:10.1257/aer.102.2.1161
13. Guardado JR, Emmons DW, Kane CK. The price effects of a large merger of health insurers: A case study of UnitedHealth-Sierra. Hmpi.org. http://hmpi.org/wp-content/uploads/2017/02/HMPI-Guardado-Emmons-Kane-Price-Effects-of-a-Larger-Merger-of-Health-Insurers.pdf
14. Hanson C, Herring B, Trish E. Do health insurance and hospital market concentration influence hospital patients’ experience of care? Health Serv Res. 2019;54(4):805-815. doi:10.1111/1475-6773.13168
15. United States District Court for the District of Columbia. US and Plaintiff States v. Anthem, Inc. and Cigna Corp. United States Department of Justice. https://www.justice.gov/opa/file/877886/download
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