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Fortnightly Magazine - February 1 1995

doctor per 415 U.S. citizens-foreshadowing a surplus of 166,000 physicians by 2000. This excess capacity will encourage regional networks to squeeze out many of the area's weakest providers.Regional Monopolies Evolve

Over the next three to five years, expanded enrollment in managed care plans will force almost all doctors and acute care facilities to associate themselves with dominant, geographically linked, vertically and horizontally diversified health alliances. This trend will accelerate as fiscal constraints force health care providers to cut costs. By the turn of the century, almost every hospital in the United States could be affiliated with any one of a maximum of 850 regional networks. That figure assumes certain concentration rates for health networks: 1) an average of two networks for each metropolitan area under 450,000, 2) three and one-half networks for areas between 450,000 and 1.5 million, and 3) five networks for each metro area greater than 1.5 million. The strongest regional alliances will be geographically linked, compatible with existing physician referral patterns, and able to develop common culture and goals among trustees, doctors, and various levels of health executives.

In this climate, and without any utility-style state public service commission for health care, we could see one or several alliances dominating each region as an oligopoly or virtual monopoly, inviting a public utility model to regulate the health field.State PUCs for Doctors?

Federal antitrust law, though created to fight monopoly power, may not prevent these massive health networks from forming. A recent (August 1994) U.S. General Accounting Office study of the 397 acute hospital mergers reviewed by the Department of Justice and the Federal Trade Commission (FTC) during the fiscal years 1981 through 1993 reveals that less than 4 percent were challenged. Neither the Department of Justice nor the FTC has ever questioned a hospital joint venture. If this state of affairs continues, one or, at most, a few networks will eventually dominate almost all regions nationally.

In 1959, the late Ray Brown (often considered the dean of American hospital administrators) proposed that state health services commissions allocate resources. Later (1970), the American Hospital Association's Ameriplan recommended forming a National Health Commission to oversee the organization and financing of the U.S. health system. Each state would create a health services commission to control the range of services and the reimbursement rates for providers. The idea of state health commissions also served as a model in the formation (1971) of the Maryland Health Services Cost Review Commission. But the health industry rejected the "commission" approach-primarily on the advice of public utility executives, who warned the nation's medical and hospital leadership to avoid such regulation at all costs.

A key concern for health providers is whether a state health commission could maintain the various competitive elements of managed care and regional networks while making health delivery more efficient and fair. Can regulators balance the rights and needs of consumers, providers, and government? Ultimately, even if regulation could be made more effective, the performance of these hypothetical state health commissions would still fall short, in my opinion, because the difficulties with regulation arise