titrust_Fall Meeting_1.gif
(Left) Joshua Soven, JD, chief of the DOJ’s Antitrust Division, Litigation I Section, encouraged audience members to report conduct by insurance companies that support monopoly activities.(Center) Rep. John Conyers Jr (D-Mich) pledged to hold hearings on antitrust activities. (Right) Robert Canterman, staff attorney at the U.S. Federal Trade Commission, noted that insurance companies are consumers because they pay for healthcare services provided by physicians.

AAOS Now

Published 1/1/2011
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Mary Ann Porucznik

Common Sense or Unreasonable Boycotts?

The good news? Antitrust laws are designed to protect physicians as consumers.

The bad news: Antitrust laws are not designed to protect physicians as sellers of professional services.

That was the message delivered by Robert Canterman, staff attorney at the U.S. Federal Trade Commission (FTC), one of the two agencies charged with enforcing antitrust laws. Speaking at the 2010 Board of Councilors (BOC)/Board of Specialty Societies (BOS) Fall Meeting, Mr. Canterman was one of a panel of attorneys who attempted to clarify how antitrust legislation applies to healthcare providers.

The purpose of antitrust legislation, noted Mr. Canterman, is to prevent private business practices—such as price fixing, boycotts, or monopolization—that unreasonably restrain competition. “Competition benefits consumers,” he said. “When consumers have a choice and can pick among competitors, they have the best opportunity to get lower prices, better quality, and increased choice, selection, convenience, and innovation.”

But who are the consumers when it comes to health care? Certainly, patients are the ultimate consumers, but if the patient has insurance, and the insurance company is paying the bill, then the insurer is also a consumer. And there’s the rub.

“If there’s price fixing among competitors [physicians], those higher prices are going to be passed on [to the ultimate consumer] in terms of higher premiums to employers, and higher copayments and deductibles to patients,” said Mr. Canterman.

On the other hand, “Insurance companies have aggressive contracting practices and demand that physicians accept lower rates of compensation,” noted Fred C. Redfern, MD, BOC secretary, who moderated the session. “But those lower payments for physicians almost never translate into lower premiums, more affordable health care, or increased access to insurance for patients.”

Antitrust 101
As Mark J. Botti, JD, an attorney with Akin Gump Strauss Hauer & Feld LLP, pointed out, antitrust enforcement is “complex, a mix of policy, years of judicial precedent in the relation of law and commercial behavior, and understanding of the particular facts.”

Although both federal and state governments have enacted parallel laws governing antitrust and unfair trade practices, the two primary acts are the Sherman Act, which prohibits “contracts, combinations, and conspiracies” that unreasonably restrain trade, and the Federal Trade Commission Act, which allows the FTC to prohibit “unfair methods of competition.” (See sidebar, “Red flag conduct under antitrust legislation.”)

“Antitrust laws infer agreements from behavior,” said Mr. Botti. “As you approach collegial conversations with colleagues on commercially sensitive topics, a later interpretation of those facts may conclude that you reached an agreement, even though no one said, ‘Do we agree?’”

Mr. Botti acknowledged that physicians may be getting “mixed messages” as antitrust regulators attempt to provide guidance that would enable providers to work together on a commercial basis. Whether the guidance has been sufficient, he said, is “a fair question to debate.”

Since 2000, there have been 35 investigations by the FTC and three by the Department of Justice (DOJ) against physicians; all but one focused on price-fixing. According to Joshua Soven, JD, chief of the DOJ’s Antitrust Division, Litigation I Section, none of these cases were close calls. In his view, the physicians involved were not “collaborating, coming up with something better, reducing fragmentation in a productive way, or otherwise doing anything but agreeing upon a price that they will offer to insurance companies.”

