Health: Antitrust Law and Hospital Mergers

The Story:

Since the 19th century, the United States has had a body of law, called antitrust law, designed to preserve competition among private sellers in interstate industries, in the expectation that competition aids the consumer and increases efficiencies. Since at least the early 1980s, it has been clear that healthcare providers are subject to this body of law.


The economics of medical care, especially the economics of running a hospital in an urban context, can be challenging. Hospitals are required, for example, to provide emergency care as needed, without first checking on whether an insurance policy is in place that will cover the service.

In recent years, smaller hospitals have faced insolvency, and have sold themselves to larger chains. This is part of a broader process by which chains are replacing stand-alone hospitals. There is an obvious synergy in chain hospital (for example a chain, as a big buyer of pharmaceuticals and hospital equipment, is in a good position to get discounted prices from those sellers than a stand-alone hospital). But the trend as a whole is in tension with the goal of the antitrust laws.

In Pill Form:

The law at present is that if a plaintiff (which may be a patients’ advocacy group, a state attorney general, or the US FTC) establishes that a particular hospital merger will hurt competition, the merging parties may put forward efficiency as an “affirmative defense.” But then the burden of proof shifts to them to establish the alleged efficiencies and to show that they are sufficient to outweigh the anti-competitive effects.

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