FTC's Renewed Focus On Hospital Merger Enforcement Reflected In Appointment Of Its First Deputy Director For Health Care And Antitrust

This note briefly analyzes the scholarly work of Leemore Dafny, who recently has been appointed as the FTC's first Deputy Director for Health Care and Antitrust, beginning August 1.1 A Harvard- and M.I.T.-educated economist, Dafny was previously a research professor specializing in hospital and health services at Northwestern University's Kellogg School of Management and a Faculty Research Associate at the National Bureau of Economic Research. Dafny has published more than a dozen articles about hospitals and health care economics. As detailed more fully below, her research, using empirical data and statistical methods, supports the structural proposition that greater market concentration leads to higher prices for consumers.

Throughout her career, Dafny's research has focused on hospitals and health insurance plans. While the FTC does not have authority over the health insurance industry, it can investigate and block mergers between hospitals or between other health care providers. Dafny's scholarly work relies on empirical methods and statistical tools and tends to show such mergers are bad for consumers because concentrated markets lead to increased costs.

In one of her most recent articles, Dafny focused on the value of consumer choice regarding health care providers and insurers.2 The study found people value choice in health care so much that they would be willing to pay more than 20 percent higher premiums if they got the choice of plans and services they wanted. Another article tried to quantify the cost of a lack of choice for consumers and found fewer choices in health insurance providers, on average, led to a seven percent increase in premium costs.3

In another article, published in the New England Journal of Medicine,4 she and her co-author argued price transparency in hospitals can be bad for consumers because it encourages hospitals and insurers to raise prices. Indeed, in a paper prepared for the Alberta Health Service in Canada, she advocated creating a sealed bid system for the state health service, where doctors would bid for the right to perform surgeries and charge a fixed cost, including all follow-up services and complications.5 In a limited market such as health care, Dafny has argued that when everyone has the same information, hospitals have less of an incentive to offer even one insurance company a discount.6 If a hospital charged one price to company A and a lower price to company B, in a transparent system...