Marshfield Clinic, physician networks, and the exercise of monopoly power

Abstract

Objective: Antitrust enforcement can improve the performance of large, vertically integrated physician-hospital organizations (PHOs). Objective: To examine the recent court decisions in the Blue Cross and Blue Shield United of Wisconsin v. Marshfield Clinic antitrust case to understand better the benefits and costs of vertical integration in healthcare.

Summary and conclusions: Vertical integration in the Marshfield Clinic may have had the benefits of reducing transactions and uncertainty costs while improving the coordination between ambulatory and inpatient visits, but at the cost of Marshfield Clinic's monopolizing of physician services and foreclosing of HMO entry in northwest Wisconsin. The denial of hospital staff privileges to non-Marshfield Clinic physicians combined with certificate-of-need regulations impeded physician entry and solidified Marshfield Clinic's monopoly position. Enforcement efforts of recent antitrust guidelines by the U.S. Department of Justice and the Federal Trade Commission will need to address carefully the benefits and costs of vertically integrated systems.