Examining the Authority of California’s Attorney General in Health Care Mergers

The health care industry has recently experienced horizontal, vertical, and cross-market consolidation unprecedented in scale and scope. While certain types of industry consolidation have been associated with marginal increases in the adoption of evidence-based care processes and health information technology, it has not been linked to conclusive increases in clinical integration, better patient experience, or improvements in patient outcomes. In short, consolidation in the health care industry has not improved the quality of care.

However, consolidation within and across the industry has been found to generate market power and to drive price growth. For example, economic research demonstrates that both horizontal consolidation of hospitals and vertical consolidation of physician practices with hospitals contribute to health care price increases throughout the nation, especially in California. Recent evidence finds an association between hospital mergers and price increases even when the merger occurs across geographic markets. Despite this evidence, many consolidation efforts, in particular vertical and cross-market mergers, continue to proceed unchallenged.

State antitrust enforcement can provide a robust alternative to federal antitrust enforcement agencies. However, current constraints limit the ability of California’s attorney general (AG) both to pursue all possible antitrust violations in California and to address the escalating scope and negative impacts of health care industry consolidation. As a result, some policymakers have begun considering expanding the AG’s oversight of health care mergers.

This report examines the California AG’s existing merger oversight authority, compares that to the authority held by other state AGs, and then offers a series of considerations for policymakers interested in ensuring that California’s health care markets operate in a more consumer-friendly manner.