Using commercial claims for 2012-2013 from Colorado’s All-Payer Claims Database, we examine how medical service prices vary for five hospital-based procedures and the complexity adjusted inpatient price. We find that prices vary substantially in multiple dimensions. Our analysis indicates that there is significant price variation across payers for the same service in the same hospital. If prices converged to the lowest rate each hospital receives, commercial expenditures would fall by 10-20%. The share of overall price variation accounted for by hospitals variation tends to be even more substantial. For four out of six prices, we find that differences associated just with hospitals’ metropolitan areas account for over 45% of the total variation. We observe substantial residual variation (17-50%) after accounting for factors specific to a given payer or provider.
Prices for Medical Services Vary Within Hospitals, But Vary More Across Them by Nathan Wilson, Ted Rosenbaum, Matthew Panhans :: SSRNJanuary 2, 2019
Mergers and Marginal Costs: New Evidence on Hospital Buyer Power by Stuart Craig, Matthew Grennan, Ashley Swanson :: SSRNSeptember 15, 2018
We estimate the effects of horizontal mergers on marginal cost efficiencies – a ubiquitous merger justification – using data containing supply purchase orders from a large sample of US hospitals 2009-2015. The data provide a level of detail that has been difficult to observe previously, and a variety of product categories that allows us to examine economic mechanisms underlying “buyer power.” We find that merger target hospitals save on average $176 thousand (or 1.5 percent) annually, driven by geographically local efficiencies in price negotiations for high-tech “physician preference items.” We find only mixed evidence on savings by acquirers.
Every state has occupational licensing laws or regulations, which require individuals seeking to offer a certain service to the public first to obtain approval from the state. Occupational licensing requirements historically derive from a desire to protect unwitting consumers from bad actors. In recent years, however, the number of licensed professions in the United States has skyrocketed and licensing requirements have become increasingly onerous. When incumbents wield licensing requirements not as a defensive shield to protect consumers but as an offensive sword to exclude new entrants, serious concerns regarding the competitive implications of the licensing schemes arise. Self-interested incumbents have incentives that may differ from consumers, and these self-interested incumbents can—and sometimes do—impose requirements that do not enhance quality, but rather restrict output, increase prices, and hamper innovation. This Paper explores the competitive implications of state occupational licensing regimes. Part I analyzes the historical development and justification for occupational licensing. Part II reviews the empirical evidence regarding the effects of occupational licensing on factors such as quality, price, innovation, and availability. Part III summarizes how antitrust law, and particularly the state action doctrine, treats state board-enacted occupational licensing. Part IV explores the interplay of occupational licensing and antitrust laws in the United States, delving into a particularly striking case at the intersection of occupational licensing and innovation: Teladoc, Inc. v. Texas Medical Board. Part V provides some suggestions for agency engagement in monitoring the effective use of occupational licensing.
In their article, “Biologics: The New Antitrust Frontier,” Michael Carrier and Carl Minniti provide a comprehensive review of the various kinds of antitrust violations that beleaguer pharmaceutical markets in the United States. Carrier & Minniti examine the applicability of these anticompetitive behaviors to biopharmaceutical (a.k.a. biologics) markets, and in doing so alert regulators and courts to such potential antitrust violations in the emerging area of follow-on biologics. Carrier & Minniti’s article also provides recommendations for limiting anticompetitive behavior in biologics markets that will, no doubt, serve as a valuable guide for regulators, judges, and practitioners. Yet, Carrier & Minniti’s article appears to share in an optimism about the prospects of such markets: that if we just policed them properly, competition could be guaranteed and, with it, prices would drop significantly. Such optimism is unwarranted.
