Contracts Mergers Collaboration or Combination? ACOs Networks - - PDF document

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Collaboration or Combination? Integration or Collusion? Beware of Antitrust Risks Mergers

Networks Employed Physicians Contracts ACOs Bundled Payments Integration Just when you thought it was safe….

September 9, 2011 House Ways & Means Committee Hearing on Health Care Industry Consolidation

“If ACOs end up stifling rather than unleashing competition, we will really have let one of the great opportunities for health care reform slip away.” Jon Leibowitz, FTC Chair

Arrangements with Antitrust Risks

• ACOs
• Collaborating with competitors on expensive

services/technology

• Mergers in the same market
• Acquiring competing practice/facility
• Employing physicians and
• Requiring in-network referrals
• Limiting call/referral patterns
• Setting artificially high standards to exclude
• thers

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Just because it makes good business sense doesn’t mean it’s legal.

Antitrust Laws

Assumption: Competition will yield lower prices, increased

• utput, and/or higher quality.

The antitrust laws protect competition, not competitors.

Sherman 1 (15 U.S.C. §1) Prohibits:

• Contract, combination, or

conspiracy

• Unreasonable restraint of

trade

Per Se vs. Rule of Reason Per Se Violations

• Market Allocation
• Price-Fixing
• Group Boycott

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Rule of reason analysis allows for review of justification for actions taken. “Whether the restrictive practice imposes an unreasonable restraint

• n trade which outweighs the

competitive benefits of the collaboration.” Rule of Reason Analysis = Case-by-Case Very Fact-Specific. HAVE GOOD FACTS FIRST!

Sherman 2 Prohibits:

• Monopolization
• Attempts to monopolize
• Possession of monopoly power in

the relevant market, AND

• The willful acquisition or

maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen,

• r historic accident.

Antitrust Enforcement

• FTC
• DOJ
• States’ Attorneys General
• Private Citizens

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Health Care’s Antitrust History

• FTC vs. many medical staffs.

See e.g., In re Forbes Reg'l Health Sys.

• Med. Staff, 94 F.T.C. 1042 (1979) (HMO-

associated members); Health Care Mgmt. Corp., 107 F.T.C. 285 (1986) (podiatrists); North Carolina Orthopaedic Ass'n., 108 F.T.C. 116 (1986) (podiatrists); Medical Staff of Mem'l Med. Ctr., 110 F.T.C. 541 (1988) (nurse midwives)

Health Care’s Antitrust History

• Ariz. v. Maricopa County Med. Society,

47 U.S. 332 (S. Ct. 1982)

• Robinson v. Magovern, 521 F.Supp. 842

(W.D. Pa. 1981), aff’d, 688 F.2d 824 (3d

• Cir. 1982)
• Patrick v. Burget, 486 U.S. 94

(S. Ct. 1988), spawned HCQIA

• Jefferson Parish Hosp. Dist. v. Hyde,

466 U.S. 2 (S. Ct. 1984)

“Health Reform” Created Another Flurry of Antitrust Activity

• Early ‘90s : “failed” Clinton

Health Plan

• Insurers Won
• Industry Response: Buy PCPs;

Merge/Acquire; PHOs, PPOs, IPAs, MSOs, PMAs

Industry protests antitrust prosecutions.

Result

DOJ, FTC Statement of Antitrust Enforcement Policy in Health Care (August 1996) Much subsequent guidance.

Clinical Integration: (FTC)

“An active and ongoing program to evaluate and modify practice patterns…and create a high degree of interdependence and cooperation among the [physicians] to control costs and assure quality. It may include:

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Certificates of Public Advantage See e.g., Wis. Stat. §150.85; Minn. Stat. §62R.06; Kan. Stat. Ann. §4955; N.D. Cent. Code §23-17.5-01; N.C. Gen. Stat. 90-21.24

What has race to “clinical integration” wrought? Perinatal Medical Group, Inc. v. Children’s Hospital Central California E.D. Cal. 2009 and E.D. Cal. April 14, 2010 Neonatology Group split

Hospital contracted with larger component (CCNG)

Dispute:

• 1. CCNG had exclusive contract for NICU

Medical Director and related services. Contract required CCNG to practice exclusively at hospital and refer exclusively to Specialty Medical

• 2. Drs. Rajani and Elliot maintained NICU

privileges, but could admit patients only if they provided 24/7/365 coverage

Claimed

• Sherman 1 –
• [No, Copperweld]
• Sherman 2 –
• Possession of monopoly power
• Willful acquisition or maintenance
• f that power as distinguished

from consequence of superior product, business acumen, or historic accident

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In April 2010, court denied motion to dismiss. Settlement Discussions

Witham v. Olympic Medical Center, 2009 WL 5205962 (W.D. Wash.) Board certified internist practice limited to oncology. OMC’s market share for medical oncology

1990 ─ 0% 2009 ─ 95%

Claims

• Intent to monopolize
• Unfair competition
• Corporate practice of

medicine (raised by court)

• Intentional interference

Federal Trade Commission v. Phoebe Putney Health System, Inc. FTC v. ProMedica Health System

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If considering any of these collaborative strategies…

First, develop your rationale: quality, cost, access Do not meet with competitors without counsel Engage timely government, payors Remember loose lips invite/extend litigation

The game goes on….