A new report in Washington suggests that a state law giving antitrust protection to healthcare providers should be repealed because competition has done a good job of controlling costs and regulating providers in lieu of competition may cost more than it's worth.
The Washington attorney general's office submitted the 89-page report to the state Legislature on Dec. 15, 1995, as part of the Legislature's review of the state's 1993 antitrust exemption law.
At least 17 other states have similar laws (See related story, p. 6).
Last May, the Washington Legislature placed a 15-month moratorium on new provider antitrust exemption applications while it decides whether the law is needed (May 29, 1995, p. 10).
The Legislature considered repealing the exemption law as part of the rollback of the state's healthcare reform laws. But last-minute lobbying by provider groups convinced the Legislature to put the bill on hold and study the issue before making a final decision.
Under the exemption statute, hospitals, physicians and other providers can seek antitrust relief from the state if their proposed collaborative venture meets specific criteria, such as lowering costs or improving quality, and those benefits exceed any anti-competitive risk.
If the state grants an exemption petition, it uses annual reports and other mechanisms to monitor the progress of the venture in meeting community-benefit goals.
Before the moratorium, providers filed 11 exemption applications. Two were approved, three are pending and six were later withdrawn.
In its report, the state attorney general's office made a strong case for dumping the law, though it stopped short of making a specific recommendation.
"Given the economic benefits of competition, substantial benefits of immunity should be found if (exemption applications are) to be granted," the report concluded.
In its report, the state's highest law-enforcement office highlighted the benefits of competition and the drawbacks of antitrust exemptions for providers.
First, the report found no economic benefit in granting antitrust immunity to healthcare providers. A study conducted for the state attorney general's office found that 1993 prices for hospital and physician services in more competitive markets in Washington were lower than prices for the same services in less competitive markets.
For example, the study projected that in markets where the number of similarly sized hospital competitors dropped from three to two, prices for hospital services could jump as much as 26%. In markets that dropped from two to one, hospital prices could be expected to jump as much as 44%.
Second, the report said most of the Antitrust
activities for which providers wanted exemptions already were legal under existing state and federal antitrust laws and enforcement policies. And it said collaborative ventures rarely met antitrust enforcement actions anyway, especially hospital transactions.
"Washington currently has very few towns in which we have hospital competition remaining," the report said. "Given that, it is unclear what relief is needed here for hospital mergers."
For the infrequent and illegal transactions that could be immunized under the law, there's no evidence that the community benefits generated by the deals would outweigh their negative impact, the report said.
"We were not presented with a single example by those in favor of immunity to support the existence of clear and measurable benefits to consumers that would result from activities permitted only if immunity is granted," it said.
Finally, the cost of setting up a state system to monitor providers' progress in meeting their collaborative goals as well as the cost borne by providers in meeting the state's regulatory demands may offset any benefits from the transactions, the report said.
The Legislature is expected to decide the law's future by July 1, when the moratorium on new exemption applications from providers expires.