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Dominant players in the healthcare industry often opine that it bears unique traits which make submission to conventional anti-trust tenets unfavorable to the general society. As a result, numerous cases of this nature often exhibit variances in the judgments passed in lower courts. Gu (2018), provides that a significant player in the North Dakota healthcare system, Sanford Health sought to merge with the Mid Dakota Clinic to which the Federal Trade Commission intervened and gained access to a court injunction halting the acquisition. The Federal Trade Commission (FTC) is mandated to fully implement antitrust legislations with respect to the huge American healthcare sector (Dafny, 2014). Such laws are primarily designed to curtail any possibility of a particular entity monopolizing aspects of the healthcare sector which often leads inefficient scales, rising care costs, less value from insurer arrangements due to diminished quality service.
Merger and acquisition activity within the healthcare industry have notably increased in the last two decades. The FTC continues to pledge greater vigilance against hospital mergers as these are often designed to limit the local options patients have for affordable care costs, enhanced, efficient, and qualified care coordination (Dafny, 2014). In June 2017, FTC acted on information concerning the adverse effects that a merger between two key played in the North Dakota health industry would have on the larger community. The two institutions are the nearest hospices serving a populace of about 125,000 people (Gu, 2018). FTC’s complaint outlined that the intended merger sought to diminish competition in North Dakota’s four-county region designed to ultimately bring about higher prices and diminishing quality of health services offered. The outcome of the merger will draw away a large proportion of the region’s physicians to a single healthcare entity thereby monopolizing skills and expertise.
For an organization keen on a successful merger, the boards of both players should be adequately cognizant with the dynamics set in motion via recent FTC instigated court cases. This is towards limiting the possibility of falling prey to similar anti-trust actions. The North Dakota hospices scenario offer clear insights relative to the FTC core intent relative to the healthcare industry. It is evident that the FTC in conjunction with the North Dakota Attorney General worked to limit local options for consumers to gain access to qualified and affordable care. For instance, the Mid Dakota Clinic operates in the Bismarck, ND area and by merging with Sanford Health; it would possess about 75% of physicians in the locality (Gu, 2018). Sanford runs 150 clinics and 40 hospitals and by absorbing the six clinics, ambulatory surgery center and 61 doctors, would effectively compel adult primary care consumers to heavily depend on the group (Gu, 2018). FTC is therefore bound to intervene in situations where there is robust substantiation that an identified merger in the sector is likely to result in higher prices (Dafny, Ho, & Lee, 2016). Such can come from increased insurance copayment as well as premiums that do not match quality improvements. In the Sanford case, the acquisition is likely to result in the formation of a large physician group thereby limiting the capacity competitors may have at meeting doctor-client ratio. Given that healthcare providers are primarily entrepreneurs looking to create wealth from investments at relatively low costs, gaining access to a large physician pool ultimately results in higher pricing of care services without a comparable improvement in quality of service.
Upon analyzing the case proceedings in which FTC attain a court order barring Sanford Health from merging with Mid Dakota Clinic, it is obvious that the oversight authority takes the best interests of consumers at heart. The defendants claimed that it has invested significantly to improve quality care delivery outcomes in accordance with mission and vision, “Stronger Together”. A failure to present evidence proving the same led the court to side with FTC’s viewpoints. Sanford did not avail evidence supporting that the merger sought to bring about greater efficiencies and synergies in the sector. It could therefore not ensure that the health care sector market environment remains competitive thereby enabling consumers gain wider options for services which allows for costs to remain low (Fulton, 2017). An organization seeking to merge should therefore appraise its quality measurement parameters regularly. One of the principal aims is to gain substantiation that a merger will not compromise on quality in the shorter and longer term while also ensuring that healthcare remains affordable. For a healthcare institution seeking to engage in a merger availing benefits as the ones in Sanford Health and Mid Dakota, the board can acknowledge the advantages resulting from integrate care (Fulton, 2017). FTC cited lack of substantiated evidence that the acquisition would lead to the development of a risk based, clinically, and financially integrated system that rewarded providers based on successes realized in patient outcomes.
In conclusion, the FTC is only concerned with availing a competitive market setting for the health sector given its significance to the society. It supports reforms and appreciated innovative as well as collaborate engagements between players through mergers that are inherently purposed to benefit target communities. The Sanford Health proprietors failed to show their goals relative to generating advantages for consumers, appraising quality of services offered as well as a commitment to reducing costs. For entities seek to merge, it is imperative that they formulate comprehensive plans which portray continued quality assessment goals and initiatives to improve accessibility to affordable healthcare.
Dafny, L. (2014). Hospital industry consolidation—still more to come?. New England Journal of Medicine, 370(3), 198-199.
Dafny, L., Ho, K., & Lee, R. S. (2016). The price effects of cross-market hospital mergers (No. w22106). National Bureau of Economic Research.
Fulton, B. D. (2017). Health care market concentration trends in the United States: evidence and policy responses. Health Affairs, 36(9), 1530-1538.
Gu, A. Y. (2018). Litigation and enforcement highlights: January 2018. Retrieved on Jan 26, 2018 from http://sourceonhealthcare.org/litigation-and-enforcement-highlights-january-2018/