Our Publications

By Brent D. Fulton, Daniel R. Arnold, Jaime S. King, Alexandra D. Montague, Thomas L. Greaney, and Richard M. Scheffler | Published November 11, 2022 in Health Affairs | Link to Full Article

Although hospital consolidation within markets has been well documented, consolidation across markets has not, even though economic theory predicts—and evidence is emerging—that cross-market hospital systems raise prices by exerting market power across markets when negotiating with common customers (primarily insurers). This study analyzes hospital systems using the American Hospital Association Annual Survey Database and defines hospital geographic markets as commuting zones that link workers to places of employment. The share of community hospitals in the US that were part of hospital systems increased from 10 percent in 1970 to 67 percent in 2019, resulting in 3,436 hospitals within 368 systems in 2019. Of these systems, 216 (59 percent) owned hospitals in multiple commuting zones, in part because 55 percent of the 1,500 hospitals targeted for a merger or acquisition between 2010 and 2019 were located in a different commuting zone than the acquirer. Based on market-power differences among hospitals in systems, the number of systems in urban commuting zones that could potentially exert enhanced cross-market power increased from thirty-seven systems in 2009 to fifty-seven systems in 2019, an increase of 54 percent. The increase in cross-market hospital systems warrants concern and scrutiny because of the potential anticompetitive impact of hospital systems exerting market power across markets in negotiations with common customers.

By Laura Alexander, Ola Abdelhadi, Brent Fulton, and Richard Scheffler | Published October 27, 2022 in the Competition Policy International (CPI) Antitrust Chronicle | Link to Full Article

The large and increasing amount of money under private equity (“PE”) management and the huge push by PE into healthcare, raises concerns and challenges for healthcare policy, but also for competition policy. Emerging evidence about the adverse impact of PE investment in healthcare on competition, prices, quality of care, and patient health is a serious concern. These troubling findings raise the question of how, if at all, antitrust law and antitrust enforcers should treat conduct and deals involving PE owners. While one of the virtues of the antitrust laws is their broad applicability, application of those laws to particular markets and companies is only effective when it is rooted in the realities of competition in those market and the competitive incentives that those companies face. PE’s impact on healthcare reveals significant gaps in the tools and methods for using the antitrust laws to protect competition. We conclude, however, that competition laws applicable only to PE are not generally needed; rather, when policymakers, regulators, and enforcers are applying competition laws to PE-owned companies, they need to take account of the unique incentives facing PE managers, the competitive implications of the PE ownership structure, and types of competition concerns that tend to arise surrounding PE deals. In markets that already face limited competition, such as healthcare, the incentives and ownership structures of PE may exacerbate existing competition concerns and anticompetitive impacts, potentially necessitating PE-specific policies.

By Robin Feldman, Brent D. Fulton, James R. Godwin, and Richard M. Scheffler | Published May 6, 2022 in the Journal of Health Politics, Policy, and Law | Link to Full Article

Dramatic increases in pharmaceutical merger and acquisition activity since 2010 suggest we are currently in the midst of a third wave of industry consolidation. Reviewing 168 economic, legal, medical, industry, and government sources, we examine the effects of consolidation on competition and innovation and explore how industry attributes complicate M&A regulation in a pharmaceutical context.

By Daniel S. Arnold, Katherine L. Gudiksen, Jaime S. King, Brent D. Fulton, and Richard M. Scheffler | Published May 11, 2022 in The Milbank Quarterly | Link to Full Article

Decades of consolidation in both health care provider and insurer markets has resulted in highly consolidated health care markets throughout the United States, leading to higher prices for patients and employers. In some instances, dominant health insurers have used their market power to demand clauses in contractual agreements that drive up the cost of health care in anticompetitive ways. As a result, antitrust enforcers and policymakers have begun scrutinizing contracting practices between health insurers and providers as one way to promote competition in consolidated markets.Most-favored-nation (MFN) clauses (sometimes called “pricing parity” or “price protection” clauses) were some of the first provisions challenged in court and prohibited by state laws, but the economic impact of these laws remains unknown. This study estimated the effect that laws banning MFN clauses in health insurance contracts have had on hospital prices.