7 HOLJs. J. HEALTII L. & POL" 265-304Copyright © 2007 Kristin Madison.Houston Journal 01 Health Law & PolicyISSN 1534-7907

HOSPITAL MERGERS IN AN ERA OF QUALITY

IMPROVEMENT

Kristin Madison, J.D., Ph.D.*

ABSTRACT

265

In 2005, nil ndmil/l~tmti,)e lmu jurlge (AL]) found that Eunl/stoll Nortlliut'stcmHenlthCl7re Corporalioll (FN I-I) hnd uiolnted Section 7 of the C!nytoll Act by e1zgag­ing ill a hospital /II'Tger that substantially lessened competitioll. III doing so, theAL] rejected an nrsulilellt that hospital qunlity improvemcnts slrould prt'clude tfzisfinding. Giuen illuensillg attempts to rt'mt'dy henlth care quality dt'{iciellcies nnrlinuensing nttentioll to l!unlity /lleasurement, sillzilar arguments lI1ny arise /lIol"1'.(l"e­quently in the future. TIlls art ide uses the ENH case ns a fens tlrJ"Oligfl i{'lrich toexamine the potent ill! impact of the quality illzprouement /}1O,'elilelll on tllltitrustann!Ijsis as well (I' its /JJ"Onder impact on thc deliuen; o( hen!th care seri'ices. TIleartic!f begins by l'xJI!orin:< IIlechanisms by which IIze

O

rgers might afkct hCI/!tiz cnrequnlity. It then SlrO'I'S !zml' tire quality-related analysis iI/ the fNH initinf decisionand appen!s brief.:. reflects sillzu!taneous!y the promise of and tire c!wllenges fncingthe nascent qualily ill1liJ"Oc'elilellt IIllwellzent. After examining till' quality Illli(le­IIlenfs illzplications tiJi' llnalysis of Irospitnl mergers, it tlll'n consitilTs tlrl' implica­tions l~f altefl/nti"l' tlpprolltllf's to nntitmst annlysis for efforts to ililprO"I' hCt1lih carcqunlit!l.

TABLE OF CO TENTS

1. Introduction " 0 • • • • •• 266II. Hospital Mergers and Health Care Quality O' • • ••• 272

Ill. E H as a Lens for Examining Qualitylmproven,ent ..... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 280A. ENH's Quality Improvement Efforts............. 281B. The Promise of the Quality Movement 284C. The Challenges Facing the Quality Movement. .. 286

1. Limitations on Quality Measures . . . . . . . . .. 2862. The Lack of Incentives for Quality

ImprO\'ement . . . . . . . . . . . . . . . . . . 2903. The Difficulty of Achieving Qua lity

Improvement . . . . . . . . 292

, PI',)fl'SSUr, Uni"l'rsit" {,{ l'l'nns,'I\'<1niCl La\-\" SchL1ul, and Sl'nillr Fe'II'l\\', Ll'lln<1rd Dill'is Insti­

tute' \'1 Hl'illth L(,)J1umic" I thank Dl'nnis Ya,) t<)r hiS lwlplul suggP-ti'lllS r,'garding

266 HOl!s. J. HE/\LIll L. & POL'Y

IV. Merger Analysis in an Era of Quality Improvement 297V. Merger Analysis and the Future of Quality

Improvement , . . . . . . . . . . . . . . . . . . . . . . . . . . .. 299Vr. Conclusion 304

I. I lTRODUCTION

In 2004, the Federal Trade Commission (FTC) issued a com­plaint alleging that Evanston Northwestern Healthcare Corpora­tion's (ENH's) merger with Highland Park Hospital substantiallylessened competition in violation of Section 7 of the Clayton Act l Inthe fall of 2005, an administrative law judge (ALl) found that thepost-merger ENH was able to increase its prices significantlythrough the exercise of market power and that its justifications anddefenses were unpersuasive.c He concluded that ENH had violatedSection 7 and ordered it to divest HighLmd Park,3 an action thatwould unwind an acquisition that had occurred nearly five yearsbefore.~ E H appealed the decision to the rTC/ which will likelyissue its decision in the near future h

The E, H case may prove to be quite in.t1uential in shaping thedirection of en.forcement policy with respect to hospital mergers.Before ENH, federal and state enforcers had lost their last sevenhospital merger cases. 7 After this string of losses, the FTC began asystematic retrospective review of hospital mergers to improve its

1II/ 1"1' ["anston NnrthwesternHealthcc1rc Cl)rporcltiun, CL'mplaint at I, :; (Feb. 10, 200-1)

(Docket No, 9:115) [hereinafter II/ I"C EvanstL'nj, lll'lui<tl>lc;/t http://wwwftc.gov/os/G1SC­

list/0l1023-J/0-1021Oemhcomplaint.pdf.

:' III I"C ["anstlH1, Initial Decision, at PMt I.A (200'i) [ht'r,'in,dtl'r ENH Initial Decision], a,-'ililil­

1I1e at http://wwwftcgtw / os/ adjpro/ d9315/0:=; IO':'l idtt'~t,·ersion.pdf

, Id.

" SCI' Press Release, FTC, FTC Challenges Hospitill 1\1L-rge'r Th,lt l\llegedly Led to Anticom­pditi'l' Price Increases (Feb. 10,2(04), tluailal>le lIt hltp: ' '\\\nvftc.go\·/opa/2004/02/enh.

htm (explaining that ENH-Highland ['ark merger "(,'ul'lni in 2(00)

, Scc [II U' Evanston, Respondent's Corrected Appeal I;riel (l,ln. 12,20(6), al'ailable at http:/ /

WW\\'. ftCgll" / os/adjpro/d9315 10601 12enhappcaIbri"t"lrrt'ded ,pdf.

,. The FTC issued its decision just as this article \VdS ,c;l,i I1g III press. The fTC aHirmed the

:\Lj's finding th"t the acquisition was anticllmpditi"l·. but rL'Cjuired the use of indepen­

dent nq~otiilting teams rather them ordcring a din'stiturl'; ';cc [II re E"anston, Opinion ofthe Commission (2007) [hereinafter CommissillT1's ()pini,'nj, l7l'tlilable at http://www.ftc

gm I osl adjpro/d9315/070806opinion.pdf.

CScc FTC & DI'I" r UF ]usrlcE, IMPRUVING HL\IHI C..\I<r: ..\ [), "E UF COMI'ETITION Ch, 4 at 1

n.7 (listing C"Sl'S); Timothy Muris, fucrythiliS Old I~ ,,\,,,' .4,\/liil Hmlth Cal"1' alld COll/petitioll

ill till' 21.;t Cell t uI"y. Prepared Remarks, 7th Annual f k,dth Cart' r'orum, Chicago, Illinois,I') (,'\j",. 7, 2Ll(2), at·ailable al http://I\·\o\''''.ftc.g,,,· , s~'l'e(hes/muris/murishealthcare­

speech1l211.pdf (discussing hospital antitrust enfOr''l'nll'nt); :'('{' also Toby G. Singer, FTC

HOSPITAL MERCERS 1 A" ERA 0 .. Ql:ALlTY I 1PROVE\1Fi':T 207

understanding of mergers' consequences for health care competi­tion.s It was thought that the information produced by such a re­view could help the FTC determine the effect of consummatedmergers on competition9 and provide a stronger evidence base forenforcement actions. In A successful suit against ENH would demon­strate that the FTC's efforts had been fruitful and potentially pro­vide a framework for analyzing and litigating future hospitalmergers. On the other hand, an unsuccessful suit would lengthenthe string of enforcenlent agencies' losses, raising concern abouttheir ability to challenge future mergers successfully 11

The ENH case raises numerous fascinating antitrust issues. Itoffers an opportunity to re-examine the Elzinga-Hogarty test usedin previous merger cases to help define hospital markets; the ALJrejected the test's use in the ENH analysis. 12 The case also providesan opportunity to weigh in on the debate over the appropriate roleof hospitals' not-for-profit status in merger analysis;L~ vvhile some

AdlJlini:"lratil'e Procceding:" lind Ihe F\'anston 0Jorth\\'t'sterll en,c, :2lJ !\"(TIT"l.I'l 2':1, 29

(Spring 2lJl(6) (describing recent history of FTC challenges to hospit,ll mergersl.

, 51'1' Muris, :"lIpra notl' 7, at 1Y-2lJ.

"Sel' id. at 19.

I" A former chairman llf tlw fTC obsern'd Ihal the data cullected mighl "h<)I~ll'r the Com­

mission's position the next time il seeks a preliminarv injunction ag,linst ,1 proposed

merger in federal district court." Id. at 2U.

115,',', e.::;., Michilel R. Bissegger, FTC ,ILl Find:" Thill J:,'Lli/:"tOIl Hospitlll A1<'rX<'l Viollll<'d Allli­

Inisl Lilli' nnd Ordl'l"s 1)i('e:"lilllrc (Oct. 28, 20(5), <7('l/illll>ll' ill http://h:;.22UllJ25] /articlc_

] ]98.html ("[T]his Gl,e . is likely tll b,'conw a bl']]wethl'r of future gon'rnml'nt antitrusl

enforcement in hospital ml'rgers.··).

I: ln the h,)spital context, the Elzinga-Hllgi1rtv test for defining markeh il1\'oln's tht., anah'sis

of patient flows to and frnm gl,,)graphi,' areas surrnunding tIll' ho~pitaJ; "y c.,\: .. I-'TC \'.

Tenet Health Can> Corp., 1Kh 1-'.3d 1O-i5, 1050 (::Hh Cir. 1L)t)LJ) (describing FTC ,'xpl'rh testi­

mom' l)n Elzinga-llogart\ Il'st); FTC ,'. Frel'man Hospital, 69 f.3d 260, 21)-i -h5 O:Hh Cir.

1995) (explaining steJls in IhO e'xperl~' applications of Elz.ing'l-Hogarty 1l'~I)' The ."'Lr~

rejection oj till' appli',ltil'n of the Flzinga-Hugart,· test W,1o based in 1';'1'1 (In l'rn!cssor

Flzinb.l·~ testimonv; ,e,' FI\H Initial Dt.'cisiun,'lIpr,1 noll' 2, ill PMt II.C2.d (llI1dings of (dCI

basL'li on EI7ing,1's ll'~tiJll,))1"); id. <1t I'Mt III.B.2.d (ani,lvsis and conclllsion~ "f 1;,\\' con­

ct'rning Elzinga-Hug'lrt\' !l'st J; ,,',' alsl) \'lichal,1 R. Bissl'gg('r, Til<' [,'l1n"I,);/ Inillll'

D,'(i,;,111: f:"

Thcn' a FllllIr".!tll· l'aliclIl n",c .·\lIeili!'i,,', 3Y J. 1'11 ..\1111 L. 1-i3 (211nhj (discu""ing EJzin,~a­

HogMt\· tesl and its n'l,~cti'lIl in ENH C,l~l').

1\ I-'ur d discu..,..,i'ln of tlw r,'liltjonshlp lwtwl','n nunpn,fit status and huspital,(llllpt>tition, sel'

gerH"r,llh'~'homas 1.. (;n.',ll1l'\·. llllill'll.-1 iJlld f-Jo:"p/tl/I Mcr~l'r,,: 0,1/', till' \jOIl!JJ'll!it 1-'<11'1/1 Af""'1

Cm/pdil/i'" Suh"I,III(l'}. 31 /. HI-\' III 1'",. [)lll', & I "111 (211116); Bar,1k RilhIllZln, /\lIi/lm'l

;Jlld 7Ijolll'rotlt H"spil,,1 .·\·l,'r~,"·o· A I~clilril ttl HI1"i(s IDuk,' I.dl\' I.t'gal Studil'~ \Y,)rking P,1per

iO. j'ih, Milrch 2(117), ,I,'l1il,/!,!,' ,II hltp://pdpers.ssrn.cnm/su!3/pdper'ctm),lhslract id=

')7"11:;2

268 HOlIS. J. HEAl.TII L. & PUl."Y

courts have taken this status into consideration,l.J the ALJ refused todo so.''; In addition, the case raises the difficult question of whatmight constitute an appropriate remedy when a merger has alreadybeen consummated;16 the ALJ ordered a divestiture, a remedy thatENH has argued would harm patients."

This article will not focus, however, on the parties' disputesover market definition or remedies or the implications of ENH'snot-for-profit status; nor will it speculate on the case's ultimate out­come or its impact on the likelihood of success of future mergerchallenges. It will instead focus on a broader issue that is as muchon the minds of medical professionals, health care scholars, policymakers, and patients as it is on the minds of antitrust scholars:health care quality.

While quality is an important benefit of competition-the Su­preme Court, for example, has said that the Sherman Antitrust Act"rests on the premise that the unrestrained interaction of competi­tive forces will yield the best allocation of our economic resources,the lowest prices, the highest quality and the greatest material pro­gress"IX-it has historically played a limited role in health care anti­trust litigation. After an exhaustive study of the role of health carequality in antitrust litigation between 1985 and 1999, Professors Pe­ter Hammer and William Sage concluded in part that "historical fac­tors and legislative interventions often cause courts to divorcequality from competition rather than factoring it into a competitivemix."''-.I They found that only about a third of heath care antitrust

11 St't", ,'g. FfC \'. Butterworth Health Corp, ')46 F. SUp? 1285,12'16-97 (W.O. Mich. ILJ'16);

,ot'e 11/,00 Crt'e1l1ev, ,ollpra note 13, 516-19 (explaining role of non-profit status in merger

litigation)

I'St't' Et\ll [nitic11 Decision, ,;lIpm note 2, at Part ILO.2.c.

I" On consun1fl1,lted mergers, see J. Robert Robertson, FTC Part III Litigatioll: l.L'~':OIl': FUIII

Chicago Bridge ,lIld Evanston orthwestern Healthc<lre, 20 !\:-JTIIRliST 12 (Spring 20(6)

(discussing recent FTC challenges to consummated mergers); Scott A. Sher, Clo:;ed Bilt NotFOJS0ltell CO[','I"/llIlelit I,-eview of COnSlII'II/illited Merger:; Ullder Sectioll 7 of tlze Claytvii Alt. ·r::;

S.·\~ 1.'\ CL\I<,\ L. RIO\'. 41 (200,*) (analyzing numewus cases involving retrospective mergt'r

ch,lllen~t's). On the diificulty of "unscrambling the eggs" of a consummated merger, scc.

for example, Iii 1'(' Evanston, Brief Amicus Curiae (If the Business Roundtable in Support of

E\'anston North\-\"Cstern Healthcare Corp. (Dec. 16,20(5), I1milable lit http://www.ftc.go\· /

os/ adjpro/ d9]] 5/051 216mobusinroundtblfileamicus.pdf (referring to scrambled eggs

problem)

I~ See 11/ 1"(' b',lflston, Respondent's Corrected Appe,l] Brief, ,:upm note 5, at Part m.1.-; Northern [',lCific R. Co. v. United States, 356 U.s. 1, 4 (1958).

I" Pc er J. Hammer & William M. Sage, Aillitl'll,:t, Health Carl' Qunlity, alld tlze CVllrl5, Jll2

C( lLL'l. L. REV. 545, 636 (2002). The study includes litigation involving pharmaceuticals,

medic,d de\'ices, ,md medical professionals, not just hospitals, and anticompctitive beha\'­iur other th,m thelt associated with mergers; SiC iel. at 553·-54.

