June 2017 Vol. 31 / No. 3 A Publication of the Health Care and Editor’s Report Pharmaceuticals Welcome to the third issue of the Chronicle for the ABA 2016-17 term. In this Committee of the Antitrust issue, we are pleased to present three original articles, all of which relate to the Section of the American recent health insurance merger cases: Aetna/Humana and Anthem/Cigna. Bar Association Value Based Contracting – Could it be a Procompetitive Efficiency in the Antitrust Analysis of Healthcare markets? by Jody Boudreault, a Co-Chairs: Senior Associate at Squire Patton Boggs (US) LLP. Seth Silber The Importance of Innovation in Healthcare: Lower Reimbursement Wilson Sonsini Rates to Providers Do Not Mean Lower Healthcare Costs, by Joe Goodrich & Rosati Whatley, Edith Kallas, and Henry Quillen, Partners at WhatleyKallas, LLP. Washington, D.C. Reduced-Form versus Structural Econometric Methods in Market Leigh Oliver Definition: Lessons from Aetna-Humana, by Paul Wong and Hogan Lovells Subramaniam Ramanarayanan, Economists at NERA Economic Consulting. Washington, D.C.
Executive Editors: We are always interested in hearing from our Committee members. If there is a Amanda G. Lewis topic that you would like to see covered in a Committee program or if you have any Federal Trade other suggestions, please contact the Committee Co-Chairs, Seth Silber Commission ([email protected]) or Leigh Oliver ([email protected]). Washington, D.C.
Anthony W. Swisher If you would like to submit an article for the Chronicle, please contact Amanda Squire Patton Boggs Lewis ([email protected]) or Anthony Swisher ([email protected]). Washington, D.C.
Executive Editors:
Amanda G. Lewis Anthony W. Swisher
Federal Trade Squire Patton Boggs Commission Washington, D.C. Washington, D.C.
Editors:
Lauren Battaglia Amanda Hamilton James Moore, III Hogan Lovells Haug Partners LLP Skadden, Arps, Slate, Washington, D.C. Washington, D.C. Meagher & Flom Washington, D.C.
Antitrust Health Care Chronicle June 2017
Value Based Contracting – Could it be A Procompetitive Efficiency in the Antitrust Analysis Of Healthcare Markets?
Jody Boudreault 2 Squire Patton Boggs (US) LLP
Introduction Value Based Contracting Background
The U.S. Department of Justice (DOJ) and the Over the past decade or more, the U.S. healthcare Federal Trade Commission (FTC) both recently system has shifted a percentage of its payments to evaluated the impact of value based contracting in providers from a “fee for service” arrangement that determining the overall effects of two proposed pays physicians for each procedure, to a different healthcare mergers. In one merger, Federal Trade approach with nicknames such as “value based Commission v. Advocate Health Care,3 the FTC contracting” (VBC), “value based care,” dismissed value based contracting as ineffective in “collaborative care,” or “risk based care,” among leading to better health, and thus it could not save others. One goal of value based contracting is to the merger from its anticompetitive effects. In the reduce the total number of healthcare procedures other, United States v. Anthem, Inc.,4 the DOJ lauded performed, by encouraging doctors to increase Cigna’s value based contracting (plus consumer- higher value care and keep people healthier. This facing wellness programs) as bending the cost curve kind of contracting attempts to integrate services, for patient health, but the defendants did not argue and shifts at least some of the risk for the total cost that this was the primary efficiency from the deal. of care from plans to providers. The ultimate While the Anthem court’s opinion did not reach a objective is global capitation (a fixed payment on a conclusion on whether value based contracting could per member per month basis) to bring about a overcome the loss of a competitor in evaluating a healthier population. merger, the DOJ planted a seed that may develop in a future merger. When taken to its logical conclusion, it may be that value based contracting is either restricted to a tiny parcel out on the margins, Efficiencies and the Merger Analysis or is a real and significant procompetitive benefit of Framework many mergers. The antitrust agencies regularly analyze hospital and health plan mergers. The agencies’ goal is to prevent 5 mergers that would enhance market power. A merger enhances market power if it is likely to cause
2 a firm “to raise price, reduce output, [or] diminish The author would like to thank Mark Botti and Anthony innovation.”6 Higher prices, lower output, and Swisher for their invaluable contributions to this article. 5 U.S. Dep’t of Justice & Fed. Trade Comm’n, Horizontal 3 2016 U.S. Dist. LEXIS 79645 (N.D. Ill. June 20, 2016). Merger Guidelines, 2 (2010). 4 2017 U.S. Dist. LEXIS 23613 (D.D.C. Feb. 8, 2017). 6 Id.
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reduced innovation are potential anticompetitive The FTC in Advocate analyzed the parties’ value effects of a merger. If these were the only effects, a based care efficiencies claims, but did not recognize merger would shrink consumer welfare, and the them as procompetitive, that is, “cognizable.” agencies would seek to enjoin it. Significantly, however, the DOJ in Anthem explained Cigna’s value based care products as But a merger may also have procompetitive effects, output-enhancing. Output-enhancing indicates called efficiencies. Efficiencies might result in procompetitive. As will be discussed below, this improved product quality, lead to lower prices or theory of value based care as procompetitive costs for consumers, or lead to innovative new supports the claim that Anthem marks a more products.7 Efficiencies are part of the overall profound cultivating of efficiencies doctrine than assessment of competitive effects.8 The agencies may initially be evident. routinely predict a firm’s post-merger incentives and decide whether they are more likely to lead to anticompetitive effects or procompetitive efficiencies.9 Agency Analysis of Two Recent Healthcare Mergers The ambiguity in what may count as an efficiency is clarified in the Horizontal Merger Guidelines. There, Federal Trade Commission v. Advocate Health the agencies insist that efficiencies are to be Care13: VBC Is Not Merger-Specific or substantiated in three ways. First, efficiencies must Cognizable be “merger specific” – both a likely consequence of the merger and unlikely to result through 10 If a merger efficiency requires something which will contracting. A company’s post-merger plan to make the combined firm more competitive post- create better products, reduce product costs, or merger, would value based care qualify? increase innovation, and a business assessment of Specifically, can a hospital that has a substantial contracts as an infeasible way to achieve these amount of value based contracting merge with one results is evidence of a merger specific efficiency. that has very little value based contracting and claim Second, efficiencies must be “cognizable” – not a the extension of VBC expertise from one to the other savings that stems from anticompetitive output as procompetitive? reductions but from something which makes the 11 merged firm a better competitor. And third, Advocate, with 11 hospitals in its system and more efficiencies must be “verifiable,” through an than two-thirds of its commercial revenues from evaluation of the merging parties’ analytical 12 some form of value based contracts, attempted to methods, data, and assumptions. merge with NorthShore, with 4 hospitals and just ten percent of its commercial revenues from value based 7 Id. at 29. contracts.14 NorthShore had no full risk capitated 15 8 contracts. NorthShore argued that it needed the U.S. Dep’t of Justice & Fed. Trade Comm’n, merger to “engage in large-scale full risk Commentary on the Horizontal Merger Guidelines, 49 contracting” because it could not expand its risk (2006).
9 See Carl Shapiro, The 2010 Horizontal Merger Guidelines: From Hedgehog to Fox in Forty Years 77 Antitrust L.J. 727-28, 752-53 (2010). 13 2016 U.S. Dist. LEXIS 79645 (N.D. Ill. June 20, 2016).
10 Horizontal Merger Guidelines, supra note 4, § 10. 14 Id. at *4, *8 (N.D. Ill. 2016).
11 Id. 15 Defs.’ Proposed Findings of Fact & Conclusions of Law at ¶ 50, Advocate, No. 15-cv-11473 (N.D. Ill. filed 12 Id. May 27, 2016) (Dkt No. 467).
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Antitrust Health Care Chronicle June 2017 contracting without broader geographic coverage NorthShore Could Implement Value Based Care 16 and the appropriate tools and experience. On Its Own: VBC Not Merger Specific
Advocate’s Arguments The FTC disputed that NorthShore needed to merge to expand into risk-based contracting. First, Advocate’s proprietary clinical practices NorthShore already was involved in risk-based care called AdvocateCare helped it “emerge as a and could continue without the merger.22 Even the leader in [population health management] hospitals did not deny that NorthShore could and and value-based health care.”17 would expand its value based contracting and population health management capabilities without Advocate’s total cost of care is lower than 23 18 the merger. Second, a number of third parties help NorthShore’s. hospitals manage risk, improve quality, and improve Advocate is better than NorthShore at population health, and can achieve results within a keeping people healthy.19 year.24 And third, NorthShore did not measure the NorthShore’s efforts to improve total health time and expense to achieve risk-based care goals have not been successful.20 independently as opposed to achieving them through the merger.25 The merger “will improve the quality of care while reducing total costs as NorthShore Additionally, the FTC maintained that providers do incorporates and applies the [population not even need to engage in risk-based care to health management] expertise and clinical improve patients’ health because incentives to integration quality measures that Advocate improve health also exist under fee for service 26 has developed.”21 arrangements. Rather, the FTC said, improved health results from how a provider performs on disease management, mortality, and readmissions.27
Advocate’s Value Based Care Model Does Not Lead to Better Health: VBC Not Cognizable
NorthShore already performed as well as or better 16 Advocate, 2016 U.S. Dist. LEXIS 79645, at *8. than Advocate in quality, utilization, efficiency, and
17 Defs.’ Proposed Findings of Fact & Conclusions of Law at ¶ 59, Advocate, (Dkt No. 467). 22 Pls.’ Proposed Findings of Fact and Conclusions of Law at ¶¶ 133-38, Advocate, No. 15-cv-11473 (N.D. Ill. 18 Id. ¶ 327. filed May 31, 2016) (Dkt. No. 468) (23% of NorthShore’s patient population treated under some form of risk-based 19 Id. ¶ 332 (“Advocate’s belief in its ability to help lower contracting). utilization at NorthShore is not inconsistent with NorthShore’s belief that it is not providing unnecessary 23 Pls.’ Post-Hr’g Br. at 29, Advocate, No. 15-cv-11473 care; Advocate’s focus ‘is more longitudinal and (N.D. Ill. filed May 24, 2016) (Dkt. No. 464). population-based’ with the added focus of preventing patients from needing in-patient hospital care in the first 24 Id. place.”). 25 Id. 20 Id. ¶ 57. 26 Pls.’ Proposed Findings of Fact and Conclusions of 21 Defs.’ Post-Hr’g Mem. in Opp’n to Pls.’ Mot. for Law at ¶ 141, (Dkt. No. 468). Prelim. Inj. at 27, Advocate, No. 15-cv-11473 (N.D. Ill. filed May 20, 2016) (Dkt No. 463). 27 Id. at ¶ 140.
