How to Minimize the Risk of Collusion in the Wake of the CMS Hospital Price Publication Mandate

In 2019, the Centers for Medicare and Medicaid Services (“CMS”) finalized a rule requiring hospitals to publish their prices for certain goods and services with the goal of encouraging price competition among hospitals and increasing affordability by increasing consumers’ ability to compare prices. Despite the admirable ambitions that led to this rule, competition law has historically disfavored the exchange of prices among firms because it carries the potential danger of increasing firms’ ability to engage in illegal price-fixing arrangements. This is especially true in highly concentrated markets, which most hospitals enjoy. There is currently no legal remedy to offset this new risk because courts generally only view price transparency as meaningfully indicative of price-fixing when firms exchange price information voluntarily and directly. To solve this quandary, this Note proposes a new multistep analysis that courts can use to evaluate circumstantial evidence under section 1 of the Sherman Act. First, this Note recommends that courts classify evidence related to the characteristics of a market as “base factors.” Second, this Note recommends that the existence of significant base factors must enhance the probative value of any existing “plus factors,” here meaning circumstantial evidence of price-fixing that acts to discount alternative explanations for parallel prices. This multistep process would offset the risks posed by the new CMS rule without requiring any statutory or regulatory changes and without putting innocent firms at risk of being punished for the conditions of their markets.