The FTC/DOJ’s March madness

The Federal Trade Commission and the Antitrust Division of the Department of Justice can learn a thing or two about competition from basketball.  The NCAA basketball playoffs are riveting because there is a level playing field, fair and transparent rules, a chance for both sides to prevail, and a fair referee.  In other words, a chance for competition to decide who the best team is.  These are the same virtues that are vital for sound competition enforcement.

The agencies usually get that right, but they clearly deserve criticism when it comes to their recent workshop “Examining Health Care Competition.” This workshop was soundly criticized for a lack of balance by the nation’s leading hospital and provider associations – the American Hospital Association, Federation of American Hospitals, AAMC, Children’s Hospital Association and Catholic Health Association.  The agencies’ attempt to provide guidance and education on key competition issues was surely lacking in the fairness that makes basketball so great.

{mosads}Certainly the agencies’ efforts to provide guidance both to themselves and the public at large is tremendously important.  Controlling health care costs is a vital national priority.  It was valuable to do some type of assessment of the reforms of the Affordable Care Act.  Especially when many industry players, including hospitals, physicians and insurers, are adapting to find new approaches to improve health care.

But that guidance depends on balance and a full expression of all positions and in this respect the workshop fell dismally short of the mark.  As the hospital associations documented, there were no hospital witnesses, no witnesses who discussed the efficiencies from the ongoing hospital integration and no testimony from economists with hospital experience.   The deck was stacked with witnesses primarily from health plans or well known critics of hospitals.

Throughout the workshop it was clear that speakers tried to paint hospitals as the sole villain in increasing health care costs (the evidence of that is far from clear).   The opening speaker highlighted the claim that the reason for hospital integration was simply to increase leverage to increase reimbursement. There was sparse attention to the efforts to improve quality and coordination – critical goals of the ACA.  There was also no attention to the efforts to preserve hospitals serving underserved inner cities or rural areas, and little attention given to how ongoing integration is improving health care.

At the same time the workshop seemed to give insurers a complete free pass.  This neglects the fact that a primary motivating force for the enactment of the ACA was to reform insurance markets and provide consumers transparency, choice and a basic level of consumer protections.  There was little assessment of whether the record of anticompetitive and unfair conduct of insurance companies had changed since the ACA was enacted and whether insurance companies have changed their playbook.

Making matters worse, the agencies have limited sources of information.  Most of their data comes from nonpublic investigations of potential wrongdoing.  They see what may raise competitive concerns; they do not see what works right.  This is essential – as the agencies noted “our credibility depends heavily upon our industry knowledge.”  This credibility is called into question when they leave out an essential group of industry participants or narrow their focus to just one side of the equation.

Why does this matter?  Because the FTC and the Antitrust Division have limited resources.  Workshops like these will inform their enforcement decisions.  It would be wrong as the result of this one-sided affair to end up with agencies focusing a lopsided portion of their enforcement gunpowder on health care providers, but not insurers where it might be more appropriate.  Indeed, the Congressional health care reform hearings documented at length egregious and deceptive practices by insurance companies, yet the enforcement actions against those companies are preciously few.

Moreover, the workshop just underscored the apparent conflict between the antitrust agencies that seem primarily concerned with the ability of insurance companies to negotiate lower reimbursement rates for providers and the health care reform efforts that seek to control costs while improving the quality of health care.

Balance and fairness.   That’s the key to a good basketball game but its essential to constructing sensible public policy.  Let’s hope the antitrust agencies get it right next time.

Balto is a former policy director of the Federal Trade Commission, attorney-adviser to Chairman Robert Pitofsky, and antitrust lawyer at the U.S. Department of Justice. He has been a senior fellow at the Center for American Progress and has worked with the International Center on Law and Economics, both of which receive funding from many organizations including Google. Balto has also published research and authored scholarship for Google on technology policy topics.


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