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population health outcomes.28 The FTC noted that United States v. Anthem, Inc.32: VBC Is “NorthShore is a well-respected and award-winning Output-Enhancing healthcare system that offers an exceptionally high 29 quality of care.” “There is no empirical evidence If a firm does not need value based care to improve that Advocate’s model leads to better outcomes for population health, and does not need a merger to patients who use its healthcare system or better 30 gain the expertise to implement value based care outreach to those who do not.” (either because it is already using value based contracting or because other firms can help it to Because NorthShore’s quality is equal to or better successfully improve the health of its enrollees), is than Advocate’s quality, the FTC predicted that the there any way that value based care could be a merger “may have no impact, or may even reduce 31 procompetitive efficiency? NorthShore’s clinical care quality and efficiency.” Anthem, a firm with high market shares and The District Court Does Not Reach the generally with the lowest provider rates, attempted Efficiencies Arguments to merge with Cigna, a much smaller firm offering products with integrated customer wellness The district court denied the plaintiffs’ motion for a programs and value based contracting. Anthem’s preliminary injunction based on an analysis of the primary argument in favor of the merger was that it relevant geographic market, and did not analyze would be able to reduce rates to providers post- claims related to population health or value based merger and pass those savings on to the employers contracting. who purchase administrative services from Anthem (known as ASO services).33
DOJ Says Output in a Healthcare Market Is Better Health
28 Pls.’ Proposed Findings of Fact and Conclusions of During the trial, Plaintiffs’ economic expert, Dr. Law at ¶¶ 127-32, (Dkt. No. 468). Dranove, testified that the correct measure of output 29 Pls.’ Post-Hr’g Br. at 34, (Dkt. 464). for antitrust analysis in this merger of two health plans is the health of a population, not the number of 30 Id. at 35. The FTC’s view that capitation is not always healthcare procedures undertaken: synonymous with better health has additional evidentiary support. For example, LA Care, a Medicaid managed care And I just want to take a time out provider in California, capitates payments for nearly all of here to repeat something I said its two million members. Jeff Goldsmith, California’s earlier about this concept of Coverage Expansion: Fiscal and Political Risks, Health reductions in output . . . . In a Affairs Blog (May 30, 2017), http://healthaffairs.org/blog/2017/05/30/californias- coverage-expansion-fiscal-and-political-risks/. And yet, 32 2017 U.S. Dist. LEXIS 23613 (D.D.C. Feb. 8, 2017). LA Care’s network “is plagued by . . . dramatic variation in quality performance.” Id. 33 Anthem’s Post-Trial Proposed Findings of Fact Phase I: “National Accounts” at ¶¶ 245-63, Anthem, No. 16-1493 31 Pls.’ Proposed Findings of Fact & Conclusions of Law (D.D.C. filed Dec. 20, 2016) (Dkt No. 417). Some at ¶ 152, (Dkt. No. 468); id. at ¶ 157 (“The significant employers self-insure, directly paying the cost of their variation in quality and population health outcomes across employees’ medical expenses and bearing the risk that Advocate’s hospitals, and the fact that several Advocate those costs may be higher than anticipated. These self- hospitals perform below the national average on these insured employers typically purchase ASO services. metrics, raises serious doubts as to whether implementing Firms such as Anthem sell ASO services, which include the AdvocateCare model at NorthShore will actually pre-negotiated rates in a designated provider network and lower costs or improve quality.”). health benefits claims administration.
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textbook economics market, say Anthem’s Arguments the market for widgets, in that market, the starting point is At trial, Anthem argued that it has more and better everybody loves widgets, and the collaborative care arrangements than Cigna: more widgets we get, the happier we are. And if anything happens Anthem currently has incentive programs in the market to reduce the for 50 percent of its spending, and more than number of widgets that we get, that's harmful to consumers. 85 percent of its commercial hospital 36 contracts. Health economists understand Anthem also argued that it “‘lead[s] the that this is the wrong way to competition’ for value-based programming” think about healthcare markets. and “has more value-based contracting than Nobody goes into the healthcare Cigna despite Anthem’s smaller geographic marketplace wanting more footprint.”37 healthcare services. I don’t go to my doctor and say, ‘That surgery The merger would provide more membership to was great. Give me another one’; make collaborative care more effective: and when they refuse to do it, I
say, ‘You're restricting output. The merger would allow the company to That’s bad for me.’ expand Cigna’s provider collaborations and
make them more effective by increasing We understand that the right membership density, in part through growth measure of output, if we can and in part through rebranding AmeriGroup conceptualize it, is the health that Medicaid membership to Cigna outside the system is producing. And 38 greater health is what we want. Anthem’s Blue states.
So people want more widgets. The merger would create a new product with some They also want more health. Cigna features mated to Anthem discounts:
Greater health is often associated with less output, not more, and so Anthem argued that the merger would result I don’t want to use quantity as a in “a coupling of improved provider standard for identifying whether discounts with the features that make this market is working or not. I Cigna’s current offerings unique . . . . really want to do it in terms of, [M]uch of what makes Cigna’s offerings say, quality of care, or ideally, if unique today are customer-facing features, the data permitted, the health of a population.34 competition in the market is beneficial because it DOJ asserted that competition increases the health of increases quality and decreases quantity.”) (internal a population and decreases the number of healthcare citation omitted). services used.35 36 Anthem’s Post-Trial Proposed Findings of Fact Phase I: “National Accounts” ¶ 294, Anthem, No. 16-1493 (Dkt. 34 Tr. of R. at 1008:22 – 1009:21, Anthem, (Nov. 28, 2016 417). PM session) (Dranove). 35 Pls.’ Proposed Findings of Fact: Phase I at ¶ 399, 37 Id. ¶ 295 (alteration in original). Anthem, No. 16-1493 (D.D.C. filed Dec. 20, 2016) (Dkt No. 416) (“Less competition in healthcare markets is not 38 Id. ¶¶ 296-97. beneficial simply because it increases quantity. More
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such as wellness programs, specialty have achieved the lowest medical-cost trend among products, and international products.”39 the four national insurers.”45
And, Anthem would continue to have incentives to Thus, the evidence showed that even though Cigna’s innovate: input costs (provider rates) are higher than Anthem’s, Cigna is able to lower healthcare It would “speed adoption of incentive- expenses to consumers through wellness programs aligned collaborations across a global and value based contracting that makes its enrollees network[.]”40 healthier. Cigna costs consumers less for better “[T]he combined company would have health than Anthem does. incentives to innovate in its collaborative care arrangements with healthcare providers.”41 DOJ Predicts the Anthem/Cigna Merger May Make the Combined Firm Less Innovative
Cigna’s Integrated Value Based Care Products DOJ then assessed the effects of the merger due to Keep its Enrollees Healthier And Lower the Cost changed incentives to innovate around value based of Better Health: VBC Cognizable care.
A focus throughout the trial was Cigna’s business DOJ first argued that “Cigna is innovating because model (the “benefit leader strategy”). DOJ described of its distinct position in the marketplace as a firm Cigna as integrating customer-facing wellness that can’t compete in the old-fashioned way of programs along with strong provider collaborations getting discounts.”46 Next, DOJ argued that Anthem to reduce consumers’ need for expensive healthcare. currently has less incentive to innovate than Cigna The provider collaborations are built on value based because Anthem’s competitive strength is based on care contracting, which “pays providers for having the lowest provider discounts.47 achieving certain targets of health outcomes.”42 Cigna aligns “the incentives of insurers, providers, Post-merger, Cigna will have less incentive to employers, and customers[,]” resulting in innovate because it will “occup[y] a very different “improve[d] health outcomes,” which “lower total position in the marketplace”.48 But because medical costs by reducing the number of unhealthy Anthem’s current innovations are, “to a large extent” employees needing treatment.”43 Cigna’s strategy is in response to competition from Cigna, the successful: “78 percent of [Cigna’s provider elimination of Cigna means that after the merger collaborations] showed improvements in quality Anthem (and other rivals) will also have less under a pay-for-value model.”44 “Cigna’s clients incentive to innovate.49
39 Id. ¶ 4 (original emphasis deleted). 45 Id. ¶ 223.
40 Id. ¶ 40. 46 Tr. of R. at 968:20-22, Anthem, (Nov. 28, 2016 PM session) (Dranove). 41 United States v. Anthem, Inc., 2017 U.S. App. LEXIS 7521, *13 (D.C. Cir. Apr. 28, 2017). 47 Pls.’ Ex. PDX005 at 53, Anthem, available at https://www.justice.gov/atr/page/file/914606/download. 42 Pls. Proposed Findings of Fact: Phase I at ¶ 50, Anthem, No. 16-1493 (D.D.C. filed Dec. 20, 2016) (Dkt No. 416). 48 Tr. of R. at 968:23-25, Anthem, (Nov. 28, 2016 PM session) (Dranove). 43 Id. ¶ 47. 49 Pls.’ Ex. PDX005 at 55, Anthem; Tr. of R. at 983:11-15, 44 Id. ¶ 229 (alteration in original). Anthem, (Nov. 28, 2016 PM session) (Dranove).
