IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/7112.html
   My bibliography  Save this paper

Antitrust and Competition in Health Care Markets

Author

Listed:
  • Martin Gaynor
  • William B. Vogt

Abstract

In this paper we review issues relating to antitrust and competition in health care markets. The paper begins with a brief review of antitrust legislation. We then discuss whether and how health care is different from other industries in ways that might affect the optimality of competition. The paper then focuses on the main areas in which antitrust has been applied to health care: hospital mergers, monopsony, and foreclosure. In each of these sections we review the relevant antitrust cases, discuss the issues that have arisen in those cases, and then review the relevant economics literature and suggest some new methods for analyzing these issues.

Suggested Citation

  • Martin Gaynor & William B. Vogt, 1999. "Antitrust and Competition in Health Care Markets," NBER Working Papers 7112, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:7112
    Note: HC
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w7112.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Michael Spence, 1976. "Product Selection, Fixed Costs, and Monopolistic Competition," Review of Economic Studies, Oxford University Press, vol. 43(2), pages 217-235.
    2. Burns, Lawton R. & Wholey, Douglas R., 1992. "The impact of physician characteristics in conditional choice models for hospital care," Journal of Health Economics, Elsevier, vol. 11(1), pages 43-62, May.
    3. Fiona M. Scott Morton, 1997. "The Strategic Response by Pharmaceutical Firms to the Medicaid Most-Favored-Customer Rules," Yale School of Management Working Papers ysm58, Yale School of Management.
    4. Scheffman, David T & Spiller, Pablo T, 1987. "Geographic Market Definition under the U.S. Department of Justice Merger Guidelines," Journal of Law and Economics, University of Chicago Press, vol. 30(1), pages 123-147, April.
    5. Fournier, Gary M & Mitchell, Jean M, 1992. "Hospital Costs and Competition for Services: A Multiproduct Analysis," The Review of Economics and Statistics, MIT Press, vol. 74(4), pages 627-634, November.
    6. Keeler, Emmett B. & Melnick, Glenn & Zwanziger, Jack, 1999. "The changing effects of competition on non-profit and for-profit hospital pricing behavior," Journal of Health Economics, Elsevier, vol. 18(1), pages 69-86, January.
    7. David Dranove & Mark Shanley & Carol Simon, 1992. "Is Hospital Competition Wasteful?," RAND Journal of Economics, The RAND Corporation, vol. 23(2), pages 247-262, Summer.
    8. Winand Emons, 1997. "Credence Goods and Fraudelent Experts," RAND Journal of Economics, The RAND Corporation, vol. 28(1), pages 107-119, Spring.
    9. Lieberman, Marvin B, 1991. "Determinants of Vertical Integration: An Empirical Test," Journal of Industrial Economics, Wiley Blackwell, vol. 39(5), pages 451-466, September.
    10. Adamache, Killard W. & Sloan, Frank A., 1983. "Competition between non-profit and for-profit health insurers," Journal of Health Economics, Elsevier, vol. 2(3), pages 225-243, December.
    11. Pauly, Mark V., 1988. "Market power, monopsony, and health insurance markets," Journal of Health Economics, Elsevier, vol. 7(2), pages 111-128, June.
    12. Dranove, David & Shanley, Mark, 1990. "A note on the relational aspects of hospital market definitions," Journal of Health Economics, Elsevier, vol. 8(4), pages 473-478, February.
    13. Png, I P L & Hirshleifer, D, 1987. "Price Discrimination through Offers to Match Price," The Journal of Business, University of Chicago Press, vol. 60(3), pages 365-383, July.
    14. Riordan, Michael H, 1998. "Anticompetitive Vertical Integration by a Dominant Firm," American Economic Review, American Economic Association, vol. 88(5), pages 1232-1248, December.
