State laws and regulations that affect your medical practice
1. How do the antitrust laws affect the health care industry?
Antitrust laws exist to preserve competition in the marketplace, and to prevent unfair or deceptive acts or practices that harm consumers. Competition benefits consumers by keeping prices low and the quality of goods and services high.
The goal of antitrust laws in the healthcare industry is to provide more choice for patients, more competition and better healthcare quality.
The Federal Trade Commission (FTC) and the U.S. Department of Justice (DOJ) share responsibility for enforcing laws that promote competition in the marketplace. There is similar enforcement at the Connecticut state level. While some antitrust violations can constitute criminal offenses, private parties may also bring actions that can result in treble damages under the antitrust laws.
2. Which federal and state antitrust laws relate to physician activity?
The primary antitrust laws affecting physicians are the Sherman Act, the Clayton Act and the 1996 Statements of Enforcement Policy in the Health Care Industry (1996 Statements), issued jointly by the Department of Justice (DOJ) and the Federal Trade Commission (FTC). While the 1996 Statements are not legal authority, they provide excellent guidance on the legality of certain arrangements and what constitutes a “safety zone.” This is discussed further in paragraph #6, below.
A. Federal Antitrust Statutes:
Generally in order to apply the federal statutes, the conduct in question must be "in or affect" interstate commerce. This test is usually met as the United States Supreme Court has historically adopted a broad view of conduct that "is or affects" interstate commerce.
Federal antitrust laws are intended to protect competition and not competitors. Therefore, these laws are violated where the competitive process has been unduly impaired or the competitive nature of a particular market has been unfairly inhibited.
The federal antitrust laws consist of the following:
i. Sherman Act
The Sherman Act was passed in 1890 and has been described by the Supreme Court as "a comprehensive charter of economic liberty aimed at preserving free and unfettered competition." The Act is divided into two sections:
* Section 1 prohibits contracts, combinations, and conspiracies that unreasonably restrain trade; and
* Section 2 prohibits monopolization, attempts to monopolize, and conspiracies to monopolize through unreasonable methods.
ii. Clayton Act
The Clayton Act was passed in 1914 in order to strengthen the Sherman Act. Generally, it deals with specific acts or practices that may have anticompetitive results. For example, the Clayton Act addresses price discrimination in the sale of goods or commodities, exclusive dealing arrangements, tying arrangements, and mergers and acquisitions which may substantially lessen competition in the market.
iii. Federal Trade Commission Act (FTC Act)
Broadly, the FTC Act prohibits unfair methods of competition in commerce. This provision has been held to "embody the provisions of the Sherman and the Clayton Acts." The FTC Act also prohibit unfair or deceptive acts or practices in commerce such as false or deceptive advertising.
B. State Antitrust Statutes:
Most states, including Connecticut, have separate antitrust statutes. Generally, these statutes are analogous to the federal statutes. In fact, frequently the language of the statute is duplicated and interpretation of the state statute is frequently referenced to the federal statutes.
C.G.S.A. § 35-24 et seq.
3. How is suspect conduct analyzed to determine whether or not it is anticompetitive?
If a cooperative arrangement between independent physicians (i.e., “competitors”) unreasonably restrains competition, either by increasing prices or reducing output, may be illegal. Some conduct is so threatening to competition that it is automatically deemed illegal. Other questionable conduct that is not per se illegal will be examined in detail under the “rule of reason” analysis discussed below.
A. Conduct that is Illegal Per Se:
Price-fixing occurs when independent physicians agree on the fees they will charge, for example, to a health plan. This is automatically illegal.
Independent physicians may not agree to boycott plans that do not accept their fee schedule or to keep certain plans (like an HMO) out of a market.
It is illegal for independent physicians to agree to refuse to sign a contract in the same general time period with a health insurer or health plan or otherwise convey negative information about the health plan.
