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October 28, 2005

Smith College Economist an Expert Witness in Precedent-Setting Antitrust Case

NORTHAMPTON, Mass.—Smith College Economist Deborah Haas-Wilson was the U.S. Federal Trade Commission’s (FTC) economic expert in its first victorious challenge to a hospital merger in more than ten years.

The judge recently ruled that the merger that created Evanston Northwestern Healthcare, a three-hospital system in suburban Chicago, violated federal antitrust laws. The merger will “substantially lessen competition and harm consumer welfare in the future,” according to the decision.

Evanston Northwestern Healthcare (ENH) must now sell the suburban hospital it purchased five years ago. ENH officials stated they will appeal the ruling.

Typically, those who enforce federal and state antitrust laws challenge mergers before, or soon after, they occur, said Haas-Wilson. Because in this case the FTC challenged the merger years after it happened, data on the pre- and post-merger prices were available to analyze the price effects of the merger.

Pointing to the testimony of Haas-Wilson, the judge wrote, “Complaint Counsel’s expert compared price increases implemented by ENH post-merger to price increases implemented by other hospitals in her control groups and found that, across all managed care plans, ENH’s price increases exceeded the control groups by 11 to 18 percent; i.e., if other hospitals raised their prices by 10 percent, ENH raised its prices by 21 to 28 percent.”

The post-acquisition decision raises the question as to whether retrospective challenges will be used in future cases, said Haas-Wilson.

Haas-Wilson is the author of “Managed Care and Monopoly Power: The Antitrust Challenge,” published by Harvard University Press in 2003, that explains how antitrust laws, when correctly enforced, permit markets to work efficiently and competitively, fostering low prices and high quality.

The judge’s decision:

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