As its members face increased market clout from consolidating insurance companies, the American Hospital Association wants the government to expand the antitrust protections that fueled hospitals' consolidation and negotiating power in the 1990s.
In a 17-page letter to the Federal Trade Commission and the U.S. Justice Department's Antitrust Division, the AHA stated the case for its member hospitals in anticipation of the agencies' expected release of a report on two years' worth of joint hearings on competition in healthcare.
The AHA is requesting that the antitrust agencies update the Statements of Antitrust Enforcement Policy in Health Care to address clinical integration. That policy statement, updated in 1994, already conferred special antitrust exemptions on hospitals, noting, for example, that most hospital mergers "do not present competitive concerns." It also stated a federal policy of not challenging hospital mergers where over a three-year period the average number of licensed acute-care beds is fewer than 100 and patient census averages were lower than 40. It also said high-tech joint ventures and joint purchasing agreements, except under extraordinary circumstances, will not be challenged.
The letter, signed by AHA Executive Vice President Rick Pollack, reiterated issues hospitals raised during the hearings, including a request for further agency guidance on clinical integration between hospitals and physicians. The letter also expressed the organization's disappointment in the regulators' failure to explore the impact of health plan consolidations on competition.
"The rate of mergers between nationally prominent health insurers is on the upswing," Pollack wrote.
The letter also attempts to dispel recent studies and information presented during the hearings that blamed hospital consolidation for driving hospital cost increases.
"Hospital consolidation, touted by some participants as an especially aggravating factor for increases in hospital costs, is a red herring," Pollack wrote. He argued that "Only a very small percent of all hospitals ... have engaged in consolidation transactions." The AHA cites studies and economic analyses that indicate consolidation actually reduced overcapacity and had a minimal impact on costs. The agencies are expected to release their report this summer.
AHA Vice President and Chief Washington Counsel Melinda Hatton said the organization sought to synthesize the extensive testimony of its members and officials during the Joint Hearings on Health Care and Competition Law and Policy and continues to seek comprehensive guidance on clinical integration.
"We saw from the hearings how important it is for regulators to act with dispatch so that fear of violating antitrust laws doesn't slow down a trend that everyone agrees is beneficial for the patients," Hatton said. It's important for the agencies to understand how unique and complex hospitals are, "to take this testimony, explain what we saw coming out of it and hope it will be reflected in the final report," she said. "The hearings were supposed to help the agencies understand healthcare and its multiple actors, to understand our industry. And we found that there are some gaps in the record, as far as health insurers are concerned, that the agencies could and should address."
Michael Cowie, former assistant director of the FTC's Bureau of Competition and head of its hospital merger litigation task force, said the FTC and Justice Department invited the AHA and payers to the hearings and seeks their contributions. Cowie's FTC successor, Chul Pak, said he did not know when the report would be issued, nor when the FTC's lookback review of hospital mergers will be done.