Consolidation in the health-care industry is accelerating and has helped drive up prices in parts of the country, Edith Ramirez, chair of the Federal Trade Commission, said in a speech Friday.
“I remain very concerned about the rapid rate of consolidation among health-care providers,” Ramirez said.
Last year, the number of hospital mergers increased 18 percent compared with the previous year, she said. In areas where there is a hospital monopoly, prices are 15 percent higher than those in areas with four or more competitors, and the average in-patient stay in those places is almost $2,000 higher, Ramirez said.
The effect of consolidation goes beyond price. “Competition plays an important role with respect to quality as hospitals compete to attract patients,” Ramirez said.
The FTC is challenging hospital mergers in West Virginia and Illinois. Last week, a federal judge denied the agency’s attempt to block the merger of two Pennsylvania hospital systems. The FTC is expected to appeal that ruling. Separately, the Justice Department is reviewing Aetna’s proposed $37 billion acquisition of Humana and the merger of Anthem and Cigna.
“While most provider mergers are not anti-competitive, the few that are could cause significant competitive harm,” Ramirez said.
“We are disappointed that the chairwoman doesn’t recognize the irony in this case clearly evident to the court: building a modern health-care system compels the kind of affiliations the commission continues to challenge,” said Rick Pollack, president of the American Hospital Association.
Ramirez’s frank speech before health-care industry officials in Virginia comes as the Obama administration has stepped up efforts to enforce antitrust rules.
Earlier this week, the FTC won a temporary injunction blocking a $6.3 billion merger between Staples and Office Depot. The companies are abandoning the deal. Last week, oil services giants Halliburton and Baker Hughes abandoned a $34 billion merger, bowing to Justice Department complaints that it would lead to decreased competition and higher prices.
And earlier this year, the Justice Department and FTC issued an unusual warning about the perils of defense industry consolidation, noting the importance of competition to keeping prices down. “Many sectors of the defense industry are already highly concentrated. Others appear to be on a similar trajectory,” the agencies said in a joint statement.
Despite some recent Obama administration successes, mergers have continued to roll through almost every industry and more industries are dominated by two or three players.
“Taken together, the Obama administration’s antitrust programs at the DOJ and the FTC have been more intervention-minded than those of the Bush administration,” said William E. Kovacic, a global competition professor at George Washington University Law School. Even so, he said, the effect has been “modest.”
“Despite the emphatic warnings of DOJ and FTC officials, firms continue to try mergers that the federal agencies regard as highly concentrative and way over the line,” said Kovacic, who served as chair of the FTC between 2008 and 2009.