HUSPITAL MERGERS IN A I ER/\ UF ()tALITY IMPROVEiVlE 'T 26LJ

cases mentioned quality as an attribute of competition.20 Of thoseopinions that did mention quality, many mentioned it generally,rather than referring to specific kinds of quality, such as the qualityassociated with "staffing, facilities, or technology."21 Hammer andSage suggested that the opinions' lack of discussion about qualityresulted partly from litigation strategy; litigants tended to disputeproduct and geographic market definitions rather than focusing onquality-related arguments. 22

The subset of health care antitrust opinions that address hospi­tal mergers often use the term "quality," but rarely analyze it.23

Opinions issued since the mid-] 990s have referred to hospital amen­ities,2-4 the qualifications of physicians post-merger,25 the scope ofservices offered,26 the desire of merging hospitals to improve thequality of care,27 and quality improvenlcnt efforts. 28 The discussionsof these issues, however, are often quite brief. The opinions maydescribe hospitals as high quality 2<i or cite experts who testify that ahospital offers high-quality services or that a merged entity would

2tl S<'f id. at 589 ("'Quality was discussed bv courts ,1S an attribute of cOlllpetition in 43(,

passagcs, appcaring in 194 different opinion" (36",,).").

cl Id.

c~ Sc<' id. at 615-16 (discussing like'l\- was"n,. for limitL'd discussion of qualitv issues in he'llth

care antitrust opinions).

c:; for a brief description of the qualit\ argun1l'nts and findings in tin' rccent ilnlitrust Cibes,

see VVarrcn Greenberg, Th<' Qut/lilll \:<lrilll,,," ill U".spital AlJl'rscr /117al.'lsis, ]':J Tilt 111'.,\1 III

L"'WYER 34, 35-37 (2006)

24 See, <'.g" United States v. Merc\' )'kalth Sen's., 902 r. Supp. ':!68, 986 (N.D. ")\\,a ]995),

L'aealni as 1/I00t, 107 F.3d 632 (8th Cir. 19':J7) (rc'jecting go\'ernnwnfs Mgumenls thilt lllcrged

entity would reduce quality of l,Ht' bv reducing al1lenitil's)

'" See, e.g, In rc Ad\'cntist Hcalth Sys, ] J7 FTC 22.J., 3].j. (199.J.) ("IS]l'veral qualil\' of can'

benefits may ha\'e already n,sulted from the acquisition. Lkiah Vallcy has been elble tll

attract more highly qualified Illanagt'nwnt, Illore qualified physicians and nur"ps, and

more medical specialists. ").

~" 5e,', <'.g" United States \. Long Island .kwi~h iVIed. Or., 983 F Supp. 12], 131 (L.D.'\Y.

]997) (de~cribing (e"timonv linking bn.'adth and depth of clinical sen'ices ,lt d lacilit\· to

quality).

c7 Sec. ".S., FTC \. Butterworth Hedlth Corp., LJ.J.6 F Supp. 128:>, 12':J7 (W.O. \.1ich. !';Yh) (TIlt'

chairlllcn of the bOMds of tIll' tw,) h",ocpit,lls in\'"IH'd ·'tcstifil'd ClH1\incingh thelt the prn­

posed nwrger is Illoti\'att>d bv ,1 ""1ll1ll0n desire 10 lower lwalth ,'ML' costs dnd imprtlH' the

qualitv of can>")

"" 5e<', <'.s., LOllS 1,/1111.1 jell'isiI Met!. Or.. ';1'13 F. Supp. ,1t ]3.J. i"Tlll' ol1gomg efforh t,,], ']l,,)lit\·

improvement b\' both instituti,)n- "'ill create th!:' potential fllr achiL'n'llll'nt in thi" :mp"r­

tant area of he"lth care.") (citing Idt,'r 1.1\' '(L'W I'mk State Department 01 lle-althl; id. ell ]-12

("[T1he princip,)1 reasons for thi" Illerger art' to t"(lntinul' and ad\',mcc' the high qualit\ ,'l

treiltment of tilt' hospitals' patients").

> See, e.g., Calif,'rnia v SuttL'r Hp,llth S\'st"1ll,111l r. Supp. 2d ]JOY, ]112 C\.D. C"l. 21lil1l

("Alt,l B<ltL,,. . l'nlov5 a reputdti"n f"r qU;'llitv l1('alth carl' sen·i,','-.")

27() H(>l's. J. HL\LTll L. & PUI 'r

offer high-quality services?1 but they generally do not offer any in­sight into how quality is defined or assessed. Nor do they systemati­cally examine the mechanisms by which a particular hospitalmerger is likely to result in higher quality.

The ALl's ENH opinion, hovvever, is different. 11 It presents ande\'aluates multiple types of quality-related evidence and discusseshow quality-related findings ought to be incorporated into the com­petitive analysis. The prominent role of health care quality in theopinion undoubtedly stems in part from its prominence in the litiga­tion itself: ENH argued that the nierger was procompetitive becauseit resulted in higher quality of care. The retrospective nature of thecasci which permitted ENH to support its claim with evidence gen­erated after the merger, also likely contributed to the prominence ofquality of care arguments.

The opinion's discussion of hospital quality is fascinating forthree main reasons. First, the opinion illustrates several differentroutes by which mergers may improve the quality of care. Much ofthe conventional economic analysis of rnergers focuses on how theycan help reap economies of scale or scope; much less has been writ­ten on how mergers improve quality, particularly the quality ofhealth C(lre services. The opinion provides a specific hospital's per­spective on how its merger may have improved its own quality.

Second, the opinion provides a lens through which to view thenascent health care quality improvement movement. Health carequality has always been a central concern of health care providers,but the movement to assess quality systematically and to address itsdeficiencies is of more recent origin. Many modern commentators,for example, rely on the tripartite quality assessment framework de­veloped by Avedis Donabedian in the 1960s. He suggested thathealth care quality could be measured according to structural, pro­cess, or outcome-based criteria. 12 More recently, two Institute ofMedicine reports, To Err is Human1

] and Crossing the Quality

Sec. eg., III Ie Adventist Health 5)'s., 117 fTC 22..t, 273-74 (1994) ("A single emergency

rUt'm wuuld increase the qualitv uf emergency Cilrl'.").

11 The ENH opinion is not the first hospital mt'rgl'r t'pinion to discuss quality issues in detail

A 1985 rTe final order requiring <1 clin'stiturl' by the Hospital Corporation of Americd

hospital chelin, for example, contains extl'nsin' discussion of quality issues. Sec FTC, III IC

Huspital Corp. of America, Opinlll!1 of the Cummission, 106 F.T.C. 361, sec. E (1905) .

•, S,'c ,.\ \'l'dis DOl1abcdian, tPa/lilli/lig lilt' QUillilti of fdedical CalC, 44 MILBANK MEi\KWI·\[

f:[;~u Q. 3, 166, 167-69 (1966).

;0 I~~r. OF MErJ., To ERR Is HUi\IA'-.i: Bl'IIJ)["' .. \ S.\IFf{ HEAI.IH SYSlEi\,r (2000).

HOSPITAL MLR(;[RS 1i'J A~ ERi\ OF QUALlT\ hlPI~()\T\l[~T 271

Chasm,:'-l have significantly increased awareness of qualityproblems. At the same time, technological development has facili­tated the measurement of quality and the dissemination of informa­tion about quality to health care providers, health care regulators,and the m,arketplace. 35 Many providers have turned their attentionto quality improvement activities, and a variety of entities have be­gun to study and track quality improvement."ib The discussion ofhealth care quality in the E H case provides a lens through whichto examine the promise of and challenges facing what this articlerefers to as the "quality improvemeJit movement," the amalgama­tion of approaches taken in recent years to try to improve healthcare quality.

Third, the opinion raises the challenging question of how toincorporate quality into merger analysis. Improved abilities to as­sess quality, enhanced awareness of quality deficiencies, and greaterdissemination of information about quality could magnify the roleof health care quality in provider competition and increase the ur­gency of efforts to determine how health care quality argumentsshould be incorporated into merger unalysis, The ENH opinionasks, for example, whether quality should be considered as part ofthe competitive effects analysis, as part of the efficiencies analysis,or as an affirmative defense. 3? In addition, the appeals briefs of theparties and the briefs of the amicus curiae dispute the role thatmerger-specificity should play in the antitrust analysis. 30 If health

:ql",s') Ur MEJ)" CJ{USS!l"C THE QL,\I.JTY CH/\S!\l: /\ ,'\:Iel\ HL!\I.TIl SYS!E\l fOR n,n: 21"") CEN,

I Lin (2001),

'0 SCI' Kristin [V!adison, R~",ull1lillg J-I~all/I Care QUi/ii!ll il1 llil 11I!'lI'llIlIll(l1i Age, 40 Uc. DA\'IS L.RI\' 1577, 1579-111 (2007),

'0 SCI'. ,'g" 1'111' JOINI C:()~IMISSIOf'.;, 1~II'RI)\'INl; /\\J!'RJl,\'" I·JO"I'II,-'.I.": A RrToEl ()N QI',\lrJ\

AN!.' S,\F11 \, Executin- Summar\' (20n7j, a,'111/"t,I,' <II http:/ / \\'W\\' ,jOintcollllll issim,rl'porl.

,)rg/prinLaSp\Jprint=l (reporling that hnspitab imprll\'t'd on ,,1 \'aridv of he"lth can­

qu"lil\' ml',bures between 2002 and 200'i).

;~ 5,',' F'\iH jnitial Decision, 5/1)'1'lI note 2, at Part lJ 1.C.2,bl 1), For the purpose,; oi its anal"sls,

till' C(lurt i1,cl'pkd F 'H's argument that qu,llil\' sh,)jild lot' cnnsidl'red in the com!1l'titin'

l'ltl'd" an,lh'siy Id. ("R,'spund"llt, h(lWl'H'r, argu,'" th,lt 11ll' qualil\' nt care should be anCl­

h1l'd ,b a pnKl)nlpditi\'<' jllstific,llilln under till' CIHllpditi\'l' effects anah'sis, r{L) 71-72,

,md tIlt' Cllurt will trt'ilt it as ~lIch"}

",<C;,',' Iii r,' halbton, Respondent's Brwf in Repl\ and Opp,)sitiull tll Cross-Appeal (\1MCh

22. 2IH)h) IIll'n-inatlt'r Rl'spondent's Brief], "t Inlmduclil1ll and Summar\', 7, II,'II/lill,:' 01

http:: ! \\1\ I\' ,ftc,g<1\' / us/ adJpro! dy,] 5/0bI1122r('sphridoppcr(lSS,lpplpdf ("CompL1int

C<1un~('1, li\..l' till' ::1,1.,1, attl'mpts to plac,' on Resp'Hldl'nl the burdl'n t)f pr()\'ing a lH'gatiH',

n,1nwh, th,11 lhl' mallY qualit\· imprm'l'nll'lll> that F\:H implellll'nted and tin,mc('d ,1l

I1Pli \\(luld nllt h,1\'<:' occurwd absent the llll'rg('r 13ut C(lmplilint C,lunsl,j ,'ill'S no kga!

,wthllrit\ n'quiring that a Jd<:'nd,lI1t prove ,1 negali\ l' to estelbli~h lhelt qualit\, impr<1\'t-­

nh'nt~ inlpll"Y\l'ntl'd tH'ld fin.lTlCl'd b\" the clcquirinh cnrnp;:1I1~· \\"en.' nll.:'rgf·r-~pt·'lifil "); iii I"c

HI)[ is. J. HLc\l IH L. & POI 'y

care quality becomes easier to measure, health care quality-relatedarguments are likely to appear more often in merger litigation, andcourts will have to confront these questions more frequently.

This article will explore each of these three dimensions of theopinion. ft begins by considering why quality is a relevant consider­ation in rnerger cases. Drawir"lg upon both tILe general antitrust liter­ature and the health care services literature, Part f[ catalogsmechanisms by which hospital mergers might affect health carequality and describes the extent to which empirical evidence hasdemonstrated such effects. Part £II then takes a look at some of thespecific quality arguments in the ALl's ENH opinion and subse­quent briefs, not to evaluate their merits, but instead to demonstratehow these arguments illustrate the promise and challenges of thequality improvement movement. Part IV builds on Part III by exam­ining how the quality movement might affect antitrust analysis ofhospital mergers. Finally, Part V describes the role of health carequality in the ENH opinion's antitrust analysis and briefly discussesthe implications of alternative analytical approaches for encourag­ing further advances in quality improvement.

II. HOSPITAL MERGERS AND HEALTH CARE QUALITY

Competition produces many benefits for consumers. In theirefforts to attract customers, firms may reduce their prices. All elseequal, the more competitors that exist in the market, the less likelythat a firm will be able to avoid this competitive dynamic; firmsfacing numerous competitors will find it difficult to unilaterally in­crease prices or maintain an agreement with other firms to increaseprices.:I'1 As competition drives prices lo\over, firms must find ways toprod uce their goods or services more efficiently or they will sacrificeprofits. As the Department of Justice and Federal Trade Commis­sion explain in their Horizontal Merger Cuidelines ("Merger Guide-

hanston, Brief of American Hospital Association in Support of Evanston Northwestern

f lealthcMe Corporation 21 (Dec. 16, 2UOSl, III 'a Iia!>!,' ill http://www.ftc.gov /os/adjpro/dY3IS/USI216moahafileamicus.pdf ("'[Clontrary to tIlt' ,\ITs conclusion, the analysis of

compditil"f' effects under Section 7 does not mdnddte that quality improvements bemergl'r-specific. . .").

,.. ct -I PHilLIP F. I\REEDA & HERBERT HCI VE1'lK.·\\II', .-'\'2 ill I,L<>T LAW 11 910 (2d ed. 2(06) (ex­

plaining how mergers lessen competition).

H()SI'ITr\L MERGERS IN AN ERA OF Oll/\I I'll' !i\lPROVJ::MF.NT 273

Jines"), "Competition usually spurs firms to achieve efficienciesinternally."-lO

Mergers can interfere with this competitive process by facilitat­ing both unilateral and coordinated exercises of market power,-ll in­creasing consumer prices and reducing pressure on managers tofind more efficient methods of production. Thus, by prohibiting ac­quisitions "where the effect of such acquisition may be substantiallyto lessen competition, or tend to create a monopoly," Section 7 of theClayton Act can limit the most problematic mergers, preserving thebenefits of competition. But neither it nor other antitrust statutesprohibit all mergers, and with good reason: Mergers can help to in­crease productive efficiency and, ultimately, the vitality of marketcompetition. An evaluation of the net impact of mergers must weighthe dangers of merger-related market power against the benefits ofmerger-related efficiency gains

What form do efficiency gains take? As the Merger Guidelinesacknowledge, mergers can allow firms to produce goods or servicesat 10'vver cost than either participating firm could individually.-l2 Thelower the total costs of production, the more benefit to society. Intheir treatise, Phillip Areeda and Herbert Hovenkamp catalog manyof the mechanisms by which mergers can help achieve efficiencies.For example, by combining production, t\,VO firms may be able tomanufacture each unit more cheaply-l3 or make more productive useof research and development spending.-l-l Mergers could also reducethe cost of acquiring capital,-l5 reduce duplicative overhead spend­ing on services such as management and accounting,-l6 or permiteach firm to take advantage of the superior resources available atthe other, such as better management or superior production faciJi­ties.-l 7 As Areeda and Hovenkamp argue, some of these benefits may

.1<' S,'!' Dep't 01 Just. & Fed. 1 rade Comlll'n,) jmizunt,d ivll-rger Guidelines §.f (rc\'. cd. 19'17),

Ili'llilali!" at http:/ /www.usdoj.go\·/atr/pubJi(! guideJinl's/horiz_book/hmg1.htll1! Ihl're"

inafter Merger Guideline,;].

:1.'1,'<' l\RI'ELM & Ht)\'ct'K,\/vIP, ,;upra 11l'tl' :iLJ, 'II 910 (explaining how n1l'rger" ll's~l'n

compdition)

" See .11ier..;er Guidelin/',. ,;ulml note .f(). '" I.;

I' S,',' .f.\ j'HiLlII' E. !\I~cc;),\ & Hll"'IJ<l Hn\;"-",\\II', r\:-"l II IWS'j L\I\ 'lllJ7'ib (2d l'd 2:1(lbj

("I'I,mt ~ize economies'·).

:·1 S,',' id. ~I 975g ("Economies in rl'search and d,'ve]opn1l.'nt").

'" Sl'l' 1,1 'lI LJ75h ("..\cc('~~ to capiLli, risk r,'ductilm")

.;,. S,.,. id ~i LJ75j (.. 'O",'r)w"d' ecnnnmie<'i.

