Health Care:

Antitrust Enforcement Under Maryland's Hospital All-Payer System

HEHS-94-81: Published: Apr 27, 1994. Publicly Released: May 9, 1994.

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Pursuant to a congressional request, GAO reviewed Maryland's hospital antitrust enforcement actions, focusing on: (1) the effect of Maryland's all-payer rate-setting and certificate of need (CON) programs on the state's antitrust enforcement actions; and (2) whether these programs render state antitrust enforcement for hospitals unnecessary.

GAO found that: (1) Maryland regulates hospital prices, mergers, and joint ventures through its rate-setting and CON programs; (2) Maryland's hospital price regulation is similar to its public utility regulation in that the state sets the unit price with annual adjustments for each hospital department and requires hospitals to charge that rate to all payers; (3) Maryland's price regulation appears to control hospital prices, since its average hospital cost per admission has dropped from 25 percent above the national average in 1976 to 11 percent below the national average in 1993; (4) Maryland rate setting programs have expanded access of care to the uninsured while not compromising quality of care; (5) Maryland's rate setting program includes reimbursement of uncompensated care in the basic rate; (6) Maryland uses its CON program to regulate hospital mergers and joint ventures rather than using antitrust enforcement to ensure that sufficient health care capacity exists and facility development is limited to what is needed; (7) federal and state governments control the quality of hospital services through state licensing, inspections, and quality assurance programs rather than antitrust enforcement; (8) state regulation of and statutory exemption for certain hospital activities have reduced the likelihood of state and federal antitrust enforcement in Maryland; and (9) federal antitrust enforcement of hospital pricing, mergers, and joint ventures depends on whether Maryland's regulatory program is found to meet state-action immunity requirements.

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