SC Connecticut News

A new study co-authored by a Yale economist provides evidence that insufficient antitrust enforcement in the U.S. hospital sector is contributing to reduced competition and higher prices for hospital care.

The study, published in the journal American Economic Review: Insights, reveals that out of 1,164 mergers among the nation's acute-care hospitals from 2000 to 2020, the Federal Trade Commission (FTC) only challenged 13, representing an enforcement rate of about 1%. Zack Cooper, an associate professor of health policy at Yale School of Public Health and co-author of the study, emphasized the impact of underenforcement, stating, "It is plainly clear that there has been underenforcement of antitrust laws in the hospital sector."

Cooper and his co-authors found that mergers the FTC could have challenged as predictably anti-competitive led to price increases of 5% or more between 2010 and 2015. The study highlights the consequences of unchecked consolidation in the $1.3 trillion hospital industry, with 90% of hospital markets now highly concentrated according to FTC and U.S. Department of Justice standards.

The research team also points out the potential link between underfunding of the FTC and its limited enforcement activity. Zarek Brot-Goldberg, an assistant professor at the University of Chicago, noted, "Mergers in the hospital sector are generating short-run harms that roughly approximate the FTC’s entire budget, which suggests the agency might lack sufficient resources to take necessary enforcement action and preserve competition."

Moreover, the study found that hospital mergers in rural regions and areas with lower incomes and higher rates of poverty resulted in larger average price increases, particularly in outpatient services. The researchers attribute this trend to the lack of competing free-standing clinics in these regions.

The findings underscore the pressing need for increased antitrust enforcement in the hospital sector to curb rising prices and promote competition in the interest of healthcare affordability and accessibility.