;~ Sl',' id. 11 LJ75k ("Cl1mpknwntarv resnu rn'<)

274------------~.._---~.

rIcJlls. J. I IEArl1-! L. & PC)[ 'y-------_.._-------

offer better justifications for mergers than others.~s Their magnitudemay vary, and they sometimes may be achieved through purchasein the marketplace (such as by contracting with an accoullting firmor hiring a better manager), thus avoiding the competitive down­sides of mergers. Nevertheless, they are all still examples of waysthat mergers could increase efficiency and contribute to a competi­tive marketplace.

While the discussion so far has focused on mergers' impact onprices and production costs, mergers can affect quality too. One wayto think about quality is as a sort of counterpart to price. Firmscould seek to out-compete one another by selling a higher-qualityproduct at the same price as its competitors, rather than by sellingthe same product at a lower price. More competition might lead tohigher quality; mergers that impede competition might red uce it.

Mergers can drive quality higher through the efficiencies theyachieve. Merger-related efficiencies can enable a firm to produce thesame product at a lower cost, or to produce a better-quality productat lower cost than would be possible without the merger . .A mergermay result in a more efficient research and development processthat promotes the development of higher-quality products, reducethe cost of capital needed to create more technologically sophisti­cated products, or offer each firm better access to the skills, knowl­edge, or other resources that facilitate the delivery of high-qualitygoods or services. As the Merger Guidelines explain, "Efficienciesgenerated through merger can enhance the merged firm's abilityand incentive to compete, which may result in lower prices, im­proved quality, enhanced service, or new products."~'!

In theory, a merger that generates efficiencies could have justone of these results, or all of these results. Whether a procompetitivemerger results in lower prices, higher quality, or both, depends onthe nature of the efficiencies and of the market, includ ing the natureof consumer demand. Efficiencies may reduce the cost of rnanufac­turing the previous product, thus enabling a post-merger firm to sellthe same product for less, or reduce the manufacturing cost of ahigher-quality product so that it is no more costly than the previousproduct, enabling the firm to sell a better product for the same price.

I" 5~~ id. 11 975. rh~v SUggl':it thdt the latter group of efficiencies should not,uf>Po["[ dn ctfi·

ciency defens~ in antitrust Cdses. Se~ id.

~>J Merger Cllidcllll~S, slipm noltc ·l(), § -t. r;or d discussion of the role of etfilic')K\ drgullwnts in

antitrust analvsl's, sce ['eter J. Hdmmer, QuesllOlIillg Tmditiollt!! Alltltrl"t ['I'["lIl1lplioIlS:

Price alld N()lIprz['~ COlll/'ctilioli ill Hospital Markets, 32 U MrClI JI. Ru< '1<" 7'27, 7-t7~753,

7S() (1999)

HOSPITAl MERGERS IN AN ERA 01- Qt'AUTY !,vlPROVEMENT 27')

Either result would benefit society more than the alternative of twoindependent firms selling the previous product at the previousprice. But efficiencies might also make possible the production of anew, higher-quality product that consumers would prefer to theprevious product (and competitors' products) even if higher pro­duction costs meant that it had to be sold at a higher price. Mergerscould, therefore, result in products that are higher-priced, but, nev­ertheless, benefit society because of their higher quality. In the con­text of health care, while some purchasers might prefer to obtain theprevious quality of care at a lower price, it certainly would not besurprising if many purchasers would prefer higher-quality ser­vices,5° even if obtaining them required paying more.

Hospitals are no different from other types of service providersin that mergers could potentially lead to provision of higher-qualityservices. The potential mechanisms for quality increases are many.'jAcquiring hospitals, for example, may bring both finarlcial re­sources and management expertise to the hospitals they acqUlre,permitting an expansion of service offerings. 52 Expansions increasequality in the sense that patients gain access to a broader array ofservices.

Mergers may also alter the average quality of care received bypatients by redirecting patient flO\NS. A merged hospital organiza­tion could choose to concentrate service offerings in the higher-qual­ity of its facilities, increasing quality for patients of the mergedorganization.';:> In addition, some studies have found a relationshipbetween procedure volumes and patient outcomes; if the m,erger ex-

;,' This IS pmticularlv true, of cpurse, if a ~1,ltil"'nt ~l'll'cting thl' ~l'n'ice is c1At'red by insuralKl'

that insulates that patient fwm the sen'ie,"s Cl1SL This article sets asidl' manv of till' CO;-11­

plexities introduced by third-party insurance ill1d otJ1l'r market failures for the sake nf

bn!\'it\', I-'or discussions pf hcalth carl' mclrkl't failurl's and th1'ir implications fnr antitrust

anillv~is, Sl'l' generally Thomas L. Cn'<lIlt'\. (JIII/lilil ,,! Car,' rlild Market Fai/llr1' D1'll'ii"<" in

Alllilm~1 Health Care I.ili:,nlioll, 21 C"T'!\:, L. 1\1 \,110:; (lCJi)Y); I'eter ], Hammer, l\nlilm.;!

[Jcl/tJlid C(1II1PClllioll: Market Fnillln'~, Tiltn! VI/t'ilim', dlld till' C/II/!ICIl,i:C or 1111 rrJl1lorkct S,'«llld, 1l,',1

Tmdco(t< 9H MllJi, L Rl\' H-!9 (2000)

;; For a bri('1 discussion 01 j1oll'nti,li dfi:'cl~ "j h"'I'II"1 ,lftiliillion~ on p,ltil'nl trl'atnwnt, ,','i'

Kristin Mddis1)n, MIIllih(l~l'ii(/1 SIf~:1'I1/ ,\J,'n;/J,ol':,llll' lIild ['III/1'nl Tr,'allll1'lIh, rX)ll'ildilur,'" "ild

01l1(i1/l/l',, lY HI,/llIll SU<\'!l 1",.. RES, 7-!Y, 7511-::;:1 t20()-!),

,,~ cr ,,1icl1l'1t: Bitoun Blecher, \,Vall Sln','1 ,':;1111"1, ;\Vill .'011',','1 .'011,',>1/, 72 Hlbl'''', & HI ..\\ III .. 'I I,

W, lI<K~ :is, -!O (19Y8) (dL'scriblllg imprl1\(,ll1l'nt, ll1,llie- bv Ill,lior hospital challl in ho~pit,ll~ it

ilcqlllr('sj,

;c SCI' Madi~,)n, _'11)11'11 n,,\t' 51, ell 7';0-:>:'0 Idt:'"nhmg I\',l\'~ th'll a!'filialinns Cdn alkel qUellil\')

cr f\ohert S, Huekll1dn, I J",'I'ilallnf<'sr"li(l1l lIil:! \ 'al1l'''; (Oil~()lidali(Jll: .-ill Allal\/:,i:, ,,( ,,\,"il/l

~ill()n, ill ,\','<1' ) (lrk .'11111,', 2:; I. HI.'\I ill hi ,,,-, ">H, hl (200hj hugg1'sting thai in ,1 I11Mkl'l

ch.lradl'ri7i'd bv mergers, thl'lV 111,1\' b,' husine" ~ll'<1ling t"'lt "rl'sult~ in Ihe lllo\'l'll1enl oj

patients lwt\\"l'f'n h"S}'II,ll,.. "'ith diffl'n'nt 1"1',,1,.. of lIndl'rlving quaJit\, (1r e",..1

276 Hot's. J. HFALI~I L. & p()('y

pands patient volumes for hospital providers, and higher volumescontribute to improved quality of care, then the merger will result inhigher-quality care."-1 On the other hand, this same reasoning sug­gests that if mergers expand service offerings, they might reduce thequality of care by dispersing patients across facilities.

A merger might also increase quality by facilitating sharing ofexperience and expertise among hospital managers and hospitalmedical staffs, both in the provision of medical care and in qualityimprovement techniques. Research has demonstrated that one wayto speed the adoption. of beneficial therapies is through peer infl u­ence. For example, one study showed that the involvement of hospi­tal "opinion leaders" in promoting therapies increased their rate ofadoption.';" If so, a merger that increases the influence of existingopinion leaders by expanding the size of hospital staff could in­crease the quality of medical care delivered. Similarly, if one of theparticipating hospitals has developed effective quality improvementmechanisms, a merger might facilitate their implementation in part­ner hospitals. While it is certainly possible to work internally to im­prove quality or to hire outside consultants to offer guidance, thecloser relationships that mergers bring may allow information andmanagement systems to transfer more easily than they othcnvisewould.

Another way in which mergers might improve hospital qualityIS by accelerating adoption of information technologies. Electronicmedical records, computerized provider order entry, and other elec­tronic systems can improve the safety and quality of medical carethrough a variety of mechanism.s, including faster access to patients'medical histories, clinical decision support systems, and alerts to po-

Wlatients may mo\'c fwm hospitals thelt ha\'e highly skilled cardiac surgeons tll those thatha\'c less-skilled surge-ons")

,4 Sct' Huckman, ::'lIl'rcI nutl' '\3, elt fil, dnd sources cited therein (describing thc \'o!un1l",'ut­come releltionship); see lIl5(1 Madison, ';111'1"<1 note 51, at 750-53 (selml'). A recent artlel .. note~

thelt if higher \'olumes lead to better llutcomes, "Antitrust analysis of hospital merscrs

should probelbly consider any impw\"l'd outcomes when evaluating the impact of tilt'mergt"r.·· 1artin Gaynor d aI., The VOIIIIIIC-Olltcollle Effect, SClIlc [col/olllies, ,111" l.clIl'IliIiX'/'II­

Doing, 9:; AM. F'CO:-J, RFV, 24:1, 2--13 (200:;). Using California datel on bvpass surgery. th,·

study shows that highet· hospital \'o!utl1cs do generate better outcomt"s, Id. at 246,

" Sct' Stephcn B, Soumerai et al., Uk,'t or l.oCI11 MediC171 Opillioll LC17ders 011 Qua/itt/ tJf C,,}'('t;'r,-I'-llte MyocardinllllJilrctinll, 279 JAMA 1358,1358 (1998) (Based on a randomi/.ed controlk'd

trial, "Working with opinion leaders and providing performance feedbelck can ,lCcel,'ratt'adoption of some beneficial AMI ther"pies.··).

HOSPJI·\L MII«JI-.:RS IN AN ERA OF QUALITY h'lPROVEMENT 277

tentially dangerous drug interactions.'>h Despite these potential ben­efits, hospitals have not been quick to il1l.plement new informationsystems. Implementing such systems can be both very costly andvery complex, given concerns about privacy, the possibility of intro­ducing nevv errors, difficulties in achieving interoperability amonginformation systems, and other issues.57 While empirical evidence ofadoption rates of electronic health records and other systems in hos­pitals is limited/'8 recent studies have put the prevalence of suchsystems at around twenty percent.59

Mergers cannot help surmount all of the potential barriers toinforrnation ted'mology adoption, but they may help with some ofthem. Some systems may be characterized by economies of scale;the m<1rginal costs of providing information services may decline asmore physicians and patients are served by the system, a likely re­sult of hospital mergers, Hospital information systems may also besubject to network effects,60 Particularly for electronic medicalrecords, each additional physician that uses a particular system in­creases its value to other physicians and to patients because infor­mation can be more easily shared among providers,

,1ergers are certainly not the only way for hospitals or theirstaff physicians to take advantage of electronic systems. For exam­ple, providers could rely on Internet-based systems or other tech­nology supplied and maintained by outside vendors. The Bushadministration has supported the development of regional healthinfornlation organizations through which providers would be ableto share medical record information e\'en if they maintained their

'" :;,',', c.s., Richard Hillestad et ilL, Cnll EleelnllliL lvJcdicnl I<.ecurd SYSlt.'ll1S Trai/:::(or11l Henlill

Car,'? P"l<'lIlial 111'01111 BCIlC(il<;, 5",;illgs, ol1d Co.';ls, 24 HrAI.JIl ,1,1-1. 1103, 1108-14 (2005) (di~­

cussing bendils of electronic medical rccord systl'ms).

,~ ::;",', "X, 1.1. at 1W4 ("Barriers to adoption include high costs, lack of ccrtificati'1I1 and stand­

<1t'cii/.illion, concerns ilbout privacy, ilnd il discl)nned between who PilYS for FMf<. syslem~

"nd \,'ho profits from them.").

'.' See "\shish K. .Ihil, 110,1' CO/llllillll Are nedrolli.. HC>I!tli RCCl1l'i?' iii the United Strllt'S? A 511/1/·

!llrll'll of file E,"irlcl1ec, 25 HEAlTH AH. w4911, wSO::'-w503 (2006) (describing limitations llf

~Ul'\'('\' dilla ilboul ildoption of electronic IWillth recnrd~).

-,,, Scc id. al \\,SO] ("The HCillthcill'E' lnformiltinn dnd i\1,magement Syslems Society (HIMSS)

::'lJlJ5 SU1'\TY found thill 17 percent nt hospitals have a lully mlc'grated EHR"); Hilles~ild l'l

aI., ,,1/1'1'1/ nnl<:' 56, ill 110,,) (repnrting thilt twenty to I\\'enh'-fin' percent III hnspilills han'

adopled electronic medicill syskms)

,., See, c.S., l,rett [Vl. Frischmilnn & f\1ark A. LemleY. SI'i!h'"cr~, lUi CUl.l."1. I.. 1<.1 \.257, ::'61

COl)?) (dl'fining Olorkets ~ublect In Iwt"'\1rk dfl'd~ as "markets in which the \',llul' the

consumer places on the good increases i1~ \1[lwr5 us,' till' g'H,d" and pro\'iding references (\1

usetul discussion" of Iwt\\'ork ,>fleets).

270 HOts. J, HL\'-TJ I L & POI Y

own separate systemshl Huwever, a recent study suggests thc1t thecompetitive environment surroundiJl.g hospitals, ph.ysicians, andhealth plans significantly impedes the cooperation necessary to de­velop regional health information organizations.b2 Civen these fac­tors, hospital mergers may be a more effective route to electronicmedical records development.

Only a few empirical studies have systematically examined thelink between hospital competition and health care quality,'" Thesestudies do not generally attempt to discern the mechanisms bywhich individual mergers affect the delivery of health care sen' ices;they instead examine the relationship betvveen hospital concentra­tion or hospital mergers in general and selected measures of healthcare quality. For example, one study found that in the early to mid­19905, mortality rates for Medicare beneficiaries with acute myocar­dial infarctions were higher in areas characterized by less hospitalcompetition.h-l Although the focus of this study was levels of market

',1 SCI' joy M. Crossm,lJ) L't ell., III1,pital-l'lnt"icial/ Portak Till' Role of CllHpl'titlt"l !H I. )ri:'il/,'{

Clil/ical Datil [,dIlIlIXC, ::'5 HULIH ,\1-1', 1629,16::'9 (2006) (d~'scribing the Bush ddministra­

tion's health infurm,ltion technolugv initiati\'t~s), SL'l'seI/I'mlll! Nicolas 1', Tern &. I.esli,' P

[-'rdncis, r:1/:'lIriI/S th,' PriPnCY 11lld c,'l/tidel/tlalitl! of [tcelrel/ie Hl'lIltli I\e(ol'd" 21)U;' L, [I I, L.

