When physicians whom patients do not choose and cannot avoid can bill out of network for care delivered within in-network hospitals, it exposes patients to financial risk and undercuts the functioning of health care markets. Using data for 2015 from a large commercial insurer, we found that at in-network hospitals, 11.8 percent of anesthesiology care, 12.3 percent of care involving a pathologist,
5.6 percent of claims for radiologists, and 11.3 percent of cases involving an assistant surgeon were billed out of network. The ability to bill out of network allows these specialists to negotiate artificially high in-network rates. Out-of-network billing is more prevalent at hospitals in concentrated hospital and insurance markets and at for-profit hospitals. Our estimates show that if these specialists were not able to bill out of network, it would lower physician payments for privately insured patients by 13.4 percent and reduce health care spending for people with employer-sponsored insurance by 3.4 percent (approximately $40 billion annually).
The goal of antitrust policy is to protect and promote a vigorous competitive process. Effective rivalry spurs firms to introduce new and innovative products, as they seek to capture profitable sales from their competitors and to protect their existing sales from future challengers. In this fundamental way, competition promotes innovation. We apply this basic insight to the antitrust treatment of horizontal mergers and of exclusionary conduct by dominant firms. A merger between rivals internalizes business-stealing effects arising from their parallel innovation efforts and thus tends to depress innovation incentives. Merger-specific synergies, such as the internalization of involuntary spillovers or an increase in the productivity of R&D, may offset the adverse effect of a merger on innovation. We describe the possible effects of a merger on innovation by developing a taxonomy of cases, with reference to recent US and EU examples. A dominant firm may engage in exclusionary conduct to eliminate the threat from disruptive firms. This suppresses innovation by foreclosing disruptive rivals and by reducing the pressure to innovative on the incumbent. We apply this broad principle to possible exclusionary strategies by dominant firms.
Antitrust enforcement against anticompetitive platform most favored nations
(MFN) provisions (also termed pricing parity provisions) can help protect competition in online markets. An online platform imposes a platform MFN when it requires that providers using its platform not offer their products or services at a lower price on other platforms. These contractual provisions may be employed by a variety of online platforms offering, for example, hotel and transportation bookings, consumer goods, digital goods, or handmade craft products. They have been the subject of antitrust enforcement in Europe but have drawn only limited antitrust scrutiny in the United States. Our Feature explains why MFNs employed by online platforms can harm competition by keeping prices high and discouraging the entry of new platform rivals, through both exclusionary and collusive mechanisms, notwithstanding the possibility that some MFNs may facilitate investment by limiting customer freeriding. We discuss ways by which government enforcers in the United States and private plaintiffs could potentially reach anticompetitive platform MFNs under the Sherman Act, and the litigation challenges such cases present.