Abstract
The United States relies on competition to balance costs and quality in the health care system. But concentration is increasing throughout the hospital, physician, and insurer markets. Midsize community hospitals face declining demand and growing competition from both larger hospitals and smaller freestanding diagnostic and surgical centers, leaving the midsize hospitals vulnerable to closure or merger with other facilities. Competition among insurers has been limited by the development of hospital systems that extend the bargaining power of "must-have" hospitals (those perceived to provide the best care for complex and less common conditions) across local health care markets. Government antitrust enforcement could play an important role in maintaining competition in both the hospital and insurer markets, but in many markets, the impact of that enforcement has been limited to date. Policy makers should consider supplementing antitrust activities with strategies that combine competition and regulation-for example, by regulating selected prices and structuring competition to cover entire insurance markets.