The legislative and regulatory efforts to instill competition into biologics markets have been fraught, from their outset, with persistent and mostly successful counter-efforts by the brand-name pharmaceutical industry (“Industry”) to make follow-on biologics a limited and contained regulatory and commercial phenomenon. To that end, the Industry — with its lobbying spearheads, BIO and PhRMA — and its many allies in Congress, state legislatures, and state and federal administrations, have been waging war to maintain existing and erect new regulatory obstacles to the development, approval, and marketing of follow-on biologics. The Industry’s success in undercutting the emergence of truly competitive follow-on biologics markets thus far rests on four pillars: (1) an Industry-favorable, obstructed pathway for the approval of follow-on biologics; (2) acceptance and upholding of the view that regulatory filings submitted to the FDA are proprietary and confidential; (3) state laws making onerous the substitution of biologics with follow-on versions thereof; and (4) efforts to block any and all specific attempts to make, gain approval for, and sell follow-on biologics. Of these four pillars, the area of antitrust law (and, thus, Carrier & Minniti’s article) addresses mostly the fourth. Yet, the emergence of competitively robust follow-on biologics markets requires dismantling more than one pillar. Until then, efforts to open biologics markets to competition will continue to be no more than a rearguard battle over the approval and marketing of a small number of follow-on versions of a mere handful of original products with limited substitutability. The price, as always, will be borne by payors, patients, and ultimately, the public.
In this comment, I discuss each of the four pillars supporting the Industry’s success in inhibiting the development, approval, and marketing of follow-on biologics. I show that unlike the story of the Hatch-Waxman Act, that of the Biologics Price Competition and Innovation Act (BPCIA) does not and probably will not have a happy ending; that if the goal is to significantly lower biologics’ prices, then the paradigm of approval of follow-on biologics in the United States would need to change.
Health care consolidation in the United States has been widespread at all levels and across all entities. This consolidation has extended beyond horizontal mergers of hospitals or other providers to include out-of-market mergers, or cross-market mergers. Cross-market mergers include the merger or acquisition of any health care entity that does not directly compete with the acquiring entity in the same product or geographic market. Antitrust enforcers have historically had little in the way of market theory, economic models, or empirical data to inform their analyses on the potential impacts of cross-market mergers on competition. However, recent developments in economic theory and empirical studies now offer evidence that cross-market mergers can, in some instances, harm competition and drive price increases in health care markets when a common insurer exists across those markets. This article aims to start a discussion among the health policy and antitrust communities about the potential for cross-market acquisitions to harm competition, whether existing antitrust laws could theoretically support a challenge to a cross-market acquisition, and the practical challenges to doing so. This article will argue that health policy analysts, antitrust enforcers, and academics should begin to consider the anti-competitive potential of cross-market acquisitions and develop a means to analyze them both legally and economically.
Americans are paying too much for health care services and insurance, in large part due to insufficiently competitive markets. Waves of consolidation have fortified providers and insurers with market power, resulting in higher prices and lower quality for consumers. As antidotes, advocates have proposed various legislative, regulatory, and enforcement solutions. Yet, unlike public antitrust enforcement, private antitrust enforcement is either not mentioned or criticized as sour grapes from competitors or a money grab by consumers. Instead of ignoring or bashing private litigation, those looking to address the health care pricing crisis in the United States should be looking to optimize it. Effective private enforcement can restore competition, deter antitrust violations, and compensate victims in the markets for health care services and insurance. For plaintiffs, the key to optimizing private antitrust enforcement is overcoming the unavoidable challenges in litigating these cases-from satisfying pleading standards and establishing standing, to defining relevant markets. This article explains the key obstacles involved in these cases and tracks recent and current plaintiffs whose experiences provide insight.
Traditionally, antitrust has not had a way to quantify the benefits of better healthcare outcomes from a potential merger, to balance them against the potential for increased costs. However, a branch of health care economics lets us make that calculation. It has not been used in antitrust analysis to date, but U.S. law is flexible enough to allow such an approach and the 2010 Horizontal Merger Guidelines contemplate it in Section 5. It enables us to use established procedures to put the quality of care into healthcare merger analysis.