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concluded that the effect of the merger would be to Moreover, DOJ argued, the larger scale of the lose the Cigna innovation that leads to improved combined company would not lead to more value health.55 based care because both already have sufficient scale to innovate and to capture the benefits of innovation, To sum up, as demonstrated by their current innovations.50 The correct measure of output in healthcare markets is the health of the population; The District Court’s Analysis Cigna’s value based care strategy today results in healthier enrollees, and therefore The district court did not believe that Anthem’s greater output; value based care is better than Cigna’s, suggesting that Cigna’s approach adds value to the consumer Implied is that value based care that results while Anthem’s approach simply uses incentives to in healthier people is likely a cognizable reduce the number of procedures.51 The district court efficiency; also did not believe that Anthem would be able to The market share leader with the lowest create a new product marrying Cigna’s benefit input costs has fewer incentives to do value leader strategy with Anthem’s discount leader 52 based contracting well, especially after it strategy. acquires the most successful value based Because of Anthem’s size, the district court believed contractor; that Anthem could have created a new product on its Anthem does not need the merger to 53 own. As for Cigna, the judge found that Cigna’s increase its value based contracting because 54 products improve health. In the end, the court it is already involved; and This merger would lead to reduced health of 50 Pls.’ Ex. PDX005 at 56, Anthem. the population, that is, reduced output.
51 Anthem, 2017 U.S. Dist. LEXIS 23613, at *25-26 After Anthem: Value Based (D.D.C. Feb. 8, 2017) (“While Anthem has also moved to incorporate quality and cost savings incentives into its Contracting Becomes a Potential provider contracts, Cigna has sought to differentiate itself Efficiency with its approach towards reducing costs by increasing
health.”). One possible bright line rule that may have emerged 52 Id. at *176 (“[T]he Cigna model depends upon from DOJ’s advocacy in Anthem is that if evidence collaboration, and . . . it takes a higher level of shows that value based care improves population compensation to encourage and enable physicians and health, than it is a cognizable efficiency. Based on hospitals to participate in the arrangements that are aimed Advocate and Anthem, what generalizations are at lowering utilization and are central to the value based possible regarding competitive effects? approach and medical cost trend guarantees that Cigna is selling.”). To address this question, consider the following
53 hypothetical. Firm A is a large health insurer with a Id. at *19 (“[T]here is nothing stopping Anthem from significant amount of value based contracting improving its wellness programs, or any other offerings experience, as well as the IT and data analysis that Cigna now does better, on its own.”). expertise that is necessary for successful value based 54 Id. at *26 (“Cigna has sought to differentiate itself with care. Evidence shows that Firm A’s value based its approach towards reducing costs by increasing contracts have improved population health. Firm C health. . . . [A]nd there was some testimony from medical personnel that the approach is working.”). 55 Id.
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Antitrust Health Care Chronicle June 2017 is a much smaller health insurer with no fully about how the DOJ might approach the competitive capitated provider contracts, but high quality care effects analysis of this merger? nonetheless. Firms A and C decide to merge, and argue that the merger will improve the total health of Again, Anthem would force us to analyze Firm C’s the population, reducing costs for all of its value based care as a procompetitive, cognizable consumers. What does Anthem tell us about how the efficiency because it is linked to greater output of DOJ might approach the competitive effects analysis better health and lower total healthcare costs for of this merger? consumers. The parties then would have to show evidence that post-merger they would have Anthem forces us to analyze the value based care as incentives and a plan to roll out Firm C’s approach a procompetitive efficiency because it is linked to to Firm A’s customers. As in the actual Anthem case, better health outcomes, and therefore greater output it may be very difficult to show that the much larger and lower costs for consumers. Once it is established firm with some market power would now have a that one party’s value based care is procompetitive different incentive to improve its products and also (i.e., cognizable), leading to better health and lower would be unable to improve its products without the costs, the analysis is more complicated. At this merger. Of course, perhaps Firm C has spent a point, the parties would have to articulate why the decade or more developing its high-quality products extension of value based care (and the data analytics with the associated IT and analytics capabilities, and and IT expertise) from Firm A to Firm C is a merger it would be very unlikely for another firm to be able specific efficiency. Perhaps the merger is the fastest to copy those products within a two-year timeframe. and least expensive way to extend better health to And, perhaps another firm with a value based care Firm C’s enrollees through value based care. business model similar to Firm C’s model remains in Perhaps the combined company, with its greater the market post-merger and provides the competitive resources and market share would have a greater incentive for the merged firm to roll out Firm C’s incentive to keep consumers healthier by being value based care to all of Firm A’s enrollees. better able to capture the profits from high quality risk-based care. Or perhaps the combined firm’s expertise or size would allow it to implement high Conclusion quality value based care in a new, innovative way. The well-counseled merging healthcare firms that Consider a slightly different hypothetical. What if can show that their value based care improves Firm A is the largest health insurer in the relevant population health will have an efficiencies argument market with a significant amount of value based to make to the antitrust agencies. Next, they will contracting experience. Firm C is a smaller health have to provide evidence that the transfer of value insurer with all fully capitated provider contracts, based care expertise from one firm to another is and high quality care. Evidence shows that Firm C’s merger-specific. If they can do this, it is possible that products have improved population health, and that future merging parties may be able to show that the Firm C’s enrollees have the lowest medical-cost procompetitive benefits of value based care are large trend among the largest insurers. Firms A and C enough to counteract the loss of a competitor. decide to merge, and argue that the merger will improve the total health of the population, reducing costs for all of its consumers by taking Firm C’s successful value based care and distributing it to all 56 of Firm A’s enrollees. What does Anthem tell us from expanding Cigna’s value-based care programs over 56 In the related litigation of Anthem, Inc. v. Cigna Corp., a larger [Anthem] network[.]” Cigna Corp.’s Br. in Opp’n C.A. No. 2017-0114-JTL (Del. Ch. 2017), Cigna said it to Anthem, Inc.’s Mot. for a Prelim. Inj. at 22-23, had advocated for this approach: “[T]he kind of pro- Anthem, Inc. v. Cigna Corp., C.A. No. 2017-0114-JTL competitive efficiencies that might have assuaged the (Del. Ch. filed May 8, 2017) (Dkt No. 360). DOJ’s concerns about the merger” included “efficiencies
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The Importance of Innovation in Healthcare: Lower Reimbursement Rates To Providers Do Not Mean Lower Healthcare Costs
Joe Whatley, Edith Kallas, and Henry Quillen WhatleyKallas, LLP
as an increase in “consumer welfare” that The authors of this article submitted an amicus outweighed the distortions to the health insurance brief for the American Medical Association in market that the merger would have caused. But support of the Appellees in the appeal of the paying providers less comes with significant costs: it Anthem merger case.1 Much of this article will damage patient care, stifle innovation, and cause comes from that Amicus Brief. The cites will be patients to use more healthcare services. Anthem’s to the record in that case. The authors are also claim that the merger would have enabled it to offer lead counsel for the Providers in the Blue Cross a new product—Cigna’s products at Anthem’s & Blue Shield Antitrust Litigation.2 prices—was contradicted by the evidence at trial and the experience of the market. As the D.C. Circuit has Introduction now held, the district court was right to reject Anthem’s “efficiencies” as neither verifiable nor merger-specific and to enjoin the merger.3 An important lesson from the recent Anthem–Cigna merger trial is that innovation in healthcare is extremely important and that using market power to How Health Insurers Can Reduce pay healthcare providers lower reimbursement rates Costs While Paying Higher Rates To stifles innovation. As a result, those lower Providers reimbursement rates diminish consumer welfare.
Anthem and the other Blue Crosses and Blue Shields Imagine two health insurers. Both have contracts have followed a strategy of paying lower with large national employers to administer those reimbursement prices to healthcare providers than employers’ health plans and provide access to the other health insurance companies. To Anthem, the insurers’ networks of healthcare providers. One most important financial consequence of a merger insurer, Insurer A, tries to keep costs low by using with Cigna was the ability to reduce payments to its market power to drive down the prices it pays for healthcare providers by billions of dollars largely by providers’ services. Insurer C tries to keep costs low applying its low reimbursement rates to Cigna’s through programs designed to keep its plan members members. Anthem described these savings, to the healthy. Even though Insurer C typically pays extent they are passed onto employers and patients, providers at a higher rate to compensate for the investment of time and money these programs 1 United States of America v. Anthem, Inc., ___ F.3d ___, No. 17-5024 (D.C. Cir. Apr. 28, 2017), affirming 2017 WL 685563 (D.D.C. Feb. 21, 2017). 3 Anthem filed a petition for certiorari, but since the 2 MDL No. 2406, Case No. 2:13-cv-20000-RDP (N.D. merger efforts have now been terminated, the petition is Ala.). now moot.
