By Brian J. Miller | Kevin Hahm
Leaders of the Centers for Medicare and Medicaid Services (CMS) across administrations have promoted the policy goal of driving all of Medicare and the majority of Medicaid patients into risk-based contracting models by 2030. With nearly half of Medicare beneficiaries enrolled in Medicare Advantage plans and nearly three-quarters of Medicaid beneficiaries receiving their benefits through Medicaid Managed Care Organizations (MCOs), policymakers have used comprehensive risk-adjusted capitated managed care models to achieve their stated policy goals of transforming volume to value. The drive towards risk-adjusted capitation encourages vertical integration through mergers, joint ventures, and organic growth with an aim to organize and integrate health financing and care delivery.
Historical merger review at the Federal Trade Commission (FTC) and the Department of Justice (DOJ) Antitrust Division have largely focused on horizontal mergers between hospitals or between health plans. With the recent changes in the antitrust agencies’ merger guidelines and a variety of merger enforcement cases with vertical relationships, this paper layers out a framework for evaluating payer-provider transactions and relationships.
Coauthored by Kevin Hahm, who previously served as the head of the FTC Bureau of Competition’s Mergers IV Division (which reviews hospital mergers) and Brian Miller (former Special Advisor at the FTC), the article lays out a framework through nine examples in the following arenas to weigh pro-competitive benefits against anti-competitive harms:
- Market Definition, Related Products, Market Shares, and Concentration
- Unilateral Effects
- Coordinated Effects.
- Pro-Competitive Effects and Improved Outcomes
As the transition towards comprehensive risk-adjusted capitated payment continues in Medicare and Medicaid, the agencies will see increasing vertical relationships and mergers as organizations attempt to manage the health care dollar. This policy framework provides the agencies, firms, policy analysts, and policymakers with additional points of reference to use in evaluating payer-provider transactions in conjunction with existing guidelines.
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