February 18, 2025

Economic Scene: Examinations of Health Costs Overlook Mergers

But when the Federal Trade Commission finally decided to look at the deal, it encountered an entirely different objective: to gain market power.

Mark Neaman, Evanston’s chief executive, had told his board that the deal would “increase our leverage, limited as it might be,” the investigation found, and “help our negotiating posture” with managed care organizations. The commission caught Ronald Spaeth, the Highland Park C.E.O., talking about the corporation’s three hospitals and explaining how “it would be real tough for any of the Fortune 40 companies in this area whose C.E.O.’s either use this place or that place to walk from Evanston, Highland Park, Glenbrook and 1,700 of their doctors.”

It was a great deal for the hospitals. The fees they charged to insurers soared. One insurer, UniCare, said it had to accept a jump of 7 to 30 percent for its health maintenance organizations and 80 percent for its preferred provider organizations.

Aetna said it swallowed price increases of 45 to 47 percent over a three-year period. “There probably would have been a walkaway point with the two independently,” testified Robert Mendonsa, an Aetna general manager for sales and network contracting. “But with the two together, that was a different conversation.”

And who was left holding the bag? Not the shareholders of UniCare or Aetna. It was the people who bought their policies, who either paid higher premiums directly or whose wages grew more slowly to compensate for the rising cost of their company health plans.

The commission’s unusual investigation of the aftermath of the Evanston-Highland Park deal produced its first successful antitrust case against a hospital merger since 1990, after a string of defeats in court. Highland Park and Evanston were forced to negotiate separately with insurers, rather than as a bundle. Collusion was forbidden.

What was learned from the investigation is more relevant than ever today. It should draw policy makers’ attention to an elephant in the room that appears to have been overlooked in the debate over how to rein in the galloping cost of health care: a lack of competition in what is now America’s biggest business — accounting for almost 18 percent of the nation’s gross domestic product.

Our anguished search for ways to slow runaway health spending has so far mostly focused on how to eliminate waste: Might the fee-for-service system used by health care providers across the nation provide perverse incentives for doctors and hospitals to prescribe costly yet pointless treatments? Are doctors prescribing every possible test to insulate themselves from any conceivable lawsuit?

The Obama administration is betting heavily on waste control to address the problem. It has offered incentives for accountable care organizations, which get a bundled payment to keep a patient in good health rather than charge for individual procedures. It has financed research into comparative effectiveness — hoping to steer patients to the best therapies.

What is missing from the stampede of policy innovation is something to tackle one of the best-known causes of high costs in the book: excessive market concentration.

Two decades ago, there were on average about four rival hospital systems of roughly equal size in each metropolitan area, according to research by Martin S. Gaynor of Carnegie Mellon University and Robert J. Town of the University of Pennsylvania. By 2006, the number of competitors was down to three.

The share of metropolitan areas with highly concentrated hospital markets, by the standards of antitrust enforcers at the Justice Department and the Federal Trade Commission, rose to 77 percent from 63 percent over the period.

And consolidation is continuing. Professor Gaynor counts more than 1,000 hospital system mergers since the mid-1990s, often involving dozens of hospitals. In 2002 doctors owned about three in four physician practices. By 2008 more than half were owned by hospitals.

If there is one thing that economists know, it is that market concentration drives prices up — and quality and innovation down.

Research by Leemore S. Dafny of Northwestern University, for instance, found that hospitals raise prices by about 40 percent after the merger of nearby rivals.

Other studies have found that hospital mergers increase the number of uninsured in the vicinity. Still others even suggest that market concentration may hurt the quality of care.

Article source: http://www.nytimes.com/2013/06/12/business/examinations-of-health-costs-overlook-mergers.html?partner=rss&emc=rss

Economic Scene: Examinations of Health Care Overlook Mergers

But when the Federal Trade Commission finally decided to look at the deal, it encountered an entirely different objective: to gain market power.

Mark Neaman, Evanston’s chief executive, had told his board that the deal would “increase our leverage, limited as it might be,” the investigation found, and “help our negotiating posture” with managed care organizations.

The commission caught Ronald Spaeth, the Highland Park C.E.O., talking about the corporation’s three hospitals and explaining how “it would be real tough for any of the Fortune 40 companies in this area whose C.E.O.’s either use this place or that place to walk from Evanston, Highland Park, Glenbrook and 1,700 of their doctors.”

