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Not-So-Fair Competition?

Philip Betbeze, for HealthLeaders Media, June 23, 2008

To hear the pronouncements coming out of the American Hospital Association or any number of other special interest groups, one would think hospitals are unified in their political voice. Some of the takeaways from recent press releases from healthcare provider organizations can be summed up thusly: We have a broken healthcare system. There are 47 million uninsured. Big for-profit insurers are bad. Any kind of cut in reimbursement from the feds or anyone else would do irreparable damage to suffering nonprofit healthcare providers—and probably kill people.

Of course that's an exaggeration, but hospitals are a powerful lobbying force. I don't wish to single out hospitals for hyperbole among special interest groups—but I write about hospitals, not the automobile manufacturing or beverage industry.

Some hospitals and systems undoubtedly will suffer from any action that reduces their reimbursement or allows more competition in such a highly regulated industry. When any such action is threatened, the bleating from interest groups begins—never mind the big picture. As an advocate for their industry, that's their job.

But I don't hear too much from the big interest groups when members are fighting each other. And believe it or not, it does happen. Lately those fights seem to have shown up as hospital systems battle each other over local market dominance. One claims its attempt to buy a local hospital or system is a cost-saving merger that will result in a reduction of expensive duplicated services. The other claims it's working for the little guy to prevent a monopoly from driving up healthcare costs and squeezing out competition.

Monopolies are like pornography in that they're hard to define. As the late Supreme Court Justice Potter Stewart once famously said about pornography, "I know it when I see it." But preventing anticompetitive behavior, even when you see it, is difficult at best. The Federal Trade Commission is charged with preventing anticompetitive behavior in the hospital business. Its record is spotty, as the organization has failed to stop any of the seven mergers it has challenged since the mid-1990s. And even though it negotiated a face-saving solution to the merger it tried for five years to block between Chicago's Evanston Northwestern Healthcare and Highland Park Hospital, the merger remains final.

But in its own back yard, the FTC has had some recent success. It blocked a planned merger in northern Virginia between Inova Health System and Prince William Hospital before it happened, scrapping 22 months of planning, according to the Washington Post. If the merger had been completed, says the FTC, Inova would have controlled about 73% of the hospital beds in northern Virginia—a certificate of need state—and would have invested more than $200 million in Prince William Hospital. The key to preventing what the agency called an anticompetitive merger may have been that the FTC was proactive this time, challenging the merger prior to its completion rather than waiting until after it was a done deal, as in the Evanston Northwestern case.

Does this mark a change in the winds for the viability of hospital mergers in general? Too early to tell, perhaps, but others are lining up to try to level the playing field, just to the south of Inova's failed merger attempt. In that case, it's not a hospital merger they're trying to prevent—they're seeking to introduce competition into an area that seems to have very little at the moment.

Virginia isn't just for lovers anymore—it's for hospital monopoly fights.

Editor's Note: When this column returns, July 7, I will look at another potential firestorm in Virginia—this time in the southern part of the state.


Philip Betbeze is finance editor with HealthLeaders magazine. He can be reached at pbetbeze@healthleadersmedia.com.
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