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Feds Seek Connection Between Mergers, Escalating Costs

MANAGED CARE April 2003. © MediMedia USA
News and Commentary

Feds Seek Connection Between Mergers, Escalating Costs

MANAGED CARE April 2003. ©MediMedia USA

Mergers and rising costs are two high-profile issues in health care and now the federal government wants to see how they are connected.

The Federal Trade Commission and the Department of Justice launched an eight-month investigation into competition involving HMOs, hospitals, drug companies, and physicians.

"As a nation, we are seeing dramatic increases for health care coverage of a sort not experienced for almost a decade," says Timothy J. Muris, FTC chairman. "The commission continues to see a wide variety of overt anticompetitive behavior in health care, along with some new variants."

The commission wants to make sure that there is healthy competition for the $1.3 trillion the country spends on health care. The DOJ will look at whether the large number of health plan and hospital mergers over the last decade has affected competition and increased costs.

The Feb. 28 hearing that kicked off the investigation focused on the Boston market. Harris Berman, MD, CEO of Tufts Health Plan, accused Partners HealthCare, a system of five hospitals in the Boston area, of having a "near monopoly" in the city's western and northern suburbs, giving Tufts "little negotiating clout."

Berman says that Partners controls the market for OB/GYN care, pediatrics, medical oncology, and pediatric psychiatry.

"Partners has used this position to demand price increases above what we would expect that normal, healthy competition would otherwise produce," said Berman. "The outcome of Partners's negotiating power and market dominance has been higher prices to the consumer."

Partners CEO James Mongan, MD, fired back that higher reimbursements are required from Tufts and other HMOs these days to make up for years of 1.5-percent increases that were far below the medical rate of inflation.

"We work very carefully to make sure we're within the bounds of the law and make sure we don't engage in anticompetitive behavior," Mongan said.