Competition Deniers Strike Again

The recent agreement in principle between Partners Healthcare (a hospital system in the Boston area) and Massachusetts Attorney General Martha Coakley is a good example of how liberals view competition and go about enforcing the antitrust laws, which is to say they don’t enforce them at all.

Whenever a hospital or other merger is likely to substantially lessen competition in a relevant market, the appropriate action for a state or federal agency would be to go to court to block the questionable merger with an injunction. Such a remedy then would prevent the market from becoming more concentrated and avoid the price increases likely to result.

In February, after an investigation, the Massachusetts Health Policy Commission found that the proposed acquisition of South Shore Hospital by Partners would indeed lessen competition and increase prices. But rather than seek to block the transaction, Coakley has agreed to what is called a “conduct” remedy, which allows the hospitals to merge and seeks only to regulate Partners’ subsequent behavior (see here and here).

The DOJ also investigated the proposed acquisition, but in so far as the state has agreed to a settlement short of blocking the deal, it is unlikely that DOJ will act to stop the transaction. Usually, the federal agency will take the lead in a merger investigation, but in this instance, it appears that DOJ has disappeared, or perhaps the DOJ is just “leading from behind.”

The remedy agreed to by AG Coakley involves implementation of price controls until the year 2020, restrictions on the ability of Partners to negotiate rates with payers as a single entity (i.e., everyone will pretend that individual hospitals in the Partners system will act as independent decision makers) as well as restrictions on Partners’ ability to acquire other hospitals (with exceptions) and physician groups.

So the conduct remedy, rather than an injunction, moves Massachusetts even further away from an economy that is regulated through competition in markets to one that is centrally planned, which will help insure a relatively stagnant economy. In her campaign for governor, Coakley evidently intends to be the stagnation candidate (although that will hardly distinguish her from other candidates in a chronically blue state).

In her press conference announcing the agreement, Coakley called Partners a “Goliath” in the market that has “used its dominance” to drive up prices. Well, okay, but again, the answer would be to prevent the Goliath from adding yet more hospitals to its lineup, and it would even call for the state to break up the Goliath into a number of smaller pieces to create a genuinely competitive market.

Of course, a consolidated market means fewer firms in the market, which makes it easier for central planners to control. Perhaps this explains the Obama administration’s absence from the Partners’ proceedings – a conduct remedy is perfectly consistent with the administration’s desire to place one sixth of the U.S. economy under the thumb of the central authority.

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