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PubMed2006

The Federal Trade Commission, clinical integration, and the organization of physician practice.

This article examines Federal Trade Commission (FTC) policy--in particular, the agency's controversial 1996 statements on clinical integration--toward joint negotiations for nonrisk contracts with health plans by physicians organized into independent practice associations (IPAs) and (with hospitals) into physician-hospital organizations (PHOs). The article concludes that the policy is consistent with anti-trust principles, consistent with current thinking on the use of organized processes to improve medical care quality, specific enough to provide guidance to physicians wanting to integrate clinically, and general enough to encourage ongoing innovations in physician organization. The FTC should consider stronger sanctions for IPAs and PHOs whose clinical integration is nothing more than a sham intended to provide cover for joint negotiations, should give the benefit of the doubt to organizations whose clinical integration appears to be reasonably consonant with the statements, and should clarify several ambiguities in the statements. Health plans should facilitate IPA and PHO efforts to improve care by rewarding quality and efficiency and by providing clinically integrated organizations with claims information on individual patients. Though creating clinically integrated organizations is difficult and expensive, physicians should recognize that clinical integration can help them both to gain some negotiating leverage with health plans and to improve the quality of care for their patients.

Antitrust Laws↗
PubMed1997

Rural health network development: public policy issues and state initiatives.

Rural health networks are a potential way for rural health care systems to improve access to care, reduce costs, and enhance quality of care. Networks provide a means for rural providers to contract with managed care organizations, develop their own managed care entities, share resources, and structure practice opportunities to support recruitment and retention of rural physicians and other health care professionals. The results of early network development initiatives indicate a need for state officials and others interested in encouraging network development to agree on common rural health network definitions, to identify clearly the goals of network development programs, and to document and analyze program outcomes. Future network development efforts need to be much more comprehensive if they are to have a significant impact on rural health care. This article analyzes public policy issues related to integrated rural health network development, discusses current efforts to encourage network development in rural areas, and suggests actions that states may take if they desire to support rural health network development. These actions include adopting a formal rural health network definition, providing networks with alternatives to certain regulatory requirements, and providing incentives such as matching grants, loans, or technical assistance. Without public sector support for networks, managed care options may continue to be unavailable in many less densely populated rural areas of the country, and locally controlled rural health networks are unlikely to develop as an alternative to the dominant pattern of managed care expansion by large urban entities. Implementation of Medicare reform legislation could provide significant incentives for the development of rural health networks, depending on the reimbursement provisions, financial solvency standards, and antitrust exemptions for provider-sponsored networks in the final legislation and federal regulations.

Antitrust Laws↗
PubMed1998

The economic returns to hospital admitting privileges.

Legal suits contesting the denial or termination of hospital staff privileges are the most common antitrust cases involving medical markets. There is, however, very little evidence about the economic implications for the physicians of having staff privileges. Using a nationally representative sample of self-employed physicians from 1992, this article presents estimates of the effects of hospital admitting privileges on physician earnings. The results indicate that for nonprimary care specialists with few admitting privileges, gaining an additional privilege increase earnings. This effect diminishes as the number of admitting privileges increases, however, and there are no economic gains beyond having three to four admitting privileges. Among primary care physicians, we detect no statistically significant effect of hospital admitting privileges on earnings. With the growing emphasis on managed care, physicians are being scrutinized both in terms of the quality of care they deliver and their impact on the economic performance of hospitals and managed care organizations. This suggests that the frequency of lawsuits involving the denial or rescission of medical staff privileges may assume even greater importance.

Antitrust Laws↗
PubMed1998

Rural hospital mergers, antitrust policy, and the Ukiah case.

