Clear Antitrust Policies Will Be Needed to Guide Providers As They Form Integrated Delivery Networks
Br. Campbell is senior attorney, Catholic Health Association, St. Louis.
Summary
Since the 1970s, the outcomes in antitrust actions against healthcare facilities have become significantly more predictable. But there are still differences of opinion among healthcare providers and antitrust enforcers as to how far antitrust enforcement activities should go.
Antitrust enforcement involves a determination of reasonable and unreasonable activities, rather than the application of clear rules. This can lead to confusion over what is legal and may inhibit providers from engaging in collaborative efforts.
Intent is very important in antitrust matters. A cooperative venture's effect on the consumer is the primary factor in the enforcers' consideration of whether it is reasonable. Thus well-planned and appropriate healthcare ventures will succeed in most places.
Congress has been considering the antitrust implications of healthcare reform. To date, however, there is no consensus on what antitrust laws need changing, if any, or whether new definitions or exemptions could address the problem. Integrated delivery networks (IDNs), the central feature of many healthcare reform proposals, could raise many classic antitrust concerns. Antitrust enforcers' interest in these arrangements will vary according to their effect on competition. Any attempts to establish IDNs will need to also ensure clear language exists regarding the reach of antitrust laws.
No matter what shape healthcare reform eventually takes, it seems certain that the cornerstone of the new system will be some form of integrated delivery network (IDN)—a group of providers, physicians, and payers working together to provide a full continuum of services. However, as healthcare providers move into collaborative ventures, they are often uncertain how far can they go without violating antitrust laws. In developing closer ties with their former competitors, healthcare facilities need clearer policies about what is permissible.
Predictable Outcomes
Since the 1970s, the outcomes in antitrust actions against healthcare facilities have become significantly more predictable. Antitrust laws employ a consistent analytical discipline that generally produces predictable results. The Department of Justice (DOJ), the Federal Trade Commission (FTC), and the courts have become knowledgeable about healthcare. Many cooperative healthcare ventures have withstood antitrust scrutiny and gone through to completion. But there are still differences of opinion among healthcare providers and antitrust enforcers as to how far antitrust enforcement activities should go.
In the antitrust regulator's view, U.S. healthcare is a significant economic activity. The ideals of competition and market efficiency apply and must be promoted. Healthcare will be improved by the competition. The DOJ and FTC apply their usual concepts to test how this economic activity operates and promotes competition, a fundamental national economic policy.
Antitrust enforcement involves a determination of reasonable and unreasonable activities, rather than the application of clear, bright-line rules. Thus healthcare providers may complain about a perceived lack of common sense in the government's application of antitrust rules to some healthcare activities. Antitrust enforcement is fact specific. Different regulators, courts, and lawyers judging similar facts can and do reach different conclusions. This can lead to frustration and confusion over what is legal and may inhibit providers from engaging in collaborative efforts.
Intent is very important in antitrust matters. Antitrust regulators believe that many plans by healthcare providers are devised to stifle competition and create monopolies rather than to benefit the community. A cooperative venture's effect on the consumer is the primary factor in the enforcers' consideration of whether it is reasonable.
Any hope that healthcare could be free of antitrust laws is wishful thinking. Healthcare costs are too large a part of the nation's economy, and a century-old tradition is at least as significant as healthcare policy. Exemptions to antitrust laws for the development of IDNs could be introduced, but only if accompanied by significant, ongoing regulation.
Would the IDN regulatory structure justify granting exemptions from traditional antitrust economic control? It seems so, but legislation should be clear on this point to avoid future confusion over the applicability of antitrust laws.
Efforts for Change and Education
Various legal education programs have spread the message that well-planned and appropriate healthcare ventures will succeed in most places. This does not eliminate the uncertainty, but it addresses the myth that antitrust laws prevent any collaborative healthcare activities.
Congress has been considering the antitrust implications of healthcare reform. Bills have been introduced to allow a waiver for certain state-based healthcare reform demonstration efforts and to define exemptions or ways the antitrust laws should be applied.
To date, however, there is no consensus on which antitrust laws need changing, if any, or whether new definitions or exemptions could address the problem. Although congressional efforts to introduce reform tend to support the traditional philosophical assumptions favoring competition, they also reveal a willingness to restrain antitrust enforcement in defined healthcare ventures.
The American Hospital Association has engaged antitrust legal counsel to help avoid antitrust problems with its healthcare reform package. Although avoidance of regulation altogether seems unattainable, the AHA may be able to reach its stated goal of securing a reasonable application of antitrust rules or reasonable exemptions of the laws. AHA has been educating its members about the many possible avenues for cooperation.
The Catholic Health Association (CHA) and its members need to be aware of what other organizations are doing to seek changes in antitrust regulations and avoid duplicating these efforts. And we need to support and broaden congressional actions to encourage healthcare collaboration and avoid unreasonable antitrust entanglements.
IDNs and Antitrust Issues
CHA's healthcare reform proposal centers on IDNs—"a self-contained system of providers offering a full continuum of integrated care to an enrolled population." IDNs may be organized in different legal structures and managed by a variety of entities. Antitrust law is not concerned with the structures, only with the effects on competition. On the one hand, this allows broad freedom for developing efficient IDN structures, even without any antitrust exemptions. On the other hand, no specific legal structure offers more or less antitrust protection under current rules.
An IDN could raise all the classic antitrust concerns such as horizontal arrangements between like providers, vertical arrangements between different types of providers, and even per se violations that fix prices. Antitrust enforcers' interest in these arrangements will vary according to their effect on competition. Coordination of services among providers who do not compete because of differences in service area or product will raise less concern than plans involving the same kinds of providers or price fixing.
If an IDN can remain focused on the patient and efficiently deliver services to the community, as is proposed, this would minimize antitrust concern. Unfortunately, some features integral to IDNs (especially pricing and arrangements among like providers) could raise serious antitrust problems.
Another antitrust challenge common in healthcare is the private use of antitrust laws to fight a hospital's denial of physician's privileges, bid to provide medical services, or medical staff membership based on the quality of his or her medical care. Providers who are shut out of IDNs for similar reasons could sue the IDN, alleging antitrust violations. And some healthcare providers, motivated by politics or self-interest, doubtless will harm the consumer and merit antitrust enforcement.
Any attempts to establish IDNs will need to also ensure clear language exists regarding the reach of antitrust laws. Healthcare providers will need support to act without being tied up by those who oppose change or believe they have lost some economic benefits. No one needs a valid reason to sue, but clear, coordinated government healthcare and antitrust policies will help ensure a successful defense and timely IDN development.
Copyright © 1993 by the Catholic Health Association of the United States
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