Dear Readers,
Of all areas of public policy, few raise passions as intensely as healthcare. After all, healthcare touches the entire human experience, in the famous words of Churchill, “from the Cradle to the Grave.” Indeed, regulating healthcare involves making decisions that affect birth, death, disease suffering, and, from an antitrust perspective, the economic welfare of individuals and the State.
The provision of healthcare services varies widely across jurisdictions, perhaps best exemplified by the contrasting approaches in the U.S., where reliance on private healthcare providers and insurers are the norm, and the approaches in European jurisdictions, where the State plays a more prominent role, though private healthcare markets exist in parallel. On both sides of the Atlantic, changes are afoot, as discussed in the timely contributions to this edition of the Chronicle.
Starting with the U.S., Holden Brooks examines how major changes are underway with respect to how healthcare deals get done in the U.S., with new merger guidelines and HSR reporting requirements waiting in the wings, new analytical frameworks being explored, and new pre-close notice and clearance laws proliferating at a rapid pace at the state level. More small-scale healthcare deals will be subject to some type of antitrust scrutiny than ever before, with many clients confronting antitrust principles and processes for the first time. As a result, for practitioners, providing effective advice to healthcare clients will become increasingly complex.
Reflecting further on the sudden nature of these changes, Dionne Lomax & Lisl Dunlop focus on how, in a largely unheralded announcement, the U.S. Department of Justice Antitrust Division (“DOJ”) withdrew three major antitrust policy statements applying to the health care industry (the Health Care Guidelines). The announcement has been met with widespread concern about the impact of the withdrawal on the industry, which over the last 30 years has arranged its affairs in the context of this guidance. This is in a context where Government health care policies have encouraged a broad range of collaborations, and the Guidelines have provided an important foundation upon which many of those collaborations are built. Before dismantling that scaffold, the authors argue that the agencies should engage in research, consultation, and provide clear and transparent guidance for the industry going forward.
Similarly, Patrick D. Souter delves into the implications of these U.S. policy shifts. The U.S. healthcare sector is composed of numerous types of actors that would, in the normal course of events, be considered to be competitors from an antitrust standpoint. However, their collaboration has been accepted in certain circumstances, due to perceived benefits to patients deriving from such arrangements. Historically, such actors could rely on the policy statements and guidance issued by the U.S. Department of Justice and Federal Trade Commission to assist in developing business arrangements and exchanging information. The author explores the implications of recent moves to withdraw such guidance and to revise the method by which healthcare business arrangements are reviewed, particularly in the light of the federal government’s heightened level of scrutiny in its analysis of healthcare-related transactions.
Turning to a specific (but important) issue in U.S. merger control, Cory Capps, Leyla Karakas & Tetyana Shvydko focus on evidence of systematic price increases following certain types of “cross-market” hospital mergers and acquisitions, i.e. combinations of hospitals that are too far apart to be close substitutes or in the same relevant antitrust market. The literature on such mergers continues to grow, and antitrust agencies have in recent years investigated transactions on the basis of cross-market concerns. As yet, however, no agency has fully litigated a cross-market challenge. The authors review the mechanisms that could drive cross-market price with a particular focus on the common customer mechanism, which posits that hospitals can be substitutes from the perspective of employers and the health insurers that market products to them, even if they are not substitutes for individual patients. Importantly, the piece emphasizes that, while complementarity between sellers is ruled out by definition for in-market mergers, parties to a cross-market merger can be complements or substitutes.
An important component of the healthcare debate in the U.S. in particular is the role of administrative costs within the system. Barak D. Richman & Dr. Kevin A. Schulman underline that even though the U.S. healthcare system exhibits higher administrative costs than any other OECD nation, they have not received substantial attention from policymakers despite their cost and impact on the market. The authors argue that competition policy could meaningfully reduce these costs. Electronic health records have arguably departed from pro-competition principles by failing to understand how healthcare firms can direct business processes exploit their incumbent positions in the market. The authors’ overarching argument is that high administrative costs in the health sector is not an inevitable consequence of a private payer system, but rather due to poorly conceived policies and a lack of competition and innovation.
On the European side, while healthcare systems in EU countries is typically characterized as being “socialized” in nature, Dr. Theodosia Stavroulaki underlines that new healthcare markets are forming in Europe. Indeed, some European countries, such as the Netherlands, have adopted a choice and competition model for healthcare delivery. The goal of competition among providers, however, may in certain cases conflict with essential goals of EU health systems including access and health equity. Competition authorities will be unable to address the main competition concerns that may emerge in light of these conflicts if they do not first address the core question of how to define and assess healthcare quality. There are three different models under which competition authorities around the globe may define and assess quality. Taking as an example the Google/Fitbit deal, this piece takes the stance that if the Commission had examined the transaction deal under what the author terms a “Regulatory” and/or a “Holistic” Approach, it might have been better able to detect the less visible harms such data-driven deals may cause to vulnerable populations and high-risk consumers.
As always, many thanks to our great panel of authors.
Sincerely,
CPI Team
