100 Iowa L. Rev. 1969 (2015)
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Abstract
The appropriate role of merger efficiencies remains unresolved in United States antitrust law and policy. The Patient Protection and Affordable Care Act (“ACA”) has led to a significant shift in health care delivery. The ACA promises that increased integration and a shift from quantity of performance to increased competition will create a system in which quality of health care will go up and prices will go down. Increasingly, due to the economic trends that respond to the ACA, including considerable consolidation both horizontally and vertically, it is imperative that the antitrust agencies provide an economically sound and administrable legal approach to efficiency-enhancing mergers. In this regard, horizontal hospital mergers present particular challenges for antitrust. Most hospital merger cases focus on cost-based efficiencies, as does most of the academic empirical literature. Yet, government policy seems out of sync with quality-enhancing efficiencies analysis. This Essay first provides a discussion of the welfare effects on quality and its implications for antitrust analysis. Then, the Essay explores quality-enhancing efficiencies analysis in both the 2010 Horizontal Merger Guidelines and in antitrust case law. In doing so, the Essay identifies areas of both clarity and ambiguity regarding quality-enhancing efficiencies policy. Third, the Essay draws parallels to an efficiency analysis of quality under rule of reason analysis, in which the Essay offers examples of resale price maintenance and tying of franchising contracts. Thereafter, the Essay addresses how agencies and courts should treat quality-enhancing efficiencies in mergers. In doing so, the Essay draws upon the existing academic literature in empirical industrial organization economics and public health on measurements of what is hospital quality in a consolidating health care marketplace. In its concluding section, the Essay advocates a more robust use of quality measurements as a guiding principle of merger law and policy that (1) is flexible enough for case by case analysis; (2) will provide for ease of administrability; and (3) will make outcomes fall more in line with sound economic analysis than the current system.