    15. Rizzo, John A. & Blumenthal, David, 1994. "Physician labor supply: Do income effects matter?," Journal of Health Economics, Elsevier, vol. 13(4), pages 433-453.
    16. Thomas G. McGuire & Mark V. Pauly, 1991. "Physician Response to Fee Changes with Multiple Payers," Papers 0015, Boston University - Industry Studies Programme.
    17. Katz, Michael L., 1989. "Vertical contractual relations," Handbook of Industrial Organization,in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 11, pages 655-721 Elsevier.
    18. Gaynor, Martin, 1994. "Issues in the Industrial Organization of the Market for Physician Services," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 3(1), pages 211-255, Spring.
    19. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    20. Robinson, James C. & Luft, Harold S., 1985. "The impact of hospital market structure on patient volume, average length of stay, and the cost of care," Journal of Health Economics, Elsevier, vol. 4(4), pages 333-356, December.
    21. Garnick, Deborah W. & Lichtenberg, Erik & Phibbs, Ciaran S. & Luft, Harold S. & Peltzman, Deborah J. & McPhee, Stephen J., 1990. "The sensitivity of conditional choice models for hospital care to estimation technique," Journal of Health Economics, Elsevier, vol. 8(4), pages 377-397, February.
    22. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
    23. Brigitte C. Madrian, 1994. "Employment-Based Health Insurance and Job Mobility: Is there Evidence of Job-Lock?," The Quarterly Journal of Economics, Oxford University Press, vol. 109(1), pages 27-54.
    24. Noether, Monica, 1988. "Competition among hospitals," Journal of Health Economics, Elsevier, vol. 7(3), pages 259-284, September.
    25. Pauly, Mark V, 1986. "Taxation, Health Insurance, and Market Failure in the Medical Economy," Journal of Economic Literature, American Economic Association, vol. 24(2), pages 629-675, June.
    26. Dranove, David & White, William D, 1994. "Recent Theory and Evidence on Competition in Hospital Markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 3(1), pages 169-209, Spring.
    27. Steven T. Berry & Joel Waldfogel, 1999. "Free Entry and Social Inefficiency in Radio Broadcasting," RAND Journal of Economics, The RAND Corporation, vol. 30(3), pages 397-420, Autumn.
    28. Romeo, Anthony A. & Wagner, Judith L. & Lee, Robert H., 1984. "Prospective reimbursement and the diffusion of new technologies in hospitals," Journal of Health Economics, Elsevier, vol. 3(1), pages 1-24, April.
    29. Brooks, John M. & Dor, Avi & Wong, Herbert S., 1997. "Hospital-insurer bargaining: An empirical investigation of appendectomy pricing," Journal of Health Economics, Elsevier, vol. 16(4), pages 417-434, August.
    30. Martin Gaynor & Ching-to Albert Ma, "undated". "Insurance, Vertical Restraints, and Competition," GSIA Working Papers 53, Carnegie Mellon University, Tepper School of Business.
    31. Hoerger, Thomas J., 1991. "'Profit' variability in for-profit and not-for-profit hospitals," Journal of Health Economics, Elsevier, vol. 10(3), pages 259-289, October.
    32. Crocker, Keith J & Lyon, Thomas P, 1994. "What do Facilitating Practices Facilitate? An Empirical Investigation of Most-Favored-Nation Clauses in Natural Gas Contracts," Journal of Law and Economics, University of Chicago Press, vol. 37(2), pages 297-322, October.
    33. Melnick, Glenn A. & Zwanziger, Jack & Bamezai, Anil & Pattison, Robert, 1992. "The effects of market structure and bargaining position on hospital prices," Journal of Health Economics, Elsevier, vol. 11(3), pages 217-233, October.
    34. Esther Gal-Or, 1997. "Exclusionary Equilibria in Health-Care Markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(1), pages 5-43, March.
    35. Ordover, Janusz A & Saloner, Garth & Salop, Steven C, 1990. "Equilibrium Vertical Foreclosure," American Economic Review, American Economic Association, vol. 80(1), pages 127-142, March.
