Health System Integration and Antitrust Laws on Collision Course

Health systems attempting to fulfill the mandate of integrating hospitals and physicians may find themselves accused of going too far.  Although the Affordable Care Act, shared savings, gainsharing and other alternative payment methodologies have made integration of physicians, hospitals and other providers an operational goal, success in reaching that goal may be challenged by private antitrust actions.

In a recent Florida federal court decision, the antitrust complaint of “several of Southern Brevard County’s physicians and physicians practice groups” was held to have stated a monopolization claim against Health First, Inc. and three of its wholly-owned subsidiaries —  an insurer, a hospital and a physician practice group.  Essentially, by fully integrating its business, and incentivizing in-network referrals and managed care pricing, Health First became vulnerable to claims of tying, exclusive dealing, price discrimination and monopolization.

Because the decision was written in the context of denial of a motion to dismiss, the allegations of the complaint were taken as true, and may have described truly predatory conduct.  On the other hand, Health First may be vindicated when the actual conduct and market analysis are ultimately before the Court.  Nevertheless, conduct such as excluding plaintiffs from a provider network, discontinuing referrals to plaintiff physicians, and “systematically” approaching physicians to join a Health First practice appear to have been the type of actions that supported the district court’s decision.

From a litigation strategy standpoint, the case counsels caution before moving to dismiss an antitrust complaint.  Typically, the allegations of buzz-words  like “anticompetitive”, “exclusive agreement”, “reduction in quality”, will be sufficient to survive a motion to dismiss in the absence of the healthcare market context — provided at least by an answer to the complaint.  Thus, a motion for judgment on the pleadings may be a better avenue to challenging the sufficiency of the complaint.

More difficult to combat is the fundamental incompatibility of the antitrust laws with the healthcare marketplace.  It has been true for many years that squeezing healthcare into typical antitrust formulations makes for unusual if not irrational results.  Price-fixing allegations against providers attempting to negotiate with commercial payers, for example, significantly strengthened the hands of payers in a way that failed to produce the benefits of a competitive marketplace.

At a time, such as now, when new payment methodologies consistently favor more highly integrated delivery of care to place responsibility for high quality and an efficient cost structure on a single entity, the antitrust laws will have to respond.  Of note, the Antitrust Division of the Department of Justice and the Federal Trade Commission will hold the second in a series of public workshops called “Examining Health Care Competition” on February 24-25.

In the meantime, courts charged with applying antitrust precedent to rapidly changing healthcare structures will likely continue to reach contradictory results unless the full healthcare context is used to explain the actual impact of what appears to be, but may not be, anticompetitive conduct.


© 2009- Duane Morris LLP. Duane Morris is a registered service mark of Duane Morris LLP.

The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

Proudly powered by WordPress