Managed Competition, Integrated Delivery Systems and Antitrust

A central question confronting proponents of managed competition during the health reform debate in 1994 was whether competitive networks or integrated delivery systems would emerge. Under reformers’ vision, controlling costs depended on the emergence of a sufficient number of efficient and viable integrated delivery systems. Conversely, if one or a few integrated networks dominate the market for physician or hospital services, rivalry on the main issues of health care cost control would likely dissipate. This article argues that vigilant and sensible antitrust enforcement was also a prerequisite for the success of the managed competition model. Despite the considerable emphasis on economic analysis in antitrust commentary and litigation, neither commentators nor judges have carefully explored the implications of market failure for antitrust doctrine in health care cases. Market imperfections add significantly to the competitive risks posed by restraints of trade and other conduct policed by antitrust law. Moreover, these conditions diminish the likelihood that self-correcting market forces will ameliorate whatever dangers antitrust law misses. Economic evidence suggesting that a large part of the country can support only the bare minimum of efficiently-sized integrated systems adds to the challenge facing market based reform

Managed Competition Integrated Delivery Systems and Antitrust

A central question confronting proponents of managed competition during the health reform debate in 1994 was whether competitive networks or integrated delivery systems would emerge. Under reformers’ vision, controlling costs depended on the emergence of a sufficient number of efficient and viable integrated delivery systems. Conversely, if one or a few integrated networks dominate the market for physician or hospital services, rivalry on the main issues of health care cost control would likely dissipate. This article argues that vigilant and sensible antitrust enforcement was also a prerequisite for the success of the managed competition model. Despite the considerable emphasis on economic analysis in antitrust commentary and litigation, neither commentators nor judges have carefully explored the implications of market failure for antitrust doctrine in health care cases. Market imperfections add significantly to the competitive risks posed by restraints of trade and other conduct policed by antitrust law. Moreover, these conditions diminish the likelihood that self-correcting market forces will ameliorate whatever dangers antitrust law misses. Economic evidence suggesting that a large part of the country can support only the bare minimum of efficiently-sized integrated systems adds to the challenge facing market based reform

Regulating to Promote Competition in Designing Health Insurance Exchanges

Many of the most contentious issues in the debate over health reform concerned the performance and competitiveness of private health insurance including abusive and unfair practices such as denying coverage to individuals with pre-existing conditions; the impact of dominant insurers serving individual and small group markets; and purportedly excessive profits of the insurance industry and lavish salaries of their executives. A key component of the Affordable Care Act for implementing and overseeing reforms directed at these problems is the establishment of market-making entities, health insurance exchanges. These state-run entities will certify insurers’ compliance with regulations, monitor their performance, and take on myriad administrative functions. But equally important is the role of exchanges in designing efficient markets for the purchase and sale of insurance. This article focuses on the somewhat overlooked, but crucially important role the exchanges can play in promoting competition in both insurance and provider markets. Despite the extensive federal regulatory regime established under the ACA, the Act leaves much to the discretion of the states. The complex array of interrelated choices inherent in designing exchanges poses a challenge for states seeking to maximize competition among insurers. Moreover, many other policy choices facing the states will significantly affect competition. This article takes the normative position that because making competition effective in insurance and provider markets is essential to the success of health reform, state legislatures establishing health exchanges should incorporate competition-promoting regulation in their designs. However, finding the best means of advancing competition is not a straightforward undertaking. Variations in markets, cultures, and state regulations will necessitate individualized approaches. This article examines some of the alternatives available to states and offers some generalized suggestions for dealing with core impediments to competition and using regulation where possible to deal with the serious problem of provider market concentration. In designing exchanges and structuring insurance markets, states can take a number of steps to promote competition. They can reduce opportunities for adverse selection, encourage new entry by insurers, enhance and exercise exchange leverage, and facilitate effective comparative shopping by individuals and employers. All are worthy undertakings and, in most markets, probably essential to ensure meaningful competition among plans. Moreover, exchanges can play a vital role in promoting competition at the provider level, the locus of the most significant obstacles to well-functioning health care markets. This advice comes with some caveats, however. Legislation and regulations need to be carefully calibrated to the market conditions in the state and entail calculated guesses about the behavior of carriers in response to the new regulatory regime. Further, much is asked of exchanges. Exchanges are expected to assume a wide variety of roles: gatekeeper, regulator, consumer guardian, promoter, market facilitator, evaluator, and informed shopper. These multiple responsibilities will likely generate conflicting impulses that can weaken exchanges’ resolve to promote competition

Regulating for Efficiency in Health Care through the Antitrust Laws

The need to evaluate the competitive consequences of cooperation among rivals has long posed a dilemma for antitrust enforcement. Collaboration can reduce rivalry, raise prices and otherwise reduce consumer welfare; at the same time cooperation among rivals carries the promise of creating cost savings, correcting market failures and producing other benefits. In many cases antitrust doctrine requires a balancing of the positive and negative effects of coordination. In health care, federal antitrust enforcement agencies have increasingly turned to regulatory tools including policy statements, advisory opinions, speeches and regulatory decrees settling cases to strike this balance. However, the agencies have paid insufficient attention to the complexities inherent in making these tradeoffs and would be well advised to adopt structured inquiries into efficiencies defenses and related issues

Thirty Years of Solicitude: Antitrust Law and Physician Cartels

Over the last thirty years the Federal Trade Commission and the Department of Justice have challenged dozens of physician cartels, networks, and other arrangements that they alleged constituted price fixing or other restraints of trade under the antitrust laws. In addition, the antitrust agencies have issued numerous advisory opinions, published detailed statements of enforcement policy, and made dozens of public statements on the issue of physician collaboration. The puzzle explored in this essay is why the government\u27s deployment of unparalleled enforcement resources has not curtailed physician attempts to engage in collective bargaining and other attempts to restrain price competition. It first analyzes the hypothesis that overly cautious government enforcement policies created a mismatch between penalties and rewards that invited abuse. While finding merit in this explanation, the essay offers a more nuanced account. It suggests that a convergence of other factors including doctrinal shortcomings, political pressures, and institutional factors may have deterred the Agencies from seeking stronger remedies and emboldened parties who questioned the role of competition in health markets generally. A related claim of this essay is that the Agencies may have inadvertently precipitated some of this conduct by the regulatory efforts they have undertaken