I’ve fielded several calls over the last few days from clients and colleagues asking about the potential implications of the Obama Administration’s vow to more rigorously enforce antitrust regulations.
During the eight years of the Bush Administration, not one case was brought against a large company charged with attacking a smaller rival. If anything, Bush et al bent over backwards to help big business, doing little to stop mergers and acquisitions that significantly consolidated market share. The change in policy by the Obama Administration came about Monday, when antitrust boss Christine Varney explicitly rejected Bush’s September 2008 rule-making that directed the government to avoid interfering in “the rough and tumble of beneficial competition.” In order to initiate action, the Bush rule required that the government determine that a merger or action’s negative impact on competition was “substantially disproportionate to any associated pro-competitive” benefit.
Speaking at an event sponsored by the Center for American Progress, Varney said the Obama administration’s approach to antitrust will be based on the understanding that the marketplace alone should not dictate what is fair competition. That implies the Feds will be taking a more active role.
Antitrust regulation is based on the Sherman Antitrust Act, wherein “a monopoly power is defined as the ability of a business to control a price within its relevant product market or its geographic market or to exclude a competitor from doing business [emphasis added] within its relevant product market or geographic market. It is only necessary to prove the business had the “power” to raise prices or exclude competitors. The plaintiff does not need to prove that prices were actually raised or that competitors were actually excluded from the market.” (FreeAdvice.com)
Implications for comp
The work comp network business is dominated by Coventry Healthcare. They have the largest network used by almost all of the larger payers and most of the mid- and smaller ones. The network was based on the First Health PPO, augmented by the acquisition of Concentra’s managed care business, and enhanced when Coventry removed Aetna Work Comp Access from the market by signing an exclusive deal.
Coventry then implemented their “all or nothing” strategy, wherein customers who wanted to use other rival networks in certain jurisdictions were told they could not do so; if they wanted Coventry anywhere, they had to use Coventry everywhere. Other customers were given more flexibility, but at a much higher price – using a ‘foreign’ network meant the customer had to pay more, and in some cases much more, to Coventry.
I’m no attorney and certainly not more than superficially knowledgeable about antitrust issues, regulation, and history. With that disclaimer, here’s a mostly uneducated opinion. It seems to me that Coventry’s ability to consolidate the comp network business and, via pricing and contracting practices, shut out competition gives them a huge advantage in the marketplace. An advantage that has driven very nice financial results. Whether those actions qualify as anti-competitive under the law is something I’m not qualified to judge. But from a layman’s perspective, the comp network business fits the definition of a monopoly.
Will the Administration look into the comp network business? I very much doubt it. Not only is this a relatively tiny market, the market consolidation, and approval thereof (to the extent Bush’s people even looked at them) occurred well before President Obama took office. Obama has demonstrated a reluctance to revisit decisions made by his predecessor; I just don’t see Varney and her attorneys re-examining the consolidation of the comp network business.
Disclaimer – After several years of attempts to engage with Coventry to hear their perspective, attempts that were ignored (except for one conversation with Jim McGarry two years ago) I don’t even try any more. If anyone from Coventry wants to discuss this, feel free to contact me.
May
14
I wrote a year ago about the Coventry situation but at the time did not know about these strong armed tactics. it was my impression that in the major states at least the payers could call Coventry’s bluff because there were (and are) alternative PPO solutions. Are there any major states in which Coventry is the only viable statewide PPO?
In Texas, this is a huge problem. If we are independently owned and not corporate owned, we cannot get into their network. Even if we were in the First Health network, it still excludes us from the major business. I have complained to the Texas Physical Therapy Association and recieved not response. Coventry was there when the state work comp laws were established so they have much of the State business.