President Joe Biden has ordered the Federal Trade Commission to fight consolidation in the health care industry, saying it is driving up prices for consumers and limiting their access to care.
The new Democratic majority on the FTC has indicated that it will not only look at traditional mergers between hospitals and other health care providers but also is interested in some legal theories of antitrust enforcement that have been used less frequently. This includes questioning whether a merger affects labor market conditions and increasing its scrutiny of vertical mergers, where hospitals, insurers, or other types of health care organizations seek to merge with companies that provide essential products or services.
Mark Seidman, an assistant director in the FTC’s Bureau of Competition, spoke with Harris Meyer about the effort. The interview has been edited for length and clarity.
Q: How is Biden? executive order Has the FTC’s guidance on antitrust enforcement in health care affected competition promotion?
It was gratifying and important to see the president’s focus on hospital mergers and competition, a bipartisan issue of concern to the FTC for at least two decades. The president making it a priority is an important message to hospital executives. We are encouraged and intend to meet the executive order’s call to be aggressive in antitrust enforcement.
Q: What were the main takeaways from the public “listening forum” held in April by the FTC and the Justice Department on the impact of mergers on the health care industry?
The biggest takeaway from those listening sessions was the impact the merger has on real people — customers of the merging hospitals and those who work for those hospitals — and how it can affect their lives. Antitrust can be a technical area of law, with a heavy focus on economics. It’s a reminder that if we’re not careful, we can lose sight of the human impact of integration.
Q: Some experts wonder whether the FTC will expand its antitrust radar to examine the potential anticompetitive effects of mergers between hospitals in different markets, not just hospital mergers in the same market. An example of a cross-market deal is the recently announced merger between Advocate Aurora Health in the Midwest and Atrium Health in the Southeast, which will create a 67-hospital, $27 billion system. What are the prospects for an expanded geographic focus?
The local versus regional integration question is difficult to answer in the abstract because we treat each integration on its own facts. We’re looking for mergers that significantly reduce competition, and that can happen in all sorts of ways. Most hospital lawsuits over the past 20 years have focused on apparently competing hospitals in fairly close proximity It would be a mistake to interpret this as the only type of hospital merger we will investigate, especially as hospital systems grow.
We are always looking at multiple ways hospital systems can compete. We must consider system versus system competition, vertical integration, the impact on the labor market, the impact on insurers, and how hospitals compete to serve workers to large employers. There is a growing economic literature on the potential negative effects of cross-market mergers leading to higher prices, and we are thinking hard about it.
Q: As FTC Chair Lina Khan discussed, is the FTC considering hospital mergers challenging based on their impact on the labor market? None of the recent FTC actions to block hospital mergers addressed labor market implications.
We look at whether hospitals are competing for the same pool of doctors, nurses, and other types of labor. Hospitals are major employers in any geography. This is less of a feature of antitrust litigation so far, but it is top of mind as a policy issue.
Q: Will the increased conservative tilt of the federal courts given former President Donald Trump’s numerous judicial appointments affect the FTC’s ability to successfully handle antitrust cases?
In my experience with courts in hospital and other cases, judges are very interested in the facts of any particular case. They have a deep understanding of antitrust law and the goal of protecting competition. I am confident that if we can assemble a factual record that the merger will harm competition, the court will be deeply interested. It is very fact-specific. I have no reason to think that more conservative judges are less open to antitrust suits.
Q: FTC commissioners split on antitrust enforcement of vertical mergers. Do you still expect the company to pursue more vertical integration? And will the FTC issue new guidance on vertical merger enforcement after deciding to withdraw the 2020 guidance?
The biggest concern with vertical integration is that one competitor controls an input that other competitors need access to. which either forecloses competitors from that input or increases the cost of that input. This is something we think about when we’re looking at provider combinations, such as a hospital or an insurer combined with a physician group. We spend a lot of time and energy thinking about the impact of such mergers on competing insurers and providers.
It is helpful to the FTC and the courts how we are going to analyze any merger case, although it is not binding on the courts. The FTC and the Department of Justice recently issued a Request for Information to amend both the Horizontal and Vertical Merger Guidelines. But the lack of vertical merger guidelines does not stop us from enforcing the vertical merger laws now. We are looking for vertical integration that significantly reduces competition.
Q: Is the FTC focused on examining health care mergers and acquisitions that involve private equity investment firms, such as the many deals by private equity firms that have built increasingly large physician specialty practices in dermatology and other medical specialties?
We are very aware of the debate about the impact of private equity in many areas, including healthcare. But we do look at mergers that come to our door through merger filings, news reports or complaints. We have to respond to what lands on our desks.
KHN (Kaiser Health News) is a national newsroom that produces in-depth journalism about health issues. Along with policy analysis and polling, KHN is one of the three main operating programs of the KFF (Kaiser Family Foundation). KFF is a non-profit organization that provides health information to the nation.
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