Integrating to Enhance Value and Quality vs. Preserving Competition to Maintain Lower Prices

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J. Mark Waxman, Sep 30, 2014

The Affordable Care Act, the Triple Aim (targeting enhanced quality and patient satisfaction, engaging in population health, and reducing per capita costs), and the need for capital and infrastructure to change from a fee-based system of care to a value- and results-based system are all driving providers to consider merging and consolidating health care systems, as never before. Those merging believe that only by engaging consumers across a larger and financially integrated platform, and eliminating the inefficiencies of fragmentation, can the necessary efficiencies and quality enhancement really occur in a sustained way.

On the other hand, concerns exist that consolidation to achieve these goals is not necessary, and may well come at the expense of the consumers or those who arrange for their care—the employer and health plan community. Forefront in this concern is the Federal Trade Commission, recently described as “a lonely but powerful voice” suggesting that “consumers may be victimized.”

Unfortunately, there is no bright line to indicate where the balance lies between the desire for efficiency and population health management and the need to retain a competitive environment as a check on pricing decisions. Instead, this debate often plays through the application of the provisions of the Clayton Act, which on a market-by-market basis looks to whether the effect of the proposed acquisition will “substantially” lessen competition or “tend” to create a monopoly. Unfortunately, while in many instances it is unnecessary, all too often the answer to this question plays out through the expensive and often frustrating prism of litigation. This Article explores two high profile transactions where the balance is being examined and, in both cases, the examination is taking case through the courts.