Monday, May 7, 2007
Posted by D. Daniel Sokol
Barak Richman has a new working paper on hospital mergers entitled Antitrust and Nonprofit Hospital Mergers: A Return to Basics. During the Muris FTC era, this was an area of significant focus by antitrust authorities.
ABSTRACT: Courts reviewing proposed mergers of nonprofit hospitals have been abandoning the bedrock principles of antitrust law, failing to pay heed to the most elemental hallmarks of socially beneficial competition - maximizing allocative efficiency and total surplus. This article suggests that courts' inability to recognize antitrust concerns in these cases reflects a failure to understand the structural details of the American health care market. After reviewing recent cases in which courts have denied challenges to proposed mergers between nonprofit hospitals, it documents how courts have engaged in a faulty analysis that ultimately protect nonprofit hospitals from the rigors of standard antitrust scrutiny. It then identifies the bedrock principles of antitrust law - preventing supracompetitive prices, optimizing output, and maximizing allocative efficiency - that have been absent from, if not violated by, the rulings in these merger cases.