Antitrust Law Daily Wrap Up, ANTITRUST NEWS: FTC official discusses agency’s role in health care market, (Jun 23, 2014)

By Linda O’Brien, J.D., LL.M.

Health care providers are reacting to market changes by adopting innovative methods to deliver their services, Deborah L. Feinstein, Director of the FTC Bureau of Competition, stated in an address on June 19 before the Fifth National Accountable Care Organization Summit in Washington, D.C.

Feinstein began her remarks, entitled “Antitrust Enforcement in Health Care: Proscription, not Prescription,” by noting that unprecedented changes in the way health care services are provided and paid for have prompted participants at all levels to reevaluate how health care is delivered and financed, including the creation and expansion of Accountable Care Organizations (ACOs). As with other sectors of the economy that have experienced dramatic change, industry participants are reacting by developing new models, learning from their experiences, and adopting best practices.

Effective antitrust enforcement is as important in a time of dynamic change as in periods of stability, according to Feinstein. The FTC’s enforcement efforts help ensure that new and potentially more efficient ways of delivering and financing health care services can develop and compete, while preventing accumulations of market power that will injure consumers through reduced competition. By preventing anticompetitive mergers, as well as alliances and conduct that thwart competition, antitrust enforcement saves money that consumers, employers, and governments would otherwise spend on health care. In addition to these cost savings, preserving competition can help spur innovation that improves care and expands access.

The FTC’s unique blend of enforcement, advocacy, and research makes the agency well-positioned to promote a competitive healthcare marketplace in the midst of change. It is critical to recognize that the integration of care provided to patients is fully compatible with core antitrust principles, Feinstein noted.

Feinstein stated that, in every investigation of health care provider transactions, the FTC carefully considers evidence that the transaction will benefit consumers through improved quality, new services, and/or decreased costs. The agency encourages parties to provide concrete evidence to support their quality claims and works closely with experts in the field to assess the arguments made by providers about improvements to quality of care. The agency also recognizes that providers want antitrust guidance to help them navigate the complex issues that arise in making business decisions in this evolving environment. In response, the FTC has undertaken a broad initiative to inform participants in health care markets about competition principles.

Feinstein next explained the FTC’s approach to enforcement in health care markets and set forth an overview of how the agency examines ACOs and other collaborations. The antitrust laws treat collaborations among health care providers that are bona fide efforts to create legitimate, efficiency-enhancing joint ventures differently from the way they treat price fixing schemes. The FTC’s analysis of ACOs is similar to its analysis of joint ventures in any market. As explained in its ACO Policy Statement, the FTC and DOJ will apply a rule of reason analysis to any ACO that meets eligibility standards for, and participates in, the Shared Savings Program (SSP) established by the Centers for Medicare and Medicaid Services and uses the same governance and leadership structures and clinical and administrative processes it uses in the SSP to serve patients in commercial markets.

There is much literature on the ongoing wave of provider consolidation in health care markets, according to Feinstein. In light of concerns about the potential anticompetitive consequences of provider consolidation, the FTC has acted to stop mergers where the evidence shows that they are likely to lead to higher prices or reduced quality. While there are concerns about certain collaborations, the FTC has challenged very few provider collaborations.

When assessing a transaction’s likely competitive effect, the FTC is concerned about market power—because that is the source of the power to raise prices—but also analyzes efficiencies. Under the Horizontal Merger Guidelines, efficiencies must meet several criteria to be credited. First, they must be merger-specific in that they could not likely be accomplished in the absence of the merger. Second, they must not be vague or speculative. Finally, they must be cognizable, by which we mean the efficiencies are verified and do not arise from anticompetitive reductions in output, Feinstein noted.

In addition to efficiencies defenses, parties often raise failing firm arguments. Specifically, they argue that an acquired hospital is experiencing financial difficulties and its acquisition by a financially stronger hospital is necessary to keep it open. Only in limited circumstances would the FTC conclude that the poor financial health of a hospital means that it has limited competitive significance.

Once the FTC determines that a proposed combination is problematic, its preferred remedy is that the combination be abandoned. If the combination has already been consummated, the agency may move for divestiture of one of the competitors to the combination. While parties in provider transactions often urge adoption of conduct remedies, the FTC generally rejects such requests. Conduct remedies do not restore the competitive status quo and raise several concerns. Moreover, proposed conduct remedies nearly always focus on price, ignoring the impact of a transaction on quality improvements or innovation, in Feinstein’s view.

The actions of the FTC make clear the important role of antitrust in health care policy. Ultimately, the agency believes that the imperatives of developing lower cost, higher quality health care can coexist with continued enforcement of the antitrust laws. For those involved in an existing ACO, or those interested in joining one, there can be little doubt that FTC enforcement in health care markets is intended to promote competition as a primary driver to hold down costs, improve quality, and encourage innovation while allowing procompetitive ventures that do not harm consumers to proceed, Feinstein concluded.

News: Antitrust FederalTradeCommissionNews