It was a great deal for the hospitals. The fees they charged to insurers soared. One insurer, UniCare, said it had to accept a jump of 7 to 30 percent for its health maintenance organizations and 80 percent for its preferred provider organizations.

Aetna said it swallowed price increases of 45 to 47 percent over a three-year period. “There probably would have been a walkaway point with the two independently,” testified Robert Mendonsa, an Aetna general manager for sales and network contracting. “But with the two together, that was a different conversation.”

And who was left holding the bag? Not the shareholders of UniCare or Aetna. It was the people who bought their policies, who either paid higher premiums directly or whose wages grew more slowly to compensate for the rising cost of their company health plans.

The commission’s unusual investigation of the aftermath of the Evanston-Highland Park deal produced its first successful antitrust case against a hospital merger since 1990, after a string of defeats in court. Highland Park and Evanston were forced to negotiate separately with insurers, rather than as a bundle. Collusion was forbidden.

What was learned from the investigation is more relevant than ever today. It should draw policy makers’ attention to an elephant in the room that appears to have been overlooked in the debate over how to rein in the galloping cost of health care: a lack of competition in what is now America’s biggest business — accounting for almost 18 percent of the nation’s gross domestic product.

Our anguished search for ways to slow runaway health spending has so far mostly focused on how to eliminate waste: Might the fee-for-service system used by health care providers across the nation provide perverse incentives for doctors and hospitals to prescribe costly yet pointless treatments? Are doctors prescribing every possible test to insulate themselves from any conceivable lawsuit?

The Obama administration is betting heavily on waste control to address the problem. It has offered incentives for accountable care organizations, which get a bundled payment to keep a patient in good health rather than charge for individual procedures. It has financed research into comparative effectiveness — hoping to steer patients to the best therapies.

What is missing from the stampede of policy innovation is something to tackle one of the best-known causes of high costs in the book: excessive market concentration.

Two decades ago, there were on average about four rival hospital systems of roughly equal size in each metropolitan area, according to research by Martin S. Gaynor of Carnegie Mellon University and Robert J. Town of the University of Pennsylvania. By 2006, the number of competitors was down to three.

The share of metropolitan areas with highly concentrated hospital markets, by the standards of antitrust enforcers at the Justice Department and the Federal Trade Commission, rose to 77 percent from 63 percent over the period.

And consolidation is continuing. Professor Gaynor counts more than 1,000 hospital system mergers since the mid-1990s, often involving dozens of hospitals. In 2002 doctors owned about three in four physician practices. By 2008 more than half were owned by hospitals.

If there is one thing that economists know, it is that market concentration drives prices up — and quality and innovation down.

Research by Leemore S. Dafny of Northwestern University, for instance, found that hospitals raise prices by about 40 percent after the merger of nearby rivals.

Other studies have found that hospital mergers increase the number of uninsured in the vicinity. Still others even suggest that market concentration may hurt the quality of care.

Article source: http://www.nytimes.com/2013/06/12/business/examinations-of-health-costs-overlook-mergers.html?partner=rss&emc=rss

DealBook: Scrutiny Intensifies on Collusion in Rate Inquiry

A Barclays trader at the New York Stock Exchange last week.Bebeto Matthews/Associated PressA Barclays trader at the New York Stock Exchange last week.

While much of the scrutiny surrounding interest rate manipulation has centered on Barclays, regulators have said that traders at the big British bank colluded with rivals to influence a key benchmark.

As part of a three-year scheme, a senior Barclays trader in Europe worked with counterparts at Crédit Agricole, HSBC, Deutsche Bank and Société Générale, according to people with knowledge of the matter who could not speak publicly because of the investigation. Regulators are examining whether at least one other bank was involved, one of the people said.

In an effort to bolster their profits, the traders collaborated to push interest rates up or down, according to regulatory documents. By doing so, they aimed to eke out extra gains on their trades or limit losses. In its complaint against Barclays, the Commodity Futures Trading Commission described the bank’s trader as having “orchestrated an effort to align trading strategies among traders at multiple banks” to profit on their portfolios.

In June, Barclays paid $450 million to settle its case with the commission, the Justice Department and the Financial Services Authority of Britain. British and American authorities accused the bank of submitting false rates from 2005 through 2009. Regulators have also conducted investigations of others involved in the scheme.