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require, it remains competitive because its members Anthem’s reimbursement cuts could cause quality to stay healthier and require less healthcare. degrade and patients to be deprived of choice.6
Now imagine two employers, X and Y, who are both But even if Anthem could lower Cigna’s fees after a self-insured. Employer X, attracted by Insurer A’s merger, Anthem never explained how or why low prices, contracts with Insurer A to administer its healthcare providers, having lost significant revenue, health plan. Thus, Employer X pays the costs of its would continue to invest in the programs they and employees’ healthcare, and it also pays Insurer A for Cigna use to keep patients healthy. Anthem’s the costs of processing claims and other assertion that “a change in a provider’s contracted administrative tasks. The employees of Employer X rates does not result in changes to the customer- do not have access to extensive wellness programs. facing programs the insurer offers pursuant to Employer X’s employees receive favorable pricing customer contracts, and vice versa,”7 was for healthcare services, but they are less healthy and unsupported and was extensively contradicted at use more of those services. Employer Y, attracted by trial. It also ran counter to the experience of Insurer C’s extensive wellness programs, contracts healthcare providers, who are on the front lines of with Insurer C, even though it pays more for the the development of new strategies for delivering individual healthcare services its employees use. healthcare, and to a basic purpose of the antitrust Employer Y values the programs Insurer C offers, laws, which is to set prices through competition. The which improve the health of its workforce. Although Court of Appeals rejected Anthem’s argument, Employer Y pays more for any given healthcare referring to “the abrasion problem” that results when service, it pays less than Employer X in the long run the lower Anthem rates will result in providers because its employers need fewer services. “offering customers less in the way of Cigna high- touch service.”8 Therefore, the district court Who is better off, Employer X and its employees, or correctly refused to save an otherwise Employer Y and its employees? Employer X’s anticompetitive merger on the basis of Anthem’s employees are sicker, visit the doctor more often, proposed pay cuts. and spend more on healthcare. Employer Y’s employees are healthier, visit the doctor less often, New Models of Collaborative Care and spend less on healthcare. The illogical assumption at the heart of Anthem’s position was Like Cigna’s Improve Consumer that Employer X is better off solely because it gets Welfare by Focusing on the Health Of better prices for the services its employees use. The Patient Population Looking only at the fees that Anthem and Cigna paid for various services, Anthem claimed that the Spending on healthcare in the United States is large difference between its generally lower fees and and growing, and it has been for decades. In 2015, Cigna’s generally higher fees represents “consumer healthcare spending totaled almost $10,000 per welfare” that the district court improperly ignored.4 person, representing 17.8% of the nation’s gross This argument ignores extensive record evidence that Anthem and Cigna buy different services from providers.5 Thus, the court properly found that Anthem’s promised transformation of Cigna plans 6 was not akin to bulk purchasing discounts or similar GSA125–26 (citing testimony of Cigna’s Chief efficiency enhancements. Indeed, it found that, Executive Officer that substituting Anthem for Cigna would “dramatically unwind” Cigna’s collaborative rather than causing an increase in output or quality, relationships with providers and “rapidly destroy the Cigna value proposition”).
7 Anthem Br. at 33. 4 Anthem Br. at 10–19. 8 Slip Opinion at 26-27. 5 GSA111 (Government’s Supplemental Appendix).
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domestic product.9 Needless to say, it is vital that nation to value-based, coordinated care.12 That spending on healthcare be as efficient and effective movement is reverberating in the commercial as possible. An important trend in controlling insurance sector.13 healthcare spending is the shift from traditional “fee- for-service” medicine,10 in which insurers reimburse Although value-based purchasing may reduce healthcare providers for their services without overall medical costs, providing healthcare services respect to the quality of those services, to “value- under a value-based contract requires greater based” purchasing, which adjusts payments to investments of time and money than a fee-for- account for the quality of services and providers’ service arrangement does. At trial, Cigna’s Chief ability to keep their patients healthy.11 The idea Executive Officer gave the example of using a nurse behind this shift is that reducing the amount of or health coach to sit down with a patient for thirty healthcare services that patients require (“reducing minutes or more to help the patient understand his utilization,” in industry parlance) will reduce overall pharmaceuticals and dietary needs—longer than a medical costs. With the adoption of the Medicare physician can typically give for these topics.14 Access and CHIP Reauthorization Act of 2015, Evidence at trial also showed the importance of Congress created strong incentives to move the collaboration between insurers and providers in developing value-based programs, as opposed to a “one size fits all” or “take it or leave it” approach like Anthem’s.15 For instance, the Chief Executive 9 Centers for Medicare and Medicaid Services, National Officer of Granite Health, a partnership of New Health Expenditures 2015 Highlights, Hampshire hospitals, described how Granite Health https://www.cms.gov/Research-Statistics-Data-and- and Cigna worked together to identify the best Systems/ Statistics-Trends-and- metrics for evaluating the quality of patient care, and Reports/NationalHealthExpendData/Downloads/ how Cigna pays a “care coordination fee” that has highlights.pdf. allowed Granite Health to save money while 16 10 One of the most recent issues of Health Affairs maintaining its quality. addresses innovation in healthcare. “Organizations seeking to create innovative environments need to address In short, finding innovative ways to improve a number of factors. These include making available patients’ health and reduce costs requires sufficient resources – especially money and space . . ..” collaboration and investments that Cigna has been D. Bates, A. Sheikh, D. Asch, “Innovative Environments more willing to undertake than Anthem. Accepting in Health Care: Where and How New Approaches to Care Anthem’s claims would have turned the efficiencies Are Succeeding,” Health Affairs, Mar. 2017, 400, 401. defense on its head, rewarding Anthem for playing When health insurance companies pay healthcare providers low rates, the providers are deprived of the resources to be able to innovate. One example of the cost 12 See 42 U.S.C. § 1395w-4(q). of innovation is that tracking patients to make sure they are receiving the best healthcare possible requires 13 For a general discussion of the expansion of value- expensive IT systems. The authors in this article further based reimbursement for healthcare providers, see Bruce recognized that: “part of the slow pace of innovation Merlin Fried and Jeremy David Sherer, Value-Based stems from the health care payment system.” The Reimbursement: The Rock Thrown Into The Health Care evidence from Cigna demonstrated that it is extremely Pond, Health Affairs Blog (July 8, 2016), difficult to reform the payment system while reducing http://healthaffairs.org/blog/2016/07/08/value-based- reimbursement rates. reimbursement-the-rock-thrown-into-the-health-care- pond/. 11 GSA119–21. See also Centers for Medicare and Medicaid Services, Better Care. Smarter Spending. 14 Tr. 418:15–24 (Trial Transcript). Healthier People: Paying Providers for Value, Not Volume, 15 GSA111, 120 n.50, 121 n.51. https://www.cms.gov/Newsroom/MediaReleaseDatabase/ Fact-sheets/2015-Fact-sheets-items/2015-01-26-3.html. 16 JA549:2–553:13 (Joint Appendix).
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catch-up through an acquisition instead of programs without an increase in compensation, or developing its own products as a result of how it could force Cigna’s providers to continue to competition. offer those programs for less compensation. Dr. Israel admitted that he had not analyzed the issue in 22 Anthem’s “Best-of-Best” Strategy for any detail. Even in its own appeal brief, Anthem’s citation for the proposition that “[t]he merger will Reducing Provider Reimbursement allow the combined firm to offer those lower Would Damage Patient Care and discount rates to Cigna customers” was testimony by Consumer Welfare the government’s expert, Dr. David Dranove, that the merger might make it more difficult for the combined company to implement Cigna’s innovative The foundation of Anthem’s appeal was the idea that models of care.23 Thus, the record in this case a merged company would supply Cigna-quality 17 demonstrated the exact opposite of Anthem’s products at Anthem’s lower prices. The “billions of argument. dollars in lower healthcare costs” that Anthem 18 touted come from a so-called “best-of-best” Further, the evidence showed that imposing “best- methodology developed by Anthem’s expert of-best” rates on providers would destroy consumer Dr. Mark Israel. He “calculated what the savings welfare by undermining the collaborative would be if the lowest provider rates already relationships with providers for which Cigna is negotiated by Anthem were made available to known.24 Cigna’s Chief Executive Officer discussed existing Cigna customers, and if the prevailing concerns that trying to combine Anthem’s and Cigna rates were made available to existing Anthem Cigna’s offerings would cause Cigna’s clients to customers in the few instances where the Cigna rates 19 20 “have an erosion [of] value so their costs will go up were lower.” because discounts would erode or collaboratives become dismantled.”25 And the government’s expert, Even if Anthem were to give its customers all the 21 Dr. Dranove, testified that “trying to push savings from “best-of-best” pricing, the resulting [Anthem’s] rates on to Cigna’s existing providers . . social harm from lower quantity and quality in the . could interfere with collaborative relationships that market for healthcare services would undermine the have currently been established and ultimately benefit of these savings. Anthem never explained at reduce the quality of the product.”26 trial how the merged company could force Anthem’s providers to participate in Cigna’s resource-intensive The evidence at trial echoed what state medical associations learned when they canvassed their 17 Anthem Br. at 5, 17, 34. members about the likely effects of an Anthem– Cigna merger. Of the nearly one thousand physicians 18 Id. at 8. who responded to a survey by the California Medical Association, 89% said that it was very likely or 19 GSA95–96. somewhat likely that “[r]eimbursement rates for physicians will decrease such that there would be a 20 While Anthem’s rates are usually lower, there was testimony that some providers agree to contract with Cigna at lower rates “to help it sustain its collaborative 22 GSA105. model and compete against the more dominant Anthem and United.” GSA115. This incentive to offer lower rates 23 Anthem Br. 17 (citing JA324:16–325:9). to Cigna will be lost if Anthem and Cigna merge. 24 GSA119. 21 It is doubtful that the merged company would pass on all its savings, for the reasons described in the district 25 Tr. 493:22–494:4. court’s opinion and the government’s brief. GSA126–27; Appellees’ Br. 58. 26 Tr. 2313:5–9.
