Chapter 10.D.2 (or 4.D.2) -- Antitrust Price-Fixing

The FTC maintains a helpful web page on Health Care Antitrust Issues generally, including a link to the DOJ/FTC Antitrust Guidelines.

For commentary on the MedSouth decision, by an FTC Commissioner, see Thomas B. Leary, the Antitrust Implications of “Clinical Integration:” An Analysis of FTC Staff’s Advisory Opinion to MedSouth, 47 St. Louis U. L. Rev. 223 (2003).

The FTC struck down as illegal price-fixing a "messenger model" arrangement in which a group that styled itself as an IPA negotiated managed care contracts on behalf of almost 500 independent physicians in Fort Worth, Texas. In re North Texas Specialty Physicians, ___ FTC___ (12/1/05).  The Commission noted that the IPA "messenger" polled physician members in advance to determine what minimum prices they would accept and refused to deliver offers it felt would be unacceptable to the majority of phyisicians.  The IPA also had physicians' power of attorney to negotiate, sign, or refuse contracts.   The Commission concluded that "this is not really a close case."  For commentary, see Health Lawyers News, May 2006, at 24.

Antitrust enforcers are turning their attention to the price-fixing implications of what are known as "virtual mergers" or "joint operating agreements." In these arrangements, two entities attempt to accomplish the substance of a merger without actual common corporate ownership, through detailed agreements that provide for joint or coordinated operations and management. Sometimes, this is done to avoid various corporate law restrictions that prevent complete merger, but sometimes this is done because the boards of the two entities simply can't agree on a full merger but still want to attempt joint operations. In such cases, the parties run the risk of per se illegal price fixing if the contractual arrangements do not create sufficient financial integration. Compare State of New York v. St. Francis Hosp., 94 F. Supp.2d 399) (S.D.N.Y. 2000) (hospitals retained separate status with HealthAmerica Pennsylvania, Inc. v. Susquehanna Health System, __ F. Supp. 2d  ___ (M.D. Pa. 2003) (finding that a joint operating agreement as creating a single entity).  For analysis, see Robert W. McCann, I Think I Am Integrated, therefore I Am, 12 BNA Health L. Rep. 1449 (Sept. 18, 2003).

The 4th Circuit once again addressed whether Blue Cross' limits on reimbursement constitute an antitrust violation.  In American Chiropractic Association. v. Trigon Healthcare Inc, __ F. 3d ___ (4th Cir. 2004), the court held that Blue Cross lacks the legal capacity to conspire with its panel of medical advisors because they share a "unity of interest" in improving patient care.  The court also rejected a claim of tortious interference with business relationships, arising from Blue Cross' capping payments for spinal manipulations by chiropractors.

For a criticism of courts' willingness to consider monopsony claims against dominant health insurers, see Peter J. Hammer and William M. Sage, Monopsony as an agency and regulatory problem in health care, 71 Antitrust L.J. 949-988 (2004).  They argue that the Kartell decision fails to sufficiently take account of the complex agency relationships in a multi-tiered set of market structures among patients, employers, providers, and insurers.

The FTC's comprehensive report, Improving Health Care: A Dose of Competition (July 2004), stresses the anticompetitive potential of "any willing provider laws."

In an innovative use of antitrust law, medical residents alleged that medical schools and teaching hospitals are illegally restraining competition and salaries through the centralized "matching"  system used to assign medical school graduates to residency programs.  See Kristin Madison, The residency match: competitive restraints in an imperfect world, 42 Hous. L. Rev. 759-836 (2005).  The suit was dismissed based on a special antitrust exemption enacted by Congress after the suit was filed.  Jung v. Association  of American Medical Colleges, 2006 WL 1582667 (D.C. Cir.  2006).

Chapter 10.D.3 (or 4.D.3) -- Antitrust Merger Law

The DOJ and FTC have provided additional Commentary on the Horizontal Merger Guidelines (March 2006)
For additional academic commentary on hospital merger cases, see Jennifer R. Conners, A Critical Misdiagnosis: How CourtsUnderestimate The Anticompetitive Implications Of Hospital Mergers, 91 Cal. L. Rev. 543 (2003).  An interesting study reports on the actual effects of the Tenet merger, based on interviews with local insurers and employers.  The study concludes that hospital prices have increased and quality has not improved.  Daniel Body, Federal Trade Commission v. Tenet: A Retrospective Review and Analysis, 36 J. Health L. 133 (2003).  For general discussion of hospital market power, see Symposium, 22(6) Health Affairs (Dec. 2003).

The FTC, recognizing its string of court losses in projecting likely effects of hospital mergers, but not wanting to let the courts have the last word, announced a new policy of challenging mergers several years after they are consummated if evidence shows that actual effects have been adverse for competition.  In the first such case, the FTC ordered divestiture based on evidence that a merger 4 years earlier of the only two hospitals in Evanston IL allowed the hospital to increase its payments under managed care contracts.  In re. Evanston Northwestern Healthcare Corporation, Docket No. 9315 (Oct. 20, 2005).

For analysis of the FTC's MedSouth decision, see Comment, 14 Ann. Health L. 125 (2005).

Return to home page.