Rl\ 6K l (2U07) (dtescribing rt'cent elcctl'l>nic health record initiati\cs),

"2 Sec Crossman et aI., :'111'1'11 note 61, dt 163-i-35 (describing bMrier;; to I'egioll,d infurmation

exchange)

,,' [-'or summaries of sume of these studies, see Greenberg, :,upm nutc 23, at :\-1-3:1, Sf'(' '.;ell<'l'­

ally Mdl'tin Gavnor, \Nltl/t Do IVe KIWi!' /l/Jout COII/petitioll 11Ild QUI/litl! ill Hetlltlt Core !vll/r­

ketc7 (Nafl Bureau llf Fcun, Research, Working Paper No, 12301, 2006J. [-'or sUlllm,Hies of

studies ,'n thc effects of hospital nwrgers on CllSts and prices, se,' Ivl<1l'tll1 C,1\'nor &

Deborah !-lads-Wilson, ClI<1IIgC, COII"lllidtltioll, I/lld COII/pdilioll ill flellltit Ctm'vl'lIkl'l,', 13 J,Eco"" PFRSf'ECflVr.S l-il, 152 (1999) (discussing efficiencies hospitals can gain trul11 consoli­

dation); Rubert Town d aI., Tlte Wclt;lIt' COl/sequel Ices of Ho~pital Maser,.; 7..1) (\1.11'1 Buredu

uf Econ. Research, Working Pdper I o. 122-i,:!, 20(6) (concluding that "[r!t's".lrl'h on the

relationship between hospital concentration and prices gcnerally finds th"t ,m incrt'dste in

ho~pital concentration is clrreldted with higher prices for inpatient carl', ,1I1d 111"11\' inter­

pret this correlation dS d caus,d reLltionship"), [n their own study, 1\)\\'n et ,d, conclude

thdt hospital mergers between ILJLJlJ and 2001 reduced consumer surplus b\ S-i22 billilln,

mostly through a transfer from consumcrs to hospitells; as " result, Il1crgter, ,.1u,.,~d little

loss in total net welfare, Set' id, at 33-3-1.

64 Daniel p, Kessler & 'dark B, iVkCIt-II,ln, J,; Hospital COII/petitioll 5lll'il/llv WII:,ft't!l! '. II::; Q, J,ECON. 577, 601-02 (2000), Another studY finds th"t competition hds little impad on the

health outcomes of less sevcrelv ill patients, but improvcs outcomes for the 1l1ll1't' ~l'\'l'relv

ill; after ev"luating its results for hoth health outcomes and expenditures, it cllJlcludes th'lt

competition is welfare-t'nhcll1cing, Daniel 1'- Kessler & Jeffrey J. Geppert, Til<' II[l'ct, "t COII/­

petitioll 011 Variatioll III tI/l' Qllalilt! alld Co:,t or Medicol Core, H J. ECON, & iVIC\I! C; I In fE(;,

575,57.5 (:WOS) , A third study links higher hospital market share and markl,t CC1l1l't'ntratioll

with lower quality, as measured b\' CJudlitv \'driables such as ad\'er",· cOlllplic'ltil1/1s and

wound infections, 5c(' Nazrni Sari, 00 COII/petitioll alld MllI/IIged Carl' 111111/'0,'(' (jllillilt!.', 11

HE"\iTII Eco:-.J. 571, 5RO (2(;02) ("For \\'lllll1d infections, the impact of a hypotl1t'li",11 IllC'rg,'r

is even higher [than for ad ","rSt: dfL-cts and iatrogenic complicdtions!: 10"" incrl'''~l' in mM-

HUSPITAL MERGERS IN AN ERA (lr Ot .\1.1 ry IrvIPRO'.'E:VIENT 27lJ

competition rather than the impact of mergers, these results suggestthat mergers might worsen health outcomes for patients served byhospitals in the merging hospitals' market area. One of the fewstudies that specifically examined the impact of hospital mergersconcluded based on California hospital data from the early to mid­] 990s that mergers had little impact on inpatient mortality, but thatsome types of consolidation \'\'ere associated with higher cardiac pa­tient hospital readmission rates h

'; A group of prominent researcherssummarized the existing literature on hospital consolidation as fol­lows: "While the evidence is limited and mixed, the majority ofstudies find that hospital consolidation lowers hospital quality."6hOn the whole, these studies suggest that there is reason to doubtthat hospital mergers will increase the quality of care delivered topatients. In other words, \Nhile theory points to numerous ways invvhich mergers could improve quality, the evidence shows that theyhave so far failed to impron: quality much in practice.

If the evidence that mergers improve quality is limited, then itseems that consideration of quality issues should be correspond­ingly circumscribed in antitrust analyses. And yet quality argu­ments played a signific;:mt role in the ENH case, and, as Part IVexplains, may play an even more important role in future mergercases. There are several reClsons why the limited evidence of merg­ers' benefits did not and should not precllide careful analysis ofquality issues in individual cases. First, an observation that hospitalmergers in general fail to improve quality docs not imply that merg­ers never improve quality. Some mergers 111ay very well increasehospital quality, even if the majority of mergers do not. Second, thestudies of the effects of hospital competition E1re generally quite lim­ited/ examining only a few lTH::,asures of health care quality for a nar­row range of conditions. h

;- Broader studies might show different

kd sh<lrt' increa~es wound int,',-tion~ b\' N.T'".·'). Tht' studies are not unanillhlu", howt'\'",r,

ill finding, thilt ClH11pclition is ilSS'K'i,ll",d ,,-ith better uutcon1L'S, h1r l'xilmpk, onL' study ot

Ci1Jifornia mort<llitv rates tor pneumonia <1nd <lcute nwoci1rdiaJ int<1rction finds Ih"t com·

petition for HMO patil'nh 1'"duCl'~ morl,lJil\' hut CLlmpt'litinn inr MedicM" patil'nh ill'

cn'i1ses mort<1lJtv, Callt,'Jll CLlwris,mkarall & Robt'rt J. Tll\\'ll, COillJ'l'IifIolI, I'llill'/'." IllId

Hospilal QlIl1lillf,:ii-\ HIAI III SI ,,\[, F~ RL..... l·W:i, l--W3 (200l)

'" Vi\'ii11l J---h, & Harloll H. llamiltnll, J/ll';pi!aJ A1t'1'SCl''' IIlId Aeqlli,;ili<l/I": Dol'S :Vldrkl'l ("'II"ll/ida

1'011 Harlll ['lllil'III,,7, lLJ I, HI.-\i"! f-.<",-,,767, 7R7-Ri-\ (2()()())

n,' C1i1udia H, Williams, William B. \'OSI &. Rnl1l'rt Town, H,)\\' Hi1s Hospit,,1 ("llsn]idatinll

AffeclL?d the I'riel' and Qu"IJII' "i 1'lnspitaJ eM"?, Robert \-Vnod .!nhllsLlIl h'L1lld,lti<l1l P"lic\'

l3rid NLl, <) (h'b. 20(6), 11,'lIi/a/'/I' II! http://,,·,,·'''.!'wji.nrg/pllblJcatiLlns/ .... \·lltlwshi l'l'p,)rh

andbrid"jpdf Inn9. pnlic\'bri,'i,pd I

:;/',', I'.,"; .. Kesskr &. McCklLln. sll/,rll nnk h-J (focu~ing on mortalitv i1nd hLl .... pll,1i l'l'"dmis­

sjon ri1ks ,)i "Iderl\ !,1<1ti,'nh "'jlh ,1ClllL' mynci1niii11 inlnrc ion)

Hcll's. J. HF,\LTII L. & POL"----. ---------

results. Finally/ most of the studies examining the effects of concen­tration predelte the recent industry-wide focus on improving healthcare quality. As a result/ the mechanisms by which mergers couldimprove quality in the 21st century differ from those that couldha\T improved quality in the 20th century. For all of these reasons/it remains worthwhile to take a closer look at quality improvementarguments in hospital merger Celses/ including the E fH case

III. ENH AS A LENS FOR EXAMINING QUALITY

IMPROVEMENT

The ALJ in the ENH case concluded that "'[c]ontemporaneoLisevidence demonstrates that ENH sought and achieved substantialprice increases as a result of the merger"68 and that "ENH signifi­cantly increased prices relative to other hospitals' price increases.""YBut merger-related price increases do not necessarily imply that themerger vvas anticompetitive. Increased market power is only one ofseveral factors that might lead " merged entity to increase prices;~{)

an alternative explanation for an increase in price is an increase inquality.71 As explained in Part II, mergers could promote competi­tion by lowering prices/ but they could also benefit consumers byleading to the provision of higher-quality services at higher prices.

ENH in fact argued that "the quality improvements at High­land Park justify ENH's increased prices and outweigh any an­ticompetitive effects of the merger."72 The ALI's opinion andsubsequent briefs provide a sketch of these quality-related argu­ments. This Part explores these arguments and the insights they of­fer into the current state of the quality improvement movement.While it does not attempt to be comprehensive in its coverage/ sub­part A highlights a number of the quality-related arguments in thecase. Subpart B shows how these arguments demonstrate the pro-

"S P\iH Initial Decision, ';lIpra note' 2, at Part III.Cl.b(2).

,." Id. at Part IU.c.l.b(J).

~() For example, the opinion nott,d th'lt an l'''pert in the case had ruled out ,;ix p,)ssible '!"plc!­

nations for price increases: "incn.'ascs in cost, l'hanges in regulation, increases in dt'manel.

changes in patient mix, changes in customer mix, and changes in teaching intt'nsity.·· Id. atPart III.Cl.b(4).

~! The AL) considered both the higher-qualitv explanation and a "Iearning-aboul-demdnd"

explanation; under the latter theGr\', E\'anston leMned that its pre-merger prices hdd becn

below the competitive level. and therdure r,lised prices post-merger. The AL) rejected

both theories. See id. at Ill.C2.'1 (expluring the lcarning-about-demand explanatillll in Lie-­

tail); id. at Part III.C1.b(..J) (rejecting quality <lnd Iedrning-about-demand explanatiuns).

-: Id. dt [)art III.C.2.b.

HOSPITAL MERCERS I ' Ai'J ER/\ OF Ql',-\L1TY IMI'ROVEtvlENT 2~1

gress of the quality improvement movement, while subpart C exam-• ines how these arguments and the responses they elicited

demonstrate the challenges that remain in achieving quality im­provement goals.

A. ENH's Quality Improvement Efforts

The ALI's opinion and the subsequent briefs in the E H casediscuss a variety of ENH actions that could potentially have im­proved quality. Some contributed to the infrastructure necessary tosupport efforts to improve and expand hospital services, whileothers were directed specificaJJy toward improving the delivery ofcare.

One action belonging in the former category was ENI-I"s sub­stantial financial investment in Highland Park and its services. Asdescribed in Part 11, a merger may benefit merging parties by facili­tating access to capital needed to improve efficiency; in its appealbrief, E H argued that Highland Park lacked the financial strengthto engage in quality improvement activities./J In its brief supportingE H, the Advisory Board similarly suggested that Highland Parkhad "too little operating income to fund the capital and skilled staff­ing investments required to provide the high-quality acute care ser­vices vital to the surrounding community," and that a merger vvith abetter-capitalized hospital could address the problem.7-l The AL]'sopinion found that ENH indeed invested S120 million in HighlandPark after the merger?5 Such an investment could support a \'arietyof ENH efforts to increase quality,

The ALI's opinion devoted a sigr1ificant amount of its cmalysisto the most visible of the quality il1lprovements presumably pur­chased with this investment: facility and equipment upgrades andthe introduction of new sc]"\'ices.;h For example, ENH created nev\'interventional cardiology and cardiac surgery programsJ7 E H hasdescribed these programs as tIlL' first of their kind in the hospital's

~'liI n' h'ansto!1, Rl'sp,)Jldl'nl's C'llT,'d,'d ..\PPl'ilI Brid, ,-III'Ul nlltt' S, at Stiltenwnl "f l:a,'I~,

8-9; id, al PMt Jill

-4 Iii ",' b',ln~t()n, Brid 1\1 ,\milll~ ClIri,h', TIll' '-\lh-i~,\I'\' !lOMd Comp,1Ilv in SlIpp"rl "I h'·

anq"n :\orthwt'skrn H",llthlM'- C,)rp, 1 :' (Del Ih, 2lJO::;), fl",liio!'!.- 0/ http:; - "'"'''' I'll,

gm f os! <ldn~rof dCJ31 S__ 11::; 1:216m"ad \'i~')l'\b"ardfi1"<1miclIs,pd I

-, [~ll Initi,11 f)l'(i~ion, 'lIi']',1 n,,!<' ::" <il 1',lIt IIIC.2,b(::')(,l),

. hi al I'd[t IIJ.C2h(2)(d)t"iH"iil

2;)2

a rea 1;"1> and noted that inten'entional cardiology programs are rarelyoffered by community hospitals,:-Y The introduction of new or ex­panded services promotes competition by giving patients morechoices, A new service will put competitive pressure on other prov­iders of similar services and enable some patients to receive servicescloser to homel a convenience that could be considered a dimensionof quality, In theoryl this expansion of services could also improvepatient health outcomes, ENH's appeal brief argues that "[p ]re­mergec half of all patients initially admitted to HPH with a heartattack were transferred to another hospital-a process that put theirIi ves at risk "K(]

Another ENH post-merger infrastructure improvement wasthe installation of a software system with computerized physiciartorder entry (CPOE) capabiIities,0] ENH adopted the Epic system "inorder to integrate records from health care providers who practicedat all three E H hospitalsl at the faculty practice medical groupland at all the affiliated physician practices that were willing to par­ticipate.'·82 In addition to integrating records and supporting CPOLit also offered clinical decision support systems,d As described inPart [II these sorts of computer systems have the potential to im­prove quality. Mergers can help merging entities take maximum ad­vantage of such systems because they allow more providers toexchange information more easily. E H has incorporated argu­ments about beneficial network effects into its appeal brief: "Bybringing HPH physicians and patients into the Epic system, themerger thus enhanced Epic's value to the entire ENH communityand raised the quality of care throughout the system, "8~

ENH argued that it had improved quality through its changesin staffingl in addition to its upgrades to facilitiesl technology, andequipment For examplel the post-merger Highland Park adopted

;, [",mston Northwestern He,lithcMe, Kel'pillS till.' ['romise, 1I1'IIilllbie at http://\vww.l'nh.(lrg

uploadedfiles/prumise.pdf (st<lling that it had cstablished ,·the first cardiac surgc'n' pro­

gram and inten'cntional cMdiology prugrdm in Llke County") (last visited Sept Y, 20U7,

7" III re ["anston, Respondent's Con'c'ded ,.\ppeal Brief, 5!11Jra note 5, at Statement ot 1'<1Ct~.

15.

'" hi.

'I Sec The Leapfrog Croup, Factshect Computer Physici<lIl Order Entry, amilaille (1/ http:/ '

www.leapfroggroup.nrg/media/file/Leapfrog-Compu ter_Physician_Order_En tn' .. F,lCtSheet pdf (last "isited Sept. 3, 20(7).

'c ENH Initial Decision, ';lIprrl n(lte 2, ,1t Part III.C.2.b(2)(e)(i).

" Id

" III I'C E"anston, Respondent's ClITl'ded Appedl Brit·f, ';lIprrl note 5, at Part II.B.2

HOSPITAL MFRCiE:RS IN AN ERA OF QUALITY hlPR()\!\lE"!T 283

an intensivist program,S5 which usually involves placing board-cer­tified physicians trained in critical care medicine in hospital inten­sive care units. s6 Studies have demonstrated an association betweenthe use of intensivists and lower mortality rates. S?

ENH's changes in staffing and management practices mayhave also created an environment more conducive to quality im­prcwement. E 'H alleged that the pre-merger Highland Park hadalready identified certain quality deficienci es l:'8 but that it was "un­willing to address substantial quality problems in key clinical areasas a stand-alone hospital"89 and faced "significant structural and or­ganizational barriers" to quality improvement.9o It argued that"[m]oney alone was insufficient to transform" Highland Park, andthat "[c]linical integration and a more collaborative culture werenecessary to achieve" the quality improvem,ents allegedly associatedwith the merger. 91

ENH responded to these problems by, among other things,"overhaul[ing] the system of physician governance by integratingthe medical staffs and replacing part-tinle, private-practice physi­cians "\lith full-time clinical chairmen" and ··terminatling] inappro­priate practices and procedures,"9~ Jt also "initiated physiciandiscipline proceedings."93 After the merger, physicians in some de­partments began to rotate through all three ENH campuses, and"about sixty Highland Park physicians obtained appointments atNorthwestern medical school."'J4 These arguments are consistentwith the theory discussed in Part n that suggests that mergers caninfluence the quality of care by altering physician leadership andencouraging interaction among physicians.

