Antitrust in Medicine
Recent legal changes are altering the competitive landscape in health care.
In the past, we have written extensively about the concept of antitrust law while noting that the government seemed to show little interest in using it to regulate consolidation in the hospital and medical insurance areas.1, 2
In the last few years, things have changed dramatically. ACR members are now experiencing an increasing number of mergers or attempted mergers among hospitals, health systems, and insurers.
Most recently, proposed mega-mergers involving four major insurers have taken center stage. Anthem and Cigna planned a $48 billion deal, while Aetna and Humana announced a merger worth $37 million.
However, in January 2017, a federal district judge in Washington, D.C., blocked the Aetna merger. Then in February, a different federal district judge disapproved the Anthem deal. In both cases, the U.S. Department of Justice sued to stop the mergers, and both judges ruled that the proposed deals would harm consumers by restricting competition in the medical insurance marketplace.
On the hospital front, the Federal Trade Commission (FTC) sued to block several proposed mergers. In a case involving Penn State Hershey Medical Center, and an unrelated case involving Advocate Health Care Network, two different federal courts of appeal overturned district-court rulings permitting the proposed mergers.3 The appellate courts sided with the FTC in blocking the mergers based on the negative impact they would have on prices and availability of medical care in the relevant markets.
In each of these four cases (and in most such cases), the enforcement authorities argued that the proposed combinations would ultimately disadvantage consumers, including patients. Note that no one mentioned the impact on physicians or other providers. Neither federal nor state authorities see antitrust laws as designed to protect or benefit physicians. Nevertheless, the failure of the proposed mergers may make it easier for physicians to deal with the insurers or hospitals involved as long as two or more such entities continue to operate in the same geographic area.
So, other than that, why should ACR members care about antitrust law? It’s because, as we wrote in our previous articles, federal and state authorities use antitrust law to regulate physician practices in the same manner as hospitals and insurers. Whether physicians attempt to join a larger practice or health system voluntarily as employees or a bigger player tries to absorb a private practice or hospital, the government is watching.
In 2015, a federal appellate court upheld a district court’s decision that invalidated a proposed acquisition by St. Luke’s Health System in Idaho of a physician group, including radiologists.4 St. Luke’s wanted to expand its footprint by taking over the state’s largest independent multispecialty physician practice. But a competing medical group — along with FTC and the Idaho attorney general — objected that competition would suffer via higher premiums and out-of-pocket costs.5 The two courts agreed, ruling that although the health system had a “pro-competitive” motive of enhancing quality care, it should have pursued a different way of achieving that objective — perhaps through a joint venture.
ACR members also have to act prudently when doing business with payers and health systems. An appellate court in 2008 affirmed FTC’s decision that a North Texas specialty practice unlawfully engaged in price fixing by negotiating agreements among its participating physicians.6 This group also violated antitrust laws by refusing to deal with insurers except on collectively agreed terms and imposing a minimum fee schedule for payer offers to physicians. The court rejected the practice’s claim that it was a clinically integrated legal entity exempt from antitrust restrictions.
Last January, FTC settled allegations that a Minnesota health system’s proposed acquisition of a physician group. Similar to the Idaho case, the government deemed the transaction to be anticompetitive because payment rates to the physicians might increase, while patients could have lost quality and service benefits from that practice. Notably, FTC required the system to permit several physicians to leave and work for other local professionals or set up their own area practice.
As the Trump administration shapes its health care agenda, antitrust enforcement looms as a major, if unheralded, area that ACR members must heed. Communicate with a qualified lawyer who can advise on pending and current arrangements with other physician groups and health systems.
1. Shields B, Hoffman T. “In Law We Antitrust,” ACR Bulletin, 2012;67(9):20.
2. Shields B, Hoffman T. “Antitrust Revisited,” ACR Bulletin, 2013; 68(8):20.
3. FTC v. Penn State Hershey Med. Ctr., (3d. Cir. 2016); FTC v. Advocate Health Care Network (7th Cir., Oct. 31, 2016).
4. Saint Alphonsus Medical Center – Nampa Inc., et al. v. St. Luke’s Health System, Ltd., et al. (9th Cir., Feb. 10, 2015).
5. Shields B, Hoffman T. “Dangerous Moves,” ACR Bulletin. 2014;69(4):20.
6. Federal Trade Commission. North Texas Specialty Physicians, In the Matter of. Updated Sept 12, 2008. Available at bit.ly/2n2J8cy. Accessed March 7, 2017.
By Bill Shields, JD, LLM, CAE, and Tom Hoffman, JD, CAE