This article examines the antitrust issues in rural hospital mergers by focusing on an important antitrust case involving the merger of two small hospitals in Ukiah, California. A key issue in this matter was whether the geographic market served by the merger included a nearby larger city. The economic efficiency of small rural hospitals and the competitive implications of their mergers are examined in the context of the Ukiah case. Economies of scale are shown to be important for small rural hospitals and should mitigate any increase in price. The efficiencies defense is shown to be difficult to make even when economies of scale make the likelihood of efficiencies high. The financial difficulties of many rural hospitals, especially in areas where too many exist, mean that mergers such as this one in Ukiah often are an efficient way to keep these hospitals financially sound and accessible. The Ukiah case suggests the desirability of the merger guidelines that permit most mergers of small rural hospitals.

Antitrust Laws↗
PubMed2000

Community control and pricing patterns of nonprofit hospitals: An antitrust analysis.

Traditional control of nonprofit hospitals by the communities they serve has been offered as justification for restraining antitrust enforcement of mergers that involve nonprofit hospitals. The community is arguably a constraint on a nonprofit's inclination to exercise market power in the form of higher prices; however, community control is likely to be attenuated for hospitals that through merger or acquisition become members of hospital systems--particularly those that operate on a regional or multiregional basis. We report findings from a study in which we examined empirically the relationship between market concentration and pricing patterns for three types of nonprofit hospitals that are distinguishable based on degree of community control: an independent hospital, a member of a local hospital system, and a member of a nonlocal hospital system. Study results indicated that when conditions existed to create a more concentrated market, (1) all three types of nonprofit hospitals exercised market power in the form of higher prices, and (2) hospitals that were members of nonlocal systems were more aggressive in exercising market power than were either independent or local system hospitals. The results have important implications for antitrust enforcement policy.

Antitrust Laws↗
PubMed1999

Change, consolidation, and competition in health care markets.

The health care industry is being transformed. Large firms are merging and acquiring other firms. Alliances and contractual relations between players in this market are shifting rapidly. Within the next few years, many markets are predicted to be dominated by a few large firms. Antitrust enforcement authorities like the Department of Justice and the Federal Trade Commission, as well as courts and legislators at both the federal and state levels, are struggling with the implications of these changes for the nature and consequences of competition in health care markets. In this paper we summarize the nature of the changes in the structure of the health care industry. We focus on the markets for health insurance, hospital services, and physician services. We then discuss the potential implications of the restructuring of the health care industry for competition, efficiency, and public policy. As will become apparent, this area offers a number of intriguing questions for inquisitive researchers.

Antitrust Laws↗
PubMed2001

Market structure and performance: evaluating the U.S. health system reform.

First, U.S. health system evolution over the last several years is assessed and found to be in line with what could be anticipated from economic theory. The immature market appears to be giving way to the concentration and the oligopolies of the mature market. This is explained in a manner accessible to non-economists. Next, the performance of market competition as a vehicle for health system reform is assessed in the areas of cost containment, quality of care, access, research/education and social mission. Overall, results have not measured up to promise. Market competition has not succeeded in bringing U.S. health care costs in line with those of other industrialized countries. There is no evidence of sustained quality improvement. Market based reform has not expanded health insurance coverage but has rather, directly or indirectly, increased the number of underinsured and uninsured Americans. Medical research and education have suffered and medicine's social mission has declined. These failures could probably have been anticipated, in advance, had policy makers carefully examined economic theory concerning market evolution. While these are some reasons to be hopeful for market performance in the future there are also potential pitfalls. Non-market oriented policy alternatives for health system reform are worth considering based on the experiences of the states and other countries.

Antitrust Laws↗
PubMed1996

The dynamics and limits of corporate growth in health care.

This paper analyzes the economic dynamics of five forms of organizational growth in health care: horizontal integration within a single geographic market; horizontal integration across different geographic markets; diversification among multiple products and types of service; diversification among multiple distribution channels; and vertical integration with suppliers. These principles are illustrated through brief case studies of three firms that have grown by way of internal expansion, mergers, acquisitions, and diversification: WellPoint Health Networks, UniHealth America, and Mullikin Medical Enterprises. The paper analyzes the potential limits of organizational growth in health care and explores the implications of integration and diversification for antitrust policy.

Antitrust Laws↗