I hope Gov Patrick's 'abuse of market power' proposal is just for show

It worries me that Massachusetts Governor Deval Patrick is touting a plan that would require a “cost and market impact review” of health care providers that appear to be involved in so-called “anti-competitive behavior.”

From the Boston Globe (Patrick proposes new way to target providers that abuse market power):

If the review finds that the provider has dominant market share, and has “materially higher’’ prices and total medical expenses than competitors, then the administration must refer the case to Attorney General Martha Coakley’s office for formal investigation. Total medical expense measures the total spending on medical care for a group of people; the reviewers would take into account the health status of a provider’s patients.

The attorney general would determine whether the provider gained its advantage by violating the law prohibiting unfair methods of competition.

Patrick claims to understand that price differences in and of themselves are not a bad thing. And I believe him. But laws like this have a funny way of backfiring. The “market power” of some of the big players in Massachusetts is the result of their success in developing and executing powerful business strategies. It’s also a result of the fact that many of their competitors have not performed as well and that the large health plans in the state were happy to go along with big price boosts by the largest players.

But the market is correcting itself now. Blue Cross has finally taken out the whip, and the other plans are following along. We also have new, lower cost providers in the market –such as Steward. We really don’t need state government to be too involved in this process. I’d like to see the big, dominant players fight hard to justify their position in the market, rather than facing an arbitrary government inquiry. And I’d like to see some of the weaker players organize themselves to compete rather than whining for governmental protection.

Patrick is a smart cookie, so I’m cautiously optimistic that if the proposal becomes law it will be more bark than bite. I sure hope so.

July 25, 2012

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