Healthcare Consolidation
Defining Health Care “Corporatization” (The New England Journal of Medicine)
Erin C. Fuse Brown
In this brief article, Fuse Brown draws on the prescient work of Paul Starr who, in his 1982 book the Social Transformation of American Medicine, foretold the coming of large healthcare conglomerates. Through consolidation, concentration, and increased focus on profits over patients, the author asserts that we have reached the “Gilded Age” of medicine, replete with dissatisfaction for all – producers, providers, and consumers. While Starr’s 40-year-old prediction has proven to be largely accurate, Fuse Brown points to several opportunities for reform to realign the mission of healthcare in service of society over shareholders.
Are M&As Spurring or Stifling Innovation? Evidence from Antidiabetic Drug Development (DIW Berlin Discussion Papers)
Jan Malek, Jo Seldeslachts, Reinhilde Veugelers
Consolidation in healthcare markets continues to be an area of interest for health economists and policymakers. While studies often examine the downstream financial implications of mergers and acquisitions (M&As), this study looks instead at M&A’s effect on innovation. The authors focus on acquired companies with antidiabetic medications in development to determine if any patterns exist between stages of product development, shared technologies between transacting firms, and the likelihood of continued or “killed” product development. Results showed greater preservation of innovation when transacting parties shared technological approaches and markets. This article imparts important empirical evidence about concerns beyond cost and quality as regulators and policymakers continue to navigate M&A activity in the healthcare markets.
Antitrust Law
Alternative Remedies for Breach of Competition Law: A Case for Restitution for Wrongs (Journal of Competition Law & Economics)
Matthew Tweddell, Konstantinos Pantelidis
This thoughtful legal analysis from England and Wales examines two common approaches to damages calculations for anticompetitive conduct, compensation and restitution. Compensatory damages are based on calculating the claimant’s loss while restitution awards are based on the calculation of a defendant’s ill-gotten gains. In competition law cases where defendants have acted to foreclose competitors, determining the counterfactual of claimants’ losses can be fairly difficult. In such cases, restitution serves to correct injustice rather than just compensate losses. The authors argue that the United Kingdom’s Competition Act 1998 and common law support restitution as a means of civil enforcement and, in fact, that such calculations serve as a simpler and more equitable award mechanism.
Wither Consumer Welfare? Antitrust in the Biden Years (George Mason University Law & Economics Research Paper)
Hon. Douglas Ginsburg
In this recent Milton Handler lecture, Douglas Ginsburg, former Assistant Attorney General of the Department of Justice’s Antitrust Division under President Ronald Reagan, analyzes the Biden administration’s approach to antitrust enforcement. Ginsburg claims that the consumer welfare standard, which prioritizes the well-being of consumers when evaluating mergers, has been the traditional driver US antitrust policy, and that antitrust policy is best when this “economic approach” takes the lead. The author notes that under President Biden, federal antitrust moved away from the consumer welfare standard, and towards a “whole of government” approach, seemingly pursuing an aggressive reform agenda through policy statements, rulemakings, and enforcement actions rather than enacting new antitrust legislation. Basing antitrust on populist principles (such as protecting small businesses) instead of economic analysis, the author contends, made the Federal Trade Commission and Department of Justice less successful in challenging mergers in court and created the appearance of arbitrary agency actions. Judge Ginsburg examines the 2023 Merger Guidelines, updated Hart-Scott-Rodino reporting requirements, and reported enforcement actions to support his premise, and ends his discussion with a brief examination of where antitrust enforcement might be headed in the second Trump administration.
Cost Containment Strategies
The Problem with California’s Plan to Contain Health Care Costs (JAMA Health Forum)
Lanhee J. Chen
California is one of 17 states to have enacted state agency oversight to address healthcare access, affordability, and competition. The Office of Health Care Affordability (OHCA) was given specific authority to slow healthcare spending growth through data collection and assessment as well as implementation of cost growth benchmarks that apply to insurers, large (>25) physician groups, and hospitals. In April 2024 OHCA published hospital cost-growth benchmarks for hospitals of 3.5% in 2025, declining to 3.0% in 2029. For certain “high-cost” hospitals in the state, OHCA proposed a cost growth benchmark of 1.8% in 2026, reaching 1.6% in 2029. Hospitals and physician groups have expressed concerns about OHCA setting cost-growth targets for high-cost hospitals more aggressively than required by statute, and that these targets could result in service reductions and cost shifting. The author notes specific concerns with OHCA applying different standards within the hospital sector rather than targets by sector, with the methods used by OHCA to identify high-cost hospitals, and that the cost-growth benchmarks being based on 2018-2022 data, which includes COVID era volatility. The article does acknowledge the real problems connected with rising healthcare costs in California, and notes the importance for reforms that the author believes would better align OHCA’s actions with policymakers’ intentions.
Does Global Budget Promote the Construction of Integrated Healthcare Delivery System? Evidence from Sanming, China. (BMC Public Health)
Liangwen Zhang, Xinyuan Yu, Ya Fang
Alternative payment methods aim to lower healthcare costs, increase the quality of care, and create efficiencies in care delivery. Global budgeting (GB) provides prospective payments (to a facility or provider) to cover all the care needed for a certain population for a designated time period. GB incentivizes efficient use of resources as the cost of excessive unnecessary care is generally borne by the facilities and/or providers, not the payer. Researchers examined GB’s effect on County Medical Communities (CMC) in Sanming, China and found that while it failed to impart significantly lower inpatient costs, it did increase more efficient use of CMC resources and encouraged a more integrated healthcare system. This multi-year interrupted time-series analysis showed improved provider coordination and increased use of primary healthcare institutions demonstrating important lessons for low- and middle- income countries.
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