B. Rule of Reason Analysis:
Most potentially anti-competitive activity is evaluated under a rule of reason analysis. Under this analysis, inquiry is made to determine whether the conduct or the activity promotes or restrains competition and whether its anti-competitive effects outweigh its pro-competitive effects (improved cost controls, quality assurance, etc.).
4. How are the antitrust laws enforced by the government?
The federal antitrust laws are enforced by the Antitrust Division of the DOJ and by the FTC. The DOJ can bring both criminal and civil actions to enforce the Sherman Act and can bring civil actions to enforce the Clayton Act in Federal District Courts.
The FTC has no criminal authority; however, it does have the authority to seek injunctive relief for violations of the Clayton Act and the FTC Act in Federal District Courts. The FTC Act also allows the FTC to bring administrative enforcement actions.
State antitrust laws often provide for both criminal and civil enforcement by the state's attorney general. Connecticut provides for civil enforcement. Any individual who has been held to have violated the State Antitrust laws shall forfeit and pay to the State a civil penalty of not more than twenty-five thousand dollars ($25,000). Any other person* who has been held to have violated any of the provisions of the State Antitrust laws shall forfeit and pay to the State a civil penalty of not more than two hundred fifty thousand dollars ($250,000).
C.G.S.A. § 35-38
5. Can antitrust suits be brought by private citizens?
Most actions brought under the federal antitrust laws involve private parties rather than government enforcement agencies. Under the Clayton Act, private damage suits can be brought by any person injured in his business by "reason of anything forbidden in the antitrust laws (meaning the Clayton and Sherman Acts)." Only the FTC, however, can bring suit under the FTC Act.
Under the Clayton Act, private plaintiffs may seek treble damages and the recovery of costs, including attorney's fees, or injunctive relief (both preliminary and permanent). The requirements for standing to bring suit are less stringent when seeking injunctive relief than when seeking treble damages and costs.
The statute of limitations in private damage suits is four years under the federal antitrust laws. Certain exceptions can, however, "toll" the statute of limitations beyond four years. For example, the statute of limitations can be tolled by related antitrust enforcement action brought by the United States, by fraudulent concealment or other inequitable acts by the defendant.
6. Which antitrust policies specifically address the health care industry?
On August 28 1996, the DOJ and the FTC issued revised Statements of Enforcement Policy in the Health Care Industry. In releasing the statements, the DOJ and the FTC revised their guidelines as to the types of joint ventures physicians may engage in without violating the antitrust statutes. By creating "safety zones," the enforcement agencies described those circumstances under which provider conduct would not be challenged under the antitrust statutes. The nine safety zones, as set forth in the 1996 Statements and condensed below, are described in detail with many examples at the FTC website: www.ftc.gov/reports/hlth3s.htm.
Antitrust "Safety Zones:"
A. Mergers Among Hospitals:
The Agencies will not challenge any merger between two general acute-care hospitals where one of the hospitals (1) has an average of fewer than 100 licensed beds over the three most recent years, and (2) has an average daily inpatient census of fewer than 40 patients over the three most recent years, absent extraordinary circumstances. This antitrust safety zone will not apply if that hospital is less than 5 years old.
B. Hospital Joint Ventures Involving High Technology Or Other Expensive Health Care Equipment:
If two hospitals are each unlikely to recover the cost of individually purchasing, operating, and marketing the services of expensive health care equipment such as a magnetic resonance imaging (MRI) over its useful life, their joint venture with respect to purchasing, operation and marketing of such equipment would not be challenged by the Agencies.
C. Hospital Joint Ventures Involving Specialized Clinical Or Other Expensive Health Care Services:
(1)Define the relevant market
The joint venture must include only other specialized services; for example, neonatal intensive care nurseries, that patients or physicians would view as reasonable alternatives.
(2)Evaluate the competitive effects of the venture
The joint venture must not eliminate an existing or potentially viable competing provider of a service or preclude others from entering a certain market. For example, if the only two hospitals providing primary and secondary acute care inpatient services in a relevant geographic market for such services were to form a joint venture to provide a tertiary service, they would continue to compete on primary and secondary services.
