FOR RELEASE: JUNE 24, 1992
ANTITRUST ENFORCEMENT HELPS CONTROL HEALTH CARE COSTS, FTC TELLS CONGRESSIONAL COMMITTEE
Although brought to bear in the health care industry only since the mid-1970s, antitrust enforcement has promoted major reforms -- including the development of a variety of "managed care" health plans -- that have boosted competition and helped contain costs, a senior attorney at the Federal Trade Commission told a Congressional panel this morning. The FTC added that competition improves the performance of hospitals under the current health care system and that antitrust enforcement will continue to play a role in ensuring such competition in the foreseeable future.
The FTC's testimony was delivered by James C. Egan, Jr., a Director for Litigation in the FTC's Bureau of Competition, at a hearing of the U.S. Congress Joint Economic Committee's Subcom- mittee on Investment, Jobs, and Prices. The topic was the structure of the hospital industry in the 21st century.
While health care markets differ in many respects from textbook competitive markets -- for example, some have cited a relative lack of access to information for patients, and third- party payers blunt the impact of price on patient purchasing decisions -- market forces still play a valuable role in the industry, according to the Commission testimony. Indeed, Egan said, the growing demand from both patients and payers for more information and more cost-effective care has led to a more competitive environment and, in turn, market responses such as health maintenance organizations and preferred provider organizations.
- more - Hospital Testimony--06/24/92)
Competitive market forces also are needed to help make hos- pitals work well, according to the FTC. The "clearest benefit" of competition in the hospital industry is the opportunity it offers third party payers to contain costs through managed care price competition, Egan said. This kind of competition is becoming increasingly widespread, he added, noting that many health care reform plans would rely more heavily on it. "The Commission places particular importance in its hospital merger enforcement activities on the preservation of the hospital alternatives needed to make managed care work," Egan said.
Even so, according to the Commission testimony, most mergers and joint ventures are likely to help consumers, as evidenced by the fact that "only a handful" of the 50-100 hospital mergers and similar transactions are investigated -- let alone challenged -- by the two federal antitrust authorities each year. Moreover, Egan added, neither has ever challenged a hospital joint venture. In fact, according to the FTC testimony, when they have chal- lenged mergers, both the FTC and the Department of Justice often have found joint ventures "desirable alternatives for hospitals to achieve efficiencies to improve specific services without sacrificing the larger benefits of price and quality competition by merging their entire operations."
In conclusion, Egan pointed to the considerable federal effort to publicize hospital merger enforcement policies "so as not to discourage legal, beneficial transactions."
Copies of the Commission testimony are available from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsyl- vania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY 1-866-653-4261.
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MEDIA CONTACT: Bonnie Jansen, Office of Public Affairs 202-326-2161
STAFF CONTACT: James C. Egan, Jr., Bureau of Competition 202-326-2886