As the rate-manipulation scandal spreads to other banks, the fallout could have major ramifications for the financial industry. Civil and criminal authorities around the world are investigating, and lawmakers in the United States have started their own inquiries. The civil and criminal actions, as well as private lawsuits, could cost the banks tens of billions of dollars.

Libor Explained

The Barclays case centers on key benchmarks, including the London interbank offered rate, or Libor, and the Euro interbank offered rate, or Euribor. Such rates are used to determine the borrowing costs for consumers and corporations. The senior trader at Barclays who worked with the four European banks specifically tried to manipulate Euribor, according to regulators.

The Barclays case was the first to emerge from the multiyear investigation, which has also touched some of the biggest banks on Wall Street. Authorities in the United States, Britain, Japan and elsewhere are also looking into the potential involvement of JPMorgan Chase, Citigroup and UBS. The Financial Times previously reported the names of the four European banks that worked with the Barclays trader.

The broad investigation has prompted outrage from lawmakers in Washington and London. In recent weeks, British central bankers and regulators testified to Parliament about their role in the rate-manipulation scandal. In the United States, politicians are asking why regulators did not stop the illegal activities, even though regulators knew about potential problems as far back as 2007.

In 2008, the Federal Reserve Bank of New York suggested changes to the process, after learning that Barclays reported artificially low rates, according to documents. The regulator then shared those recommendations with the Bank of England, the British central bank. But the New York Fed did not end the rate manipulation at Barclays.

Top central bank officials are now signaling a willingness to change the system.

On Wednesday, Mark Carney, the governor of the Bank of Canada, said he and other central bank chiefs would discuss ways of improving Libor, or even replacing it, when they are scheduled to meet on Sept. 17.

“In terms of alternatives, there is an attraction to moving toward, obviously, market-based rates if possible,” Mr. Carney said at a news conference. Mr. Carney currently heads the Financial Stability Board, a body consisting of central banks and finance ministries that was set up in 2009 to coordinate global financial regulation.

Mervyn A. King, governor of the Bank of England, sent a letter on Wednesday to central bank chiefs inviting them to discuss Libor reforms at another meeting scheduled for September. The Bank of England did not respond to a request for comment. Jeremy Harrison, a Bank of Canada spokesman, confirmed the existence of Mr. King’s letter and its purpose.

The United States Congress is also delving into the matter, as lawmakers question why the rate-setting process was not better policed.

Representative Randy Neugebauer, the Republican chairman of the House Financial Services subcommittee investigating Libor, is seeking documents from the New York Fed about JPMorgan Chase, Citigroup and Bank of America, the three American banks involved in setting the rate. Last week, Mr. Neugebauer collected transcripts from at least a dozen phone calls in 2007 and 2008 between New York Fed officials and executives at Barclays.

The House committee has also homed in on Barclays. On Monday, Congressional staff will receive a briefing about Libor from the general counsel of Barclays in America and its chief lobbyist, according to a government official.

Peter Eavis contributed reporting.

Article source: http://dealbook.nytimes.com/2012/07/18/rate-inquiry-focus-turns-to-possible-collusion/?partner=rss&emc=rss

Television: British Reporters, Not Ad Men, in ’50s, Not ’60s

When “The Hour” had its premiere here on BBC2 last month (it has its BBC America premiere Wednesday at 10 p.m.), “Mad Men” comparisons abounded despite some crucial differences. For all the shadowy after-hours nightclubs and tight sheath dresses, the show’s backdrop isn’t as shiny as the Manhattan of “Mad Men,” set less than a decade later. It’s cold, wet London two years after the end of rationing, a city still struggling to regain its footing after the bombings of World War II.

Yet “The Hour” may remind American viewers of nothing so much as our own age. Several scenes seem to anticipate the News of the World phone hacking scandal, like when Freddie bribes a policeman to let him examine a body at the morgue, and the phones of reporters are tapped by government agents (even though it was journalists doing the listening-in at News of the World).

The recent revelations about News of the World and the hacking of cellphones owned by, among others, a murder victim hadn’t yet surfaced by the time “The Hour” went into production. But one of its executive producers, Derek Wax, acknowledged that the current scandal had given the show a sense of immediacy.

“It does seem very pertinent now,” Mr. Wax said last month at a Television Critics Association gathering, noting that the show touches on current issues like the collusion between politicians and journalists, and “who you have lunch with one day and how stories are leaked.” He added, “We are very much in 1956, but at times you feel that nothing’s really changed.” (A second season, if approved, would address the Notting Hill race riot of 1958.)