ENH also took a more direct approach to improving quality:issuing guidelines for the provision of care. Specifically, E H states

S, ['\JIJ Initial Decision, :'lIl'rn note 2, at Part Ill.C2b(2)k)("i,),

,,, SCI' TIll' Lc'apfrog Croup, rdcts}1l'et, ICC f'h\'sici"n Staffing (1P5), ill'diloble al http://\\w\\',

k,'pfrnggnluporg! media! file I Leapfrog-ICC Phvc.iciill1_5taffing Fact.Sheet,pdf (describ­

ing m!e of inll'nc.i\isls) (last ,'isill'd Sl'pL 1, 2011;)

,,; SCt' id, (dl'scribing n~k\'ant sludit>s'l.

',- E;\H Initial Decision, :'1I1'm noll' 2, al I'Mt IIIC2b(2)ld)iiil.

,'" Iii n- b'an"t<ln, Rl'~p<lndt'nf,; Bril'!, -111'1'11 nlllt' .>t>, <it I'art IILB.:1.,),

",' III 1',' [",111:--1,)]1, Re,;pondent's CL)ITl" ted :\p~1l'al llril'f. -lIl'm note '1, al Part ILB.l

,,; Id,

": Id, ,lt St,1I<'n1l'nl (If Facls, 12, :'''/' ,jl~" FNH Initial lJl'cision, ';II/,m nnt" ~, ,11 P,nt

JJIC~N:2)(d)(ii) (d,'scribing [-,f\:H'" p"st-mt'rg,'r act inns)

,,' Ll\H InJli,)1 Uecisilll1, ';111'1',1 n,'ll' 2, ,11 Part Jlle 2b(2)(d)(i),

,,' 1,1. "t I'.HI IIIC:2b(2)(e)(ii)

2<-\4 HOl 's. J. HI .-\ I [I I L. & P() L ....-----------------

that after the merger, it implemented nev\-' "multi-disciplinaryclinical pathways - data-driven treatment plans aimed at improvingpatient care.'''';

In short, the ENH case presents many possible routes to qual­ity improvement potentially relevant to an antitrust analysis: theprovision of financial resources, the expansion of offered services,the implementation of computer systems that could support im­proved delivery of care, the alteration of staffing patterns and man­agement practices to promote higher-quality carc, and thedevelopment of new protocols for delivering care. At the same time,these examples of quality improvement and the discussion they pro­voked provide insight into the quality improvement movement ingeneral.

B. The Promise of the Quality Movement

The ENH case illustrates the promise of the quality improve­ment movement in two main ways. The first is through the kinds ofsteps that ENH took to improve quality. While some of ENH's qual­ity arguments invoke trad itiona!, structural approaches to improv­ing quality-hospitals have long tried to attract patients orphysicians by incrcasing quality in the form of upgraded facilities orequipment or new services, for example%-other reforms exemplifymore innovative approaches to improving the delivery of healthcare. The development of clinical pathways is an early example ofsuch an approach. The creation and adoption of evidence-basedpractice guidelines as a mechanism for improving health care qual­ity began to accelerate in the 1980s and 1990s and continues today.Y?The implementation of an intensivist program is a step encouragedby the Leapfrog Croup, a national leader in the quality improve-

"5 III rl' Evanston, ReSpUnLll'nt":' Corrected Appeal Brief, slIpra note 5, dt St,ltcment of Fdcts,

14. On clinical path\\'a\'~ ,\lId practice guidelines, see, for example, Lars. 10ah, Ml'dicillt"sEpistt'lllOloglf: Mappillg the Ililpllll:ard Diffusioll of KIlOll'ledgt' ill the Biouweii,'al COI/II/IUllity, 44

ARIZ. L. RE\ ~73, -116-,+2" (2002) (discussing practice guidelines); \iicll!<1s P. rerry, AllEHealth Diptyell Tlil' lliipil(i III flU(l{)C!! Regulation 01/ Medical Errors alld !V11111,mctice Litlgiltioll,27 Ai'·!' J,L. & MEil. '>61. "Sb (:~()07) C-Tn many cases, institutions will takE' the initiative and

convert such data into t'\pli~'it norms by adopting clinical pathways,"},

'Jb This sort of competition h,b sometimes been criticized as a -'medical arms race" that

reduces welfdre. Set' HdnlnlCr, "/lPrcl note 50, at 864 ("Nonprice compditit)n has been con­

demned by some ,IS d nwdical drms race, and praised by others for creating incentives toimprove qualitv and pnl\ide better care to patients, for example, new technology, betterdoctors, impn)\"ed facili it'S.')

"7 Set' David :vI, Edd\'. tc"idcllt"t'-Bllscd Medicille: it Ullified Approach, 2.+ Hc,\LI HArT. 9,11-13

(2005) (describins dt'\~'lt)pmt'ntof practice guidelines).

HOSPITAL MER(iI:.RS J\i A'i ERA or QUALITY hIPRO\!-\IL\i, 285

ment movement.% So is the adoption of CPOE.qq In the last fewyears, countless academic, policy, and professional articles have de­scribed the potential safety and quality benefits associated withadoption of various types of electronic information systems. lOO Theargument that CPOE advances health care quality is very much instep with today's quality improvement movement lOI

The second way in which the ENH case illustrates the promiseof the quality improvement movement is through the sorts of evi­dence the parties discuss in trying to establish whether ENH's ac­tions in fact improved quality. As described in Part 1,10:2 manyprevious hospital merger opinions contained very circumscribeddiscussions of quality. Professors Hammer and Sage found thathealth care outcome statistics appeared in the antitrust opinionsthey reviewed only once as a measure of qmdi ty 111~ and that courtsusing "firm-specific criteria take clinical structure into accOLmt farmore often than clinical process or outcomes.··W-l Arguments aboutstructural quality indicators such as the nature of equipment or fa­cilities are more common than those about other kinds of indicators,perhaps in part because of the difference in ease of proof of theirexistence. lOCi Many courts have considered experts' opinions ofhealth care quality; numerous antitrust opinions have cited physi­cians' assessments of the quality of care delivered post-merger.106

One court even relied on its own quality assessment based on a fa­ci Ii ty tour.HJ~

40 See The Leapfrog Croup, fact Sheet, amilable tit http://,,,,,·\\·.kdpfruggruup.org/ml'dia/

file/leapfrug_factslll'et.pdf (describing Leaplrog's patient ",lld\' initiatin''', including in­

tensivist programs) (last visited Sept. 3, 20(7)

1<" See. e.g., Richard Hillestad et al., ~1I]Jra note 5b, at 1107-1-J (d,'snibing bent'fits of "Mious

electronic svslL'ms. including CPOE).

li\; Bllt sec ilifra Part III.C (acknowledging that manv actiun~ thuught t<, p,)lL'nli,i1h' improH'

quality ultimillt'h- mav fail to do so).

H'= See ';lI]JnJ kAt an'()mpanying notes 23-311.

'".; Hammer & Sage. "lIl'nJ note 1'1. at 5'10.

:'4 1d. at 623

il" Sce id. (Tlw authors find that a number uf hL'alth carl' ,1l1tilrLhl "piniolls h"d dislu~sl'd

adequ,1Cv of ph\'sical f,Kilities ,1I1d that --bias in f,1"or e)f structur,Ji cn]1l"c'rns is Ill)t surpris­

ing because such d1ariJcteri~tics are easier to detect dnd q'rif\.··).

I"" 51't'. I'.g. 11/ 1',' ,Alh-entist Health Svs., 117 fTC 224. Findings nt F,lct 1.''1. 1:; I (1')<).:)); Sc',' illsl)

Hammer & S,1gl', ."I1prll note' 1'1. at A111 n.lh-J (In Olll.' (·,bl'. --I)", (()urt rdited hea\'jh' "n

aspirationdl "lall'll1E'nls bv physicialls ass'Ki"ltcd with lhl' dl'll'lld,1I1t hospiti'lls thaI pnst­

merger recruitment nf speci'1lists would deer",lsl' murbidll\' and mnrlalil\' rates.").

l,'~ Sf,. Hammer & S<1gc, "I1prl1 nntt' "ILl, dl 61tl n.lh-l ("[T]h" ",)url J'l'IiL'd ul'"n ih ",,'n impn',,­

"ions obti'lilwd Irnm d ~1L'rSl)llal tllllr of till' dc·fendanl huspit,li 1.1l·ilIlll's. vVhih' Ill)[ p~()\',d-

Hot's, J, H r,,\1 TIf L. & PUL'Y

Hy contrast, the ALI's opinion noted that the parties presented"extensive data on outcomes, structure, process measures, and pa­tient satisfaction,"lo~ and attelllpted to incorporate these measuresinto its analysis, Unfortunately, many of the references to specificqua lity measures have been redacted in the public versions of theopinion and subsequent filings, but the evidence included measuressuch as the provision of aspirin and beta-blockers to patients uponhospital admission and discharge,'OLJ The development and dissemi­nation of such measures has been a very important feature of thequality improvement movement,110 and health care quality advo­cacy organizations continue to develop these measures, I I I The use ofsuch measures in the E H case is a sign of their increasing role inhospital operations and, more generally, the success of advocacy forsuch measures as a mechanism for improving quality,

C. The Challenges Facing the Quality Movement

While in many ways the ALI's opinion and the parties' subse­quent briefs illustrate the progress and promise of the quality im­provement movement, in other ways their discussion of qualityissues illustrates just how much progress remains to be made, Thissubpart focuses on three challenges facing those trying to improvehealth care quality: the limitations of qua ntitative rneasures of qual­ity, the lack of financial incentives to improve health care quality,and, finally, the sometimes loose connections between quality im­provement mechanisms and increases in health care quality,

1. Limitations on Quality tvleasllres

While the use of quantitative measures to assess quality is asign of progress, much work remains to be done before such mea­sures reach their full potential as tools for quality measurement, im­provement, and oversight. For example, one of the measures that

in); much specific analysis, the judge was confident that he knew quality when he' 5,)\"

it'),

:L" E H Initial Decision, supra note 2, at Part IIl.C.2,b(2)(c),

lUg Sec [/I 1[' b',mston, Respondent's Brief, supra note 38, at Part IlI.B.2.c (referring to Lbl' of

heart attack medication); Brief of American Hnspital Association, supra note 38, at 28 (re­ferring specifically to aspirin and beta-blockers),

:1"~Cl' 'v[adison, supra note 35, at 1603-13 (descrihing increasing availability of inforlll,ltilln

<lbuut hCC11th care qUC1lity).

"' SCI'. c.g.. dtional Qualitv Forum, http://www.qudlityforum.org (describing recent acti\i­

tic'~ llf (lrganization "created to develop and implement a national strategy for healthcMl'qualitv") (Id~t \'isited Sept. 3, 2007).

HOSI'IL\L MERl,ERS IN AN ERA OF QUAI.ITY livlPROVEMENT 2R7

the ALl's opinion relied on was a numeric score calculated by a pri­vate accreditation organization r the Joint Commission. The JointCommission has long played an important role in hospital qualityoversight. Most hospitals are Joint Commission-accredited r andMedicare deems Joint Commission-accredited hospitals as comply­ing \'\lith its participation requirements.112 The Joint Commissionconducts a regular survey process r including a site visit which pro­vides a foundation for its accreditation adivities. ll3 The opinion ex­plained that based on a scoring formula incorporating 1200elements of hospital performance r the Joint Commission grantedHighland Park a score of 96 in 1999 and a score of 94 in 2002. 114 TheALJ concluded that Highland Park did not improve its quality ofcare during this period r but instead offered excellent care before themerger and maintained its reputation for quality after the merger. 11 "

In a brief in support of ENH, the Joint Commission respondedto this conclusion as follows: "Different scores in the 90s of two di f­fen'nt hospitals or of one hospital over a period of time ... do notlend themselves to help determine whether one hospital is substan­tiall\' better or worse or the same than the other or whether the onehospital has become substantially better or worse ...."116 Accredita­tion may ensure that a hospital meets minimum standards, but theprocess is not designed to distinguish small differences in levels ofaggregate quality across time or hospitals. Traditional regulaton'and quality monitoring regimes designed to ensure that qualityI1leets a particular standard, such as accreditation or licensure r pro­vide little information about incremental improvements in qualitybeyond that standard. Those seeking to track quality ilT1provements,vvhether they are administrators or providers or others assessinghospital quality, or antitrust analysts, must turn to alternative toolsfor assessing quality.l17 The controversy over the use of Joint Com-

I j" S<,,' 13,\1"" R, h':RROIV 1"1 AL., HE/\LTH L\\V ~ ] --I (2d L'd 21111()) (dl'scribing Joint Commi'­

~i(m <KCl"l'ditiltion process).

,', ,";,',' Thl' Joint Commission, Accrl!ditalion Pro\·,'s:.;: I'<lct~ About tl1l' On-Site' 5\11'\'('\' PnK<'~~,

ht tv / / ",,,'W ,jointcommission,LJrg/ /\ccred iI'll illnl'rngra 1l1~ / H ospj t'lls/ :\ccred ila Iion! 'nl­

(l'~S;'onsilt' _'la.hlm (I<lsl \'isited Sept. 3. :'()()7)

'I! I-'.;H Initial Dl'cisiun, ,,/lPff; noll' 2, at 1'.11"1 ]Jl.l'.2,b(2)(c)

I ~ c, Iii,

1'" Iii r,' E\'anston, Briel of Ami,us Curial' Jllint CommiSSion nn ACc'rl'dilcltion of Hl'alth Carl'

UrganlZcltinnS in Suppurt oj h'<lnstnn North\\"\,,.;tern Hll~pit,l! 7 (Dl'C 16,200:;).

TIll' jnint Commis~inn ha~ [w('n " k',lckr in dt'\'('ln~'ing SUdl toob. Sf',' Tht'jnint C"mmis­

::-il In. PL'r(I)ITndnCe j\llC\lSU rt..:'lnent, htt p:,' ./ \\"\\ "" .jnin ll·()nlnlis~i{lll.lHg/ P('rf01Tllallce]\·1l'a­

'-lirenwnt/ (dl'scribing Juint C,Hllmbsi,m'" 'llla}il\, InL'<1surc'n1l'nl-rt,jakd acti\'ilit's) (I"st

\'j"ill'd Scpt. 3, 2007). It ntl\\ incnrpor,lll'~ llw~l' Ilwasurt', intn lh" ,kCl"nillalion pnxL's;,

Hcn;s. J. HI:r\LfH L. & POL'y

mission scores, therefore, illustrates both the limitations of tradi­tional quality assessment tools in modern efforts to improve quality,and the ways in which quantitative measures of quality can some­times be misleading.

Newly-developed, detailed quantitative measures of qualitycan be much more helpful in assessing differences in quality, bothover time and between hospitals. The outcomes, process, and pa­tient satisfaction measures described in subpart B as demonstratingthe promise of the quality movement have the potential to serve thispurpose. Ultimately, however, these quality measures played quitea limited role in shaping the ALI's antitrust analysis, in part becausethese quantitative measures also can be misleading.

For example, the ALJ noted that complaint counsel relied onPress Ganey patient satisfaction measures but then cited evidencesuggesting that the underlying survey response rate was low, that"the experts were not aware of the survey methodology used, sothat the survey's trustworthiness could not be determined," andthat none of the other patient satisfaction data was "scientificallyvalid, comprehensive, and reliable."lls The opinion also explainedthat complaint counsel used some health care quality measures de­veloped by the Agency for Healthcare Research and Quality("'AHRQ") and other measures developed by the Joint Commission,but then observed that the findings were contlicting and/ or not sta­tistically significant. ll9 The opinion then suggested that the differ­ences in findings might have arisen as a result of different riskadjustment methodoiogies,I20 a problem particularly likely to arisewhen quality measures are based on health outcomes. The ALJ con­cluded that "[t]his quality of care evidence ... is inconclusive inmany instances."l21

[n an appeal brief, ENH challenged the evidence that com­plaint counsel had presented, including, presumably, some of theevidence that the ALJ had commented upon. It called the quantita­tive measures that complaint counsel's expert had used "narrow

See The Joint Commission, Oryx, http;! /www.jointcommission.orO;/l\ccrediti1tionPro­

grams/ Hospiti1ls/0RYX/oryx_fdcts.htm ("Introduced in February 1997, The Joint Com­

mission's ORYX initiative inlPgrcltes outcomes and other performance Il1l'dsurement data

into the accreditation procL'S5 . . tn 2002, accredited hospitals begdn Cl,Jlecting data onstandardized-or 'cnre'-performance measures.") (last visited Sept. 3, :2007).

