1996 Department of Justice and Federal Trade Commission Statements of Antitrust Enforcement Policy in Health Care

• Pages: 165-253

165

1996 DEPARTMENT OF JUSTICE AND FEDERAL

TRADE COMMISSION STATEMENTS OF

ANTITRUST ENFORCEMENT POLICY IN HEALTH

CARE

Introduction

In September 1993, the Department of Justice and the Federal Trade

Commission (the “Agencies”) issued six statements of their antitrust

enforcement policies regarding mergers and various joint activities in the

health care area. The six policy statements addressed: (1) hospital

mergers; (2) hospital joint ventures involving high-technology or other

expensive medical equipment; (3) physicians’ provision of information

to purchasers of health care services; (4) hospital participation in

exchanges of price and cost information; (5) health care providers’ joint

purchasing arrangements; and (6) physician network joint ventures. The

Agencies also committed to issuing expedited Department of Justice

business reviews and Federal Trade Commission advisory opinions in

response to requests for antitrust guidance on specific proposed conduct

involving the health care industry.

The 1993 policy statements and expedited specific Agency guidance

were designed to advise the health care community in a time of

tremendous change, and to address, as completely as possible, the

problem of uncertainty concerning the Agencies’ enforcement policy that

some had said might deter mergers, joint ventures, or other activities that

could lower health care costs. Sound antitrust enforcement, of course,

continued to protect consumers against anticompetitive activities.

When the Agencies issued the 1993 health care antitrust enforcement

policy statements, they recognized that additional guidance might be

desirable in the areas covered by those statements as well as in other

health care areas, and committed to issuing revised and additional policy

statements as warranted. In light of the comments the Agencies received

on the 1993 statements and the Agencies’ own experience, the Agencies

revised and expanded the health care antitrust enforcement policy

166 HANDBOOK OF U.S. ANTITRUST SOURCES

statements in September 1994. The 1994 statements, which superseded

the 1993 statements, added new statements addressing hospital joint

ventures involving specialized clinical or other expensive health care

services, providers’ collective provision of fee-related information to

purchasers of health care services, and analytical principles relating to a

broad range of health care provider networks (termed “multiprovider

networks”), and expanded the antitrust “safety zones” for several other

statements.

Since issuance of the 1994 statements, health care markets have

continued to evolve in response to consumer demand and competition in

the marketplace. New arrangements and variations on existing

arrangements involving joint activity by health care providers continue to

emerge to meet consumers’, purchasers’, and payers’ desire for more

efficient delivery of high quality health care services. During this period,

the Agencies have gained additional experience with arrangements

involving joint provider activity. As a result of these developments, the

Agencies have decided to amplify the enforcement policy statement on

physician network joint ventures and the more general statement on

multiprovider networks.

In these revised statements, the Agencies continue to analyze all

types of health care provider networks under general antitrust principles.

These principles are sufficiently flexible to take into account the

particular characteristics of health care markets and the rapid changes

that are occurring in those markets. The Agencies emphasize that it is

not their intent to treat such networks either more strictly or more

leniently than joint ventures in other industries, or to favor any particular

procompetitive organization or structure of health care delivery over

other forms that consumers may desire. Rather, their goal is to ensure a

competitive marketplace in which consumers will have the benefit of

high quality, cost-effective health care and a wide range of choices,

including new provider-controlled networks that expand consumer

choice and increase competition.

The revisions to the statements on physician network joint ventures

and multiprovider networks are summarized below. In addition to these

revisions, various changes have been made to the language of both

statements to improve their clarity. No revisions have been made to any

of the other statements.

1996 STATEMENTS OF ANTITRUST ENFORCEMENT POLICY IN HEALTH CARE 167

Physician Network Joint Ventures

The revised statement on physician network joint ventures provides

an expanded discussion of the antitrust principles that apply to such

ventures. The revisions focus on the analysis of networks that fall

outside the safety zones contained in the existing statement, particularly

those networks that do not involve the sharing of substantial financial

risk by their physician participants. The revised statement explains that

where physicians’ integration through the network is likely to produce

significant efficiencies, any agreements on price reasonably necessary to

accomplish the venture’s procompetitive benefits will be analyzed under

the rule of reason.

The revised statement adds three hypothetical examples to further

illustrate the application of these principles: (1) a physician network

joint venture that does not involve the sharing of substantial financial

risk, but receives rule of reason treatment due to the extensive integration

among its physician participants; (2) a network that involves both

risk-sharing and non-risk-sharing activities, and receives rule of reason

treatment; and (3) a network that involves little or no integration among

its physician participants, and is per se illegal.

The safety zones for physician network joint ventures remain

unchanged, but the revised statement identifies additional types of

financial risk-sharing arrangements that can qualify a network for the

safety zones. It also further emphasizes two points previously made in

the 1994 statements. First, the enumeration in the statements of

particular examples of substantial financial risk sharing does not

foreclose consideration of other arrangements through which physicians

may share substantial financial risk. Second, a physician network that

falls outside the safety zones is not necessarily anticompetitive.

Multiprovider Networks

In 1994, the Agencies issued a new statement on multiprovider

health care networks that described the general antitrust analysis of such

networks. The revised statement on multiprovider networks emphasizes

that it is intended to articulate general principles relating to a wide range

of health care provider networks. Many of the revisions to this statement

reflect changes made to the revised statement on physician network joint

ventures. In addition, four hypothetical examples involving PHOs