Anti-trust laws in the United States have been effectively used to prevent monopolies in industries like telecommunications, oil and gas and computer software. Anti-trust laws are enforced in order to maintain free competition in the marketplace, which generates lower prices and incentivizes the development of high quality products. Today, hospital systems are experiencing an era of heavy consolidation, which include mergers and acquisitions and physician practice buy-outs. According to the Wall Street Journal, hospitals completed 86 merger and acquisition deals valued at $7.9 billion in 2011, which was the most in a decade. Like in other industries, this developing trend in hospital consolidations encourages price fixing and
…show more content…
Bell System, the precursor to AT&T, implemented this solution in 1982, when it was forced to break into smaller ‘Baby Bells’. A second solution would be to force hospital monopolies to separate its core hospital operations from the ancillary services provided to patients, including laboratory services, outpatient services and primary care. Kodak implemented a similar solution in 1954, when it was forced to separate its film division from its processing division and license the color finishing process to third parties. A policy of price transparency must accompany any action in order complement these anti-trust enforcement measures. Each hospital system must have access to competitors’ pricing in order to fully realize economies of scale. When each individual hospital negotiates its pricing in a vacuum, it cannot achieve fair pricing. Pricing transparency levels negotiations and allows hospitals to negotiate volume-based contracts in order to achieve maximum savings.
Anti-trust laws scrutinize many types of business practices. The FTC reviews contracts between two business entities that sell the same products in order to limit price fixing. Government regulators also review production quality of products in service in order to ensure a basic minimum standard. Within the healthcare industry, the strongest