On May 9, 2016, the US District Court for the Middle District of Pennsylvania denied the motion by the Federal Trade Commission and Pennsylvania Office of Attorney General for a preliminary injunction to enjoin the merger of Penn State Hershey Medical Center and PinnacleHealth System. The decision ends a string of victories by the FTC in recent health care merger litigation.
In this month’s American Bar Association (ABA) Section of Antitrust Law Spring Meeting, the program “Antitrust & Health Care: Square Peg in a Round Hole?” featured debate and discussion about antitrust law treatment of health care transactions and how that treatment might (or should) evolve (via regulation, legislation, or some combination of approaches), or conversely, whether the intersection of antitrust law and health care is more akin to a square peg meeting a round hole. Moderated by Jim Donahue (Office of the Pennsylvania Attorney General), the panel’s speakers included Robert Berenson, MD (The Urban Institute), Alexis Gilman (the Federal Trade Commission (FTC)), Melinda Hatton (American Hospital Association (AHA)) and Elinor Hoffmann (Office of the New York Attorney General (AG)).
The program first considered a hypothetical merger of specialty physician practices, where the acquiring practice has privileges at one of the market’s two hospitals and the merger would consolidate privileges at that hospital.
The FTC said it would likely look at the transaction on a specialty-by-specialty basis; the New York AG agreed, but thought it was worth considering: is multi-specialty a market itself? She referenced ProMedica’s cluster markets as a possible route for analyzing the transaction (e.g., a parent might take two children to a multi-specialty practice at the same time, one to see a pediatrician and the other to see a dermatologist).
The American Hospital Association (AHA) thought that with the Affordable Care Act’s (ACA’s) incentive to keep the population out of the hospital, hospitals are repurposing services toward population health goals, and referenced remote medicine and affiliations.
The FTC stated that it continued to prefer structural remedies in the form of injunctions or divestitures for health care transactions, pointing to its rejection of Phoebe Putney’s proposed conduct remedy. The New York AG agreed that while structural remedies are typically best, the states (particularly Pennsylvania and New York) tend to be more willing to consider conduct remedies, often with the goal of marrying regulation with achievement (efficiencies).
Dr. Berenson posited that physician group acquisitions are the wave of the future, because the current regulatory environment makes solo practice difficult. So, he said, where physicians or specialties must be divested, those doctors are now likely to seek hospital employment.
From the hospital perspective, the AHA noted that health care transactions are a peculiar breed— health care cannot be divorced from regulation, acquisition costs are usually very high, and hospitals must pay fair market value under Stark and Anti-Kickback laws—and commented that the peculiarities of such transactions are not always adequately taken into consideration in merger challenges.
Vertical Mergers; Narrow vs. Broad Networks
The panel next considered a hypothetical merger where a health plan with 60 percent market share in a mid-size city purchases one of the two hospitals and changes its network from broad to narrow.
The FTC noted that although they have not challenged this sort of vertical health care transaction, it would do so under the right circumstances (e.g., if the hospital had no excess capacity, [...]
At the recent Antitrust in Health Care conference in Arlington, Virginia, representatives from the Federal Trade Commission and U.S. Department of Justice Antitrust Division discussed important health care and antitrust topics. Speakers stressed that the Affordable Care Act is not an opportunity for anticompetitive consolidation and conduct. Providers and payers alike should continue to analyze every acquisition, collaborative arrangement, contract or unilateral action under the traditional framework of antitrust law.
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FTC Commissioner Julie Brill addressed attendees at the 2013 National Summit on Provider Market Power on June 11. The focus of her remarks were on the intersection of antitrust, the Affordable Care Act (ACA) and Accountable Care Organizations (ACOs). She first touched on the ACA. Noting the empirical evidence shows that high concentration among health care providers has harmful competitive effects, she was optimistic that the exchanges that will be established as a result of the ACA will offer consumers a range of competing, affordable health care products and will encourage greater competition in local insurance markets.
Turning to ACOs and antitrust, she stated that the FTC is starting to hear providers contend that the ACO program is a justification for their (alleged) anticompetitive activity. Providers complain that the government is "talking out of both sides of their mouth" with Centers for Medicare & Medicaid Services (CMS) encouraging coordination via the ACO program and the antitrust agencies challenging coordination. Commissioner Brill disagreed stating that "the goals of the ACA and antitrust enforcement are aligned and compatible." She noted the extensive cooperation between CMS and the antitrust agencies. She explained that the ACA requires coordination of care but that it "neither requires nor encourages to merger or otherwise consolidate," but like any collaboration short of a merger, they must do so in a way that does not violate antitrust laws. Commissioner Brill also stated that ACOs are flourishing and only two provider groups have thus far sought antitrust guidance as permitted under the ACO Policy Statement from the agencies before forming the ACOs.
Finally, Commissioner Brill emphasized that the FTC will continue to investigate provider collaborations or mergers where there may be competitive harm. She made a point to clarify that the FTC evaluates all assertions of efficiencies and quality improvements but that parties must provide "good documentary evidence" to support these assertions.
Commissioner Brill’s speech is consistent with the posture and approach the agencies have been taking with regard to provider consolidations in the relatively new landscape being built by the ACA and formation of ACOs. There is not yet enough data to see exactly how the ACA will affect providers from an antitrust perspective. But providers can be certain that the agencies will continue to look closely at any consolidation or collaboration that may violate the antitrust laws, regardless of whether the activity was taken to try to comply with the ACA.
The full speech can be found here.