FTC commissioner: Panel outmatched by healthcare's merger mania

FTC building
The Federal Trade Commission needs resources and state cooperation to fight antitrust litigation. (Wikimedia Commons)

Two key challenges face the Federal Trade Commission as it aims to more effectively monitor healthcare mergers: a lack of resources and too little power to intervene in the insurance sector.

While mergers are increasing, FTC resources are decreasing, said Commissioner Rebecca Kelly Slaughter at an event on antitrust issues hosted by the Center for American Progress. Slaughter says the agency has 50% fewer employees than it did at the beginning of the Reagan administration. Yet enforcement, trials and case expert fees have increased over that same period of time.

In addition, the FTC faces stiff restrictions to stepping into a payer merger. The FTC does not have a right to look at insurance industry data without an explicit request from Congress, so the only way to see these data from an insurance company is for the payer to make the information public, she said.

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Therefore, Slaughter encourages insurers to join the Healthcare Cost Institute and make data available, but some insurers, such as UnitedHealthcare, have been backing out of the partnership. And, she said, she's "all for" eliminating the McCarran-Ferguson Act, which exempts the industry from much federal oversight.

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There are also steep evidentiary requirements in examining such deals, she said.

“It came as a surprise to me the type and extend of evidence the courts expect and the reliance on insurance companies,” Slaughter said.

While insurance companies have a rich well of data on patients, they work intimately with providers and hospitals. So, given their reliance on providers, insurance companies might be reluctant to testify against a hospital and ruin a relationship.

Additional challenges, Slaughter said, include pre-merger reporting. According to law, “small” transactions do not need to be reported in advance, and the FTC can only challenge them after the fact. However, Slaughter notes that small deals in 2000 made up about $30 billion to $40 billion, many in the healthcare vertical. Plus, the FTC currently has no control over the conduct of nonprofit hospitals. As nearly half of all U.S. hospitals are nonprofits, that makes it much harder to intervene in a significant amount of mergers, she said.

The role states play in enforcement also poses a hurdle, she said. Often, state requirements are not in sync with federal requirements. And some states have put in place Certificates of Public Advantages (COPAs), laws that protect hospitals from FTC challenges to mergers.

She said that states need to work with, not against, the FTC. And states need to assist the FTC in conducting a new round of hospital retrospectives to examine the results of recent hospital mergers. The FTC also needs to target where COPAs have prevented enforcement. 

RELATED: Complaints to FTC accuses Facebook of health privacy violations

Slaughter also touched on the impact these mergers can have on the industry.

According to Slaughter, price markups due to insufficient competition and rapid consolidation are major reasons the U.S. spends more on healthcare than any other developed nation. In 2018 alone, mergers and acquisitions in the healthcare industry reached $120 billion. The FTC is relying on collaboration with Congress and individual states to improve competition that will ultimately benefit both patients and healthcare workers. 

“We can’t deliver affordable healthcare or fair wages without competitive providers,” said Slaughter.

Slaughter notes that while prices from hospitals have continued to increase, worker wages have either remained stagnant or declined between 2007 and 2011. And there is limited evidence these hospitals are now more efficient post-mergers. So, rather than allaying blame, Slaughter suggests that the FTC examine the past and plan for the future.

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