Relevant Markets for Health Care
| Date | 01 February 2010 |
CHAPTER
HI
RELEVANT
MARKETS
FOR
HEALTH
CARE
In
defining
relevant
markets
for
health
care
sector
industries
(or
in
any
industry),
it
is
always
important
to
understand
the
purpose
of
the
exercise.
Market
definition,
although
determinative
in
many
cases,
is
not
an
end
in
itself
but
a
first
step
in
attempting
to
assess
the
effect
on
competition
of
particular
conduct
by
particular
parties.’
In
cases
under
Sections
1
and
2
of
the
Sherman
Act
(and
possibly
Section
7
of
the
Clayton
Act),
however,
market
definition
may
not
be
necessary
if
the
plaintiff
can
show
the
requisite
anticompetitive
effects
directly,
through,
for
example,
sustained
higher-than-competitive
prices.”
The
purpose
of
defining
the
relevant
market
is
to
identify
those
sellers
or
buyers
that
constrain
the
ability
of
the
firm
(or
firms)
in
question
to
exercise
market
power.
Defining
the
relevant
market
and
identifying
competitors
then
permits
calculation
of
market
shares
and
market
concentration,
which
can
shed
substantial
light
on
the
ability
of
the
firm
in
question
to
exercise
market
power.
Several
factors
complicate
analysis
of
relevant
markets
in
some
health
care
industries.
These
include
the
fact
that,
most
frequently,
the
parties
recommending
particular
health
care
services
(physicians),
the
parties
paying
for
those
services
(health
insurers},
and
the
parties
actually
receiving
the
services
(patients)
are
different
and
may
have
different
incentives.
Moreover,
the
relevant
data
or
other
information
may
not
be
available,
or
available
only
through
discovery
and
thus
available
only
if
the
matter
is
litigated.
The
plaintiff
always
bears
the
burden
of
defining
the
relevant
product
and
geographic
markets.’
That
determination
requires
both
determining
who
the
customer
is
(in
seller-side
cases)
and
identifying
the
potential
anticompetitive
effects
from
the
challenged
conduct.
There
1.
E.g.,
Law
vy.
NCAA,
1010,
1020
(10th
Cir,
1998)
(explaining
that
market
definition
“is
not
an
end‘ unto
itself
but
rather
exists
to
illuminate
a
practice’s
effect
on
competition.”).
2.
£.g.,
Broadcom
Corp.
v.
Qualcomm,
Inc.,
297,
307
(3d
Cir.
2007).
3.
£.g.,
HDC
Med.
v.
Minntech
Corp.,
543,
547
(8th
Cir.
2007)
(“The
relevant
market
is
a
question
of
fact,
which
the
plaintiff
bears
the
burden
of
proving.”);
Gordon
v.
Lewistown
Hosp.,
184,
202
(3d
Cir.
2005).
129
130
Antitrust
Health
Care
Handbook
may
be
several
relevant
markets
in
the
same
case.
And
every
relevant
product
market
has
its
own
relevant
geographic
market;
definition
of
the
relevant
geographic
market
thus
depends
on
the
definition
of
the
relevant
product
market.
For
example,
the
relevant
geographic
markets
for
primary
care
physician
services
and
the
services
of
open-heart
surgeons
are
likely
to
be
quite
different.
The
relevant
product
market
must
be
defined
first
or
at
least
simultaneously
with
the
relevant
geographic
market.
Finally,
the
relevant
market
may
depend
on
the
type
of
violation
alleged,
the
alleged
effect
on
competition,
and
the
identity
of
the
plaintiff.
A.
Relevant
Markets
for
Hospitals
1.
Relevant
Product
Markets
for
Hospital
Services
As
noted
before,
definition
of
the
relevant
market
(in
seller-side
cases)
requires
identifying
the
reasonably
interchangeable
suppliers
available
to
customers
and
the
extent
to
which
customers
would
switch
to
other
products
or
sellers
as
a
result
of
the
seller
(or
sellers)
in
question
raising
price.’
The
first
issue
is
to
identify
the
customers.
In
some
situations,
health
care antitrust
decisions
provide
little
clarity
on
this
question.
Some
cases suggest,
if
they
do
not
hold,
that
patients
are
the
customers
since
they
receive
the
services
in
question.
Recently,
however,
the
FTC
held
in
Evanston
Northwestern
Healthcare.”
a
hospital-merger
decision,
that
health plans
are the
customer
because
they
negotiate,
contract
for,
and pay
for
the
services.
Under
one
framework
of
analysis,
both
are
customers:
Hospitals
compete
to
participate
in
health
plans,
primarily
on
the
basis
of
price,
and
then
hospitals
participating
in
health
plan
networks
compete
to
provide
services
to
those
health
plans’
members,
primarily
on
the
basis
of
perceived
quality,
amenities,
and
composition
of
the
medical
staff.°
This distinction
can
be
important
in
defining
the
relevant
geographic
market
but
is
probably
not
80
important
in
defining
the
relevant
product
market
because
patients
and
health
plans
are
typically
purchasing
and
receiving
the
same
services.
Moreover,
even
when
viewing
health
plans
as
the
customer,
the
needs
and
preferences
of
their
members
play
an
important
role
in
health
plans’
4.
See
supra
Ch.
IB.
5,
2007
FTC
LEXIS
210
(FTC
2007).
6
See
generally
Gregory
Vistnes,
Hospitals,
Mergers,
and
Two-Stage
Competition,
67
ANTITRUST
L.J.
671
(20090).
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