: Is E"JH Initial Decision, slipra note 2, at Part ffl.C.2.b(2)(c).

:1" Id.

le'lld.

111 Ill.

HOSPITAL MFR(iERS '" AN ERA OF QUALITY IMPRO\F~vIENT 289

outcome indicators utilizing unreliable administrative data thatlacked clinical validity," noting that the expert had "conceded thatthe administrative data he used suffered from numerous deficien­cies that limited its utility in measuring quality."122 It added that"reliance on these administrative data was improper because theywere designed as a first-round quality screen, not as definitive mea­sures, a fact candidly recognized by AHRQ."123 It suggested thatcomplaint counsel's expert's analysis was based on a measure "theresults of which were contradicted by another, superior measure."12~

One natural response of a judge, provider, payer, or patient tothese sorts of criticism is to conclude that the data are untrustvvor­thy or inconclusive and should, therefore, be ignored or signifi­cantly discounted. Another potential response is to revert toevidence of quality based on the views expressed by physicians,friends, internet commentators, or others, in the case of medicaltreatment, or evidence of quality based on expert testimony, site vis­its, and interviews, in the case of legal proceedings. ENH, for exam­ple, contrasted complaint counsel's "superficial analysis" with thework of its cxpert, who had "conducted two site visits and formallyinterviewed 34 key physicians, nurses and administrative lead­ers,"12~ an approach incorporating a quite different, less quantitative,and more traditional mechanism for assessing quality. These mecha­nisms have the advantage of providing more nuanced and fully­rounded qualitative assessments of quality, but have the disadvan­tage of being anecdotal rather than systematic and, therefore, poten­tially less likely to provide useful information about the level ofquality a particular caregiver has been able to achieve.

The Jrguments in these documents highlight the challenge ofdeveloping the quantitative assessments of quality that provide thefoundation for many quality improvement efforts. They reflect thedifficulty of developing accurate and reliable measures of quality,or, alternatively, the difficulty in establishing conclusively that accu­rate and reliable measures are in fact accurate and reliable. Differentmethodologies for constructing quantitative measures can generatedifferent results, fueling debates over providers' quality. Measuresusing easi]\, available, inexpensive data such as administrativc datu

i.'; It!. <11 I'MI IJlB.2.b.

2lj() HUI!S. J. Hl--.\llil L. & POL"---------- _.._ .._---_._---------

are criticized as being subject to "deficiencies" or not "definitive.'"i2bIf such measures are not in fact deficient, then such criticism dem­onstrates the difficulty of convincing skeptical stakeholders to makeuse of the measures; if they are deficient, then such. criticism impliesthat developing reliable quality measurements for use in quality im­provement activities might be prohibitively expensive. [n short,these documents point to both the pitfalls of current approaches toqua lity measurement and the challenges facing the quality improve­ment movement. Quality measurement advocates m.ust develop re­liable measures and then convince relevant dccisionmakers of theirreliability in order to shape future quality improvement efforts.

2. The Lack of Incentives for Quality Improvement

A second insight that the ENH opinion and subsequent briefsoffer about the challenges facing quality improvement efforts con­cerns financial incenti ves. Hospitals might try to increase the attrac­tiveness of their facilities to entice patients who might otherwisechoose another facility. They might similarly increase the a ttractive­ness of their facilities or the sophistication of their equipment to en­tice physicians, given physicians' considerable influence overpatients' choices. l27 To the extent that providing patient services isprofitable, the more patients hospitals serve, the more profit theywill make. Providers are often rewarded for increasing the quantityof services they provide.

Rewards for increasing quality are much more limited. To theextent that physicians make hospital recommendations to patientsbased on the clinical quality of their facilities, hospitals may receivesome financial benefit from improving clinical quality. But clinicalquality can be difficult to judge, especially for patients. Patientsmay, therefore, choose hospitals based on other criteria. Even if hos­pitals did not receive more admissions as a result of their quality,they could be rewarded for higher quality through higher pay­ments; historically, however, health care plans have not tied theirpayments to hospital performance. 128 The evidence offered in the

126 Id.

127 5ee, e.g., Chad T. Wilson et ,d., Choosing Where to Haue !Vlaior Surgel'll: Wlw Makes the Deci­

SID/I?, 142 AI,CIIIVE5 C)F Sl,I,CUty 242, 242 (2007) (reporting that oJ ..,urn·yed Medicare pa­

tients, 31 %, said their physicians made decision about where' to have surgery, 42"';' said

they decided equally with their physician, and 22"" sdid that tht'v were main

decisionmaker).

12., 5ee, e.g., IN';T. OF MFI J., PERF( W\[',NCE IV1FivsUREME,'Jr ACCTIERXI l'.j" I \II'R( )\'],\II','JT 28 (not­

ing historical lack oJ reward fur delivery of highest-quality care); \ltTl'dith B. Rosenthal et

HOSPITAL MCRCjERS IN ;\!\i ERA OF QUALITY lYlI'ROVL:Yllc?\1 291

E H case illustrates payers' lack of attention to quality issues quitestarkly: "Managed care representatives testified that during contractnegotiations, the topic of quality improvements never came up.ENH's COO admitted that he did not tell managed care representa­tives that the higher prices \,vere justified by quality changes toHighland Park."129 Furthermore, "fe]ven after these changes, E Hnever advertised them to managed care organizations."Bo In addi­tion/ "the managed care representatives testified that the value ofENH to their networks was principally due to the hospital's geogra­phy, not quality,,'1:11

The ENH experience provides just one example of negotiationsbetween payers and providers, and the example is now quite dated.But it does point to a significant challenge facing the quality im­provement movement: historical inattention to quality issues/ espe­cially among those purchasing care. In such an environment,refocusing providers', payers', and patients' attention on quality is­sues, particularly measures of relative quality, will be a difficulttask. After all, such a focus makes sense only after one has acceptedthe possibility of significant variation in quality, over time or acrossproviders.

It is a task, however, that some groups have begun to take on.Payers, including both health plans and employers, have been animportant force behind health care quality reforms. Many have be­gun to implement pay-for-performance initiatives, revvarding pro\'-

al., Paying ,ftn- Q/li/li/y: Pnl(>idcr< fl1Cenli",.,;/i-" Qllnlill/ fillpn1i'f'llIf'lIf, HI'ALTH AIT" Mar.-Apr.

2004, .It ]27-28 (describing advent of pav-for-performance initiati\es),

12" ENH Initial Decision, ';lIpm nntt' 2, ilt J-\nt IILC.2b(2)(h),

DO fd,

;,1 Id, In thc ENH (.le,c, thie, l"\'idencc \\'de, importimt Lwcau'l' it IIndermined arguments that

higher quaJit\' \\'ould cAplilin or jll~tify the higher nt-golidted prices, But tht' e\'idcncl' abn

raises bigg,'r questions ilbout the rnle nf qUilJity in mergl'r an,1!\'si5 more gl-Iwra!lv: Are wc

too quiCk t(1 a,sunw thill better qLL11itv would be a prncompdilin' bendit, or, for th,11

matter, rl'fkcl an dficil'ncv) A lack of discussion abl1ul qUdlil\' during price negotiatilln,

could reflect a lack nf an\' qualit\' imprnn'ment, a la,'k of \'l'l'ifiable qualit:-, il11prnn'l11enl,

or a lalk uf pan'r interee,l in qualih imprOH'l11l'nt. The fir"t P'b~ibility implie" th"l qualit\

ilrgument'- "hnllld be Ign,'rl'd in till' ,lnlilrusl anillve,i~, bC'C"lhl' therc' i~ nu b,1Si, for lhcm;

the second, that qll"lih' Mgumenh e,hllUld ha\'l' nn imp,lel lm tilt' ,lntitru,t ani1I\'~is, bl"

CdUSt' of ,1 IdCk uf c'\'idencl'; till' third, thill quali\\- argumenl~ should bc iITP!c\'anl 10 11ll'

antitrust ,1n,1!\'~i~, hec"u~c' higher '1ualit\, nflers no bencfit. TIle' typical ,lntitrllst "n,l!\',i",

howl'\'l'r, trl'dl~ qll,"li\\' ,l~ bcnefici.11. Scc, c,S" 1\t1l'1'St'r Gllld,Ji;h'';, ,'II/'m nntl' ,±O, ~ -f (1i~ting

imprll\'C'cl 'lu'llilv illnng \"ilh IllWl'r priCl's ,b potcnti,'l cnlb"qllel1l'l' uf dticienc\'-l'nh,lllc"dabilitv III "ompd!'), II Ie, pll~"iblc th,ll ",hill, Pil\'l'rS folil 10 ,'onlrild \)\'l'r gu,'lih', p,lticnh

prder higlwr qll,dil\', cOJ1:ii~tenl ",ith tilt' standard ,mlilru"t In'dlnwnl. TIll' di"c"Jllll'ct

cnuld lw dl1t' 10 inll1rmdti,m l)]' "genc\' fililurl'S that limit !',1ticnl'" pn's,llfl' <1l1 pil\','r~ ill

scek highl-r '1",1111\,

2<)2

iders that deliver services the payer has defined as high quality.l:\:'Hospitals participating in a Medicare demonstration project, for ex­ample, receive a bonus if their performance measu res place them inthe top twenty percent of hospitals.'~' While limited financial re­wards for higher quality have traditionally presented a challenge toefforts to improve quality, either by muting incentives or by depriv­ing providers of the means to finance necessary investments, thischallenge is one that the quality improvement movement has begunto address.

3. The Difficulty of Achieving Quality Improvement

A third type of quality-related challenge the ALI's opinion il­lustrates is the sometimes weak connection between quality im­provement efforts and quality improvement results. In some cases,quality improvement efforts fail because they are less than fully im­plemented. Managers may seek to encourage change but may ulti­mately fail. The ENH opinion illustrates this difficulty through itsdiscussion of post-merger clinical protocols. While ENH presentedevidence of the adoption of critical pathways to support its quality­related arguments, the ALJ noted that ..the evidence does not clearlyshow whether the critical pathways are always being followed."U-l Ifthe ALI's conclusion is correct, it is possible that the evidence wassimply lacking, but it is also possible that the creation of protocolsfailed to significantly change providers' behavior.

Even when quality improvement initiatives are properly im­plemented, they may not prove effective in increasing clinical qual­ity of care, or, ultimately, improving patient outcomes. Consistentwith the theory outlined in Part II, the ALJ acknowledged thatENH's post-merger affiliations with Northwestern University'smedical school could generate merger-specific benefits. us He alsofound, however, that the ·'evidence does not establish ... that the

132 Scc EXlIIllillins {',nl/iJr f'erfl1l"l1l'lIICC tV!ca5ures (llld Other Trclld, ill flllplOlja-SpOll5ured /-h:nlth

Cnre: HmrillS Bcflll'c the H. COI/III/. 011 Edllcntioll alld the Workfurce. Sl!bCOl/llI1. 011 EllIployer­

EII/ploI/'''' 1~c1'lti"II" 109th Congo :2 (2005) (statemt!nt oi Meredith B. Rosenthal, f\ssistantProicssor l1i He<ll th Economics a.nd Policy, Han'Md School oi Public Health), amilaNe at

http://cd \\'orkforce.house.gll\' /hearings/ 109th/ ecr / heal thOSl705 / rosenthal. pd f (d is­

cussing prnlifer<llion of pay-for-performance programs); Madison, slIpra note 35, at

1606-07 (describing pay-ior-periormance progr,lffis).

m Sec PrL'micr Illlspital Quality Incentivc Demonstration, F,lCt Sheet, Jan. 2007, at'ailable at

http://w\\.\\..cl11s.h.hs.gm· / Hospi talQual itylnits/downloads/ Huspi tal PremierfS200602.

pdf.

1'4 ENH Initidl U"cisiun, ,lIl'ra note 2, at Part III.C2.b(2)(d)(iii)

I" Id. at Pilrt III.C.2.b(2)(c)(ii)

HOSPIT/\L MERCrRS 11" Ax ERA OF QUALITY I:vlPROVE~'lf-"1 293

relationship with Northwestern Medical School had a noticeable im­pact on quality of care of patients, patient satisfaction, or improvedstructure, process, or outcomes."B6 Again, it is possible that this con­clusion simply reflects the difficulty of demonstrating increases inquality, or the difficulty of establishing the relationship betweenparticular types of activities and their impacts. On the other hand, itcould demonstrate that the organizational change thought to influ­ence quality in theory does not necessarily influence quality inpractice.

While the AL]'s opinion did not express similar doubts withrespect to the impact on quality of ENH's adoption of CPOE andother electronic systems, researchers have raised such doubts. Manyproviders, researchers, and others tout the potential benefits ofhealth information technologies, but studies showing that they haveactually improved patient health outcomes are limited,JJ7 and somestudies have found that they can introduce errors.Bt' One of the big­gest challenges facing efforts to improve quality today is to identifyand fully implement steps that will ultimately prove successful inincreasing quality, particularly quality as measured by healthoutcomes.

After examining the evidence of quality improvement occur­ring post-merger, the ALJ ultimately concluded that the impact ofthe medical records system (along with the impacts of clinical affili­ations and integration) did not "sufficiently outvveigh the merger'sharm to competition and ultimately to consumers."139 For antitrustanalysis, as for quality improvement initiatives more generally, it isimportant to be able to establisll. that the actions taken in further­ance of quality actually improve it.

While it can be difficult to implement quality improvementprograms, even more difficult to actually improve quality, and more

I'~ SCf', f',:':', Basil Chi\udhn' ,'I ,11., Sy'tf'lIlntif RCi'U',!,: Ilil/hilt of H['{/!tll 111/(1)')11,;1;'011 Tet"illIOI(1S1/ 0/1

(Judlitll, [tfiot'n'.]/, fmd C,',I~ o{ ;\.1t'dit"ul Carc, 144 /\""!\I,~ IN 111,',\[ ~llu, 742, 7,42 ("Four

benchmMk in~\ilulions h"n' d,>m,lI1slriltl'd the l'ifi,',KY of health information tl'chnojogie~

in impnl\ing qu,11it\, ;1nd dficielln' WIll'tlwr ilno h,'\\' other in~ iluli()n~ Ciln achit'\e simi­

lar lwne{its, i1nd ,1\ wh"l C(,,,ts, ilre uncJear."),

i;'; See, eX" l~os" K,lpI'e! l'l ,II., Rol,' or L'O)l1/JlIlt'rizCf? Ordt'J' [IIIi'll Sll"ft'I/I' iii F{/t"ililuliilS A1cdiCtJ­

1;'011 fin".', 2'1.' 1.-1,\1,\ 1J'I7, 1 ]97 (2005) (concluding thilt "il leJding ('POE ~\'~\('m l)ften

faciliLltl'd nwd,c,lli,m l'ITl)[' J'lsks, \\'ilh m,)))\, rq,orkd to occur tr,'qul'nlh"); 'ce ,11,';0 Roberl

Ivi. \\''',lChkr, fXl'edl',i flli,! LJiII'xp{'(/eti C,1II';1'11IICli(l', or the Qlflifitl/ lind /1I1,'rilltlli'J/i F,'(hillJ/OSll

R,','"luli"il', 29:; L\i\1A 27;-';11,2781-82 (2006) (commenting on pruhlem~ and belll'fil e "f in­

{orm"lion ll"'hnn]ngiL''' in nwdicinl'l.