But concerns about carrier dominance has prompted a shift in the allocation of DOJ antitrust resources. The most recent investigation by the DOJ concerns potential antitrust violations by an insurance company. Mr. Soven noted that the DOJ is now devoting more resources to investigating health insurers, particularly in concentrated markets.

titrust_Fall Meeting_1.gif
(Left) Joshua Soven, JD, chief of the DOJ’s Antitrust Division, Litigation I Section, encouraged audience members to report conduct by insurance companies that support monopoly activities.(Center) Rep. John Conyers Jr (D-Mich) pledged to hold hearings on antitrust activities. (Right) Robert Canterman, staff attorney at the U.S. Federal Trade Commission, noted that insurance companies are consumers because they pay for healthcare services provided by physicians.

“Any health insurance merger that comes before us gets enormous scrutiny,” he said. “But the primary issue in terms of concentration and competition—or lack thereof—is not mergers, but entry barriers,” which, antitrust legislation does not address.

According to Mr. Soven, smaller health insurance companies are going out of business. As hospitals reduce the number of company contracts and individuals move from smaller companies to larger companies, market concentration increases.

“Antitrust legislation is good at challenging the blockbuster deal between A and B, but it is not good at stopping this very gradual creep,” admitted Mr. Soven.

If, however, investigators can find entry barriers in the contracts between hospitals and health insurers, they can take action. For example, if a company negotiates a specific price for a certain service, and, as part of that negotiation, requires the hospital to charge any other health insurer a percentage above that price for the same service, it creates an almost insurmountable barrier for other health insurers to enter the market.

What about ACOs?
Under the new health reform law, accountable care organizations (ACOs), the panelists noted, may be one way for providers to work together and jointly negotiate with payers without committing “per se” antitrust violations. As Mr. Canterman pointed out, “A joint venture in which physicians integrate their operation in a way that benefits consumers is viewed as procompetitive because it has the potential to reduce costs and improve quality of care.”

He advised the audience to focus on creating efficiencies to avoid antitrust problems. Financial risk-sharing by providers, for example, may create incentives to reduce costs or improve quality of care. Providers may be willing to accept capitation or global fees (all-inclusive case rates). They may also be willing to increase clinical integration to create efficiencies and reduce costs.

Mr. Canterman defined clinical integration as “an active and ongoing program to evaluate and modify the practice patterns of physicians and create a high degree of interdependence and cooperation to control costs and ensure quality.” Such a program might have the following characteristics:

  • mechanisms to monitor and control utilization of healthcare services that are designed to control costs and ensure quality of care
  • selection of network physicians who are likely to further these efficiency objectives
  • a significant investment of monetary and human capital in the necessary infrastructure and capability to realize the claimed efficiencies

Although such a program might include the use of electronic medical records, a more important factor would be a way to share information, measure performance, and monitor care—electronically or otherwise. “How would you want to go about sharing that information?” he asked. “We’re willing to listen to you.”

He did express concern about referrals to specialists and exclusivity within ACOs. An exclusive contract between a specialist and an ACO may be problematic under antitrust legislation if a competing ACO is unable to obtain specialist coverage, and thus would be unable to compete in the market. He also noted that primary care physicians, who are expected to be exclusive to an ACO, might limit referrals to specialists within their organization, thus cutting off a source of referrals for some specialists.

The challenge to providers
“The provider community is understandably concerned about facing a dominant player on the other side of the negotiating table,” said Mr. Soven. “It’s certainly true that a payer can get too big and reduce payment to providers in a way that reduces output, reduces quality of care, or reduces the number of providers, creating a shortage. That sort of market power does harm consumers and falls within the antitrust charter.”

In such a case, urged Mr. Soven, providers should step forward and should not be reticent about approaching authorities.

“Are you encouraging physicians to bring to your attention conduct of insurance companies that help maintain their monopolies?” asked Henry Allen Jr, MPA, JD, senior attorney for the American Medical Association.

“Absolutely,” replied Mr. Soven. “The bulk of cases we investigate result from people coming to us, sitting in a conference room, doing our level best to keep the information confidential, listening to what they say, and acting on that.”

Red flag conduct under antitrust legislation (PDF)

Note: The information contained in this article is intended for general information purposes and should not be considered legal advice. Individuals who need legal advice should contact a duly licensed professional.