Antitrust Law Daily Wrap Up, ANTITRUST NEWS: FTC urges New York legislature to reconsider bills granting antitrust immunity to certain health care providers, (Jun 8, 2015)

By Edward L. Puzzo, J.D.

The Federal Trade Commission is urging the New York legislature to reconsider pending legislation that would grant broad antitrust immunity to certain health care corporations in the state, it was announced.

The antitrust immunity bills, New York Senate Bill 2647 (S-2647) and New York Assembly Bill 2888 (A-2888), were passed by the New York Senate last week and would shield Erie County Medical Center Corporation (ECMCC) and Westchester Health Care Corporation (WHCC) from antitrust enforcement if they entered into agreements for the creation and operation of health care delivery system networks. The providers, as well as all entities with which they collaborate, would be affirmatively permitted to engage in collaborative activities and immunized from liability under both federal and state antitrust laws.

The June 5 letter from the staff of the FTC’s Bureau of Competition and others, to bill sponsors New York Senator Ranzenhofer and New York Assemblyman Abinanti, urged the legislature to “carefully consider whether antitrust immunity—especially the broad immunity these bills purport to grant—would further legitimate public policy goals or, instead, result in higher prices for consumers without any offsetting improvements to health care quality and access” (FTC File No. V150005).

Faulty premises. In the view of the FTC, the proposed legislation appears to be based on two premises they view as fundamentally flawed: that efficient, pro-competitive collaborations among otherwise independent health care providers are prohibited under the antitrust laws; and, that antitrust immunity is necessary to encourage such collaborations.

Collaborations currently allowed. The FTC acknowledged that collaborations among health care providers—including initiatives that lower the costs of health care services, improve their quality, and expand patient access—can frequently be pro-competitive. However, they emphasized, the antitrust laws are not a barrier to the formation of efficient health care collaborations that benefit health care consumers. For that reason, antitrust authorities have challenged very few health care provider mergers, joint ventures, or other types of collaborations.

Immunity. Because pro-competitive or competitively benign health care collaborations already are permissible under the antitrust laws, no special “exemption” or “immunity” from existing antitrust laws is necessary to ensure that such pro-competitive or competitively benign collaborations occur, the FTC argues. Instead, the main effect of this legislation, in their view, would be to immunize conduct that would not generate efficiencies that are greater than consumer harms, and therefore would not pass muster under the antitrust laws. The FTC cited as an example one of the stated goals of the bills: to allow ECMC and WCHC to engage in collaborations or transactions that improve their bargaining leverage with commercial payors to increase their reimbursement rates. These higher reimbursement rates, the FTC argues, are likely to lead to higher health care costs for employers and commercially insured patients.

Health care providers have repeatedly sought antitrust immunity for various forms of joint conduct, including agreements on the prices they will accept from payors, asserting that immunity for joint bargaining is necessary to “level the playing field,” the FTC noted. In the view of the FTC, there is no reason to treat the health care industry differently with regard to application of the antitrust laws. Indeed, in the health care industry, just like in other industries, consumers benefit from vigorous competition and are harmed by anticompetitive conduct and transactions.

The FTC further noted that state legislation aimed at exempting health care providers engaging in collaborative activities from antitrust scrutiny may “encourage providers to negotiate collectively with health plans in order to extract higher rates, in effect allowing providers to fix their prices. By permitting conduct that would ordinarily violate antitrust laws, the bills would lead to higher prices and lower-quality care—undercutting the very objectives they aim to achieve.”

Affordable Care Act. Despite what some health care industry participants have claimed, the FTC continued, the antitrust laws do not prohibit the kinds of collaboration necessary to achieve the health care reforms contemplated by the Affordable Care Act (ACA). Specifically, antitrust is not a barrier to New York health care providers who seek to form pro-competitive collaborative arrangements that are likely to reduce costs and benefit health care consumers through increased efficiency and improved coordination of care. Indeed, the antitrust agencies seek only to prevent mergers and other collaborations when there is substantial anticompetitive harm and when that harm is not offset by likely pro-competitive benefits of the transaction, including reduced costs, higher quality, and increased access to care.

Attorney General. The FTC comment follows the issuance of a May 15 letter by the New York Attorney General’s office also opposing the bills, charging that they would allow the providers “virtually unlimited discretion to work together with their competitors to raise the prices of health care services.” In the letter, Eric J. Stock, Chief of the Antitrust Bureau of the New York Office of the Attorney General, charged that the legislation would allow any collaboration by the named corporations with any type of health care organization to completely evade antitrust scrutiny in perpetuity.

Companies: Erie County Medical Center Corporation; Westchester Health Care Corporation

News: Antitrust NewYorkNews