Coping With Concentration

Provider market power is a powerful driver of high health care costs in the United States. Despite decades of antitrust litigation and regulatory interventions, the problem has worsened and threatens to undermine the benefits of market-based policies. A critical but neglected challenge for all health care reform proposals relying on market competition to address costs is finding effective tools to address the extant market power of dominant hospitals, hospital systems, and many specialty physician practices. This article analyzes the principal market-oriented approaches that have been used in the past and proposed for the future. It argues that antitrust law has an important but constrained role to play and has proved to be especially inept in dealing with extant market power. It finds serious deficiencies in the conduct decrees imposed by some courts and in open-ended regulatory regimes such as those established by Certificate of Public Advantage laws. Although not without administrative complications, policies that target providers who possess market power by capping prices may be the most effective means to control costs and retain the benefits of a competitive delivery system.