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Medical Monopolies
FTC Puts Hospital Mergers in Its Crosshairs

The Federal Trade Commission is getting aggressive in challenging hospital mergers—and not a moment too soon. The NYT profiles several of the FTC’s recent victories against proposed mergers in Georgia, Ohio, and Illinois. Though the commission has only challenged roughly 1 percent of mergers, its recent wins are causing hospital executives nationwide to think twice about forming monopolies.

According to the NYT, the FTC is responding to an uptick in hospital centralizations caused by the ACA. Medical monopolies reduce competition and beef up hospitals’ bargaining power with insurers; mergers can raise prices by as much as 40 to 50 percent. Hospitals, of course, dispute this, but the FTC’s not buying:

Hospital executives say mergers can benefit consumers by pumping money into struggling institutions in order to buy new medical equipment and adopt electronic health records. In other cases, hospitals say their goal is to increase the quality of care, lower its cost and eliminate duplication — for example, by consolidating cardiac care or cancer treatment at one site.

Federal officials view such arguments with skepticism and require hospitals to document the benefits with detailed studies.

“Vague promises and aspirations that an acquisition will reduce costs and improve care are not sufficient,” said Julie Brill, a member of the commission.

That there are some benefits to a certain degree of collaboration and consolidation is probably true—which is why the FTC has only fought 1 percent of relevant cases. In many cases, however, hospitals have gone far past the limits of efficiency gains, and consumers have suffered.

While the FTC’s efforts to bring hospitals to heel is a good move, a purely negative campaign against mergers isn’t a complete answer to the price problem either. Only when the FTC’s more vigorous anti-trust actions are combined with an industry shift to greater use of clinics and other lower-cost care settings will we  see prices really come down.

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