Where is the future of federal healthcare antitrust policy being decided? The halls of the U.S. Justice Department? The offices of the Federal Trade Commission? The corridors of Congress?
How about Smith College, an all-women school of 2,800 undergraduate students in Northampton, Mass., some 100 miles west of Boston.
That's where economics professor Deborah Haas-Wilson and co-investigator Martin Gaynor, a public policy professor at Carnegie Mellon University in Pittsburgh, have launched a two-year study of whether federal antitrust policies have helped or hurt consumers of healthcare services by encouraging or thwarting certain healthcare business transactions.
The ultimate goal of the project is coming up with guidelines to help federal antitrust enforcers decide when to let a transaction go through or block it because of anticompetitive risks.
Current federal antitrust enforcement policies in the healthcare industry primarily are theoretical. They're based on assumptions that transactions of certain types or of certain sizes inherently pose dangers to competition and the subsequent benefits that competition provides to consumers.
However, under that framework, some transactions that may end up helping consumers are stopped and others that ultimately hurt consumers go through.
The new research project will take a look at how some healthcare deals played out with the hope of coming up with better predictors as to when the federal government should step in or step aside.
"We could find that antitrust policy has been too lenient and consumers have been injured," said Haas-Wilson.
The project couldn't be more relevant, given the explosion in hospital mergers and acquisitions, the dozens of managed-care mega-deals and the host of networking strategies involving both hospitals and physicians. All have occurred with little interference from federal antitrust enforcers from the Justice Department and the FTC.
And despite a virtual free ride from the feds, many sectors of the industry, particularly hospitals and physicians, have lobbied Washington lawmakers for statutory leniency under existing federal antitrust law (Jan. 8, p. 40).
The Robert Wood Johnson Foundation, a Princeton, N.J.-based philanthropy, funded the research with a $246,691 grant. The foundation awarded the grant in January, but the two-year funding clock was retroactive to Sept. 1, 1995. The grant runs through Aug. 31, 1997.
The research project, titled "Antitrust Policy and the Transformation of the Health Care Delivery System," will address three questions with the stated goal of developing new enforcement guidelines that might be useful to the feds:
What are the social welfare effects of the structural changes occurring in healthcare markets?
To what extent are these changes efficiency- or quality-enhancing, and to what extent may they facilitate collusion and market power?
And, if competition is lessened, is there a significant welfare loss, and if so, what is appropriate antitrust policy?
Haas-Wilson said the project will measure "welfare loss" primarily in terms of price and quality-specifically, are consumers paying more or less than they're willing to pay for care, and are providers offering the optimum level of care for that price?
In addition to looking at hospital mergers and acquisitions, the researchers will examine mergers and acquisitions among managed-care plans, physician integration, integration between hospitals and physicians and between providers and managed-care plans.
To help them in their quest, the researchers have formed a four-member advisory panel of antitrust experts. They are: Robert Bloch, a private antitrust attorney who formerly headed the Justice Department's healthcare enforcement efforts; Dennis Yao, an economist and former FTC commissioner; William Sage, M.D., a physician-attorney who was a member of the national healthcare reform task force headed by first lady Hillary Rodham Clinton; and Robert Berenson, M.D., a physician who also served on the national healthcare reform task force.
Before publishing their comprehensive findings in a book, the researchers plan on publishing a series of articles based on their work.
"We've been in communication with the Justice Department and FTC," Haas-Wilson said. "They're aware of our work and are very interested in it."