The FTC and Overlapping Boards: Antitrust Compliance by Health Systems
Friday, February 10, 2017

Important new guidance from the Federal Trade Commission (FTC) underscores the value of antitrust compliance when health systems use interlocking officers and directors, and other overlapping governance relationships, to establish collaborative arrangements.

This guidance took the form of a January 23, 2017, public release, “Have a plan to comply with the bar on Horizontal Interlocks,” issued by Debbie Feinstein, Director of the FTC’s Bureau of Competition. Interlocking director and officer arrangements are a popular affiliation model in health care. They are used by some health care systems to foster collaborative arrangements, and to facilitate governance connections between organizations that are loosely connected by common sponsorship, charitable purposes or religious affiliation but are not under common control or ownership. They also arise in acquisitions involving less-than-control positions.

The antitrust concern (Section 8 of the Clayton Act) arises when the collaborative arrangements that involve interlocking relationships are created between organizations that the government could reasonably consider to be “competitors.” That is not always an obvious circumstance, given the variables of the law, and the nuances of particular collaborative arrangements. Given the often (seemingly) innocuous nature of interlocking relationships, the antitrust considerations may not always be apparent to corporate strategic leaders or external planning consultants. Thus, the new FTC guidance offers a timely opportunity for the health system general counsel to discuss the antitrust risks that can arise from interlocks, and the best ways to identify concerns that may be presented by particular proposals. It may also be a reminder for the compliance committee to assure that management receives appropriate levels of antitrust-based compliance training.

 

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