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June 8, 2022
Health Law Health care costs
John E. McDonough
Jun 29, 2021
Apr 28, 2021
Oct 14, 2020
Back to The Milbank Quarterly Opinion
For decades, corporate mergers and consolidations in the US health care system were like the weather—complain all you want because you can’t do anything about them. Corporate consolidation is recognized as a major culprit for fast rising health care prices and costs across the United States. For years, the big players have only gotten bigger with little or no evidence demonstrating improvements in quality or value from such growth.
Now, for the first time in many years, the federal government is paying attention again to antitrust and monopoly activity across society, with the health care industry a prime target. Key officials in President Joe Biden’s administration are working to upend 40-plus years of precedent that regarded corporate concentration as no big problem. These new officials include Lina Khan, chair of the Federal Trade Commission, Jonathan Kanter, chief of the Justice Department’s Antitrust Division, and Tim Wu of the White House Council of Economic Advisers.
The most well-known of these three is Khan—the face, voice, and pen of today’s new anti-trust movement. In 2017, while a student at Yale Law School, she wrote a devastating takedown of Amazon.com called “Amazon’s Antitrust Paradox.” She chose the title carefully, modeled after the late Judge Robert Bork’s influential 1978 book, The Antitrust Paradox, the intellectual spear against the prior dominant idea that the purpose of antitrust law was to prevent corporate consolidation and monopoly. Bork’s idea, central to that era’s neoliberal revolution, asserted that any merger or consolidation that promoted “consumer welfare” in the form of lower prices to someone was de facto legal.
In his Senate confirmation process in 2021, Kanter responded to queries from Senator Chuck Grassley (R-IA) writing back that, “the application of the consumer welfare standard has been inconsistent, vague, and insufficient to keep pace with market realities.” On April 21, 2022 he delivered a keynote address at the University of Chicago’s Stigler Center entitled: Antitrust Enforcement: The Road to Recovery. He did not mince his words:
“I am here to declare that the era of lax enforcement is over, and the new era of vigorous and effective antitrust law enforcement has begun. But the path will not be easy or linear…The public depends on us to police the channels of commerce against collusion and monopoly. When we fail, families struggle to afford groceries. They earn lower wages. They lose control of their own private data to dominant platforms. The American Dream slips away.”
Khan and colleagues are challenging the Bork (and Stephen Breyer) thesis that bigness is fine as long as someone’s prices go down as a result. While defenders of today’s status quo lampoon Khan et al.’s work as “hipster antitrust,” others view it as an effort to restore the ideas of late US Supreme Court Justice Louis Brandeis (1856-1941) who defended and promoted antitrust as the best way to foster market competition. Those looking for a Brandeis-centric history of this important public policy debate should read the compelling book, Goliath by Matt Stoller, the troubadour of the new antitrust movement who covers this topic relentlessly on Substack.
“Know yourself, know your enemy,” wrote Sun Tzu. Last November, US Chamber of Commerce CEO Suzanne Clark publicly steamed: ““The FTC is waging a war against American businesses, so the US Chamber is fighting back to protect free enterprise, American competitiveness, and economic growth. The FTC’s radical departure from its core mission under Chairwoman Khan is deeply concerning to our members across the business ecosystem.” But Khan and company are not going rogue within the Biden Administration. Here is a brief paragraph on the health sector concentration from President Joe Biden’s July 9 2021 executive order directing a new national approach to antitrust:
“Americans are paying too much for prescription drugs and healthcare services—far more than the prices paid in other countries. Hospital consolidation has left many areas, particularly rural communities, with inadequate or more expensive healthcare options. And too often, patent and other laws have been misused to inhibit or delay—for years and even decades—competition from generic drugs and biosimilars, denying Americans access to lower-cost drugs.”
One change in antitrust practice over the past 40 years was a shift away from market consolidation as a broad-based public concern to an insiders’ game where economists hold sway and battle each other with arcane and often incomprehensible financial models to bolster the viewpoints of their powerful sponsors. Team Biden is determined to change that, including in the health care space. On April 14, 2022 the FTC and the Justice Department cosponsored a “Listening Forum on the Effects of Mergers in the Health Care Industry.” The featured speakers included registered nurses, a general surgeon, a rheumatologist, a Type 1 diabetic and insulin accessibility advocate, pharmacists, and others. You can read the compelling testimonies here.