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reduction in the quality and quantity of the services outside of medicine that are more rewarding, that physicians are able to offer patients.”27 Eighty- financially or otherwise. A recent survey by the two percent reported that they would be very likely Physicians Foundation showed that 48% of or somewhat likely to feel pressured not to engage in physicians plan to cut back on hours, retire, take a aggressive patient advocacy as a result of the non-clinical job, switch to “concierge” medicine, or merger.28 Surveys in other states found similar take other steps limiting patient access to their results.29 practices.31 According to a study released by the Association of American Medical Colleges, the U.S. In addition to the immediate effect of Anthem’s will face a shortage of between 61,700 and 94,700 single-minded drive to pay healthcare providers less, physicians by 2025.32 An Anthem–Cigna merger there are concerns about the long-term effect on the threatened to swell these figures; the California medical profession and consumers. The district court Medical Association found that 15% of California found no evidence that the rates charged by physicians believed that were they not able to providers within Anthem’s service area are “inflated contract with a merged Anthem and Cigna, they due to the providers’ market power.”30 Therefore, would have had to close their practice.33 Given that reducing reimbursement to providers will likely there are already too few physicians, it would not reduce patient care and access by motivating enhance consumer welfare to drive down physicians to retire early or seek opportunities reimbursements so far that physicians are driven from the practice of medicine.
27 California Medical Association, CMA Survey Shows These findings are consistent with the conclusions of Strong Physician Opposition to Health Insurer Market academics and consumer advocates who examined Consolidation (Mar. 28, 2016) at 14 (California Medical the merger while it was pending. Professor Leemore Association Survey), https://www.cmanet.org/files/assets/ news/2016/03/merger-survey-results-032816.pdf. Dafny, a Harvard economist who focuses on the healthcare industry, testified to the United States 28 Id. Senate:
29 Medical Association of Georgia, Summary of the [E]ven if price reductions [for healthcare Medical Association of Georgia’s Survey Concerning services] are in fact realized and passed Proposed Mega-Health Insurance Mergers, through [to consumers], if they are http://www.mag.org/sites/default/files/downloads/SUMM achieved as a result of monopsonization ARYOFMAGSURVEYONPROPOSEDMEGA- of healthcare service markets then HEALTHINSURANCEMERGERS.pdf; Memorandum to consumers may experience an offsetting Colorado Medical Society (Feb. 16, 2016), harm. Monopsony is the mirror image of https://drive.google.com/file/d/ 0B6oiUaUvJzHbdDNCd05reklrSzQ/view; Missouri State monopoly; lower input prices are Medical Association, Summary of the Missouri State achieved by reducing the quantity or Medical Association’s Survey Concerning Proposed Mega-Health Insurance Mergers, 31 The Physicians Foundation, 2016 Survey of America’s http://www.msma.org/uploads/ Physicians: Practice Patterns and Perspectives at 7, 6/2/5/3/62530417/msma_physician_survey_on_insurance http://www.physiciansfoundation.org/uploads/ _mergers.pdf; Medical Society of Virginia, Medical default/Biennial_Physician_Survey_2016.pdf. Society of Virginia Merger Survey Summary, https://goo.gl/6O4goC; Statement of the American 32 American Association of Medical Colleges, 2016 Medical Association to the Indiana Department of Update: The Complexities of Physician Supply and Insurance Re: Anthem Application for the Proposed Demand: Projections from 2014 to 2025 (Apr. 5, 2016), Acquisition of Cigna (Apr. 26, 2016), https://www.aamc.org/download/458082/data/2016_comp https://www.ismanet.org/pdf/news/ lexities_of_supply_and_demand_projections.pdf. AMAStatementtotheIDOI4266.pdf. 33 California Medical Association Survey, supra note 6, at 30 GSA128. 12.
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quality of services below the level that is met its cost-cutting goals, it did so at the expense of socially optimal.34 quality and service; after the merger, PacifiCare violated the California insurance laws more than At the same hearing, the Senior Policy Counsel of 900,000 times.38 Consumers Union testified that “a dominant insurer could force doctors and hospitals to go beyond On this point of monopsony power, it should be trimming costs, to cut costs so far that it begins to recognized that even Judge Kavanaugh’s dissenting degrade the care and service they provide below opinion would not have resulted in a victory for what consumers value and need.”35 Anthem. As he stated: “Notably, even Anthem- Cigna concedes that the merger would be unlawful if In fact, the California Department of Insurance cited the merger would give Anthem-Cigna monopsony this very concern when it recommended that the power in the upstream market.”39 His dissenting United States challenge the merger: “Allowing opinion would have resulted in a remand for the Anthem to increase its already enormous bargaining District Court to decide: “Would Anthem-Cigna power will further limit network size and obtain lower provider rates from hospitals and excessively squeeze reimbursement rates, thereby doctors because of its exercise of unlawful discouraging provider contracting and unacceptably monopsony power in the upstream market where it reducing consumer choice and quality of care.”36 negotiates rates with healthcare providers?” The Department of Insurance also pointed out that it had discovered that Anthem violated laws regarding In the end, Anthem’s proposed “efficiencies” from claims handling 16,000 times, and that the California reducing payments to healthcare providers are a Department of Managed Health Care ranked Anthem chimerical free lunch—a way to get something for third worst among ten companies on “coordination nothing. “There ain’t no such thing as a free lunch, of care.”37 Describing a merger between United even in the insurance business.”40 Healthcare and PacifiCare in 2005, the Department of Insurance noted that while the combined company Agreements Between Purchasers to Depress Provider Prices Are 34 Testimony of Leemore S. Dafny, Ph.D before the Manifestly Anticompetitive Senate Committee on the Judiciary, Subcommittee on Antitrust, Competition Policy, and Consumer Rights (Sept. 22, 2015) at 10, While the district court did not categorically decide https://www.judiciary.senate.gov/imo/media/doc/09-22- whether implementing “best-of-best” pricing would 15%20Dafny%20Testimony%20Updated.pdf. always violate the antitrust laws, it rightly questioned whether an agreement to depress prices 35 Statement of George Slover before the Senate for healthcare services is a cognizable efficiency.41 Committee on the Judiciary, Subcommittee on Antitrust, The court concluded: Competition Policy, and Consumer Rights (Sept. 22, 2015) at 3, [S]ince [Anthem’s] efficiencies defense https://www.judiciary.senate.gov/imo/media/doc/09-22- is based not on any economies of scale, 15%20Slover% 20Testimony.pdf. reduced transaction costs, or production 36 Letter from Dave Jones, California Insurance Commissioner, to Loretta E. Lynch, United States 38 Id. at 13–14. Attorney General, and Renata B. Hesse, Principal Deputy Assistant Attorney General (June 16, 2016) at 13, 39 Slip Opinion at 13. http://www.insurance.ca.gov/ 0400-news/0100-press- releases/2016/upload/LetterUSDOJAnthem-Cigna06-16- 40 Great Lakes Dredge & Dock Co. v. City of Chicago, 16.pdf. 260 F.3d 789, 794 (7th Cir. 2001).
