NEW YORK TIMES
By REED ABELSON
The chairman of the Federal Trade Commission, concerned about rising medical costs, said yesterday that his agency planned to step up scrutiny of past hospital mergers and groups of doctors to make sure they had not joined forces simply to fix prices.
The chairman, Timothy J. Muris, said in an interview that the commission had increased spending 50 percent on its antitrust efforts in health care, which also include the review of the drug and health insurance industries.
In the past, the commission has tried, largely unsuccessfully, to persuade federal courts to stop hospital mergers. Its new focus will be on determining whether previous mergers have actually benefited patients or simply allowed hospitals to charge more.
"I've always thought it made sense for the government to go back and look at its work," said Mr. Muris, who became the chairman of the commission in June 2001 and has long been interested in these issues.
If it finds evidence that mergers raised prices without benefiting patients, the F.T.C. could move to dissolve them through administrative hearings. While many cases would probably move to federal court on appeal, antitrust lawyers believe that the commission may have an easier time now, after the mergers, because it can show evidence of higher prices.
The decision to focus more
on health care appears to be prompted largely by sharply rising costs. Last
year, many employers had to contend with increases of more than 10 percent in
the premiums they paid for their employees, and further increases are expected
soon. Health care spending increased nearly 9 percent last year, according to
Paul B. Ginsburg, president of the Center for Studying Health System Change
in
"The hospitals have clout," Mr. Ginsburg said, although he cautioned that most organizations were doing nothing illegal in their attempts to negotiate higher prices to cover costs.
In the 1990's, when managed care loomed large, hospitals were forced by insurers to lower their prices. In response, many hospitals combined to create huge systems within their local markets, giving themselves more power in negotiating prices with insurers.
"There has been an incredible
amount of consolidation," said David Dranove, a professor at the Kellogg
School of Management at
Though mergers that improve the quality of care or allow the institutions to become more efficient are not of concern, mergers are of concern if their goal seems mainly to be able to raise prices.
"What bothers me is that
there were a number of mergers that were just mergers on paper," said David
Balto, a former F.T.C. lawyer who works for the firm of White & Case in
Although the F.T.C. can try to prevent mergers, federal judges have generally not been convinced of the threat of rising prices. The federal government has lost its last seven cases, including an F.T.C. case challenging Tenet Healthcare's </redirect/marketwatch/redirect.ctx?MW=http://custom.marketwatch.com/custom/
nyt-com/html-companyprofile.asp&symb=THC> acqusition of
a hospital in
Antitrust lawyers say that
the F.T.C. may have more success in proving that mergers violated antitrust
laws if they can show that without benefit to patients, prices have increased
beyond what other hospitals charge. Because the F.T.C. will be arguing in administrative
hearings, essentially before itself, rather than before a judge in federal district
court, it has a much better chance of prevailing, according to William Kopit,
a lawyer with Epstein Becker & Green in
What is more, he said, because in many mergers the hospitals combine only in name, undoing a merger is possible. "You can unscramble the eggs," Mr. Kopit said.
If the F.T.C. is successful in cases brought against a few hospitals, Mr. Kopit said, the industry as a whole will be more cautious. "It will make a huge difference," he said.
David Marx Jr., an antitrust lawyer with McDermott, Will & Emery, said: "The F.T.C. appears to be reinvigorated. Chairman Muris views health care as very, very important, and I think he is exerting considerable influence."
Though the commission has historically
been active in bringing cases against doctors for fixing prices, the new chairman
has stepped up efforts in these cases, too. Earlier this year the F.T.C. settled
with three doctors' groups, two in
"I think it's important to establish an antitrust presence," Mr. Muris said.
These cases are less complicated than ones involving mergers, and they tend to be settled quickly, although some lawyers worry that doctors think there is no real risk in trying to influence fees by forming a group. The American Medical Association has promoted legislation that would exempt doctors from antitrust laws, but the commission maintains that doctors must show they have joined together in a group in more than name only.
The F.T.C. has been interested in the financial arrangements of the doctors, but it will now also take into consideration whether such groups have integrated their clinical practices, according to Mr. Muris.
"If doctors are getting together and improving quality, not fixing prices, we're not going to stand in their way," he said.
The commission has also recently requested information about a merger of two of the nation's largest physician staffing groups in the care of premature infants - the Pediatrix Medical Group </redirect/marketwatch/redirect.ctx?MW=http://custom.marketwatch.com/custom/
nyt-com/html-companyprofile.asp&symb=PDX> and the Magella
Healthcare Corporation. In addition to other markets, the F.T.C. is seeking
information about three areas -
"We're in the process of gathering the documents they requested and submitting them," a Pediatrix spokesman said.
Lawyers who specialize in health-care antitrust issues say they expect more activity, given the shift in priorities. "Most of us would find striking out seven consecutive times demoralizing," said Henry S. Allen Jr., a lawyer at McBride Baker & Coles, "but the F.T.C. appears to have the courage to step back into the batter's box."