Break Up The Big Hospitals

In his Time magazine cover story, Steven Brill criticized the prices that M.D. Anderson Cancer Center in Houston charges patients. In an op-ed piece appearing in the Wash-ington Post, a couple of the hospital’s doctors step forward evidently to defend their employer against Brill’s criticism. And no surprise, the good doctors point the finger away from the hospital and at the drug companies.

To fix the problem, the doctors suggest that Medicare be allowed to negotiate drug prices, which the law now prohibits, and they want to outlaw “pay for delay” agreements through which drug companies delay the introduction of generic products. The doctors also sug-gest that “market forces should have a greater role” in cancer drug pricing.

Their definition of “market forces,” however, would require FDA approval which the doc-tors apparently do not understand is the opposite of market forces. Brill does the same thing in his article:  he wants us to tighten the antitrust laws, meaning a move toward markets and competition, but then Brill makes additional suggestions that would destroy markets and competition. Both Brill and the doctors are incoherent.

Brill is quite correct that more antitrust enforcement is needed to control healthcare prices. But blocking mergers in obscure markets would not be sufficient – the government must also break up the big hospitals and the other big players in the industry. And a good place to start would be with the Texas Medical Center to which M.D. Anderson belongs. As Brill points out, the Texas Medical Center is a 1,300 acre, 280-building complex with 19,000 employees. It could be broken up nicely into perhaps three separate companies.

Breaking up the Texas Medical Center would increase healthcare competition in Houston and even beyond and start to bring prices down. Relying on this kind of market-based approach would be better than the centralized approach that everyone seems to find acceptable, even though all the evidence shows that centrally planned economies never outperform those based upon markets.

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