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Show this apparent conflict, the Federal Trade Commission and the Department of Justice recently issued proposed antitrust guidelines specifically for the health care sector (B.N.A. Antitrust & Trade Regulation Report, 1993). The purpose of this paper is to examine those guidelines, first by placing them in the context of antitrust regulation generally and of trends in antitrust enforcement within the health care sector specifically, secondly by analyzing the goal (or goals) each guideline appears to be designed to accomplish, and finally by discussing whether the guidelines portend any change in antitrust enforcement goals. An Overview of the Antitrust Laws Passed in 1890 in response to the growing market power of trusts, the Sherman Act prohibited "every contract, combination...in restraint of trade.." as well as "... attempt(s) to monopolize...". In 1914, the Clayton Act was passed declaring several specific actions illegal, including price discrimination, exclusive dealing, total requirements, and tying contracts and prevented mergers where the effect may be to "...substantially lessen competition or tend to create a monopoly. " In theory, completely competitive markets lead simultaneously to least cost production as well as optimum consumer welfare (i.e., satisfaction). Because reality and theory are often difficult to reconcile, antitrust legislation is really an expression of preference for competition rather than an instrument which sets precisely the conditions that are to be met for the practice of competition. However, since competition leads to a general state of efficiency, antitrust officials attempt to maintain (as closely as possible) the basic conditions necessary for competition. Because the antitrust laws are an expression of preference for competition, the courts are continually involved in interpreting the laws in specific cases; the need for such interpretation is exceeded perhaps only by constitutional law. Early in its enforcement history, however, certain particularly pernicious deviations from the "model" of competition (including collaborative agreements such as price fixing and market division) were writing campaign (in which identical letters were sent by participating dentists) demanding higher reimbursement rates. As a final note, the frustration of physicians about negotiations with managed care plans has led Senator Orrin Hatch of Utah and Represnetative Bill Archer of Texas to introduce legislation in May of 1994 that would enable groups of physicians and other providers to, under certain circumstances, get together to set prices, market their services and engage in other collaborative activities. judged to have no redeeming value and were henceforth treated as per se violations. For these actions, only the existence of such agreements need be established as evidence of a violation; their impact on the market is not considered. Most collaborative agreements, however, are examined specifically for their purpose and impact under the rule of reason. Such an analysis takes account of the special nature of the markets in which the collaborators operate. Because of this case by case analysis, actions of the nation's enforcement agencies (the FTC and DOJ), and resulting case law, can differ from one administration to another. Of particular relevance in such evolving interpretations is the priority ascribed to the multiple attributes of the concept of "efficiency." It is to this topic that we turn next. Some argue that the conflict perceived between health care providers' goals of cost containment or efficient delivery of care and the antitrust authorities' goals of creating and maintaining competition is exacerbated when competition is viewed narrowly as an end in itself rather than as a means to the more basic ends of achieving least cost production and maximizing consumer welfare. When the notion of "efficiency' is looked at closely, as economists do, a distinction is made between technical efficiency (least cost production) and allocative efficiency (marginal cost pricing, or equivalently, consumer welfare). This distinction is important because when buyers or sellers gain market power, least cost production and a maximum of consumer welfare may no longer be simultaneous outcomes. Hence, antitrust authorities are often in the position of considering tradeoffs between technical efficiency and consumer welfare. When legal authorities focus on the protection or creation of consumer welfare as their primary goal for antitrust enforcement, collaborative agreements between providers aimed at cost containment may be threatened. The Conflicting Goals of Antitrust Enforcement To highlight the potential conflicts between the goals of consumer welfare and economic efficiency, we rely on the model first developed by Williamson (1968).4 Slightly modified for Figure Other scholars have found it instructive to characterize the conflicts which arise in antitrust enforcement differently. For example, Flynn (1990) argues that conflicts arise between the goal of developing rules compatible with the neoclassical model of competition and the goal of developing rules which ensure that the exercise of economic power is compatible with social and political values. We recognize the validity of this and other characterizations of conflicts which arise in the 104 REVOLUTION, EVOLUTON, OR BUSINESS AS USUAL? |