    36. John Simpson & Richard Shin, 1998. "Do Nonprofit Hospitals Exercise Market Power?," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 5(2), pages 141-157.
    37. Pauly, Mark V., 1988. "Reply," Journal of Health Economics, Elsevier, vol. 7(1), pages 85-87, March.
    38. Mark A. Satterthwaite, 1979. "Consumer Information, Equilibrium Industry Price, and the Number of Sellers," Bell Journal of Economics, The RAND Corporation, vol. 10(2), pages 483-502, Autumn.
    39. Butz, David A, 1990. "Durable-Good Monopoly and Best-Price Provisions," American Economic Review, American Economic Association, vol. 80(5), pages 1062-1076, December.
    40. Salop, Steven C & Scheffman, David T, 1983. "Raising Rivals' Costs," American Economic Review, American Economic Association, vol. 73(2), pages 267-271, May.
    41. Dranove, David & Ludwick, Richard, 1999. "Competition and pricing by nonprofit hospitals: a reassessment of Lynk's analysis," Journal of Health Economics, Elsevier, vol. 18(1), pages 87-98, January.
    42. Grannemann, Thomas W. & Brown, Randall S. & Pauly, Mark V., 1986. "Estimating hospital costs : A multiple-output analysis," Journal of Health Economics, Elsevier, vol. 5(2), pages 107-127, June.
    43. Riley, John G, 1979. "Informational Equilibrium," Econometrica, Econometric Society, vol. 47(2), pages 331-359, March.
    44. Francine Lafontaine, 1992. "Agency Theory and Franchising: Some Empirical Results," RAND Journal of Economics, The RAND Corporation, vol. 23(2), pages 263-283, Summer.
    45. Salop, Steven C & Scheffman, David T, 1987. "Cost-Raising Strategies," Journal of Industrial Economics, Wiley Blackwell, vol. 36(1), pages 19-34, September.
    46. Ho, Vivian & Hamilton, Barton H., 2000. "Hospital mergers and acquisitions: does market consolidation harm patients?," Journal of Health Economics, Elsevier, vol. 19(5), pages 767-791, September.
    47. Comanor, William S & Frech, H E, III, 1985. "The Competitive Effects of Vertical Agreements?," American Economic Review, American Economic Association, vol. 75(3), pages 539-546, June.
    48. Frech, Ted E, 1998. "Managed Care, Distance Traveled, and Hospital Market Definition," University of California at Santa Barbara, Economics Working Paper Series qt84x5q49q, Department of Economics, UC Santa Barbara.
    49. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
    50. H.E. Frech, III & Kenneth L. Danger, 1998. "Exclusive contracts between hospitals and physicians: the antitrust issues," Health Economics, John Wiley & Sons, Ltd., vol. 7(2), pages 175-178.
    51. Bresnahan, Timothy F & Reiss, Peter C, 1991. "Entry and Competition in Concentrated Markets," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 977-1009, October.
    52. Lynk, William J., 1995. "The creation of economic efficiencies in hospital mergers," Journal of Health Economics, Elsevier, vol. 14(5), pages 507-530, December.
    53. Philip Crooke & Luke Froeb & Steven Tschantz & Gregory Werden, 1999. "Effects of Assumed Demand Form on Simulated Postmerger Equilibria," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 15(3), pages 205-217, November.
    54. Dor, Avi & Farley, Dean E., 1996. "Payment source and the cost of hospital care: Evidence from a multiproduct cost function with multiple payers," Journal of Health Economics, Elsevier, vol. 15(1), pages 1-21, February.
    55. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-890, July.
    56. Richard G. Frank & David S. Salkever, 1994. "Nonprofit Organizations in the Health Sector," Journal of Economic Perspectives, American Economic Association, vol. 8(4), pages 129-144, Fall.
    57. Luft, Harold S. & Phibbs, Ciaran S. & Garnick, Deborah W. & Robinson, James C., 1990. "Rejoinder to Dranove and Shanley," Journal of Health Economics, Elsevier, vol. 8(4), pages 479-483, February.
