Consolidation, Coordination, and Competition:

A Challenging Prescription for Health Care

One of the objectives of the Affordable Care Act (ACA) is to encourage health care providers to improve the quality and efficacy of patient care by coordinating services.

Many hospitals and physician groups are seeking to achieve this goal, and to reduce costs, through mergers. As consolidation among health care providers continues, some transactions have triggered concerns over potentially anticompetitive arrangements. In these cases, which are subject to government investigations and private actions, antitrust economists are called on to examine possible competitive effects of the transaction in question, market definition and market power, and any potential price impact on consumers and competitors. The issues in these matters point to the challenges of implementing the ACA to its full effectiveness in the broader context of preserving a rigorous antitrust policy.

Case in Point:

Saint Alphonsus Medical Center - Nampa et al. v. St. Luke’s Health System Ltd.

In the first case challenging a health system’s acquisition of a physician group to go to trial since the ACA became law, US District Judge B. Lynn Winmill ruled that St. Luke’s Health System’s acquisition of Saltzer Medical Group – the largest independent, physician-owned, multispecialty group in Idaho – was anticompetitive and ordered St. Luke’s to unwind the acquisition. Analysis Group and academic affiliate Professor Deborah Haas-Wilson of Smith College were retained by attorneys representing plaintiff Saint Alphonsus Health System to evaluate the likely competitive effects of the acquisition. The lawsuit, which was a companion case to one brought by the Idaho Office of the Attorney General and the Federal Trade Commission, alleged that the acquisition would substantially lessen competition for health care services, in violation of federal and state antitrust law.

Under the direction of Professor Haas-Wilson, an Analysis Group team that included Managing Principal Kris Comeaux undertook complex, multidimensional analyses of claims data to tackle issues of market definition and market power, and to assess the impact of prior St. Luke’s acquisitions on physician referral practices. Citing Professor Haas-Wilson’s trial testimony, Judge Winmill noted that after each of five different physician practice acquisitions by St. Luke’s, the acquired physicians moved their referrals to St. Luke’s. Judge Winmill concluded, “After the Acquisition, it is virtually certain that this trend will continue and Saltzer referrals to St. Luke’s will increase.”

Deborah Haas-Wilson is the Marilyn Carlson Nelson Professor of Economics at Smith College. She is an expert in health care antitrust, including the competitive effects of vertical consolidation in health care markets. ■