Competition is at the heart of the healthcare debate – AAF

Competition is at the heart of the healthcare debate - AAF


  • President Bidens’ executive order on promoting competition in the American economy focused, in part, on hospital consolidation and its effect on health care costs and access to services.
  • Several bills have been introduced, or reintroduced, in Congress, often with bipartisan support, that would fill antitrust enforcement gaps, remove barriers to entry, and remove an antitrust exemption for a residency program facilitator critic.
  • Promoting competition and granting antitrust agencies the authority to act when necessary are prerequisites for reducing costs and improving the quality of assistance.


In July 2021, President Biden issued an executive order on promoting competition in the American economy. The ordinance focused, in part, on the effects of hospital consolidation on health care costs and access to services.

Recently, Congress and executive agencies launched investigations of pharmaceutical benefit managers, insurance companies and other health care market participants as part of the larger discussion about rising costs and access to health care services. Competition and antitrust enforcement in the hospital sector have been at the heart of this debate.

Several bills have been introduced, or reintroduced, in Congress that would fill gaps in the enforcement of antitrust agencies, reduce barriers to hospital entry, and remove an antitrust exemption on a facilitator of critical residency programs. The cumulative effect of these pieces of legislation will promote a more competitive hospital sector, which will reduce the cost of care and improve the quality of and access to care.

Proposed legislation

Law against hospital monopolies

Community hospitals in the United States are a mix of for-profit hospitals, hospitals operated by state and local governments, and non-profit hospitals. Non-profit organizations account for 58% of all community hospitals (Figure 1). There are few operational differences between nonprofit hospitals and their for-profit counterparts, but there is a noticeable difference in terms of federal oversight. Hospitals accused of engaging in activities harmful to competition are not treated equally.

Figure 1

*Chart created using data from the American Hospital Association

In most other sectors of the economy, the Federal Trade Commission (FTC) would rely on the authority granted in section 5 of the FTC Act which prohibits unfair methods of competition and unfair or deceptive acts or practices. However, a gap in the relevant statute prevents the FTC from asserting this authority to nonprofit hospitals.

The current statute extends the executive power of the body to natural persons, partnerships or companies (bodies regulated by other bodies or statutes are also excluded). There is a loophole: non-profit organizations are excluded.

Representatives Pramila Jayapal (D-WA) and Victoria Spartz (R-IN) reintroduced the Combatting Hospital Monopolies Act in April 2023 to address this gap. The proposed legislation would amend the FTC Act by broadening the definition of a corporation to include any hospital organization or cooperative hospital service organization described in section 501(c)(3) of the Internal Revenue Code of 1986 and exempt from taxation under section 501 ( a) of this Code.

State action, a legal doctrine, would still protect some government hospitals from federal antitrust scrutiny.

Expanding the FTC’s ability to investigate and stop the anticompetitive behavior of nonprofit hospitals, which account for more than half of all community hospitals, would help ensure that consumers are protected from any unfair or deceptive acts or practices.

Medical Resident Rights Restoration Act

After finishing medical school, recent graduates participate in a residency program. These programs offer prospective physicians the opportunity to supplement their studies with hands-on experience. The National Resident Matching Program (NRMP), known as The Match, facilitates this process.

The NRMP is a non-profit organization that provides an algorithmic matching system based on the ranked preferences of both applicant and residency programs. Once all applicants have been considered and matched, the resident and residency program matches become final and binding. In 2023, 37,425 first-year postgraduate positions were offered through the NRMP, an all-time high.

While the NRMP is an efficient tool for matching labor supply and demand, there are several anti-competitive concerns. These concerns were the basis of a 2002 class action lawsuit, Jung v AAMCfiled by a group of doctors against the Association of American Medical Colleges (AAMC).

The lawsuit alleged that The Match violated Section 1 of the Sherman Act which outlaws any contract, combination or conspiracy to restrict trade. The plaintiffs alleged that the defendants, medical education administrators, and institutions sponsoring the residency programs contracted, combined, and conspired to eliminate competition in the recruitment, hiring, employment, and compensation of resident physicians and to enforce a regime of restrictions which have the purpose and effect of fixing, artificially depressing, standardizing and stabilizing resident medical competitions and other working conditions. In other words, the lawsuit alleged that the combination of the accreditation system, the binding nature of the NRMP, and the sharing of information between hospitals through the AAMC led to a conspiracy that deprived residents of their ability to individually negotiate terms of employment, including wages and hours worked.