1'- L:\!H Ini i,,1 Dl'ci~i,'n,"-;lI!p'fl note 2, ,11 IJMt Ill.e 2bLil.

2l)4 H(; l s. J. H[ ....... L.T H L. & P() L . y

difficult still to demonstrate that quality has improved, the most dif­ficult challenge of a II maybe to demonstra te the link between merg­ers and quality improvements. As Part IT explains, mergers couldincrease quality by facilitating changes in financing, managementculture, or the economics of the production process that lead tohigher quality. Hovvevec the fact that mergers could do so does notmean that they actually will do so. Mergers may lower the transac­tion costs of coordination, thus facilitating higher quality care, butthey may also fail to produce the integratior1. that makes this chainof events possible.I~(IOc as previously explained, mergers may leadto changes, but the changes may not increase quality. Or mergersmay precipitate changes that increase quality, but alternative ap­proaches could have achieved similar results at similar cost so thatmergers offer no marginal benefits for quality while increasing therisk of anticompetitive behavior. A richer understanding of the roleof mergers in accelerating quality improvements is important bothto antitrust policy analysts, who try to understand the impact ofmergers on competition, and to quality advocates who try to under­stand the mechanisms of quality improvenlent.

The ENH case illustrates how one merger may (or may not)have influenced quality. \Nhile the ALJ viewed many of ENITsstructural improvements as enhancing quality, he refused to recog­nize them on the grounds that they were not merger-specific. PI TheMerger Cuidelines define merger-specific efficiencies as "those effi­ciencies likely to be accomplished with the proposed merger andunlikely to be accomplished in the absence of either the proposedmerger or another means having comparable anticompetitive ef­fects."II~ While ENH emphasized the size of their post-merger finan­cial investment in Highland Park, the ALJ found that Highland Parkhad budgeted for future improvements and that they had the eco­nomic ability to make them.'~3 While ENH emphasized the post­merger add ition of services, the ALJ suggested that Highland Parkcould have established such programs through collaborations with

1~(J Hospit,d mergers often fail to produce meaningful inll'gration. See, c.g., Dal'id Bel1to, Fed;;

Need I,l Cct Flack ill the Callie, M()UEI(~ HFAlTllC'\!(E, Apr. 29, 2002, at 25 ("'often the merged

hC l spitc1ls rem,1in basically unintegrated and the n1l'rgl'r exists mainlv on paper"); 5abll1

Russt'l!, NCiL':' AlIall/sis: No LOile Lost ill Split of HClllth Carl' Cillllls: LlCSF, Stallford Arc 0pPll.

:,itl" Tlwt OrrllI't I\lImct, 5.F. CHRON. Al (Oct.j(), 19")Y) (describing failure of UCSF ,md

Stanf~)rd hospitals to integrate their programs).

i~l r:N~1 Initial Decision, supra noll' 2, at [Jart IILC2.b(2)(d)

1'2 'OCt' Ai,'rgcl' l~lJuldill[,S, supra nute -W, § -l.

I~\ LNH Initial Decision, ~Upl'll nute 2, at I'art [ILC2b(2)(d)

HOSPITAL MERGERS I.' 295

other facilities.1-l-l Thus, while claims about equipment and facilitiesplayed a prominent role in the merger litigation, this evidence ulti­mately fell short because of the difficulty of establishing that themerger played a special role in creating the structural changes, arole that could not have been played by other actions. 1-l 5

Merger specificity arguments also arose in connection \Ivith re­forms associated with the modern quality lTlOVement. While the ALJaccepted the argument that the electronic medical records systemwas a merger-specific impro\'ement,'4(, he found that the new criticalpathways and intensivist programs could have been created byHighland Park without the mergcr. I -l 7 Tn an environment in whichnumerous hospitals arc beginning to adopt various reforms in­tended to improve quality, it becomes especially difficult to provethat the merger generated or accelerated these reforms.1-l~

The ALl's opinion also discounted the claim that the mergerhad resulted in cultural changes within the hospital organization.The opinion noted that with respect to certain quality issues, thepre-merger "Highland Park was a\,vare of and actively taking stepsto change the culture, but that such changes take time.'·1-l9 It sug­gested that the cultural changes that E H tried to link to the mergercould have been achieved through the actions of newly-hired man­agers or the recommendations of outsiders. ISO It also said thatENH's changes to the quali ty C1ssurance process may siniply havereflected industry-wide changes, vvhich again demonstrates the dif-

144 SCl', I'S, id. ilt PMt llJ.C.2.b(2)(d)("\il

14; In ib appeill brief, ENH cIi1inwd th,)l it "impn'\"l'd Cilre ill illl thrl'l' ENH hospitals through

lhe 'rationillization' of clinical ~l'n'il'l's, i.e., .... nhancing qualitv and cosl efficil'nc)' bv deter­

mining at what localion in il hl)spit.d s\'~tem particular clinical sl'n'ices can best bt' ren­

dered." III I"C [\'anston, ReSpllndt'nt' s Clnrecled Appeal Brief, :'111'1"'7 note 5, .It Part II. 1).2.

This sort of imprn\"l'ment clHild .lr~ll;lbh· be merger-specific, but it was not i1 point that the

:'\I.J discussed "'Iwn l'\'aluating n1l'rgn sp"cificity in his opinion.

",- FNH lilitial Decisilln, ';1I!'1"t/ noll' 2, ,1t PMt Ill.l,2,b(2)k)(i). Thl' Feder;ll Tradl' Cl)mJJli~sion

subsequent\\' rejl'cted thi" ar~uml'nL It tllund that the installatinll of the S\'"ll'm \\'.l~ not il

merger-specific impJ'l)\'l'l1wnl. hel~;1l1Sl' it il had remained independl'llt, Highlalld I'ark

"likely wln,Jd h,1\'c Clmtinut'd It) imprtH'I' itO> operaliDns hv inH'sting in nlrrent informa­

lion techllo)og\· ... Cllmmi~sion'~ Opini'1Jl, ~/lPI",1 nntL' 6, al P.lrt \11.8.].

'~-l:'NH Initial Ueci"ion, :'111'/:1 nlllt'::', ,11 1\1I't IIIC.2.b(2)(d)(iii) (critical pilthw.1\~); id ,11 PMt

III.C2,b(2)(d)(:-.i\') (inkn~i\i~l 11rngr,1m)

14,- E:"H clmtrtlnlL'd thi~ prtlbh'm h' M~uing th,ll thl' po~t-nll'rger Highbnd ["11'1-. \'.'.1' dn

e,lrl\' ,ldnpkr 01 bnth the inlt'n"I\'i~t 11rllgrilm ,lnd thc Illl'dicdi rl"(llrd~ s\·,.ll'lll. -"',,,' iii ,.,.[\'alls[on, Rl'spondl'nl's Ihil'!, '111,,.,1 llntl' lB, ,1t j"i\rt 1lI.B.l.c

:4" ENH Initi.l1 Lkci,illn, :'711',.<1 Ill>ll' 2. ilt Pilrt III.C.2.b(2)(d)(i).

I". M .11 I'Mt IIIC2.b(2)(d).

HOI:s. J. ![['.,\ITH L. & POl'y----------_.. --------------

ficulty of showing merger-specific quality imprcwement acti\'ities ina.n era of quality improvernent1C;1

[t is certainly possible to institute full-time department chair­men or upgrade quality assurance programs as an independent hos­pital. As the quality mo\'ement progresses, it is becomingincreasingly clear that there are many steps that independent hospi­tals can take to improve quality. The real question in this case, as inthe field of health care services generally, is how best to achieveimplementation of reforms that we believe will improve quality.The ALJ was correct to observe that "changes take time,"" but thelonger changes take, the more potential for harm to patients.

[mproving the quality of hospital care is not easy. If mecha­nisms for improving quality and patient safety were obvious, cheap,and easy for managers to implement, then it is unlikely that qualityand safety deficiencies of the types identified in the Institute ofMedicine reports 152 would persist for long. But hospitals are com­plex institutions in which hospital administrators and a medicalstaff traditionally comprised of independent physicians must worktogether to ensure the quality of services provided. Given this envi­ron.ment, improving quality is a difficult process, probably moredifficult than it would be for other kinds of providers of goods orservices. In addition, as E H points out in its reply brief, high qual­ity cannot be maintained by government agencies and third parties,which often focus only on minimum quality requirements in anyevent. 153 Outside bodies that are interested in quality improvementmay be able to offer guidance about how to improve quality, buthave "no direct authority to effectuate change."I:;-l As discussed inPart IILC2 above, quality has not yet fully been incorporated intohospitals' competitive process either, so a significant amount of thepressure for quality improvement will continue to come internally,from providers themselves. For this reason, management and cul­ture are especially important in a hospital setting, and we cannotassume that changes would inevitably occur on their own.

Mergers may accelerate the rate of change, both by allowingfor the easier transfer of managerial knowledge and expertise andby promoting the kind of integration and information exchange thatcan lead to faster adoption of measures that will ultimately improve

I"~ Sec slIpra notes 33 and 3-1

1" II/ re Evanston, Respondenf~ Brief. "lIprtl note 38, at Part [V.e.

1'.J Id.

H()SI'ITAI MERCjERS I AN ERA OF QL,AIITY hlI'ROV[ivIEl\T 297

pCltient care. The challenge, for both competition and health policyanalysts, is to determine whether mergers really do have a specialrole to pla,y in generating these changes in a hospital setting as op­posed to other environments. More research on the effects of merg­ers on culture, on the relationship between mergers and qualityimprovement Clctivities, and on the relationship between mergersand health care quality would facilitate the work of both types ofanalvsts.

IV. MERGER ANALYSIS IN AN ERA OF QUALITY

IMPROVEMENT

While Part III examined the insights the ENH case offered withrespect to the quality improvement movement, this Part focuses onthe implications of the quality improvement movement for mergeranZllysis. It argues that as the quality movement begins to build onthe achievements and address some of the challenges identified inPMt llI, the nature of hospital competition and merger analysis willchange. Ultimately, the quality movement will improve the qualityof both prospective and retrospective merger analysis, and help toshape future enforcement policy.

Part lJI.S explained that ENH i]]ustrated two central achie\'c­ments of the quality movement: the introduction of new approachesfor improving quality, and the development of new methods formeasuring quality, Both of these achievements could have far-reach­ing implications for merger analysis, The movement's introductionof nevv approaches to quality improvement, combined with its suc­cess in focusing attention on quality issues, increases the likelihoodthat hospitals will engage in quality-improving activities. At thesame time, the movement's focus on measuring quality facilitatesefforts to track success in improving quality. Organizations continueto v.'ork to overcome the obstacles to quality measurement identi­fied in Part llJ, In a recent report, the Institute of Medicine advo­cated research to develop 11,ore accur3te and meaningful risk­adjusted performance measures,J~" and J number of organizationsh(w(;' tClken on this task,I"!> In addition, the Institute of Medicine hCls

:'" S"C 11"~I, ')1 ,\'1"1 I" ,'/ll'm Ih)[" 12K, ,1l l~ (dl'~nibing rl'St',H,-h .lgl·nd'l tor perf,)rm.1JlC,' 111l',1'

~url'n1llnl clnd reporting).

i"-.' .~l'I' id. ilt 1)-I-~:1 (describing \'(lrj{lll~ l..Hgc1ni/,ltil.)I1 .... in\"ol\'ed in pl'rtnrtllc1tll'(' 1l11."'lclSUrl'lllt'nt

,1Jld tlwir <1cli\'i[it'sl. h)r ,1 di~(u~~i')Jl of Ill',llth ,',H" '1Ll,1Iil\' nW<1~lln', <1nd pnlt'ntial \\',,\'~ hI

impr,)\"<' tlll'lll, ,~l'l' JI."1,,di,..on, '!lI"',1 noll' ,1:;, <11 Ih(l~;n, lh~h--:;l

promoted efforts to stdndardize performance measures tl '>? which

might speed adoption of the measures and address at least some ofthe disputes over conflicting measures that arose in the ENHlitigation.

Increased qua lity improvement efforts t particuldrly when com­bined with increased quality measurement capabilities t \!\fill likelyincrease the role of quality in future merger dnalyses. At the mostbel sic levet the proliferation of quality improvement activities inhospital settings means that more merging hospitals are likely toengage in them t vvhich means that quality arguments are morelikely to appear in litigation t all else equal. But the nature of thechange may be even more fundamental: these two trends may in­crease the role of quality in the competitive process itself. [f qualityis measurable t providers can more easily create and monitor inter­nal quality improvement processes and then advertise their qualityachievements in the hope of attracting more patients. [f quality ismeasurable t payers can more easily ma.ke quality a criterion in de­veloping provider networks or setting payment rates. If quality ismeasurable t patients can begin to select pro\'iders on the basis ofquality or put pressure on payers to do so. [n short, the develop­ment of quality measures can help to resolve information problemsthat impede competition in health care markets. The more closelythat health care markets resemble conventional markets t the morestraightforward antitrust analysis will become.

In addition t if quality is measurable t antitrust litigants canmore easily use quality measures to support their arguments aboutthe impact of mergers t particularly in cases involving retrospectiveanalyses. Defendants in merger cases could more easily show thattheir efforts had improved quality. Tn criticizing L H argumentst

complaint counsel stated that ENH relied on intangibles such asgovernancet teamworkt staffingt and culture lSX rather than present­ing "reasonably verifiable data showing how the alleged quality im­provements improved patient outcomes or patient satisfaction."159Better quality measures can help fulfill the need for such data. Atthe same timet those investigating or challenging mergers couldmore easily determine whether a particular merger was al)ticompe-

i;~ Sec. e.g., [,"ST. Of :viED.• ':'lIpra nnte 128, at 12 (recommending endllr"emcnt of "national

standards performdncp medsures currently appron>d through ongoing consensusprocesses led bv majur stdkelwlder groups").

".' III re Evanstnn. Answ,>ring ilnd Cruss-Appeal Brid of Cl1mpldint Cuun'el. dt IV.8.2, nunila­/lIe at http://www.ttcgO\· / 05/ ildjpro/d9313/06021Uccdtt,1Chmntpursu"ntrule.pdf.

~<'I Id.

I-10SPllf\L MERCFRS IN 1\1\ ERA Uf Ql ALITY IrvIPROVEMEr--;'T

titive. The link between a particular merger and quality impro\'c­Illent may still be harder to demonstrate than the mere existence ofquality improvement, but the better the data available, the more \vewill understand about the nature of the link.

Better quality measures can also improve general researcl, onthe links between mergers, organizational changes, structuralchanges, health care processes, and health care outcomes, vvhichcould shape future enforcement policy, particularly in the context ofprospective merger challenges, While improved quality measure­nient might not answer questions about how best to weigh or aggre­gate different types of quality evidence, it would facilitateassessment of the impact of hospital mergers.

V. MERGER ANALYSIS AND THE FUTURE OF QUALITY

IMPROVEMENT

This article has not provided a detailed legal analysis of theENH case; indeed, such an analysis is beyond the article's scope,lbiJ

The article would be incomplete, however, if it did not comment emthe relationship between questions raised in the case about theproper way to incorporate quality-of-care claims in a Section 7 anal­ysis and broader efforts to promote health care quality. SpecificallY,this P3rt argues that from a health care policy perspective, it may bebeneficial to impose a high burden on merging parties seeking todefend mergers on the basis of quality improvement.

ln the ENH initial decision, the ALJ raised the question ofvvhether quality of care should be considered as part of the competi­tive effects analysis, as part of an efficiencies analysis, or as an af­firmative defense, but ultimately accepted ENH's argument thatquality should be treated as a "procompetitive justification underthe competitive effects analysis" for the purposes of the ini ti3] deci­sion IbJ After eV3luating the evidence, the ALJ found that althoughENH made quality improvements post-nterger, most were notmerger-specific, and those that were, did not "'justify increasedprices or outweigh the probable anticompetitive effects of themerger.··lh~

Fur " di,,'uSSll111 pj CladOl1 Ad Sl,Ltiul1 -; d~ i1ppli,'d Il) h(lSpltal l1wrgl'rs in ,SL'lwr,,1. ~l't'

I htlm,,~ L Crl'ant'\', i\Ji'!,!J1 1.11I III 11I,,\' Oil llil ,'\iriTi7(t C,nriel f-/o>1' I till !v1er,'!.l'r" iilid·\i1II1I/1..;1

Iilil', :::' ,\\1 I.\. &: rv1;[). J9] (]LJLJ7).