Joseph Thon, a registered nurse at a 120-year-old hospital in Lewiston, Idaho that was purchased by a for-profit Nashville-based system in 2015, recalled:
“…the hospital had more than a thousand employees. Now, we’ve got about 700. 62 employees were downsized just months after the merger closed in 2017. Employees who stayed got squeezed. The cost of our insurance benefits went way up while our coverage went down. We lost several benefits altogether, such as our extended illness bank hours, or in other words, sick pay. We lost pension pay and health retirement arrangement accounts as well…
“What’s this mean for you as a patient? As a patient, you may have longer wait times before your call light is answered when you may need to use a bathroom or when you need pain medicine. We’ve had more falls occurring at our hospital as well since the loss of staff. Maybe your visitors will not be able to eat in the cafeteria as it now has reduced hours and doesn’t even stay open during daytime hours. Maybe you have a question on your bill only to be transferred to a billing company on the Eastern side of the United States and given the runaround.”
Here’s Dr. Mitchell Lee, a practicing emergency physician and founder of “Take Back Medicine.”
“I’m here to speak on behalf of my physician colleagues who are silenced by fear of retaliation and anti-competitive contract language often preventing them from serving patients in their own communities. Physicians are further silenced through a systematic bypassing of due process rights. Meanwhile, immigrant physicians who depend on work visas are even more vulnerable…My specialty and the only defacto universal medical safety net in the United States is at risk of collapse due to consolidation and leveraged buyouts by private equity.
“In 2017, the year I graduated from residency, TeamHealth was acquired by the PE firm Blackstone. Shortly thereafter, TeamHealth was in the news for predatory billing practices suing the working poor and garnishing their wages while patients suffer, my profession’s name has been tarnished. In 2019, the New York Times reported Blackstone-backed TeamHealth and KKR-backed Envision were behind a deceptive $28 million ad campaign by an organization calling itself Doctor Patient Unity and opposing implementation of the No Surprises Act. Meanwhile, physicians working for TeamHealth Envision have no access to what is actually billed or collected in their names.”
In 2010, the last time FTC officials revised their regulations regarding antitrust, they received 32 public comments in toto. This time, as of mid-May, they received 5,825 public comments, with hundreds specifically relating to health care mergers and acquisitions.
Importantly, it’s not just Democrats and progressives who are rattling these cages. Rachel Bovard, Senior Policy Director for the Conservative Partnership Institute, made the case one year ago in The American Conservative for “Why Republicans Must Rethink Antitrust.” The tech giants such as Google, Facebook, and Twitter, are at the top of the list, and by no means the only objects of concern. Bovard observes, “…the right has largely woken up to the threat of concentrated economic power, acting at scale, because it has been so overtly wielded against them.”
No one can predict how far this effort will go. I’ll predict one thing—this is not going away.
John E. McDonough, DrPH, MPA, is a professor of public health practice at the Harvard University TH Chan School of Public Health in the Department of Health Policy and Management. Between 2008 and 2010, he served as a senior adviser on national health reform to the US Senate Committee on Health, Education, Labor, and Pensions, where he worked on the writing and passage of the Affordable Care Act. Between 2003 and 2008, he was executive director of Health Care For All, a Massachusetts consumer health advocacy organization, where he played a leading role in the passage of the 2006 Massachusetts health reform law. From 1985 to 1997, he was a member of the Massachusetts House of Representatives where he cochaired the Joint Committee on Health Care. His articles have appeared in the New England Journal of Medicine, Health Affairs and other journals. He has written several books including Inside National Health Reform in 2011 and Experiencing Politics: A Legislator’s Stories of Government and Health Care in 2000, both by the University of California Press and the Milbank Fund. He holds a doctorate in public health from the University of Michigan and a master’s in public administration from the Kennedy School of Government at Harvard University.
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