Background
In a press release dated February 3, 2023, the Department of Justice’s Antitrust Division (“DOJ”) announced the withdrawal of three important policy statements that health systems and providers have relied upon for decades in ordering operations, setting internal protocols, and conducting diligence during transactions. The three policy statements include, Department of Justice and FTC Antitrust Enforcement Policy Statements in the Health Care Area (Sept. 15, 1993); Statements of Antitrust Enforcement Policy in Health Care (Aug. 1, 1996); and Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program (Oct. 20, 2011). These withdrawals were effective immediately, and health care professionals can no longer solely rely on these policy statements when evaluating antitrust risk in the health care sector. Instead, the DOJ announced it would rely on “a case-by-case enforcement approach … to better evaluate mergers and conduct in health care markets.”
The Withdrawn Statements
The three withdrawn statements, two of which have been published and relied on for nearly thirty years by health care professionals, provide a summary of prior cases and policy statements covering numerous aspects of the health care sector. Topics addressed by the statements include mergers, information exchanges, collaborations in CIN, PHOs, and ACOs, and joint purchasing arrangements, among many others.
Perhaps most importantly, these statements provided a number of safety zones related to common conduct in which health systems and providers regularly engage. These safety zones defined criteria for conduct, allowing participants to know that there was minimal risk of a federal antitrust investigation and prosecution, barring extraordinary circumstances. Examples of the safety zones include:
- Wage surveys (requiring the survey is conducted by a third party, includes data three months or older, and includes at least five blinded data points)
- GPOs (when the group’s purchases account for less than 35% of the total purchases of the relevant product or service, and the cost of the product or service being purchased accounts for less than 20% of the total revenues from all products or services sold by each participant)
- Certain mergers (in which one of the merging hospitals has less than 100 licensed beds and an average daily inpatient census of less than 40 patients)
- Multi-Hospital ventures involving high technology equipment or services (where a joint venture is reasonably necessary to recover these costs and does not include a hospital or a group of hospitals that could have offered a competing service to the planned joint venture)
- Provider-Controlled Joint Ventures and Networks (including ACOs and CINs) (comprised of 20% or less of the physicians in each physician specialty in the relevant geographic market, when the members share substantial financial risk or meet the presumption of sufficient clinical integration)
Implications of DOJ’s Withdrawal
The primary impact of the DOJ’s actions will be to increase risk and frequency of antitrust investigations on joint provider conduct. DOJ’s preference for case-by-case determination will create uncertainty for health care systems engaging in diligence and discussions with potential collaborators on ventures intended to improve health care access, reduce overhead and costs, and improve outcomes.
This increased risk comes at a time when the DOJ and its sister agency, the Federal Trade Commission (“FTC”) have increased enforcement activities in all areas of health care, including merger enforcement, labor markets, and pharmaceutical and pharmacy-benefit markets.
Additionally, while the FTC has not yet publicly withdrawn its support for the guidance, setting up a potential conflict between agency enforcement perspectives, we anticipate the FTC will eventually withdraw the guidelines as well. Until it does, there is a potential conflict between agency enforcement perspectives.
Practical Takeaways
As a result, health care providers engaging in transactions, or joint venture and network negotiations should be mindful that there will be more uncertainty surrounding the antitrust risk in exchanging information with potential partners, structuring new affiliations, and even operating existing joint ventures, ACOs, CINs, and other networks. Providers will want to ensure they set up robust antitrust guardrails as part of the process and reevaluate prior assumptions. Similarly, companies and associations that administer information-sharing endeavors, such as wage surveys, should review existing protocols to ensure competitively sensitive information is protected.
In addition, health care providers should consider the following actions to limit potential existing liability:
- Review existing policies and practices related to sharing information through wage surveys, joint ventures, and joint provider activities;
- Analyze current competitor relationships, particularly CINs, PHOs, or ACOs in rural and suburban areas, that may have previously relied on the DOJ’s safety zones relating to market shares, exclusivity, or integration for potential antitrust risk; and
- Closely monitor ongoing developments, including litigation, settlements, and speeches by the DOJ related to enforcement in the health care sector.
Hall Render is actively tracking the developments at the DOJ and FTC regarding health care antitrust enforcement. If you have any questions or would like additional information about this topic, please contact one of the following members of Hall Render’s Antitrust Practice Group:
- Nathan Chubb at (202) 780-2991 or nchubb@hallrender.com;
- William Berlin at (202) 370-9582 or wberlin@hallrender.com;
- Michael Greer at (317) 977-1493 or mgreer@hallrender.com; or
- Your primary Hall Render contact.
Hall Render blog posts and articles are intended for informational purposes only. For ethical reasons, Hall Render attorneys cannot give legal advice outside of an attorney-client relationship.
