Oregon Law Review : Vol. 89, No. 3, p. 847-884 : The Provider Monopoly Problem in Health Care
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Date
2011
Authors
Havinghurst, Clark C.
Richman, Barak D.
Journal Title
Journal ISSN
Volume Title
Publisher
University of Oregon School of Law
Abstract
Health care providers with market power enjoy substantially more
pricing freedom than comparable monopolists in other markets, and
the reason, which is not generally recognized, is U.S.-style health
insurance. Monopoly in health care markets, therefore, has
redistributive effects that are especially burdensome for consumers.
Significant allocative inefficiencies—albeit not the kind usually
associated with monopoly—also result, particularly when the
monopolist is a nonprofit hospital. We first note the need for a more
aggressive antitrust policy for the health sector, one that effectively
prevents the creation of new provider market power through mergers
and other alliances. An immediate need is to prevent the formation of
“accountable care organizations” that integrate providers horizontally
to achieve market power and not just vertically to achieve efficiency.
Because it is unlikely that courts or agencies could undo past mergers
that bestowed providers with monopoly power, we also suggest some
strategies for contesting existing monopolies. One strategy is to apply
antitrust rules against “tying” arrangements so purchasers can contest
providers’ profit-enhancing practice of overcharging for large bundles
of services instead of trying to exploit separately the monopolies they
possess in various submarkets. Another strategy is to use antitrust or
regulatory rules to prohibit anti-competitive provisions, such as “anti-steering”
or “most-favored-nation” clauses, in provider-insurer
contracts. The provider monopoly problem is severe enough that we
cannot exclude the more radical alternative of regulating provider
prices.
Description
38 p.
Keywords
Health care providers
Citation
89 Or. L. Rev. 847 (2011)