37 Id. at 11. 41 GSA123–26, GSA130.
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efficiencies that will be achieved by agreements between purchasers to depress input either the carriers or the providers due to prices are manifestly anticompetitive, the district the combination of the two enterprises, court was justified in doubting Anthem’s contention but rather on Anthem’s ability to that its otherwise anticompetitive merger was exercise the muscle it has already redeemed by using its newly acquired market power obtained by virtue of its size, with no to depress prices. corresponding increase in value or output, the scenario seems better Other Lessons from the Merger- characterized as an application of market power rather than a cognizable Related Litigation beneficial effect of the merger.42 Because of related litigation, the Anthem merger It is absurd to suggest that an agreement between presents unique insight into considerations for any purchasers to lower their purchase prices solely merger in the health insurance industry. In an effort through an exercise of buyer-side market power to keep the merger alive, Anthem brought an action should be seen in the merger context as a in the Court of Chancery in Delaware.45 Anthem procompetitive efficiency powerful enough to offset obtained a temporary restraining order preventing other anticompetitive effects of the merger. Mergers Cigna from terminating the merger agreement and whose effect may be to lessen competition on May 11, 2017, lost its motion for a preliminary substantially among buyers have been found to injunction to keep the merger agreement in effect. violate Section 7 of the Clayton Act.43 As in those The next day, Anthem announced that it was cases, the plaintiffs here challenged the merger terminating the merger. between buyers of provider services as a Section 7 violation. Cigna’s Brief in Opposition to Anthem’s Motion for Further, cases decided under Section 1 of the a Preliminary Injunction, filed on May 8, 2017 Sherman Act show why an agreement to depress (“Cigna Opp.”), contains a detailed but at times purchase prices cannot be treated as a highly redacted description of the process through procompetitive efficiency. For example, in which Anthem and Cigna agreed to merge and under Mandeville Island Farms v. Am. Crystal Sugar Co., which the Department of Justice was considering the the Supreme Court concluded that an agreement among purchasers to lower their purchase prices is no less serious than that of a price-fixing agreement among buyers to depress acquisition prices are by sellers and is unlawful per se, without regard for tolerated”); Khan v. State Oil Co., 93 F.3d 1358, 1361 any potential benefit to consumers.44 Because (7th Cir. 1996) (Posner, J.), vacated on other grounds, 522 U.S. 3 (1997), cited with approval in Weyerhaeuser Co. v Ross-Simmons Hardware Lumber Company Inc., 42 GSA130. 549 U.S. 312, 322 (2007) (monopsony price fixing “is analytically the same as monopoly or cartel pricing and so 43 See United States v. Rice Growers Ass’n of Cal., No. S- treated by the law”); see also W. Penn Allegheny Health 84-1066, 1986 WL 12562, at *12 (E.D. Cal. Jan. 31, Sys. Inc. v. UPMC, 627 F.3d 85, 105 (3d Cir. 2010) 1986) (acquisition would substantially lessen competition (holding that an alleged agreement between a hospital in the purchase of paddy rice in California); United States system and a health insurer to reduce the plaintiff v. Pennzoil Co., 252 F. Supp. 962, 985 (W.D. Pa. 1965) hospital’s reimbursement rates “was anticompetitive and (merger would substantially lessen competition in the cannot be defended on the sole ground that it enabled [the purchase of Penn grade crude). insurer] to set lower premiums on its insurance plans”); Todd v. Exxon Corp, 275 F.3d 191, 214 (2d Cir. 2001) 44 334 U.S. 219, 235, 242 (1948). Other cases include (Sotomayor, J.) (holding that an agreement to exchange Knevelbaard Dairies v. Kraft Foods Inc, 232 F.3d 979, salary information violated Section 1 where the effect was 988 (9th Cir. 2000) (“[T]he central purpose of the to depress salaries). antitrust laws, state and federal, is to preserve competition[,]” and cases discussing competition causing 45 Anthem v. Cigna, C.A. No. 2017-0114-JTL. low prices for consumers “do not mean that conspiracies
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proposed merger. Anthem is the largest licensee of view other Blues member as viable divestees – the the Blue Cross & Blue Shield Association, and along whole anticompetitive trouble with the deal was with the other thirty-five licensees, it has agreed to concentrating market power in the Blues network operate under the Association rules.46 Those other and so divesting to another Blue achieved licensees include some of the largest health nothing.”48 Also, Blue One would benefit because it insurance companies in the country, including the has other members in Blue Two’s service area. fourth largest, and two additional health insurance When 15 of the 25 largest health insurance companies in the top ten. Fifteen of the largest companies in the country are taken out of the twenty-five health insurance companies in the divestiture consideration, divestiture opportunities country are Blues. Because of the Association rules are limited. on territorial restrictions, these Blue health insurance companies cannot compete as Blues in any way. Through the Anthem-Cigna merger consideration Because of what the Blues and the Association call process, the regulators learned a great deal about the “best efforts” rules, the thirty-five licensees are also Blues system. Any future mergers among Blues will restricted in the amount of non-Blue competition now be considered against this backdrop. they can have, an issue that was central in the Anthem–Cigna merger litigation. Because of the Finally, the House of Representatives has now BlueCard program that the Blues have developed, passed Trumpcare (formally named the “American every Blue gets to pay the same price to providers Health Care Act of 2017”), and if anything like the for their services. For example, although Illinois is House Bill becomes law, it would greatly increase not in one of Anthem’s exclusive service areas, it the numbers of uninsured patients and greatly has members in Illinois whose employers are located decrease the amount of Medicaid payments. Given in those areas. HCSC, which operates as Blue Cross the possible shock of Trumpcare to healthcare & Blue Shield of Illinois, is the only Blue with providers, any merger that would also reduce which a provider may contract if it wants to treat payments to healthcare providers would cause many these patients. When one of these patients sees an of them to go out of business or at least to reduce Illinois provider, the Blues’ rules entitle Anthem to services significantly. The negative consumer pay the provider at HCSC’s contracted rate. When it welfare effect would be enormous. became clear that the Department of Justice was going to sue to block the Anthem-Cigna merger, Conclusion Anthem made last-minute efforts of divestiture to get the merger approved. The problem is that those The record and findings in the Anthem merger case efforts were with other Blues and because of the demonstrate that the strategy of Anthem and the inter-connections and anti-competitive restrictions, other Blues to pay the lowest reimbursement rates to the Department of Justice would not approve a healthcare providers does not increase consumer divestiture from one Blue to another.47 welfare. At this point in the development of our
healthcare industry, innovation is essential to As it relates to this article, if Blue One were to divest providing high quality healthcare while combatting members to Blue Two, thereby increasing Blue increases in costs. Cigna’s success in innovating to Two’s market power in dealing with providers, the achieve high quality healthcare while paying higher result would be reduced payments to those providers reimbursement rates demonstrates that the Blues, and lower consumer welfare in the manner discussed including Anthem, should consider a different above. As Cigna described the issue: “Two of pricing strategy in order to increase consumer Anthem’s proposed divestiture partners were also welfare. Blues members. As Cigna noted, the DOJ would not
46 Cigna Opp. at 4.
47 Cigna Opp. at 24. 48 Id.
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Reduced-Form versus Structural Econometric Methods in Market Definition: Lessons from Aetna-Humana
Paul Wong and Subramaniam Ramanarayanan1 NERA Economic Consulting
3 Introduction product and geographic markets in Anthem-Cigna. This focus on market definition by the federal antitrust agencies and courts has persisted in spite of Market definition has been a central point of the relative de-emphasis on market definition in the contention in many of the healthcare merger cases 2010 Horizontal Merger Guidelines,4 which further that were challenged and litigated by the Federal promoted the analysis of direct competitive effects Trade Commission (FTC) and U.S. Department of compared to earlier versions.5 Justice (DOJ) in the last few years. In hospital merger challenges, the primary dispute has been The Guidelines prescribe the use of the over the definition of the relevant geographic “Hypothetical Monopolist Test” to define the market, including in Advocate-NorthShore (whether relevant product and geographic markets, and all of hospitals in downtown Chicago represent network these recent merger cases exhibited at least some alternatives for commercial insurers in lieu of reference to this test. As explained in the Guidelines, hospitals in the northern suburbs of Chicago) and the Hypothetical Monopolist Test seeks to answer Hershey-Pinnacle (whether commercial insurers the following question: What is the set of products could market a health plan network to Harrisburg- and geographic regions such that a single firm area residents that excluded Harrisburg-area 2 hospitals). In health insurance merger challenges, the dispute over market definition has focused on, 3 United States of America, et al. v. Aetna Inc., et al., No. alternately, the relevant product market in Aetna- 16-1494, 2017 WL 325189 (D.D.C. 2017); United States Humana, and both the relevant of America, et al. v. Anthem Inc., et al., No. 16-1493, 2017 WL 527923 (D.D.C. 2017). We discuss Aetna- Humana below. In Anthem-Cigna, the DOJ and the 1 Paul Wong, Ph.D., is an economist and Senior insurers debated the definition of “national accounts” and Consultant in the Los Angeles office of NERA Economic the geographic scope of those accounts and of other large Consulting. Subramaniam (“Subbu”) Ramanarayanan, employers. Ph.D., is an economist and Associate Director in the New York City office of NERA Economic Consulting. Both 4 U.S. Department of Justice and Federal Trade authors participated in the DOJ’s investigation of the Commission, Horizontal Merger Guidelines, 2010 Aetna-Humana merger, and contributed to analyses (“Guidelines”). presented on behalf of Aetna, Inc. The views expressed in this article represent those of the authors alone and do not 5 Roush, Corey and Lawrence Wu, “Market Definition represent the views of Aetna, Inc. or Humana, Inc. and Implications for Merger Review,” July 11, 2011, 2 FTC v. Advocate Health Care Network, et al., No. 1:15- Law360 Expert Analysis (available at cv-11473, 2016 WL 3387163 (N.D. Ill. Jun. 20, 2016); https://www.law360.com/articles/257021/market- Federal Trade Commission, et al., v. Penn State Hershey definition-and-implications-for-merger- Medical Center, et al., No. 16-2365, 2016 WL 5389289 review?article_related_content=1, accessed April 28, (M.D. Pa. Sept. 27, 2016). 2017).
