Anti-trust bat­tles add drama

Modern Healthcare - - SPECIAL REPORT - —Joe Carl­son

Reg­u­la­tors are fo­cused on high health­care prices at a time when providers and pay­ers are look­ing to in­no­vate and ex­pand the var­i­ous ways that Amer­i­cans re­ceive their care. That con­flict will pro­duce sev­eral high­pro­file court fights—and pos­si­bly even some na­tion­ally watched de­ci­sions—in 2013.

Health­care ex­ec­u­tives have re­cently been vent­ing frus­tra­tion over how their plans to pro­vide the best deals for pa­tients run into reg­u­la­tory chal­lenges, whether it’s best-pric­ing con­tracts with in­sur­ers or hos­pi­tals look­ing to gain ef­fi­cien­cies by ac­quir­ing com­peti­tor hos­pi­tals and physi­cian prac­tices.

Some amount of cog­ni­tive dis­so­nance on the part of health­care ex­ec­u­tives is to be ex­pected, as pro-com­pe­ti­tion laws push back against the mar­ket power that may be gained through ef­forts to im­prove the ef­fi­ciency of health­care.

Even though health­care ex­ec­u­tives “be­lieve in their hearts of hearts that they will do the op­po­site, the an­titrust laws ex­pect that par­ties will ex­er­cise their eco­nom­i­cally ra­tio­nal power at some point,” says Mark Botti, a part­ner with Akin Gump Strauss Hauer and Feld in Washington and a former chief of lit­i­ga­tion for the U.S. Jus­tice De­part­ment’s An­titrust Di­vi­sion, which reg­u­lates health­care com­pa­nies.

“If mar­kets are well-de­fined and you know that you are go­ing to have sub­stan­tial mar­ket share af­ter the trans­ac­tion, and that mar­ket con­cen­tra­tion is go­ing to in­crease af­ter the trans­ac­tion, you can read­ily pre­dict that you are go­ing to draw some level of an­titrust scru­tiny,” Botti says.

No less an author­ity than the U.S. Supreme Court is ex­pected to rule this year on whether a pub­lic hospi­tal in Al­bany, Ga., was granted le­gal

im­mu­nity from an­titrust scru­tiny, en­abling it to con­sol­i­date the city’s only two hos­pi­tals un­der a sin­gle op­er­a­tor called Phoebe Put­ney Health Sys­tem.

The hos­pi­tals say the $200 mil­lion trans­ac­tion was le­gal, while the Fed­eral Trade Com­mis­sion ac­cuses Phoebe of­fi­cials of us­ing pub­lic own­er­ship to il­le­gally shield a hospi­tal mo­nop­oly from re­view. The high court heard oral ar­gu­ments in Novem­ber, but any de­ci­sion is likely to deal with some­what nar­row ques­tions that could af­fect pub­licly run hos­pi­tals and a le­gal prin­ci­ple known as “state-ac­tion im­mu­nity” from an­titrust laws.

Wider in im­pli­ca­tions for hos­pi­tals across the U.S. will be the case of ProMed­ica Health Sys­tem v. Fed­eral Trade Com­mis­sion, which is ex­pected to have oral ar­gu­ments be­fore the 6th U.S. Cir­cuit Court of Ap­peals in Cincin­nati this spring. ProMed­ica, Toledo, Ohio, de­fends its de­ci­sion to ac­quire a fi­nan­cially dis­tressed hospi­tal in nearby Maumee. The FTC said in­ter­nal emails among ex­ec­u­tives dis­cussing fu­ture price in­creases should doom the ac­qui­si­tion, but the sys­tem says in­creas­ing prices for that par­tic­u­lar hospi­tal was nec­es­sary to keep it afloat, and more ef­fi­cient for the lo­cal health­care mar­ket as a whole than build­ing a sec­ond, com­pet­ing hospi­tal in town.

Mean­while, a U.S. District Court in Detroit is sched­uled to fi­nally con­sider the le­gal­ity of “most-fa­vored na­tion” in­surance con­tracts, which are used widely be­tween in­sur­ers and hos­pi­tals across the coun­try. Such agree­ments es­sen­tially stip­u­late that a dom­i­nant in­surer will al­ways re­ceive the best price for any ser­vice, but the Jus­tice De­part­ment says that Blue Cross and Blue Shield of Michi­gan uses them to drive up prices for other in­sur­ers’ ben­e­fi­cia­ries.

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