Search

"Any-willing-provider" (AWP) laws compel managed care plans to accept any provider willing to accept the plan's terms and conditions, potentially undermining managed care's ability to constrain spending. However. AWP laws potentially respond to inefficient risk-selection by providers of managed care. With risk selection, observed reductions in expenditures in the managed care sector may be offset by increases in the fee-for-service (FFS) sector, with no net decrease. This paper uses panel data on state expenditures to compare per capita spending levels in states with and without AWP laws. The results indicate that expenditures are higher when AWP laws are enacted.

Woolley (1989) attempted to analyze the competitive impact of horizontal hospital mergers using the 'event study' method. Woolley characterized his results as consistent with traditional 'oligopoly' theories of market behavior. We scrutinize in detail a large number of his events, however, and find that most either generated concentration increases too small to plausibly produce market power, or could not have conferred monopoly returns on firms improperly characterized as rivals. Accordingly, any observed abnormal returns are likely attributable to some other cause; we suggest some alternative interpretations of his results. Our paper highlights the need for care in the selection of events and the identification of rivals when applying the event study method to the analysis of mergers.

The Federal Trade Commission (FTC or Commission) has been very active in enforcing antitrust laws in the health care field for the past two decades. The staff has investigated a wide variety of cases covering a broad range of restrictions on competition. These cases can be divided into three basic types of cases in health care: (1) mergers and acquisitions, (2) horizontal restraints cases or agreements among competitors, and (3) input market monopolization cases, such as hospital privileges cases. The Commission relies on both legal and economic analysis in all of these cases. As Chairman Steiger of the Federal Trade Commission has stated, antitrust policy has been "increasingly reshaped by analysis based on economic theory." This article attempts to explain the economic analysis used in antitrust enforcement as applied to the first two of the three types of health care cases. Section I presents the basic economic framework that is used to assess the competitive implications of health care mergers and acquisitions. Section II describes the analysis applied to other agreements among competitors in the health care field and briefly explains how this analysis differs in other health care cases.

This paper estimates a multiproduct variable cost function using data on a sample of California hospitals. The results provide useful insights into the advantages and disadvantages of flexible functional forms for cost analysis. The translog function appears to provide reasonable estimates of marginal costs when evaluated at or near the approximation point of the function. The estimated function performs less satisfactorily, however, when evaluated outside this range. The paper's results do not provide strong evidence of either ray scale economies or of weak cost complementarities. There is some evidence, however, that the degree of scale economies may be underestimated.