AAMC survey data showed that inflation-adjusted wages for first-year residents fell 5.7 percent in 2022 year-over-year to their lowest level since the 1993-1994 survey. Meanwhile, real wages across the economy fell by just 1.6%. Since 1990, inflation-adjusted wages for residents have increased by only 3.3% compared to a 14.6% increase for the economy as a whole. Such evidence lends credence to the lawsuit’s allegations that the information exchange and the NRMP artificially depressed wages.

As the case went through the courts, Congress passed the Pension Funding Equity Act of 2004. Unrelated to the rest of the act was Section 207, which granted an antitrust exemption for the NRMP and, as a result, Jung v AAMC he was fired from the court.

The Restoring Rights of Medical Residents Act, introduced by Rep. Spartz, would remove the exemption by repealing Section 207 of the Pension Funding Equity Act 2004, which could give rise to future litigation similar to Jung v AAMC. If a future case rules in favor of the plaintiffs, the restrictions imposed by The Match system that prevent residents from engaging in individual negotiations on salary and other terms of employment would be lifted, placing the negotiating power back in the hands of the residents.

Law on the restoration of the rights of doctors to their hospitals

Consolidating hospitals was a focal point of President Biden’s Executive Order on Promoting Competition in the American Economy, which stated that [h]hospital consolidation has left many areas, particularly rural communities, with inadequate or more expensive health care options.

Data from the Health Care Cost Institute found that 125 of the 186 metropolitan areas studied had highly or highly concentrated hospital markets based on their [Herfindahl-Hirschman Index, or HHI] level. (See Figure 2.)

figure 2

*Data taken from the Health Care Cost Institute Hospital Concentration Index

While many of these markets are considered highly or very concentrated, some of these markets may not be of concern to the FTC. For example, a market consisting of four equally sized hospitals would have an HHI of 2,500. According to the 2010 horizontal merger guidelines, 2,500 is the level that divides a market that is considered moderately concentrated and highly concentrated. HHI probably isn’t the primary factor when the FTC decides to contest a hospital merger.

To restore competition to the hospital sector, Senator James Lankford (R-OK) has reintroduced the Patient Access to Higher Quality Health Care Act and Rep. Michael Burgess, MD (R-TX) is leading the bills introduction to the House of Representatives. In addition, Representative Spartz introduced the law on the restoration of the rights of doctors to their hospitals. Both bills would repeal the Affordable Care Acts prohibition on the creation and expansion of new physician-owned (POH) hospitals and allow POHs to participate in Medicare and Medicaid.

A white paper written by Matthew Mandelberg of the Justice Department’s Antitrust Division, Michael Smith of the Federal Trade Commission, Jesse Ehrenfeld of the American Medical Association and Brian Miller of the Johns Hopkins University School of Medicine found that POHs present an opportunity to inject more competition in patient/consumer markets, US payer markets, and medical services markets. They supported it [c]competition in these markets is vital to reducing costs and improving quality. Furthermore, the authors concluded that POHs would create more opportunities for entrepreneurship and innovation in patient care.

The document also explains that the authorization of POHs will help reverse a decades-long trend of industry consolidation. Creating more competition for hospital services will put downward pressure on prices by providing patients with more care options. Furthermore, competition for doctors and staff would increase, possibly by raising wages.


President Biden’s executive order on fostering competition in the American economy has pushed hospital consolidation and competition to the forefront of the larger debate about rising health care costs and expanding medical services.

Several bills have been introduced, or reintroduced, in Congress, often with bipartisan support, that would fill gaps in antitrust enforcement, remove barriers to entry, and remove an antitrust exemption on a residency program facilitator critic.

Encouraging competition by removing barriers to entry and granting antitrust agencies adequate authority to act are necessary preconditions for reducing costs and improving the quality of care.

#Competition #heart #healthcare #debate #AAF

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