Agenda for Joint FTC/DOJ Hearings
on Health Care and Competition Law and Policy
Wednesday,
April 23, 2003 Morning Session 9:15 am- 12:15 pm
Framing
Presentation: Paul
B. Ginsburg, Center For Studying Health
System Change
- Title: Health Insurance
Monopoly Issues - Market Definition
- Health care coverage is a highly
differentiated product, and comes in many varieties,
including health maintenance organizations ("HMOs"),
preferred provider organizations ("PPOs"),
point of service plans ("POSs") and
indemnity plans. Some insurance products are regulated
by the state in which the coverage is issued,
while other arrangements are subject to partial
or exclusive federal regulation. Many firms and
individuals self-insure, with the extent of self-insurance
influenced by the cost of coverage. Given these
dynamics, what are the relevant economic and legal
principles for defining the relevant product market
in the health insurance setting? Do these principles
differ in material ways from the principles of
market definition applied in other industries?
What information is required to determine the
relevant market in a particular case? What, if
any, guidance is provided by examining consumer
behavior and enrollment shifts among these options
over time?
- Henry R. Desmarais, M.D., Health
Insurance Association of America
- Roger
Feldman, University of Minnesota Center
for Health Services Research
- Barry C. Harris, Economists,
Inc.
- Arthur
N. Lerner, Crowell & Moring
- David
Monk, National Economic Research Associates
Wednesday,
April 23, 2003, Afternoon Session 2:00 pm-5:00 pm
- Title: Health Insurance
Monopoly Issues - Competitive Effects
- This session will explore the
range of potential competitive effects theories
that might predict higher prices or diminished
quality following a merger. Are the merging plans
sufficiently close substitutes for each other
in their various price and non-price attributes
that the merger might allow a unilateral competitive
effect? Are the merging plans the low cost bidders
for employer contracts such that auction theory
would predict a price effect from the merger?
How important is brand name loyalty in the health
insurance industry? Because health insurance cannot
be resold, do insurers price discriminate either
geographically or among employers of different
sizes? What does this imply about the competitive
consequences of insurance plan mergers? Under
what circumstances should the agencies be concerned
about coordinated effects arising from a merger
of insurance plans?
- Helen
Darling, Washington Business Group on
Health
- Jon
Gabel, Health Research and Educational
Trust/American Hospital Association
- Michael
J. Mazzeo, [Document
2], Northwestern University
- Lawrence
Wu, [Document
2], National Economics Research Associates
- Steven
Pizer, [Document
2], [Document
3], Boston University
- Fred
Dodson, PacifiCare of California
Thursday,
April 24, 2003, Morning Session 9:15 am- 12:15 pm
- Title: Health Insurance
Monopoly Issues - Entry and Efficiencies
- In most geographic markets
in the United States, insurance plans frequently
enter and exit. This session will examine entry,
expansion, or product repositioning in this industry.
Is entry generally likely in response to an otherwise
anti-competitive combination, and is such entry
generally likely, timely, and sufficient to defeat
each source of potential competitive effect? What
factors do plans take into account when considering
entry into a particular market? Do contracting
practices such as "most favored nation"
clauses or "all product clauses" make
entry more difficult? What, if any, regulatory
barriers to entry exist in health plan markets?
What, if anything, does the exit of national and
provider-sponsored plans from some geographic
markets reveal about the existence and significance
of barriers to entry in health plan markets?
-
- A second part of this session
will be devoted to possible efficiencies arising
out of insurance plan mergers. A variety of empirical
research has indicated that economies of scope
and scale are exhausted at relatively modest levels
in the provision of insurance. When insurance
plans merge, however, they often claim that significant
efficiencies will stem from the merger. What specific
types of efficiencies are claimed? How should
the agencies evaluate these statements and what
factors or tests should they employ to evaluate
whether or not the efficiencies are merger specific?
What types of efficiencies are most likely (and
least likely) to be cognizable and merger-specific?
- Jay Angoff, Roger G. Brown
and Associates
- Stephen
Foreman, representing American Medical
Association
- Ruth
Given, Deloitte Consulting
- Arthur N. Lerner, Crowell
& Moring
- Mary Beth Senkewicz, National
Association of Insurance Commissioners
- Lawrence
Wu, National Economic Research Associates
Thursday,
April 24, 2003, Afternoon Session 2:00 pm -5:00
pm
- Title: Health Insurance
Monopsony - Market Definition
- Conceptually, monopsony can
be viewed as the flip side of monopoly -- it is
substantial market power being exercised by buyers
over sellers. In the health insurance industry,
health insurers are both sellers (of insurance
to consumers) and buyers (of, for example, hospital
and physician services). In this session we examine
monopsony product market definition by asking
how to apply the hypothetical monopolist paradigm
to buyer side/monopsony concerns. We consider
whether and how to reverse the standard seller-side
formula that asks about the extent to which at-risk
consumers can and will shift to other sellers
in response to a post-merger small but significant
and non-transitory increase in price ("SSNIP").
Do we, for example, ask in the monopsony context
about the extent to which at-risk suppliers will
substitute other outlets for their services in
response to a small but significant and non-transitory
decrease in price ("SSNDP")? What are
the costs faced by different suppliers in switching
to different outlets for their services? What
are the other outlets and how do such substitution
possibilities differ across physicians, hospitals,
or other potentially vulnerable supplier groups?
How do we apply the concept of price discrimination
in a buyer side case, and what are the potential
product markets for such a theory? How do these
theories apply to private and public purchasers
of coverage from monopsony insurers? What interesting
or unusual geographic market issues for different
supplier groups are implicated by insurer monopsony
theory?
