July 9, 2020

Health care collaborations among competitors: minimizing antitrust risks

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Close-up of female doctor using stethoscope , focus on stethoscope

Close-up of female doctor using stethoscope , focus on stethoscope

By Scott P. Perlman, From Corporate Counsel

In the past five years since the adoption of the Affordable Care Act (ACA), the health care industry has experienced an unprecedented wave of consolidation and collaboration. While much of the attention has focused on hospital mergers, including those that have been successfully challenged by the Federal Trade Commission (Phoebe Putney, ProMedica, and St. Luke’s), the ACA also has driven other types of collaboration by competing health care providers, including hospitals, outpatient facilities and physicians. In particular, as part of the Medicare Shared Savings Program, the ACA encourages providers to form accountable care organizations (ACOs) that take responsibility for managing the health of a given population in return for the ability to share in savings achieved with Medicare. Further, the costs of complying with certain ACA requirements, such as adopting electronic medical records, have driven physicians and smaller hospitals to form joint ventures or other affiliations with larger institutions.

While these collaborations offer potential “procompetitive” benefits, such as lower rates and premiums for health plans, employers and patients, they also can raise antitrust concerns that combinations of competing providers will result in higher prices and/or reduced quality of care. This article provides guidance on how parties to such transactions can minimize these antitrust risks while still capturing the benefits of collaboration.

General Antitrust Principles Applicable to Collaborations Among Competitors

As a general matter, ACOs and other non-merger collaborations between competing providers raise three potential antitrust issues spelled out in the questions below:

(1) Does the collaboration represent a procompetitive, efficiency-enhancing integration of the competing providers, or is it a naked attempt by those competitors to fix prices, allocate markets or engage in other per se illegal anticompetitive activity (e.g., a provider boycott to obtain higher rates)?

(2) Assuming the collaboration itself is procompetitive, are agreements among the parties on prices, customers, territories and other matters on which they ordinarily compete reasonably necessary to achieve the collaboration’s procompetitive benefits?

(3) Will the collaboration enable the competing parties to exercise market power (i.e., the power to raise prices above competitive levels or exclude competition) they could not have achieved without the collaboration? Analysis of this question focuses on issues such as defining the relevant product and geographic markets in which the parties compete, the market share of the parties and other competitors and whether the collaboration is exclusive (i.e., the parties cannot compete with the collaboration) or non-exclusive.

In 1996, the Department of Justice (DOJ) and the Federal Trade Commission (FTC) issued statements outlining their antitrust enforcement policies in the health care industry. These provided guidance on how such collaborations are evaluated by the agencies and defined “safety zones” in which qualifying collaborations were unlikely to be challenged. In 2011, the agencies issued statements providing similar guidance specifically for ACOs.

Steps to Minimize Antitrust Risks

Based on the DOJ and FTC guidelines, along with advisory opinions from both agencies, parties to ACOs and other provider collaborations seeking to minimize the antitrust risks of such arrangements should consider adopting the following strategies.

  1. Establish clear evidence of efficiency-enhancing integration:

For Non-ACO Collaborations

  • Agree to enter into only capitated contracts with payers or other forms of substantial financial risk sharing (e.g., agreeing to withhold 20 percent or more of provider compensation subject to meeting group cost savings and/or quality goals); or
  • Adopt a program of clinical integration;

o   In general, this requires an ongoing program to evaluate and monitor practice patterns and create a high degree of interdependence among providers to control costs and quality, as well as a significant investment of financial and human capital by members.

o   In the FTC’s 2013 Norman PHO advisory opinion, this included creating committees to establish clinical practice guidelines, creating a mechanism to enforce compliance, adopting integrated electronic platforms and requiring physician commitments of time and money.

For more on this story go to: http://www.corpcounsel.com/id=1202745239302/Health-Care-Collaborations-Among-Competitors-Minimizing-Antitrust-Risks#ixzz3uzdGkdt5

 

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