SI'I' ]'\,H Illlba] Decisillll, ";1l1'1'i1 11"le 2, at I'M] 111.C.2.b(])

Jd "I j'MI IV, Cllllllu~jlln 2iJ

HO[is. J. Hr· .. \I.TH L. & POL.')

ElH argued that "enhanced quality, quite aside from its roleas a potential efficiency defense, is a cognizable procompetitive ef­fect that must be considered in a Clayton Act Section 7 merger anal­ysis because quality improvements are a substantial benefit toconsumers and, ultimately, reflect a form of improved competi­tion,"lh3 and that complaint counsel had the burden of proving thatthe net effect of the merger would be to harm competition. 16-1 ENHfurther argued that the ALJ erred by imposing "heightened merger­specificity requirements on Respondent,"163 and that "[b]y requiringENH to provide additional evidence that quality enhancements di­rectly resulted from the merger, the ALJ erroneously shifted theburden of persuasion to E H."166

The antitrust inquiry under the language of Section 7 iswhether the effect of the challenged acquisition "may be substan­tially to lessen competition,"167 language that provides courts littleguidance about the potential role of quality or efficiencies in amerger analysis. Taken together, the opinion and subsequent briefsdemonstrate considerable confusion and disagreement about howquality and merger specificity should factor into merger analysis,including assignments of the burden of proof. Confusion and disa­greement about such issues is by no means a new phenomenon.Many similar discussions preceded the 1997 creation l68 of the effi­ciencies portion of the Merger Guidelines. 169 For example, the FTCsponsored a series of hearings about the proper role of efficienciesin merger analysis.170 FTC staff summarized the testimony at thehea rings in part as follows:

A large portion of testimony supported the idea that efficien­cies should be evaluated as part of the analysis of a merger's likelycompetitive effects rather than as an absolute defense.. . Therewas some disagreement about vvhether efficiencies should be

!I•.' iJl r~ E\'anston, Respondent's Brief, ,;lIl'ra nok','\. at Part [I].B.l.

!".; Id

\!>' [JI n: E\'c1nston, Respondent's Corrected Appeal lhid. ~lIprtl note 5, at Part Il.B. In an ami­

cus brief, the American Hospital ,L\ssociation made tbe further assertion that "the analysis

of competitive effects under Section 7 doc~ not mandate that quality improvements be

merger-specific." Brief of Americc1n Hospital .\ssLlciation, ~lIpra note 38, at 2l.

1".. III r~ Evanston, Respondent's Corrected Appeal Brief, ~lIpra note 5, at Part ll.B,3,

h- 13 USC § 18 (2000),

I" S~~ Maser Cilidelille~, silpra note 40 (describing history of revisions to guidelines),

I,,· 5~~ also FTC v, University Health, Inc., 438 f-'.2d 1206, 1222-24 (11th Cir. 1991) (describing

debate over appropriate treatment of efficiencies in merger cases).

17,' 5~~ SCII~l"I7l1y FTC STAFF, AN I'ICWA !"INC THF 2"l~T CE~TLJRY: COMPETITIO"i POLICY Ii'; n-!E NEW

HrcH-TEcH, GLOBAL MARKETPLACE, Chapter 2 (;VILw 1996), ami/able at http://ww\\·.ftc

gll\' I opplgloball reportlgcv1.pd f (discussing l·fficiencies).

HOSPITAL MERGERS IN AN EI".'\ UF QlALlTY IMPROVEME_ T 301

"merger-specific" vvhen evaluated as part of a transaction's overallcompetitive effects __ . Others argued that efficiencies be placed inan affirmative defense framework in order to avoid in routine casesthe evidentiary difficulties associated with evaluating efficienciesclaims , ... [V]irtually everyone believed that the burden of pro­duction regarding efficil'ncies should be on the merging parties, Re­garding the burden of persuasion, some thought that thegovernment should bear the ultimate burden of proof when effi­ciencies were considered as part of the competitive effects of atransaction. When efficiencies were asserted as an affirmative de­fense, some thought that the merging parties should bear the bur-den of persuasion, 171

The FTC staff responded to these hearings by recommendingthat efficiencies be considered as part of the competitive effects anal­ysis and constitute a rebuttal, not a defense,172. that the "agency neednot consider procompetitive efficiencies that likely would occur ab­sent the proposed merger,"17:1 that "the parties bear the burden ofproducing evidence of competitively relevant efficiencies,"m butthat there "is no question that the burden of persuasion as towhether a transaction is likely to lessen competition substantiallyremains with the government."l7S Consistent with these recommen­dations, the 1997 Merger Guidelines treat quality as a potential com­petitive effect of merger-related efficiencies. l76 This approach retlectsthe kind of reasoning illustrated in Part II above. Mergers facilitatethe production of quality, which increases the likelihood that thequality of hospital services improves and that hospitals compete onthis basis. The Merger Guidelines explain that in analyzing mergers,antitrust agencies consider first whether a merger might have ad­verse competitive effects, and later whether there are "efficiencygains that reasonably cannot be achieved by the parties throughother means."177 They state that "merging firms must substantiateefficiency claims so that the Agency can verify" the efficiency's mag­nitude, effect on competition, merger specificity, and othercharacteristics. 17s

1,1 See id, at J-l JR.

17: Sct' id at 25.

17.; See id, at 30174 SCI.' id, al 37

J-:-.:" See Id, ill 3S

!~" MaSI'r Cuideline,;, ,;ul'l'iI no!l' oW, § --l (listing illlpron'd qu"litv il!ong ,,'jlh 1(1\\'l'l' priet·",

enhilnred sl'r\'ice, ilnd ne\\' proci uds as potl'nliillly rcsulting IrDIll effil-il'nlil',,)

l~- 51'c id, § 02 (pr()viding In'l'n'jc\\' Df nwrgl'r ,mClJvsis) In ,1dditi(1n 10 being Ill"l):\er-'pl'cific,

lhe dfil-iencies ShDUld Iw "\'C'rifi"d" Clod "Jl()t arise from ilnlicl)mpditin' r,'ducli'JIl" in llut­

put llf sen-ict'," Sct' Id

3()2 Hot's. J. HL\Llfl L. & POI'Y

rhe issue of who must show what matters to litigants, ofcourse, because it affects the likelihood that they will prevail. Froma competition policy perspective, assignments of burdens of prod uc­tion and persuasion can affect the likelihood that the outcome of acase is "correct" in its ultimate assessment of a merger's competitiveeffects, as well as affecting the relative magnitude of errors favoringmerging parties versus errors favoring those challenging mergers.Placing higher burdens on parties that have better access to infor­mation will help to ensure that that information is revealed duringlitigation, but imposing burdens that are simply too difficult to meetwill be outcome-determinative. l7L

)

From a health care quality perspective, who must show whatin merger cases matters in two respects. First, to the extent thatmerging parties bear higher burdens, they will be less likely tomerge. If mergers do improve quality, then approaches to antitrustanalysis imposing high burdens on merging parties could worsencare for everyone. Second, an obligation to demonstrate quality im­provement may affect the likelihood that evidence substantiatingquality will be systematically gathered and analyzed by the parties.If the burden imposed on merging parties to establish quality ishigh, hospitals that anticipate future mergers will be more proactivein finding ways to assess quality and to establish the connectionsbetween mergers and quality. And, if they do merge, they will bemore likely to create systems that document quality improvementsthat actually occur. Of course, hospitals may be concerned that in­creased documentation will reveal tha t mergers do not in fact im­prove quality, but if the litigation burdens they face are sufficientlyhigh, such fears will not be enough to suppress measurementefforts.

As Part II showed, the limited evidence that does exist on theimpact of mergers on quality suggests that the link is weak. Thepotential benefits of more systematic documentation of quality,however, are significant, particularly given the decreasing costs ofdata collection and analysis. ISO In addition to permitting more thor­ough evaluations of competitive effects of a particular merger ormergers in general, an increase in reliable, systematic, and meaning­ful measures of quality can promote quality improvement efforts

IC" Sec Xl'IIcrally Dennis A. Yao & Thomils I\'. Dahdouh, In/LJrlllatloll ProblelJls ill Merger Dccl­SiOllllltlkillg alld Their IlJIpact 011 DeveloplJlellt of illl Ut/l'iel/(ics Defmse, 62 A",nTKlJST L.J. 23

(1l)l)3) (cxpluring how informatior1 deficier1cies Illlf;ht atfect merger analysis).

I,'" Sec Madison, supra note 35, at 1595-97 (discussing decrmsing costs of data collection ,lnddn,dvsis)

HOSPITAL MERGERS IN AN ERA OF 01 ."\Ll1"1' IMI'ROVFJ','IENT

throughout the hospital industry. As Parts III and IV suggested, in­creased attention to quality measurement can simultaneously ad­vance internal quality improvement efforts and encourage hospitalcompeti tion on the basis of quali ty. In other words, it is possible tha tmerger analysis will affect conlpetition and quality not just by influ­encing mergers, but also by spurring innovation in quality improve­ment and measurement techniques that may diffuse across theindustry, altering the nature of competition in the long run.

Together, these arguments suggest that imposing relativelyhigh burdens on parties seeking to defend mergers on the basis ofpotential or actual quality improvements could help reinforce tlLequality movement in the long run]"1 Professor Jonathan Baker hasargued that in the context of prospective merger challenges, if "effi­ciencies were offered as evidence that would excuse higherprices ... the defendants vvould have to satisfy both a burden ofproduction and the burden of persuasion."182 This approach hasconsiderable appeal in the context of both prospective and retro­spective hospital merger challenges involving parties that point toquality-enhancing efficiencies as justifications for higher prices.Even if quality increases are analyzed solely as competitive effectsfor which the enforcement agency has the ultimate burden of per­suasion, carefully scrutinizing defendants' evidence of quality in­creases and requiring defendants to produce evidence tracing theconnection betvveen the merger (md quality increases could advancecurrent efforts to remedy deficiencies in the quality of medicalcare. 1 :>

].'J In their analysis of tbe impact ,)1 inf"rmatiun deficiencies on n1l'rger analvsis, Yao and

lJahdouh conclude that e\'identiM\ standards should be less daunting when tlwre are

uncertainties and gaps in informali"n, .l~ opposed to mere asvmnwtries in informati'Ht

(",I1l're parties hold information that l'nf"r,','n1l'nt authorities do not), SI'/' Yao &. 1),1hd"uh,

'lIpl"ll note] 7Y, at -1--1--,,-1-5 By contr~ht, thi, artide MgU"S that if the goal is tll imprm,' qual­

itv, e\'identiiHY standards should bc' n1l'r" ciilunting hecause they \\'ill encuuragc' I'n)\'id"r"

to fill information gaps

,,: 5<,,' 1-I<"lrinS B,:/;))"<, tl1<' Antitrus! ModaIlLa!it}1I Conlilli,sioll 011 tfl/cil'u .. il',- ill Nlt'r's.. r [Ii!"]"""

In"il! 22 (2005) (k'stimonv of Jll!1,llh,)n 13, J)"ker), ai'ailah/c at http://www.amc.gm./ •• l!l)­

missinn hl.'aring,;/pdf/Baker S\,llL'n1l'nt.pdf; id, at J n.2 (limiting lc'slill1on\' In pr,)sj.wclin'

mergers). This lestimo!)\' contain" ,111 e~cl'llenl discussion of allnciltifllb of hurd"lb ,,! pnl ­

Guclion and pcr:-,;ucl.Sll1Jl in 111crh"'r t.-d~l·~ in\·oh-ing efficiencies.

>"!n tht' dl;c-isi,)n issucd Just bd'Jrl' tlw, ,1rlJdc' Wl'nt 10 press, tIll' 1'1-<': considc'rc'd FNII'"

c]u"litv 01 cat'l' drguml'nts b,)th in the '-(Jnk'~t ()f cumpetiti"l' elkc\:-- and a,; ,) "j\lStlfic"li(,n'

Sec Commis~ion's Opiniun, Sll/'1'Il n()!,' h, "I 3. Tlw Commission n"ted that b,'call"l' (Uf))­

pl;linl ,'()unspi attempted to sho,,' f)),Hkl'l pm"l'r by dc'monstrating price in, rl','''t'~ nnt ,11­

tribllt,lbll' tll bl'nign factor", [\:1-1'" quallt\, ('vide'nc(' was rt'll'\'ant tll shmYin).', th,tl II",

prict' incrl'asto,d d~ a n'sllit llt hig!",r dc'Jl)ilnd tied I,) impnl\'"d qll,liil\' ratl",r than "t)1l'r

,""d" r" , Itl ill 71, llll' COJl)mi,;"inn !<)lInd th,11 th" n'cnro did not "uppnrl the' ,ugullwn th,,1

]()4 HO\ls. J. HE.--\L.TH L. & PC>I.·Y

VI. CONCLUSION

This article has not attempted to analyze all of the quality-re­lated evidence and arguments presented in the ENH case, much lessother legal arguments that may playa central role when the fullFTC considers the case. Instead, it has used some of the evidenceand arguments presented in the case to analyze the relationship be­tween mergers and quality against the backdrop of the quality im­provement movement. The ALI's opinion and the subsequent briefsillustrate both recent advances in the quality movement and imped­iments to further advancem.ent. They also reveal how two aspects ofthe quality improvement movement, the introduction of new qual­ity improvement approaches and the development of quality mea­sures, could influence merger litigation.

While some scholars have discussed the possibility of aban­doning quality-of-care defenses because they are too difficult orcomplex to prove,lo-l advances in quality measurement make suchdefenses potentially viable. At the same time, imposing burdens onparties seeking to defend mergers on the basis of quality improve­ment may promote further advances in quality measurement and,ultimately, in the quality of care.

higher qUillity led to higher prices, hnwe\'er Id. With respect to the quality justitication,

the Commission noted that FNH did nut argue that quality improvements resulted frumefficiencies, but instead that the qualitv improvements were 'benefits ... that offset allv

adverse competitive effects pruduced hv the merger.·' Id. at 82. The Commission then ac­

knowledged that case law \\',15 unclear about the role of qualitiltive benefits in a cumpeti­

tive effects analysis, but cuncluded that "it is clear that quality improvements must be

subject to the same 'rigorous anillysis' that applies to all claims of procompetitive dficien­cies," including that they be ·'\crifiable.·· "merger-specific," and "greater than the transac­

tion's substantial anticompetiti\'l~ ettects.·· Id. The Commission then found that the

"evidence presented by ENH filib to rebut complaint counsel's showing of anticompeti­

tive effects" because e\'idence of merger-speciticity and verifiable evidence of quality im­

provements were both lacking. Id. ilt fB. While the Commission refers multiple times to the

fact that ENH tracked quality indicators but did not use them to support its case, it!. at S.J.,

85, an observation that could dampen merging parties' incentives to collect indicators that

they fear may not show improvement, the Commission's overall analysis puts consideril­

ble pressure on merging hospitills to use quantitative evidence to demonstrate quality im­

provement, an approach that reinforces the efforts of the quality movement.

l'ISCt', e.g" Thomas E. Kauper, Till' Rulc of Q1II/lity oj Health Care COl/sideratiol/s iI/ Alltitrust

AliI/lysis. 51 LAW & CO:--JH.'v!P. PRllBS 273,278-79 (Spring 1988); cf Yao & Dahdouh, S1I1'1'!l

note 179, at 28 & n.1-1. (noting some COlTlmentators' opposition to efficiency defenses).