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owning (or controlling) this set would likely raise modeling might also inform market definition price(s) by a small but significant and non-transitory through the assessment of the competitive effects of amount (a “SSNIP”)?6 The Guidelines further the merger, since by performing the competitive explain that, while the set of products (and/or effects analysis, one might identify the set of geographic regions) that passes the Hypothetical relevant competitors outside of the candidate market Monopolist Test is not predefined and might vary with the ability to exercise sufficient competitive from case to case, the set may necessarily exclude constraint and defeat an attempted SSNIP by the some competitors. Hypothetical Monopolist.8
The Guidelines are, furthermore, careful to describe The econometric analysis supporting definition of the Hypothetical Monopolist Test as a thought the relevant product market in Aetna-Humana experiment, and they do not prescribe a specific brought to the fore a debate over what is considered method or algorithm for implementing the test. appropriate proof for establishing that a candidate Ordinary course documents from the merging parties market passes the Hypothetical Monopolist Test. and deposition testimony from customers are often Specifically, the analysis undertaken by both sides in used as supporting evidence to demonstrate that a implementation of the Hypothetical Monopolist Test candidate market passes the Hypothetical pitted “structural” econometric methods (relied on Monopolist Test. In addition, econometric analysis by the DOJ’s expert) against “reduced-form” and modeling, both of consumer demand and firm econometric methods (relied on by Aetna-Humana’s behavior, are often central to demonstrating that a expert).9 candidate market passes the Hypothetical Monopolist Test. Typically, this takes the form of a Structural modeling outlines a theoretical model of “critical loss analysis,” which attempts to assess the how competition works, uses data to estimate the extent to which “a SSNIP on one or more products parameters of the model, and employs these in a candidate market would raise or lower the estimates in a simulation to predict a different state hypothetical monopolist’s profits.”7 The economic of the world.10 In this particular case, the structural approach involved simulating the actions of the 6 While the agencies typically define a SSNIP to be 5 percent, the Guidelines acknowledge that in certain situations, it might be appropriate to use a threshold larger 8 Guidelines, §4 (“evidence that a reduction in the number or smaller than 5 percent. Guidelines § 4.1.2. For of significant rivals offering a group of products causes example, in Federal Trade Commission v. Whole Foods, prices for those products to rise significantly can itself both the FTC and the experts for the defense agreed that a establish that those products form a relevant market”). SSNIP as low as 1 percent may be appropriate. FTC v. Whole Foods Market, Inc., 502 F. Supp. 2d 1, 28 9 To be clear, the econometric analysis discussed here was (D.D.C.2007) at 28 and note 9. just one of multiple types of data-driven evidence proffered by both sides to support their respective claims 7 Guidelines, §4.1.3. While the original formulation of the concerning the relevant product market. Specifically, the critical loss analysis assumed a single prevailing DOJ’s expert examined data on customer switching premerger price, such an assumption would be too patterns and conducted an analysis of consumer plan restrictive if the candidate market includes differentiated choice, in addition to estimating a “structural” products. The Guidelines, therefore, allow for some implementation of the critical loss test and a merger flexibility on whether the SSNIP threshold must be passed simulation model. Aetna-Humana’s expert also conducted by a single product or by all products in the candidate an analysis of consumer plan choice and switching, in market, and whether all products must be subject to the addition to the “reduced-form” methods discussed in this same or differing price increases. For a discussion on how article. to implement the critical loss analysis under these different scenarios, see Meyer, Christine and Yijia Wang, 10 Nevo, Aviv and Michael D. Whinston, "Taking the “A Comprehensive Look at the Critical Loss Analysis in a Dogma Out of Econometrics: Structural Modeling and Differentiated Products Market,” Journal of Competition Credible Inference," Journal of Economic Perspectives, Law and Economics, vol. 8, no. 4, 2012, 863-879. vol. 24, no. 2, 2010, 69-82.
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Hypothetical Monopolist to test whether a profit- Market Definition in the Aetna- maximizing Hypothetical Monopolist is likely to Humana Merger Litigation impose a SSNIP. Reduced-form methods can encompass analyzing a “natural experiment” that has occurred in the past,11 or examining variation in The key question pertaining to relevant market competitive conditions and outcomes across definition that was under debate in Aetna-Humana markets. Based on the patterns in the data and the was: Do Medicare Advantage plans sold to analysis that is implemented, one can either directly individuals constitute a relevant product market, or should Original Medicare options also be included assess whether a candidate market passes the 12 Hypothetical Monopolist Test (e.g., by analysis of a as part of the market? While each side presented natural experiment), or one can use direct evidence evidence from ordinary course documents and on market outcomes to make inferences about the deposition testimony to support their respective scope of the relevant market. positions, the econometric evidence presented by the experts in the case illustrated the different In this article, we use the setting of the Aetna- econometric approaches summarized earlier. On the Humana merger litigation to examine the issues one hand, the DOJ’s expert implemented the surrounding the use of structural versus reduced- Hypothetical Monopolist Test based on structural form methods, particularly when it comes to econometric methods, arguing that results from these informing relevant market definition. We believe methods showed that a profit-maximizing each approach has its merits and flaws, and if Hypothetical Monopolist of only Medicare implemented appropriately, each can serve as a Advantage products in each county would likely 13 valuable and insightful input to the market definition impose a SSNIP. This formed the basis of the exercise. While structural econometric analysis DOJ’s contention that Original Medicare should be might better lend itself to a literal implementation of excluded from the relevant product market. On the the thought experiment underlying the Hypothetical other hand, Aetna-Humana’s expert proposed Monopolist Test specified in the Guidelines, it also reduced-form evidence on market outcomes to rebut might run the risk of being driven by non- the DOJ’s implementation of the Hypothetical transparent assumptions about consumer demand or Monopolist Test, arguing that across the country, firm behavior that are out of line with market there was no positive relationship between realities. In such instances, reduced-form studies of market outcomes could provide an additional, and 12 possibly complementary, approach toward Opinion by the Honorable John D. Bates, United States understanding the nature of competitive interaction District Judge, United States v. Aetna, supra note 2 (the and what that implies for market definition. This is “Aetna-Humana Opinion”) at 6 (“Together, Medicare Parts A and B are often called `Original Medicare.’”), at 8 particularly true in the healthcare setting, where the (“Rather than enrolling in Original Medicare (with or substantial degree of variation in market conditions, without a MedSupp or Part D plan), a senior may choose outcomes across time and across the country (driven to enroll in a Medicare Advantage plan sold by a private by differences in regulation, technology, insurer.”), and at 22 (“The central market definition demographics, etc.), and the availability of detailed question in this case is about the nature and extent of any data make it an environment that is ripe for such competition between Original Medicare options and study. We expand on these arguments below. Medicare Advantage. Phrased in terms of the hypothetical monopolist test, the question is whether a hypothetical monopolist of all the Medicare Advantage plans in a particular county could profitably impose a small but significant non-transitory increase in price on those plans- or whether substitution by seniors to Original Medicare options would make any attempted price increase 11 Coate, Malcolm B., "The Use of Natural Experiments unprofitable.”). in Merger Analysis," Journal of Antitrust Enforcement, vol. 1, no. 2, 2013, 437-467. 13 Id. at 46.
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concentrated Medicare Advantage markets (e.g., number of customers that would substitute toward markets with only one Medicare Advantage insurer) the Hypothetical Monopolist’s other co-owned and prices for Medicare Advantage products in those product(s) (the “cross-price elasticity”); and (c) the markets. Aetna-Humana argued on this basis that profit that the Hypothetical Monopolist stood to there was empirical evidence based on “real-world” recapture in customers that substituted back toward market outcomes that a Hypothetical Monopolist of co-owned products, as well as the profit that it stood only Medicare Advantage plans in each county to forgo in losing whatever customers ultimately could not actually raise prices, and as a result, the substituted out of the market (the “price-cost candidate product market proposed by the DOJ markup”).18 While each parameter can be derived failed to pass muster.14 from a variety of data sources, in this case, all three were estimated using the same econometric model of The DOJ expert’s economic model implemented the insurance demand.19 Putting the three parameters Hypothetical Monopolist Test in two ways: first, together in a fairly standard critical loss calculus, the following a “critical loss” framework15 to evaluate DOJ argued that the Hypothetical Monopolist could whether a Hypothetical Monopolist “could increase profitably increase the price of at least one of Aetna- profits by imposing a SSNIP on at least one Aetna or Humana’s Medicare Advantage products in Humana plan,”16 and second, implementing a merger essentially all of the markets at issue.20 simulation model to assess whether the Hypothetical Monopolist would likely impose a SSNIP on at least Aetna-Humana countered the DOJ’s proposed one plan if allowed to increase prices on all plans.17 market with direct evidence of market outcomes that This critical loss and merger simulation model was based on an empirical study of Medicare required three parameters: (a) the number of Advantage markets across the country.21 This customers that would substitute away from the approach reasoned that there are a variety of market Hypothetical Monopolist’s product(s) in response to structures already observed across the country— a change in price (the “own-price elasticity”); (b) the there are some markets with only one or two Medicare Advantage insurers, just as there are some 14 Id. at 55. markets with many Medicare Advantage insurers. In observing a wide range of market structures, one 15 Harris, Barry C. and Joseph J. Simons, “Focusing could use established econometric methods to Market Definition: How Much Substitution Is estimate the “real world” relationship between Necessary?” Research in Law and Economics, vol. 12, market structure and prices in Medicare 1989, 212-215; Katz, Michael L. and Carl Shapiro, "Critical Loss: Let's Tell the Whole Story," Antitrust, vol. 17, no. 2, 2003, 49-56. The intuition from the critical loss analysis is the basis for the Generalized Upward Pricing 18 Id. at 45-46. Pressure Index (GUPPI) theory, and most merger simulation (“merger sim”) models also rely on what is 19 Id. at 44, 47-48. The opinion discusses in more detail essentially a critical loss analysis, albeit with potentially the “nested logit” demand model and the key parameters richer models of demand than were used in the original from the model. Both sides offered versions of the nested critical loss literature. See, e.g., Farrell, Joseph and Carl logit demand model, with the main debate over the correct Shapiro, "Antitrust Evaluation of Horizontal Mergers: An magnitude and proper use of the “nesting parameter” that Economic Alternative to Market Definition," The B.E. governed substitution between Original Medicare and Journal of Theoretical Economics, vol. 10, no. 1, art. 9, Medicare Advantage. 2010; Epstein, Roy J. and Daniel L. Rubinfeld, "Merger Simulation: A Simplified Approach with New 20 Demonstrative slides for Dr. Aviv Nevo, United States Applications," Antitrust Law Journal, vol. 69, no. 3, 2002, of America, et al. v. Aetna Inc., et al., No. 16-cv-01494 883-919. (D.D.C. 2017) (available at https://www.justice.gov/atr/page/file/918706/download, 16 Aetna-Humana Opinion at 46. accessed April 28, 2017) at 44.
