Minimizing the Risk of Antitrust Liability: Physician Integration
On March 7, Rob McCann presented Minimizing the Risk of Antitrust Liability at the American Conference Institute’s Advanced Forum on Healthcare Provider Disputes. Rob led an audience of health care executives and legal counsel in an examination of recent developments and future trends in private and public antitrust enforcement from a risk management perspective.This is the first of a two-part Insight publication featuring highlights from Rob’s remarks. The following are some of the comments Rob presented on physician integration.
Hospitals and health systems embarked on a significant course of physician practice acquisitions must assess, and periodically re-assess, how they deal with others in the marketplace. There are potential competitive issues that arise when a hospital or health system acquires a significant market share in a physician specialty that do not arise if those physicians are coming together outside the hospital or health system umbrella.
If a hospital put a ‘Help Wanted’ sign in the window and every cardiologist in town applied for employment, no antitrust violation would result from a decision to hire all of them. This is because pure employment decisions are beyond the reach of the antitrust laws. The quest to “acquire” physician practices sometimes creates unnecessary antitrust risk. Of course, what you do after you employ all the cardiologists matters – you can’t use your newfound position to create barriers to competition.
At the end of the day, the FTC is probably more concerned about the effects of physician integration on hospital competition than the effects on physician competition. In the recent St. Luke’s litigation, the FTC challenged the hospital’s acquisition of a large primary care practice based on a prediction of adverse price effects in the adult primary care market. But economically there was much more at stake in the ability of St. Luke’s to capture hospital admissions from its competitors.
The Affordable Care Act does not give blanket antitrust protection to physician alignment strategies. In many cases it is going to be difficult to argue that the objectives of clinical integration can only be achieved by acquisition of physician practices, and there is not a lot of empirical evidence to rely on at this time concerning the benefits of clinical integration strategies to consumers and their health plans.
Post-transaction conduct matters. There is no statute of limitations on challenges to completed transactions. If you exert undue leverage against the market after a merger, acquisition, or joint venture, you may be inviting antitrust scrutiny. In fact, the new chair of the Federal Trade Commission has called for renewed retrospective scrutiny of completed transactions in the health care industry.
In the second installment of this Insight, Rob will comment on antitrust risks in the context of clinical integration and exclusive contracting, and provide some general observations on antitrust risk management.
For part 2 click here.