Antitrust Law Daily Wrap Up, ANTITRUST NEWS: FTC Commissioner Ohlhausen Discusses Agency's Response to Health Care Consolidation, (Mar 14, 2013)

By Jeffrey May, J.D.

The FTC’s role in policing hospital and health care provider consolidation was the topic of remarks delivered by FTC Commissioner Maureen K. Ohlhausen at the 2013 America’s Health Insurance Plans (AHIP) National Policy Forum, in Washington, D.C. on March 13. AHIP is the national trade association representing the health insurance industry.

In her speech, entitled “Hospital Consolidation: The Good, the Bad, and the Ugly,” Ohlhausen talked about how the agency has been responding to the trend toward consolidation in the industry, a trend that “seems to have picked up pace” in recent years. “We need to try to foster the potential benefits that can come from clinical integration while guarding against the possibility of provider market power, collusion, or other conduct that could harm consumers,” she said.

First, identifying the “good,” Ohlhausen pointed to the utilization of agency guidance by health care providers to avoid antitrust pitfalls. Providers have used the Department of Justice/FTC health care guidelines and advisory opinion program “to realize the efficiencies of clinical integration and cost-sharing while staying within the bounds of the antitrust laws,” she noted.

A recent FTC staff letter to Norman Physician Hospital Organization (PHO) was highlighted as an example. In that letter, the staff concluded that the agency should not challenge the establishment of a clinically integrated provider network to engage in joint contracting with third-party payers on behalf of its participating physicians and hospitals in Oklahoma. The steps taken by the PHO appeared “to offer the potential for a high degree of cooperation among the participating physicians and to generate significant efficiencies.”

In addition, the FTC's “considerable guidance” for Accountable Care Organizations (ACOs) being administered by the Centers for Medicare and Medicaid Services (CMS) was touted. An ACO is a group of health care providers or suppliers or a network of groups—often affiliated with a hospital—that collaboratively manage and coordinate care.

“While it is still too early to tell whether this program can achieve its goals, thus far more than 250 ACOs have been established insuring in excess of 4 million people, many in areas in greatest need of quality care,” Ohlhausen said.

The FTC's recent challenges to provider consolidation and alleged price fixing by providers also were discussed. Some recent merger challenges that resulted from potentially “bad” conduct were identified. First up was the FTC/Idaho Attorney General challenge to St. Luke’s Health System, Ltd.’s acquisition of Saltzer Medical Group, P.A., which was announced earlier this week. The FTC and state attorney general are moving to block the transaction on the ground that the combined entity would have market power in the Nampa, Idaho, region to demand higher rates for health care services provided by primary care physicians. This acquisition also is the subject of a private action filed by a competitor.

“The deal and the private litigation have garnered national attention with the press focusing on the ability of hospital systems to buy up primary care groups, change the sign over the door, and then raise prices for the same procedures as before and impose new facilities fees because the doctors are now ostensibly in a hospital facility,” according to Ohlhausen.

Another instance of "bad" conduct was the Reading Health System's attempted purchase of a local specialty hospital, the Surgical Institute of Reading, in Pennsylvania. The deal was abandoned after the FTC filed suit in November 2012.

“Had we not been vigilant and kept an eye on this deal it could have been a major blow to consumers in a hardscrabble part of central Pennsylvania,” Ohlhausen asserted.

Also noted was Promedica Health System’s purchase of St. Luke’s Hospital near Toledo, Ohio. The Sixth Circuit is currently reviewing a Commission opinion (2012-1 Trade Cases ¶77,840) ordering Promedica to divest the property acquired in August 2010.

The “ugly” refers to naked price fixing conduct and collective refusals to deal. Ohlhausen pointed to the agency's recent action against a group of eight independent providers of nephrology services in southwestern Puerto Rico. The FTC alleged that the doctors illegally collectively bargained with insurers and refused to treat health plan patients when their price demands were rebuffed by health plans. Under a proposed FTC consent order, the doctors would be barred from jointly negotiating prices, jointly refusing to deal with any insurer, and jointly refusing to treat patients.

“I see a potentially significant benefit in laying down a marker in defense of competition as the key ordering principle in health care,” Ohlhausen said. “While antitrust intervention should be pursued with great care, in the health care space antitrust actually may help to prevent or forestall much more onerous forms of regulation that may be called for in the future if too much consolidation takes place.”

News: Antitrust FederalTradeCommissionNews