- Roger D. Blair, University
of Florida, Gainesville
- Stephen Foreman, representing
American Medical Association
- H.E. Frech III, University
of California, Santa Barbara
- Thomas
R. McCarthy, National Economic Research
Associates
- John J. Miles, Ober, Kaler,
Grimes & Shriver
Friday,
April 25, 2003, Two Sessions, 9:15 am - 12:15 pm,
2:00 pm - 5:00 pm
- Title: Health Insurance
Monopsony - Competitive Effects
- Mergers between health insurers
may raise a concern that monopsony power could
be exercised against providers. Many providers
accuse insurance companies of forcing them to
accept unreasonably low rates and unattractive
contract terms. When a merger increases the share
of a physician's patients covered by a given insurance
plan, the cost to the physician of withdrawing
from that plan in response to a lowering of rates
increases. What is the relationship between market
shares and this cost? How do the agencies distinguish
between a shift in relative bargaining power and
an unlawful exercise of monopsony power? Is it
sufficient to show that provider prices will likely
be reduced from premerger levels to demonstrate
the exercise of monopsony power, or must we affirmatively
show that price levels will fall below competitive
levels? Must the acquisition and exercise of monopsony
power be accompanied by a reduction in the output
of provider services? Is it plausible that a payor
without downstream market power could exercise
monopsony power unilaterally? What are the conditions
that must exist for such a payor to exercise monopsony
power? Are those conditions likely to be satisfied
in health care markets?
- Sharon
Allen, Arkansas Blue Cross and Blue Shield
- Stephen
Foreman, representing American Medical
Association
- H.E. Frech III, University
of California, Santa Barbara
- Dennis
A. Hall, Baptist Health System
- Stephanie
W. Kanwit, [Document
2], American Association of Health Plans
- Thomas
R. McCarthy, National Economic Research
Associates
- John J. Miles, Ober, Kaler,
Grimes and Shriver
- Marius Schwartz, Georgetown
University
- Steve
Mansfield, President & CEO, St. Vincent
Health System
Wednesday,
May 7, 2003, Morning Session 9:15 am - 12:15 pm
- Title: Health Insurance/Providers
- Countervailing Market Power
- Providers have argued that
health plans routinely wield monopsony power,
reducing provider reimbursement and quality. Solutions
proposed by providers include legislation or doctrinal
development that would permit providers to acquire
countervailing market power. The providers argue
that, if permitted to acquire countervailing market
power, they can correct the problems caused by
the health plans exercise of monopsony power.
Assuming the possession of significant monopsony
power by health plans, would the aggregation of
market power by providers have a net benefit or
cost? Under what conditions, if any, would the
aggregation of market power by providers reduce
the monopsony power of purchasers? Are those conditions
likely to be present in health care markets? Does
the reverse also hold, that is, should health
plans be permitted to acquire monopsony power
in response to the possession of significant market
power by providers? Should both physicians and
hospitals be permitted to acquire countervailing
market power, or is this an option that should
only be available to certain providers? Leaving
aside the economic justifications for acquiring
countervailing market power, does existing legal
precedent leave open the possibility of doctrinal
developments that would permit providers to engage
in what would otherwise be unlawful collective
bargaining?
Wednesday,
May 7, 2003, Afternoon Session 2:00 pm- 5:00 pm
- Title: Most Favored
Nation Clauses
- A "Most Favored Nation"
("MFN") clause is a contractual agreement
between a supplier and a customer that requires
the supplier to sell to the customer on pricing
terms at least as favorable as the pricing terms
on which that supplier sells to other customers.
These clauses are not infrequently found in contracts
health insurers enter into with hospitals or physicians.
They allow the insurer to be confident that the
reimbursement rates it pays providers are no greater
than those that its competitors have negotiated.
MFNs, however, may raise competitive concerns
because they can discourage providers from lowering
the reimbursement rates they offer to some insurers.
Consequently, the agencies continue to receive
and evaluate complaints about MFNs to determine
whether they merit more complete investigation
and enforcement action. This session will consider
the following questions: What are the pro-competitive
justifications for MFNs? What competitive concerns
do they raise? What are the agencies prior
enforcement activities with respect to MFNs, and
what are the characteristics of the market and/or
the contracts that lead to such action?
- Jonathan
B. Baker, American University Washington
College of Law
- William G. Kopit, Epstein,
Becker and Green, P.C.
- Thomas Overstreet, Charles
River Associates
- Robert M. McNair, Jr., [Letter]
Drinker, Biddle and Reath, LLC
- Steven E. Snow, Partridge,
Snow & Hahn, LLP
Thursday,
May 8, 2003, Morning Session 9:15 am- 12:15 pm
- Title: Physician
Hospital Organizations
- A Physician Hospital Organization
("PHO") is a vertical arrangement that
combines physician and hospital services within
one organization. In theory, PHOs may create incentives
to lower prices and enhance quality. In practice,
many PHOs have declared bankruptcy or dissolved.
The agencies have taken several enforcement actions
against PHOs in response to specific anti-competitive
conduct. What anti-competitive risks do PHOs create?
For example, would doctors who are not members
of the PHO be denied privileges at the hospital
or given less favorable treatment? Under what
circumstances might it be anti-competitive for
a physician hospital organization to offer an
insurance product? What factors have led the agencies
to take action against PHOs?
- Brad Buxton, Illinois Blue
Cross & Blue Shield
- Serdar
Dalkir, Microeconomic Research Consulting
Associates
- Margaret
E. Guerin-Calvert, Competition Policy
Associates, Inc.
- John
P. Marren, Hogan, Marren & McCahill,
Ltd.
- John J. Miles, Ober, Kaler,
Grimes and Shriver
- Ernie
Weiss, representing the American Hospital
Association
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