Wisconsin Association of Health Plans September 16 2016 Barak Richman Duke Law School amp Fuqua School of Business Overview Competition Works BUT Competition only happens with policymakers support ID: 617389
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Slide1
Competition Matters
Wisconsin Association of
Health Plans
September 16, 2016
Barak
Richman
Duke Law School & Fuqua School of BusinessSlide2
Overview
Competition Works
BUT:
Competition only happens with policymakers’ support
Competition can be enhanced with with pro-competition policies
A View of Wisconsin
Issues aheadSlide3
Backdrop: The Crisis in Health Care SpendingSlide4
Why Rising Spending? Rising Prices
Factors Accounting For Growth In Per Capita National Health Expenditures, 2004-2014Slide5
Why Rising Spending? Rising Prices
Changes In Utilization And Prices Of Medical Service Categories, 2014Slide6
Why Higher Prices?Lessening CompetitionSlide7
Competition isGood for Quality Too
Research Findings:
Less Competition
Higher AMI Mortality
Following Hosp.
Merger Increase in Heart Attack,
Pneumonia, Stroke Mortality
In NHS: Less Competition
Higher Mortality, Slower
Improvements in Heart Care
& MI MortalitySlide8
More Mergers Have Brought Less Competition
Vogt & Town (2006): Hospital Consolidation raised healthcare prices by at least 5%, by 40% when hospitals were near each otherSlide9
Insurers Too: Less Competition, Higher Prices
Dafny
, et al., (2010): Health insurance premiums
i
ncreased 7%
from 1998-2006 because of greater consolidationSlide10
How Did This Happen? The Role of Judges
“Defendants’ nonprofit status also militates in favor of finding their combination reasonable. Defendants’ boards of directors both include business leaders who can be expected to demand that the institutions use the savings achieved through the merger to reduce hospital
charges.”
-- U.S. v.
Carilion Health System (W.D. Va. 1989)
“In the real world, hospitals are in the business of saving lives, and managed care organizations are in the business of saving dollars
.”
“Even
though competition may be lessened, the interests of consumers are, under the unique circumstances of this case, likely to be advanced rather than
hurt.”
-- FTC v. Butterworth Health Corp. (W.D. Mich. 1996)Slide11
How Did This Happen? The Role of Judges
“I
don’t feel that the Federal Trade Commission has shown sufficient factual basis that they are entitled to a TRO. . . . I don’t think you’ve got any business being in here. I don’t see how the Federal Trade Commission can claim there is lack of competition when there [are] four or five hospitals in the area, and reducing it by one is not going to wipe out competition. . . . It looks to me like Washington D.C. once again thinks they know better what’s going on in southwest Missouri. I think they ought to stay in D.C
.”
-- FTC v. Freeman Hosp. (8th Cir. 1995)
“We
find it no small irony that the same federal government under which the FTC operates has created a climate that virtually compels institutions to seek alliances such as the Hospitals intend here. Like the corner store, the community medical center is a charming but increasingly antiquated concept. It is better for the people they treat that such hospitals unite and survive rather than remain divided and wither
.”
-- FTC v. Penn State Hershey Med. Ctr. (M.D. Pa. 2016)Slide12
How Did This Happen? The Role of States
Phoebe Putnam Hospital (2013)
Phoebe Putney Health System wanted to purchase Palmyra
Hosp
, the only other hospital in
Dougherty County, GeorgiaBut merger law (and FTC) would not allowSo, the Dougherty County Hospital Authority purchased Palmyra using Phoebe Putney funds, and then leased to Palmyra to Phoebe Putney for $1.
In
re Cabell Huntington
Hosp.
(2016)
Cabell
Huntington
Hospital and St
. Mary’s Medical
Center, two hospitals located three
miles apart in Huntington, West
Virginia, proposed to merge
The FTC objected, concluded the merger would create a dominant firm with a near monopoly over inpatient
hospital services and outpatient surgical
services
West Virginia
legislature passed “
SB
597”, providing an antitrust exemption and allowing hospitals to collaborate under a “cooperative agreement.”
The FTC gave up
BUT: Some state policymakers have helped promote competition:
Attorneys General help enforce antitrust laws (MA, ID, NY)
Insurance Commissioners can maintain competitive
insurance
markets (MO, CA)
Medicaid programs can encourage adoption of new
efficient technologies, facilitate competition among
MMC plans (AK)
State health plans can organize a competitive market, encourage
subscribers to make cost-effective choices (CA)Slide13
Wisconsin’s Story:Competitive Insurance Market
Number of Insurers with >5% Market shareSlide14
Wisconsin’s Story:A National LeaderSlide15
NYT: Dec.15, 2015Slide16
Wisconsin’s Story:Unappreciated!Slide17
Looking Forward (and Towards Policymakers):
Critical to preserve market
competition
Resist consolidation trend, enforce antitrust laws
Resist arguments suggesting that competition isn’t necessary
Resist arguments suggesting that competition is bad (for patients, for community)Resist arguments suggesting that competition does not require active attention
Develop strategies to make local markets competitive
Monitor dominant providers &
payors
, challenge any abuse of market power
Give subscribers choices (of plans, of providers)
Give subscribers information (prices, quality) so they make informed choices
Allow entry, innovation
Consider state policies that affect statewide markets. Pursue policies that instill widespread
competition (see: debate over self-insuring
state employees)
Be creative, be vigilant, stay committed