    58. Crew, Michael A, 1969. "Coinsurance and the Welfare Economics of Medical Care," American Economic Review, American Economic Association, vol. 59(5), pages 906-908, December.
    59. Gaynor, Martin & Anderson, Gerard F., 1995. "Uncertain demand, the structure of hospital costs, and the cost of empty hospital beds," Journal of Health Economics, Elsevier, vol. 14(3), pages 291-317, August.
    60. Jonathan Gruber, 1992. "The Effect of Price Shopping in Medical Markets: Hospital Responses to PPOs in California," NBER Working Papers 4190, National Bureau of Economic Research, Inc.
    61. Anne Beeson Royalty & Neil Solomon, 1999. "Health Plan Choice: Price Elasticities in a Managed Competition Setting," Journal of Human Resources, University of Wisconsin Press, vol. 34(1), pages 1-41.
    62. Bresnahan, Timothy F., 1989. "Empirical studies of industries with market power," Handbook of Industrial Organization,in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 17, pages 1011-1057 Elsevier.
    63. Krattenmaker, Thomas G & Salop, Steven C, 1986. "Competition and Cooperation in the Market for Exclusionary Rights," American Economic Review, American Economic Association, vol. 76(2), pages 109-113, May.
    64. Baker, Jonathan B. & Bresnahan, Timothy F., 1988. "Estimating the residual demand curve facing a single firm," International Journal of Industrial Organization, Elsevier, vol. 6(3), pages 283-300.
    65. Pauly, Mark V., 1987. "Monopsony power in health insurance: thinking straight while standing on your head," Journal of Health Economics, Elsevier, vol. 6(1), pages 73-81, March.
    66. Krishnan, Ranjani, 2001. "Market restructuring and pricing in the hospital industry," Journal of Health Economics, Elsevier, vol. 20(2), pages 213-237, March.
    67. Dranove, David, 1988. "Demand Inducement and the Physician/Patient Relationship," Economic Inquiry, Western Economic Association International, vol. 26(2), pages 281-298, April.
    68. Lynk, William J, 1995. "Nonprofit Hospital Mergers and the Exercise of Market Power," Journal of Law and Economics, University of Chicago Press, vol. 38(2), pages 437-461, October.
    69. McGuire, Thomas G. & Pauly, Mark V., 1991. "Physician response to fee changes with multiple payers," Journal of Health Economics, Elsevier, vol. 10(4), pages 385-410.
    70. Dranove, David & Shanley, Mark & White, William D, 1993. "Price and Concentration in Hospital Markets: The Switch from Patient-Driven to Payer-Driven Competition," Journal of Law and Economics, University of Chicago Press, vol. 36(1), pages 179-204, April.
    71. Becker, Edmund R & Sloan, Frank A, 1985. "Hospital Ownership and Performance," Economic Inquiry, Western Economic Association International, vol. 23(1), pages 21-36, January.
    72. Foreman, Stephen Earl & Wilson, John Anderson & Scheffler, Richard M, 1996. "Monopoly, Monopsony and Contestability in Health Insurance: A Study of Blue Cross Plans," Economic Inquiry, Western Economic Association International, vol. 34(4), pages 662-677, October.
    73. Martin Gaynor & Deborah Haas-Wilson & William B. Vogt, "undated". "Are Invisible Hands Good Hands? Moral Hazard, Competition, and the 2nd Best in Health Care Markets," GSIA Working Papers 1999-E30, Carnegie Mellon University, Tepper School of Business.
    74. Masten, Scott E, 1984. "The Organization of Production: Evidence from the Aerospace Industry," Journal of Law and Economics, University of Chicago Press, vol. 27(2), pages 403-417, October.
    Full references (including those not matched with items on IDEAS)

    More about this item

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:7112. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: http://edirc.repec.org/data/nberrus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.