For this week at least, Economic Antitrust Policy Trumps Consolidation for “Enhanced Access and Quality”

Just to the south of New Hampshire, the Commonwealth of Massachusetts this week has encountered the vagaries of the world of health policy and economics. Suffolk Superior Court Judge Janet L. Sanders has dealt what the Boston Globe calls “a devastating blow to Partners HealthCare’s plans to expand its dominance across Eastern Massachusetts.” Judge Sanders has rejected the consent judgment reached between Partners and former MA Attorney General Martha Coakley that allowed the acquisition of three community hospitals and hundreds of physicians to Partners’ network.

Is this a general swing of the anti-trust pendulum or an aberration in terms of merger activity?

A few of the issues addressed in the Judge’s decision include:

  • The consent judgment in the Judge’s opinion did not provide sufficient protections against the market power of Partners, and thus it would have allowed Partners to control pricing in the Massachusetts’ market.
  • The consent judgment (or “agreement” between Coakley and Partners) was not in the “public interest.” Consumers and employers would bear the costs of Partners’ “market muscle” in the form of higher insurance premiums and higher deductibles on their insurance plans. The “conduct-based” remedies in the consent agreement did not adequately address the “harm that is almost certain to occur as a consequence of the anticompetitive conduct by Partners “that the petitioners in the case described.
  • Judge Sanders’ decision directly questioned her Court’s ability to monitor the consent agreement’s process of on-going judicial involvement. The consent agreement envisioned a ten-year period during which the Court would have been involved in complicated areas and asked to resolve difficult issues, such as health care pricing. While acknowledging that litigation settlements should be reviewed with favor, Judge Sanders stated that “[t]his Court is ill-equipped to keep abreast of those changes [in the entire health care field] as they unfold over the next decade or to predict at this point how such changes might affect the meaning and application “ of the proposed consent agreement.
  • The “price caps” within the consent agreement would expire within six years, leaving Partners’ with the ability to raise prices because of its market power created by its mergers and the acquisition of the physicians.

While my views of this decision are in development, my initial reaction is this: With the drum beat of “consolidation across the health care continuum,” this decision appears to bolster (and restore, perhaps) the notion that strong economic players in the “healthcare market” cannot exert raw market power that results in higher prices even as they hide behind the veneer of “consolidation as a means of enhancing access and quality.”