Of course times have changed dramatically for women. Abi Morgan, who wrote and created “The Hour,” said that while researching the project she discovered that if you were one of the few women employed by the BBC in postwar London, you were most likely a telephone-answering, tea-carrying secretary. “I think America was a bit ahead of us in that regard,” Ms. Morgan said. “There were a lot more women in the workplace in America than in Britain.” Throughout most of the series Bel is so outnumbered that when men unapologetically disparage women in front of her, nothing — no resentment, no frustration — ever registers on her pale face.

When asked if this was an acting choice, Ms. Garai, speaking in her agent’s office in central London, said that her Bel wouldn’t have expected to be treated as an equal. “I mean, misogyny would not have been misogyny at that time. It wouldn’t have been exceptional. It would have been life.”

To prepare for the role Ms. Garai studied up on Grace Wyndham Goldie, a British news pioneer. Ms. Goldie, a radio critic who didn’t begin her television career until her late 40s, was the producer most famously associated with the success of BBC programs like “Tonight” and “Panorama,” which broke ground by covering current affairs as they happened, thus ignoring the “14-day rule,” which dictated that the BBC not report on issues that were to be debated in Parliament within two weeks.

“She was absolutely at the forefront of that movement, and she was totally alone,” Ms. Garai said. “She was like any woman who had to operate in that climate. She was intimidating, formidable. Definitely a woman with the emphasis on ‘man.’ ” (In “The Hour” Bel is a woman in her 20s who wears figure-hugging dresses, bright-red lipstick and smokes cigarettes as elegantly as Myrna Loy in a “Thin Man” movie.)

Before it was broadcast, some British news outlets had positioned the series as the country’s glossy answer to “Mad Men.” But when the executive producer Jane Featherstone, president of Kudos Film and Television (“MI5,” “Life on Mars”), first commissioned Ms. Morgan to create a series about a time when the BBC stopped broadcasting government-sanctioned newsreels and focused on investigative news, Ms. Featherstone was thinking of a political thriller involving television reporters and the Suez Canal crisis of 1956.

“In British terms that was the end of our empire, the moment that Britain really gave up its position as a global player,” Ms. Featherstone explained, adding that only 12 hours passed before Ms. Morgan returned with an outline for a series that included espionage, lots of drinking and the mysterious suicide of a beautiful socialite who Freddie insists has been murdered. When Bel falls for her lead anchor, a smooth-voiced beefcake named Hector Madden (Dominic West), viewers will instantly know that Ms. Morgan also took a page from “Broadcast News,” James L. Brooks’s 1987 romantic comedy about love, longing and unchecked journalistic ambition. What? No “Mad Men”?

“What they share is some fashion and some lampshades,” Ms. Featherstone said, trying to hide the “Can we drop the ‘Mad Men’ comparisons?” weariness in her voice. Then she confessed to her own micro-campaign to distinguish the two by “going around slightly smugly correcting everybody: ‘It’s not the same decade! This is 1956, and those are the ’60s!’ ” She added, “In terms of pace and tone you can see they’re miles and miles apart.”

There are those, of course, who will tune in thinking they might get their Jimmy McNulty fix, that is, the boozing, authority-defying police detective that Mr. West played on the HBO series “The Wire,” which ended in 2008 Stateside and was a huge hit in Britain. Speaking by phone, Mr. West wondered about what this segment of the viewing public would think of him as the posh Hector Madden, wearing hand-tailored suits, sporting a dapper side part in his curly hair and enunciating every British-inflected syllable. “ ‘Wire’ fans, they’re hoping for hard-bitten Baltimore, and they get very received-pronunciation English,” said Mr. West, who seems unable to get the word out that he was educated at Eton. “There’s always a sense of deflation in a room when I go in and they hear me speak.”

Here in Britain there is one viewer excited that Mr. West has dropped his disheveled cop routine and inhabited the character of an anchorman who rivals James Bond when it comes to careful grooming. “My wife was just in heaven,” Mr. West said. “I always say: ‘There’s nothing I can do about it. I’m at the mercy of whatever job I’m doing.’ And she said: ‘Finally. You get a decent haircut.’ ”

Article source: http://feeds.nytimes.com/click.phdo?i=757bb4edaa2fa6393ed5ae7bf0da4a67