How antitrust laws hinder the goals of healthcare reform

May 10, 2012

With all eyes on the Patient Protection and Affordable Care Act, few are seeing why antitrust laws could frustrate reform.

Key Points

Antitrust laws are one of the greatest obstacles to healthcare reform. They limit the ways competing physicians, hospitals, and other healthcare providers can do business together.


Some agreements are so egregious that they need not even restrain competition. The mere fact that the agreement has occurred is enough, and no defense exists. Some of these per se violations of antitrust laws include agreements among two or more independent physicians. For example:

■ charging a particular amount for a particular service (price-fixing);

■ not contracting with a particular managed care organization (MCO) (boycotting); or

■ agreeing on hours of operation, services offered, or the geographic areas served (market allocation).

This is by no means a complete list or definitive description of antitrust laws. It simply describes some of the activities that will violate them.

To illustrate, suppose a payer approaches you and several of your colleagues, who are competitors. The payer gives you a contract and fee schedule that you review with your colleagues. Although the payer recognizes that all of you are not a physician group practice, it would like to deal with just one of you for contracting purposes. You choose one person to represent the group, and you seek changes in the contract, including the fee schedule.

You and your colleagues have violated the Sherman Antitrust Act. Because you and your colleagues are competitors and are not members of a single professional corporation through which you conduct all, or substantially all, of your professional practices, you may not discuss fees among yourselves, and you may not appoint someone to act as the voice of the group. In addition to price-fixing, if you decide together not to contract with the payer, you would be engaging in a group boycott.


You can avoid these violations by properly structuring a formal group and adhering to certain rules when negotiating with payers. When scrutinizing physician organization activities, antitrust enforcement authorities will examine the degree of an organization's economic integration and the degree to which economic risk is shared among the shareholders. The level of integration is key in determining whether the organization is a single economic unit or whether it consists of two or more economic units.

Determining whether a physician organization is sufficiently integrated, however, often is an extremely difficult task because the law changes and is fact-specific. The Federal Trade Commission (FTC) looks to such indicators as whether the organization is capitated; the extent to which services are centralized in the organization; and the accountability of the shareholders to the organization through things such as utilization management, quality assurance, and peer review.


Healthcare reform is causing the U.S. Department of Justice (DOJ) and other regulators to do two nearly unprecedented things in the history of anti-trust law: innovate and cooperate. I'm exaggerating, but the truth is that healthcare reform has motivated government regulators to find ways to facilitate competing healthcare providers to "come together" for the sake of reducing cost and improving quality.

Several years ago, the DOJ lightened its antitrust restrictions by expanding the rule of reason analysis for determining whether the antitrust laws have been breached, the notion of shared financial risk beyond mere capitation, and the role of the messenger.

Although the role of so-called messenger model organizations proved to be a failure, the fact that the DOJ would consider other ways of creating "substantial economic risk" was surprising. And now, what's even more surprising is that the DOJ recently promised to view all accountable care organization (ACO) proposals essentially more leniently. Also, in a joint statement with the Health and Human Services Office of Inspector General (which has primary enforcement authority on such regulations as Stark laws and the federal anti-kick-back statute), it agreed to cooperate to facilitate the development and rollout of ACOs.