David Pearl, Toby Singer, Jul 17, 2012
With the Supreme Court having resolved the constitutionality of the individual mandate component of the Patient Protection and Affordable Care Act, interested parties are now turning their attention to trying to divine how the ACA, mandate and all, will work in practice, as it gets fully phased in over the next several years. One refrain we have been hearing is that the ACA will push health care organizations to consolidate and that this push is in direct conflict with the DOJ and FTC’s resurgent efforts to vigorously enforce the antitrust laws in the health care industry. As antitrust attorneys, we have several reactions to this statement: (1) we need to unpack what is meant by consolidation because (2) different types of consolidation have different antitrust implications that (3) health care organizations considering a merger need to understand.
Since the passage of the ACA, experts have disagreed over the impact it will have on competition in the health care industry. In a recent example, in May of this year, Congress held a hearing entitled, “Health Care Consolidation and Competition after PPACA” to address just this issue. The chairman of the Judiciary Committee and witnesses associated with the American Enterprise Institute and the Heritage Foundation argued, among other things, that various provisions of the ACA will create incentives for health care organizations, both providers and insurers, to consolidate their operations, leading to a decrease in competition and harm to consumers. In opposition, Professor Thomas Greaney of Saint Louis University College of Law argued that the trend in increased market concentration in health care stretches back decades before the advent of the ACA and that the ACA itself, whether it will lead to consolidation or not, promotes competition in a number of ways, including through its creation of health care exchanges and fostering of new delivery systems.
This debate has understandably raised concerns among industry participants about whether they are about to find themselves between Scylla and Charybdis, urged by one part of the federal government to merge while another part of it lies in wait, ready to pounce at any hint of an increased market share. Whatever the ultimate merits of the differing views on the impact of the ACA on incentives to consolidate, we feel it important to be precise about the meaning of consolidation, as some of the previous debate has failed to do.