Small is Not Beautiful: A Critique of Antitrust Economics and Policy in Health Care

The dominant health policy perspective today appears to be that markets are over-consolidated and in need of anti-trust intervention. This commentary argues that the diagnosis is largely incorrect and the proposed treatment ineffective or, worse, effective but undesirable. The anti-trust ideal of a fragmented cottage industry of physician practices, hospitals, and other care organizations does not promise efficiency, even if the current industry configuration also is far from ideal. Many health care market are indeed competitive, and most are contestable, when one views provider organizations as multiproduct firms competing in overlapping geographic and customer markets. For example, many hospital systems compete in overlapping markets for primary care, specialty procedures, drug infusion, home health, subacute care, transplant surgery, telemedicine, population health management, and other services beyond traditional acute inpatient care. The anti-trust perspective should articulate its short-term and its long-term vision for the future of health care. What if it stopped all further mergers but left the status quo in place. What then? What if it not only stopped mergers but reversed them and brought us back to the health care industry of 1980? What then?