17 Ibid. 21 Aetna-Humana Opinion at 55.
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Advantage.22 Aetna-Humana’s expert’s Monopolist Test—begin with a set of products (i.e., implementation of this analysis showed, in fact, that the candidate market) and continue adding products there was no statistical relationship between price until the SSNIP threshold (i.e., the critical loss and market structure—concentrated markets did not threshold) is achieved. actually have higher prices. Given this finding, Aetna-Humana argued that a Hypothetical Yet this structural econometric approach may create Monopolist of Medicare Advantage plans, which by a risk of false precision. The model used for definition would inhabit a concentrated market, estimation of the key parameters and the model (if could not actually impose a SSNIP. Rather, the different) used to make the critical loss calculus are insurers argued that it was competition from only as good as their underlying assumptions and Original Medicare that constrained pricing in all data. It may be difficult for courts to properly markets, and hence, Original Medicare should be understand these assumptions or verify issues with included as part of the relevant product market.23 the underlying data, and it may be difficult to diagnose which parameters or logic are properly (or To be clear, in this case, there are well-reasoned improperly) applied and sensibly used. Even for merits and flaws to each side’s approach, and it was experts in the field, it may be difficult to see which not obvious at the outset that either approach was assumptions or features of the data are driving the superior. Furthermore, these merits and flaws are key results. For example, the substitution patterns in very much in line with the broader strengths and the actual market may not easily reduce to just two weaknesses of the structural and reduced-form elasticity parameters, but capturing the proper econometric methods, respectively. nuance may make estimation next to impossible due to the “curse of dimensionality.”24 Likewise, the The DOJ’s structural approach offers a detailed price-cost markups (i.e., profit margins) may be hard analysis at the level of the firm—if the Hypothetical to estimate, or they may not properly reflect market Monopolist were to come into existence and to re- power for the case at hand.25 optimize its prices in light of its newfound position in the market, it would follow—almost precisely— the critical loss calculus in order to maximize its 24 Simple logit models may suffer from “independence of profits. Moreover, the workings of the model, which irrelevant alternatives.” Debreu, Gerard, "Review of are summarized by the three main parameters, Individual Choice Behavior by R. Luce," American provide an accessible and intuitive machinery that a Economic Review, vol. 50, 1960, 186-188; Hausman, court can use to navigate the Hypothetical Jerry and Daniel McFadden, "Specification Tests for the Monopolist Test. To this end, this approach provides Multinomial Logit Model," Econometrica, vol. 52, no. 5, a direct way to simulate the Hypothetical 1984, 1219-40. Econometrically rich demand models (such as a highly specified multinomial logit model) can suffer from a “curse of dimensionality” that can make 22 Ibid. estimation difficult or impossible. Rust, John, "Using Randomization to Break the Curse of Dimensionality," 23 While this was the primary analysis that related to the Econometrica, vol. 65, no. 3, 1997, 487-516. Hypothetical Monopolist Test, this was not the only argument that Aetna-Humana offered as evidence that 25 This issue was raised by Aetna-Humana, which Original Medicare should be included in the relevant contended that the DOJ’s preferred model used profit product market. The insurers also argued that, irrespective margins that were inconsistent with market realities given of the outcome of the Hypothetical Monopolist Test, Medicare Advantage plans are subject to medical-loss- Original Medicare should be included because, by the ratio regulation. Aetna-Humana Opinion at 47-48. “circle principle” in Example 6 of the Guidelines, Similarly, in Advocate-NorthShore, another recently Original Medicare was the nearest and best substitute decided healthcare merger litigation, there was a debate product for the merging parties. The court reasoned, between the experts over whether contribution margins however, that counting Original Medicare as one product were an appropriate measure of market power to use in a was unfairly grouping a wide basket of products. Aetna- merger simulation model in an industry with high fixed- Humana Opinion at 50-51. costs. FTC v. Advocate, supra note 1 at 19-20.
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Aetna-Humana’s reduced-form approach offers a different but attractive simplicity. The rationale How did the court rule in this case after all? The underlying this approach is: Why resort to court reasoned that the DOJ’s arguments carried the complicated modeling and a host of “identifying day on two fronts. First, although the court found assumptions” to make one’s inference, when one can that Aetna-Humana raised legitimate concerns with simply observe market outcomes or other historical the structural econometric approach, such as the events that speak to the likely constraints faced by correct magnitude of the diversion ratios (i.e., the the Hypothetical Monopolist? A reduced-form study substitution to Original Medicare), the proper use of can provide an empirically grounded answer without instrumental variables, and plausibly overstated the need for extensive theory and a complicated profit margins, the DOJ was able to demonstrate that estimation process. Furthermore, simply observing its conclusions were robust to a variety of what history has already taught may be more holistic specification checks that tested the weaknesses of and account for many factors at once, as opposed to the model and its assumptions.28 Second, while the forcing things through a narrow lens imposed by a reduced-form approach had the potential to speak to structural econometric model. A reduced-form the “real-world” effects, the court concurred with the approach may lead to a richer, fuller answer than can DOJ expert’s critique of the analysis offered by be had by structural estimation and modeling, which Aetna-Humana—specifically, that in attempting to must necessarily reduce the analysis and simulation isolate the causal effect of market structure, the down to a few key parameters. reduced-form study in this case suffered from econometric flaws and moreover, that the bulk of the And, yet, with reduced-form econometric analyses, economic literature outside of the case supported the in the benefit lies the rub. Without credible empirical opposite conclusion.29 “identification strategies” that can help establish a causal effect, there is the danger of spuriously ascribing causal interpretations to correlations that A Debate for the Future? merely exist in the data. For example, there is voluminous literature on the struggles in isolating 26 Even in light of the opinion in the case, the debate the causal effect of market structure on prices. The over market definition raised in the Aetna-Humana richness in factors that might be captured in a merger trial is one that rages on. In many merger comparison of markets across the country makes it litigations, structural econometric methods have difficult to disentangle the likely effect of the been used, and economists on both sides have used Hypothetical Monopolist on prices from other tools such as critical loss, GUPPI, and merger confounding factors. If concentrated (monopoly) markets, for example, have very different patient the prescriptions in the Guidelines, which call for populations or different healthcare providers, we determination of relevant antitrust markets based “solely may not be able to simply compare prices in those on demand substitution factors.” Guidelines, §4. markets to other markets for the purposes of However, we do not believe this automatically invalidates 27 informing insurance product market definition. the use of reduced-form approaches in market definition. Rather, we believe these approaches can help to assess the extent of possible competitive effects, which, in turn, can 26 See, e.g., Bresnahan, Timothy F., "Empirical Studies of be helpful in making inferences about market definition. Industries with Market Power," Handbook of Industrial Organization, vol. 2, 1989, 1011-1057; Evans, William 28 Aetna-Humana Opinion at 43-49 (discussion of the N., Luke M. Froeb, and Gregory J. Werden, "Endogeneity econometric critiques) and at 49 (“No matter which set of in the Concentration-Price Relationship: Causes, estimates…the candidate market – Medicare Advantage – Consequences, and Cures," Journal of Industrial passed the hypothetical monopolist test for the majority – Economics, vol. 41, no. 4, 1993, 431-38. and usually for the overwhelming majority – of the complaint counties.”). 27 We also note that, to the extent that estimates from reduced-form approaches might incorporate the effect of 29 Aetna-Humana Opinion at 55-56. supply-side factors, they may not directly comport with
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simulation to follow the intuition laid out in the other industries do not afford. Healthcare regulation Horizontal Merger Guidelines. But this does not and technology are evolving rapidly; healthcare data mean reduced-form econometric methods are dead, and information systems have expanded or that efforts to use reduced-form evidence to exponentially; and health outcomes, firms, and conduct (or inform) the Hypothetical Monopolist patient populations vary enormously across the Test should be cast aside completely. To the country and even throughout the world. Embedded contrary, even federal antitrust agencies have looked in these variations are thousands of natural to reduced-form evidence to support market experiments and studies waiting to be uncovered. definition and to conduct the Hypothetical Monopolist Test, including the DOJ in the same If “the devil is in the details,” then our objective as Aetna-Humana case30 and the FTC in Hershey- antitrust practitioners should be to uncover those Pinnacle.31 Rather, the challenge for practitioners on details by whatever methods we have at our both sides lies in identifying, implementing, and disposal, be they structural or reduced-form. While it explaining reduced-form approaches and seems clear that structural econometric methods are demonstrating to the courts how these efforts aid in here to stay, particularly when it comes to market market definition. One must carefully explain how definition and evaluating the Hypothetical the variation being studied—be it different markets Monopolist Test, they are not the only way to across the country or different events over time—is answer the questions at hand. There is still an ample relevant, how the research design properly isolates future for “real-world” analyses in healthcare the effect of market structure, and how analysis of antitrust, and they will most certainly inform market such variation informs market definition. definition in cases to come. Moving forward, reduced-form approaches present an avenue ripe for study and opportunity for merger litigations in the future, particularly in healthcare. This will be, perhaps, doubly true as the techniques for market definition in healthcare evolve. For one, the reduced-form econometric approaches present an important counterbalance to the structural econometric approaches that are often espoused as part of the Horizontal Merger Guidelines, such as critical loss analysis and merger simulation. If the main challenge with these structural approaches is that they require diagnosing and digesting a complicated economic model, a simple, intuitive reduced-form approach may offer a needed alternative perspective and guard against overreliance on any one assumption or on a narrow set of data. And the basic premise is attractive: use real-world data and historical events to learn how markets function, and use findings from that inquiry to make inferences about the extent of the relevant market. This intuition is approachable for the courts and can lend itself to rich insights. Finally, the healthcare field presents opportunities that many
30 Demonstrative slides for Dr. Nevo, supra note 20 at 119-120.
31 FTC v. Penn State Hershey, supra note 1 at 29-30.
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AntitrustAntitrust Health Health Care Care Chronicle Chronicle JanuarySeptember 2016 2010
Antitrust Health Care Chronicle Editorial Board
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