Antitrust Revisited

Understanding the specifics of how antitrust relates to physicians.antitrust revisted

The ACR Legal Office continues to receive questions about why federal and state authorities seem more concerned about doctors violating antitrust laws and less concerned about hospitals and insurance companies doing so.

The simple answer to these queries is that the antitrust laws are designed to protect the consumer rather than the other entities involved in business transactions. In addition, insurance is traditionally regulated by state law, while most antitrust enforcement originates at the federal level. In our October 2012 column, "In Law We Antitrust," we laid out the basics of antitrust law. This month, we delve a little deeper into the application of antitrust laws when it comes to physicians and their practices.

Physicians are prohibited from joining together and sharing cost and pricing information in order to collectively negotiate reimbursement with payers, unless the physicians have integrated their practices to, in essence, become one practice. The government has established "safety zones," or safe harbors, that permit physicians to negotiate collectively if they achieve certain levels of clinical and financial integration. In that case, the large integrated practice is permitted to negotiate on behalf of itself and its physicians. In the same vein, individual physicians, or separate groups of physicians, are not permitted to coordinate their actions to withhold their services from an insurer or hospital, i.e., to threaten to or actually go on strike. Only if the physicians are employees of the hospital or other health care entity are they permitted to collectively negotiate compensation and working conditions.

The stated logic behind this approach is that collective action by physicians would inevitably lead to increased reimbursement or compensation for physicians, thus raising costs to payers and ultimately increasing costs to consumers — in this case, patients. Perhaps this would be so in a textbook economic model. However, in the real world, insurers and hospital systems have been consolidating at an increasing pace, with new mergers and expansions announced almost monthly. While the government occasionally opposes a hospital merger or acquisition that would result in a single hospital in a locality, it seems less concerned about situations where consolidation has left only one or two insurers in an area or even an entire state. In such cases, the insurer has a virtual monopoly and can set reimbursement to physicians, and to hospitals, as low as it chooses. This logic also ignores the 800-pound Medicare gorilla in the room, which sets and cuts rates without any competition and without regard for the actual costs for physicians doing business. Increasingly, CMS simply ignores the data submitted by organizations like the ACR and responds only to political pressure to cut health-care expenditures.

So what can radiologists and other physicians do to overcome this inherently unfair situation? One approach is to try to change the law. In Connecticut, physicians have introduced Connecticut House Bill 6431, "An Act Concerning Cooperative Health Care Arrangements," which would exempt certain "cooperative arrangements" among providers from antitrust laws. Such arrangements would permit providers to collectively negotiate reimbursement rates with insurers without full practice integration and after state approval of the arrangement. Insurers, the state attorney general, and the Federal Trade Commission (FTC) have opposed the bill, saying it would allow price fixing. The FTC has opposed similar legislation in other states on the grounds such legislation is likely to foster anticompetitive conduct that is inconsistent with federal antitrust law and policy. It has also contended that such conduct could work to the detriment of health-care consumers. Such legislation is possible due to what is known as the "state action" exemption, based on a U.S. Supreme Court case holding that Congress did not intend federal antitrust laws to restrain state action or official action directed by states, so states could take or authorize certain anticompetitive actions that would otherwise violate federal antitrust law (Parker v. Brown, 317 U.S. 341 [1943]). As a result, if there is sufficient state involvement in administering the so-called anticompetitive action, it may be considered exempt from application of federal antitrust law. This is why the FTC and sometimes the Department of Justice insert themselves into state legislative matters — in order to prevent loss of their authority over matters that would otherwise be under their jurisdiction.

Nevertheless, as insurer and hospital consolidation continues to increase, some state legislatures seem willing to at least consider legislation that provides a more equal bargaining position for physicians. If you or your practice is interested in learning more about this approach, your first step should be to contact your state chapter to see if it is already working on this issue or would be interested in doing so. After that, the chapter can contact ACR's government relations and chapter relations staff to assist with model legislation or, in states that have undertaken this process, provide contact information for those involved.

By Bill Shields, JD, LLM, CAE, and Tom Hoffman, JD, CAE

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