(3) Evaluate the impact of procompetitive efficiencies
In the case of certain specialized clinical services, such as open heart surgery, the joint venture may be desirable because it will permit the program to generate sufficient patient volume to meet well-accepted minimum standards for assuring quality and patient safety.
(4) Evaluate collateral agreements
The joint venture should be evaluated to determine whether it includes collateral agreements or conditions that unreasonably restrict competition and are unlikely to contribute significantly to the legitimate purposes of the joint venture.
D. Providers' Collective Provision Of Non-Fee-Related Information To Purchasers Of Health Care Services:
The Agencies will not challenge, absent extraordinary circumstances, a medical society's collection of non-price data from its members which relates to the mode, quality or efficiency of treatment.
E. Providers' Collective Provision Of Fee-Related Information To Purchasers Of Health Care Services:
Providers' collective provision to purchasers of health care services of factual information concerning the providers' current or historical fees or other aspects of reimbursement, such as discounts or alternative reimbursement methods accepted (including capitation arrangements, risk-withhold fee arrangements, or use of all-inclusive fees), is unlikely to raise significant antitrust concern and will not be challenged by the Agencies, absent extraordinary circumstances.
F. Provider Participation In Exchanges Of Price And Cost Information:
The Agencies will not challenge, absent extraordinary circumstances, provider participation in written surveys of (a) prices for health care services, or (b) wages, salaries, or benefits of health care personnel, if the following conditions are satisfied:
(1) the survey is managed by a third-party (e.g., a purchaser, government agency, health care consultant, academic institution, or trade association);
(2) the information provided by survey participants is based on data more than 3 months old; and
(3) there are at least five providers reporting data upon which each disseminated statistic is based, no individual provider's data represents more than 25 percent on a weighted basis of that statistic, and any information disseminated is sufficiently aggregated such that it would not allow recipients to identify the prices charged or compensation paid by any particular provider.
G. Joint Purchasing Arrangements Among Health Care Providers:
Most joint purchasing arrangements among hospitals or other health care providers do not raise antitrust concerns. Such collaborative activities typically allow the participants to achieve efficiencies that will benefit consumers. Examples include the purchase of laundry or food services by hospitals, the purchase of computer or data processing services by hospitals or other groups of providers, and the purchase of prescription drugs and other pharmaceutical products.
H. Physician Network Joint Ventures:
(1) Exclusive Physician Network Joint Venture
The Agencies will not challenge, absent extraordinary circumstances, an exclusive physician network joint venture whose physician participants share substantial financial risk and constitute 20 percent or less of the physicians in each physician specialty with active hospital staff privileges who practice in the relevant geographic market. In markets where there are less than five physicians in a particular specialty, a joint venture may include one physician from that specialty and still qualify for the “safety zone.”
(2) Non-Exclusive Physician Network Joint Venture
The Agencies will not challenge, absent extraordinary circumstances, a non-exclusive physician network joint venture whose physician participants share substantial financial risk and constitute 30 percent or less of the physicians in each physician specialty with active hospital staff privileges who practice in the relevant geographic market. In markets with fewer than four physicians in a particular specialty, a non-exclusive physician network joint venture otherwise qualifying for the antitrust safety zone may include one physician from that specialty, even though the inclusion of that physician results in the venture consisting of more than 30 percent of the physicians in that specialty.
I. Multi provider Networks
Multi provider networks will not be viewed as per se illegal, if the providers' integration through the network is likely to produce significant efficiencies that benefit consumers, and any price agreements (or other agreements that would otherwise be per se illegal) by the network providers are reasonably necessary to realize those efficiencies.
* "Person" means any individual, proprietorship, corporation, limited liability company, firm, partnership, incorporated and unincorporated association, or any other legal or commercial entity.
C.G.S.A. § 35-25
Copyright © Kern Augustine Conroy and Schoppmann, P.C. Used with permission.