Loyola University Chicago School of Law, JD 2024
On February 3, 2023, the Department of Justice (DOJ) formally withdrew its support for three policies that created longstanding safe harbors from antitrust enforcement, relied upon by the healthcare industry for nearly thirty years. Assistant Attorney General, Jonathan Kanter, of the DOJ’s Antitrust Division stated that these changes were “long overdue”, and that the, “[DOJ] will continue to work to ensure that its enforcement efforts reflect modern market realities.” In striking these guidelines, the DOJ notably left no new guidelines in its place, leaving many healthcare providers and purchasers uncertain of whether they will face litigation or even criminal prosecution under the Sherman Act.
Previous DOJ guidelines; policy on accountable care organizations
The Federal Trade Commission (FTC) guidelines for the healthcare industry were first published in 1993. These guidelines designated antirust safety zones for certain hospital mergers, hospital joint ventures, information sharing, pricing exchanges, and physician joint ventures. Under these ‘safe zones’, agencies deliberately avoided pursuing antitrust enforcement under the described scenarios absent some extreme or unusual circumstance.
These provisions were later clarified in 1996, where the FTC recognized for the first time that provider joint network ventures may be sufficiently integrated to negotiate price terms. So long as the clinical integration was designed to achieve quality and cost efficiencies, it was protected under the guidelines.
The most notable of these safe harbor provisions for the modern era is the provider participation in exchanges of price and cost information. This provision allowed providers to exchange information on “prices for health care services, or … wages, salaries, or benefits of health care personnel” subject to certain requirements. In addition, the exception for provision of information to purchasers of healthcare services allowed a medical society to collect outcome data from its members about a procedure they believe should be covered by a purchaser.
Both safe harbor provisions demonstrate the unique nature of the health care market. In other industries, sharing of information of costs and salaries would not only be seen as a form of collusion, but also would undoubtedly be seen as anticompetitive behavior. However, as many uninsured Americans experience firsthand, health care pricing has been skyrocketing out of control. Sharing price information, even if anticompetitive in theory, is a small measure that can help reduce health care expenditures.
Another important exception for health care entities came in the wake of the Patient Protection and Affordable Care Act (colloquially referred to as “Obamacare”) and its promotion of Accountable Care Organizations (ACOs). ACOs are specifically designed to promote horizontal and vertical integration to achieve fully integrated care, allowing patients to access all forms of healthcare services they need under one umbrella organization. In 2011, the DOJ issues a policy that ACOs were not subject to antitrust scrutiny, so long as they contracted with CMS, had a shared savings program and did not constitute greater than thirty percent of the relevant market.
DOJ guidance in the wake of its withdrawal and its implications for healthcare industry
The key issue that many health care experts have warned about, and arguably the reason the guidelines were established in the first place, is that the ability on a large scale to both increase healthcare access and lower costs often requires actions that can be considered anticompetitive. With no new guidance in place, many entities are struggling to determine the new contours of permissible conduct without clearly established guidelines.
Going forward, DOJ enforcement will likely return to the rule of reason instead of having clear safe-harbor provisions. While case law provides a clearly established line of per se violations (including price fixing, bid rigging, and horizontal customer allocation, among others) all other antitrust actions involve a complicated and often expensive rule of reason standard, which requires a thorough examination of all relevant factors affecting competition in the given market. Fewer established safe harbors mean providers may face the choice of taking actions that can potentially be seen as anticompetitive and incurring expensive litigation costs, or waiting to see how the case law develops before taking certain actions.
The impacts of this new case-by-case approach is yet to be seen. However, all indications demonstrate that health care entities will be much more sensitive with the type of information they share. We can also expect to see an increased interest in health care antitrust, potentially putting a strain on organizations seeking to create value-based, integrated care models. Ultimately, the impact of this withdrawal could fall on consumers, as lack of information exchanged may encourage providers to charge based on historical practice rather than industry norms.
The DOJ should not have blanketly withdrawn its guidelines without further guidance. While the healthcare industry in particular will suffer, other industries also rely on the exceptions for information exchanges between competitors. The withdrawal as a whole signals a movement towards increased enforcement action and risk-adverse entities should take measurable steps now to prevent the appearance of per se illegality and criminal collusion.