Lina Khan no longer chairs the Federal Trade Commission (FTC), but the agency’s fixation on “bigness” as the fundamental problem in American business hasn’t changed from the Biden years. On October 22nd, President Trump’s FTC chair Andrew Ferguson announced investigations into what he dubbed “serial acquisitions” referring to smaller repeated purchases of hospital systems that individually pass FTC scrutiny, but which together may help a firm attain market power.
To deter mergers with large firms, Chairman Ferguson and Commissioner Mark Meador sent a stern warning to hospitals, dismissing the “failing firm” defense in the transaction between Fairfield Medical Center and Adina Health. The message was clear: even failing hospitals should seek out smaller competitors before approaching dominant systems.
It’s as if Lina Khan never left. Federal authorities are still treating largescale mergers with suspicion, by default, without cause. This needs to stop.
The Consumer Choice Center recently presented its paper at the first-ever symposium on the roots of the U.S. healthcare crisis, jointly organized with the Center for the Study of Governance and Society at King’s College London. It identified two truths pertaining to hospital mergers that should encourage the FTC to drop it’s hostility toward bigness.
First, the supposed adverse effects of concentration may not be due to concentration at all. The FTC holds that serial acquisitions and mergers of failed firms lead to price hikes and a decline in patient quality. But a major systematic study of the question complicates that story. Drawing on more than 1.3 million managed-care discharges from 343 hospitals, ranging from independents to systems with as many as 175 members, the authors examined how system membership shapes a hospital’s leverage with insurers. They found that bargaining power explains more of the price gap between hospitals than local market concentration does.
When it comes to quality, a merger most often improves hospital service. By incorporating existing systems into established practices and protocols, local units gain access to the expertise of many more doctors and nurses than would otherwise be the case, thereby raising the quality of medical practice. Not only that, but because they enjoy the backing of a much stronger conglomerate, they strike better deals for their patients. With more information and power, hospitals are better positioned to serve their communities.
Then there’s the second truth—the FTC does not and cannot know in advance what the optimal hospital size might be. When it has tried to guess in the past, it has made mistakes.
In the 1990s and early 2000s, the FTC brought cases against independent physician associations that had engaged in joint bargaining with insurers. The stated reason was protecting patients from cartels. However, the only way for doctors’ groups to avoid being considered cartels and prosecution was to become clinically integrated under FTC rules. Compliance costs proved very high, since full integration required large initial capital, digital infrastructure that smaller practices lacked, and a bureaucracy that many could not sustain.
As such, many of these independent organizations merged into larger units, contributing to the very concentration that the FTC rejects today.
There is no reason to believe that preventing serial acquisitions or failing firms from merging will not have a similar impact, freezing in place a status quo that would otherwise have evolved away from consolidation.
If it wants to be effective, the FTC’s approach must change. A simple, general principle of consumer welfare is preferable to case-by-case interventions because it does not require extensive data on ideal market concentration or market predictions to reach an antitrust decision.
A ban on price-fixing or the modified per se rule applicable to tie-ins under the Jefferson Parish decision can provide enough protection for hospitals without foreclosing future mergers and acquisitions. The federal government would then offer a predictable framework within which private individuals and organizations can discover what works and what does not.
That ultimately benefits hospital systems, insurers, and patients. Lina Khan is gone from the FTC—her playbook should be too.
Dr. Emil Panzaru is Research Director for the Consumer Choice Center. He has written on topics related to health governance, such as health assessment technologies and international drug reference pricing, championing healthcare systems that prioritize competition and consumer choice. He has also co-authored groundbreaking academic articles on the societal effects of GLP-1 drugs alongside Managing Director Fred Roeder.
