Market Failure and Non-Standard Contracting: How the Ghost of Perfect Competition Still Haunts Antitrust

Modern antitrust policy has a ‘love hate’ relationshipwith non-standard contracts that can overcome market failure.On the one hand, courts have abandoned various per se rulesthat once condemned such agreements outright, concluding thatmany non-standard contracts may produce benefits that are cognizableunder the antitrust laws.¹ The prospect of such benefits, itis said, compels courts to analyze these agreements under theRule of Reason, under which the tribunal determines whethera given restraint enhances or destroys competition.² At thesame time, courts, scholars, and the enforcement agencies haveembraced methods of rule of reason analysis that are undulyhostile to such agreements.³ In particular, courts and othersare too quick to view such agreements and the market outcomesthey produce as manifestations of market power. This articleseeks to explain why these agreements are still the object ofundue hostility.     

The impact of health maintenance organizations and competition on hospitals in Minneapolis/St. Paul

The Healthcare Educational and Research Foundation (HERF) in Minneapolis undertook a two-year research project to study the effects of health maintenance organizations (HMOs) and competition on the hospital industry in Minneapolis/St. Paul. This article summarizes HERF's major findings surrounding three key questions: (1) do the HMOs in Minneapolis/St. Paul use fewer hospital resources relative to conventional payers?; (2) do recent overall community trends in inpatient use suggest evidence of hospital utilization-reducing effects attributable to HMOs?; and (3) given the highly visible competitive process among Minneapolis/St. Paul providers, do hospital cost and revenue data suggest any evidence of cost-containment? The findings (based on data through 1982) indicate that for comparable patients, Twin Cities HMOs appear to use fewer medical care resources per hospitalized patient. There was, however, no clear evidence of community-wide, utilization-reducing effects directly attributable to the "competitive effect" of HMO introduction and development in the market. In addition, there was no empirical evidence that HMOs (which had enrolled 25 percent of the consumer market by 1982), or other large buyers of inpatient services, have selected hospitals on the basis of price as hypothesized by competition advocates.