When there's less competition, prices are higher. That's one fundamental principle of economics that applies to all markets, and this is especially true in healthcare, where American hospitals are the driver of the rising cost of care, Barak Richman, PhD, professor of law and business administration at Durham, N.C.-based Duke University, wrote in a Jan. 19 column for Politico.
Consolidation has been rife within the hospital sector over the past three decades, resulting in increased healthcare costs, which is likely why there is a renewed focus on antitrust laws on Capitol Hill, according to Dr. Richman.
"When nearby hospitals merge, prices go up; cities with fewer competing hospitals exhibit higher prices; and even hospitals acquired by distant health systems increase prices more than unacquired, stand-alone hospitals," Dr. Richman wrote. "In fact, most of America's unsustainable healthcare costs are driven by hospital care, and most of that price inflation over the past decades has been due to hospital mergers."
The Federal Trade Commission is clamping down on mergers it deems anticompetitive, but Dr. Richman argues that antitrust policy should also be reinvented to support the benefits of competition at a time when telemedicine and at-home care offers hospitals new delivery models.
"Better antitrust policy to combat hospital dominance means understanding the dysfunction of the current market and the benefits of certain innovations," according to Dr. Richman wrote. "It is not a blanket hostility to size or mergers but instead a targeted attention to where specific structural changes would bring transformational benefits."
Dr. Richman highlighted three areas where policymakers should focus on to guide competition policy:
1. Protect independent physicians: Policymakers should pay attention to physicians as a competitive threat to hospital dominance.
2. Promote new business models: Antitrust policy should support new business models for hospitals and payers in response to large hospitals and insurers working to prevent newcomers from entering the market.
3. Protect digital startups. Policymakers should prevent industry powerhouses from snapping up digital startups.
"Healthcare antitrust must be about more than combatting traditional mergers and instead should commit itself to nurturing a dynamic market, one that encourages entry, creativity, and innovation," according to Dr. Richman.