Monopoly: Healthcare Edition (Part 1)
Antitrust laws were established at the state and federal level to ensure fair competition among businesses. The Sherman Act was the first antitrust law and was passed by Congress in 1890. The stated intention was to serve as a “comprehensive charter of economic liberty aimed at preserving free and unfettered competition as the rule of trade.” Two additional antitrust laws were passed in 1914, The Federal Trade Commission Act and the Clayton. These have been revised over the years, but they still constitute the core of modern antitrust legislation.
Under the Sherman Act, there are several indefensible / unjustifiable actions which include cooperation among competitors to engage in price fixing, market division or bid rigging. There is significant gray areas. The theme of the legislation is to outlaw engaging in or conspiracy to engage in restraint of trade or monopolization.
The Federal Trade Commission (FTC) was created under the Federal Trade Commission Act. Makes sense. The FTC Act allows the FTC to present cases of violations of the Sherman as well as cases mentioned in the previously mentioned gray areas. “Unfair methods of competition” and “unfair or deceptive acts or practices” are in the crosshairs of the FTC Act.
The Clayton Act expanded on the Sherman Act and dealt with mergers and interlocking directorates (a person making business decisions for competing companies). Mergers and acquisitions where the intent or likely outcome “may be substantially to lessen competition, or to tend to create a monopoly”, are prohibited.
As mentioned previously, these three laws serve as the foundation of antitrust law in the US. Multiple tweaks and clarifications have been made over the years at the federal and state levels to keep up with the changing of times and exploiters of loopholes. I don’t intend for this to be a legal treatise. The pertinent laws are being discussed to reflect that “We the People” see the merit in protecting a free market economic system.
Free market and competition are generally but not always seen as being good for everyone. From the consumer to the CEO. Potential benefits include but are not limited to:
Improved costs / prices for products and services
Improved quality for products and services
More options or choices
Stimulation of innovation, growth and development
Encouragement of increased efficiency and productivity
Improved options for employees / service providers
This is the spirit of the free market society. Encourage competition and let the consumer decide.
Do the same antitrust laws apply to healthcare systems?
Imagine this scenario. Say for the sake of discussion that you live in northeast Tennessee in an area that also provides healthcare services to portions of southeast Kentucky, southwest Virginia and sometimes northwest North Carolina and southern West Virginia. Over decades multiple businesses are established and different entities provide various healthcare and related services to the communities that they serve. At some point, larger business emerge that have access to more capital, so they begin buying and assimilating some of the smaller business within their area of expertise. This move proves to be highly successful and lucrative. Eventually, the ability to grow becomes saturated, so the only option for growth is to branch out into other sectors. Next comes vertical integration on crack.
Multiple entities are doing this simultaneously and continuously, but as the process continues to play out, two dominant health care systems emerge. They compete against each other to purchase smaller hospitals, clinics, labs, rehab services, DME companies, pharmacies, nursing homes, etc. The appetite for growth is insatiable. But as they continue to gobble up everything in their path, the growth begins to fizzle out. Political strings are pulled, assurances about the greater good of the community are issued, and “Wham! Bam! Thank you, Ma’am!”, approval for a merger is secured.
Similar scenarios are playing out with increasing frequency across the United States. Think about it a minute. Isn’t it an impressive conquest? I mean, aren’t we taught to win at all costs from an early age? It’s in all of the t.v. shows, movies and video games. At least the ones that aren’t for losers. “He who dies with the most toys win.” “If you’re not first, you’re last.” “Finish Him! Fatality! Flawless victory!” Becoming the leader of a health care monopoly would be like becoming an emperor. I wonder if the CEO gets to wear a crown and sit on a throne… It would be suitable, don’t you think? Leading such a system would put an immense amount of power at the fingertips of the person or persons in charge, wouldn’t it? On the other hand, the peasants subject to the ruling regime would be completely at the mercy of their masters. But Victori spolia! Right?!?
These healthcare monopolies often coalesce under the umbrella of a “non-profit organization”. To me, this designation has the connotation of service, charity, benevolence, and cost consciousness. As it turns out, this labeling can be misleading…
Can you think of some examples of modern monopolies?
How about examples of circumstances in which monopolies are beneficial?
Are healthcare monopolies a good thing or a bad thing?
“In the Land of Mordor where the shadows lie.
One ring to rule them all, One ring to find them,
One ring to bring them all, and in the darkness bind them.
In the Land of Mordor where the shadows lie.”
- J.R.R. Tolkien
Sources:
ftc.gov
Rosalsky, Greg. “The Untamed Rise of Hospital Monopolies”. NPR News, 20 July 2021, npr.org.
