A recent review shows that states with stronger antitrust laws were more likely than others to flex those powers and challenge hospital mergers, yet they were still generally unsuccessful in limiting consolidation and higher prices.
Across the 862 mergers proposed during the 2010s, 42 (4.9%) were challenged by states and the Federal Trade Commission, and 35 (4.1%) of those were challenged by states alone, researchers wrote this week in Health Affairs.
Among them, 25 of the challenges were headed by eight states the researchers determined to have the most robust merger review authority, according to the analysis. Two of those 25 mergers were blocked, and three were abandoned.
“States could play a critically important role in addressing poorly functioning hospital markets because federal antitrust enforcement is limited by resource constraints, high [federal antitrust] filing thresholds, less flexible merger review authority and less knowledge of local market conditions,” the researchers wrote in Health Affairs.
“With mounting evidence of the anticompetitive effects of hospital consolidation, coupled with the increasing trend of consolidation moving beyond horizontal mergers to include vertical and cross-market mergers as well as joint ventures, management contracts and affiliations, having an effective antitrust enforcement framework is imperative.”
However, simply having a more robust merger approval authority in place wasn’t enough to moderate hospital consolidation and healthcare price increases, both of which the study found still occurred in the states with stronger laws and more frequent merger challenges.
Here, the researchers pointed to the remaining 20 hospital mergers that were challenged by states but ultimately were permitted to go through.
Just seven of these allowances included conditions that sought to preserve the competitiveness of their markets, as most restrictions addressed other state priorities such as continued access to services for vulnerable populations, the researchers wrote. Those that did address market power often turned to time-limited restrictions that only delayed growth, the researchers wrote.
“Although we did not find evidence that merger challenges moderated hospital price increases in these states, retrospective studies could analyze the effects of these challenges on postmerger prices,” they wrote.
“Additional research is needed to understand whether more rigorous use of competition-based enforcement tools, including structural remedies (such as blocking the merger or divestitures) and competitive impact conditions (such as caps on post-merger price increases) can effectively promote competition and restrain price growth or whether regulatory interventions such hospital rate-setting are required to achieve these goals.”
Hospital consolidation protections have been a priority at the federal level, with President Joe Biden instructing regulators to take a heavier hand over the summer, much to the chagrin of industry groups.
But the states have also been proactive of late—just last month, a coalition of 25 attorneys general threw its support behind the challenge of a New Jersey health system deal under the pretense of preserving its ability to contest nonprofit hospital mergers.