DOJ warns hospitals, insurers: Mergers will be scrutinized

The Obama administration warned the health care industry Monday that it "won't hesitate to block mergers that threaten to stifle competition," The Associated Press reports.

"Justice Department antitrust chief Christine Varney told a lawyers' conference that vigorous enforcement of anti-monopoly laws is vital to the success of the new health care law, particularly in trying to control rising premiums." Varney listed both insurers and hospitals as potential targets of investigations. The new health exchanges should provide choice and competition for individuals and small businesses buying insurance policies directly, but "Varney said the goals of health care overhaul 'cannot be achieved' if insurer mergers reduce competition, or if big companies use their market clout to keep out upstarts" (Alonso-Zaldivar, 5/24).

Main Justice: "According to an internal DOJ study, Varney said, new insurers have trouble competing with large players in certain markets because they can't recruit new patients without provider discounts. It becomes a catch-22, she said, because they can't negotiate for discounts without a large number of patients. But in markets with a few medium-sized players, where no one plan has the clout to demand a larger discount, new firms are more likely to secure similar discounts, she said. 'It is, therefore, imperative that the division prevent mergers or acquisitions that will create, or even increase the size of, dominant health insurance plans, particularly in the small-group and individual markets,' Varney said."

In addition, the DOJ "will also challenge exclusive contracts between insurers and large providers that make it harder for the provider to negotiate with a new insurer, she said" (Viswanatha, 5/24).