FTC Gets Ready to Flex Enforcement Muscle Regarding Healthcare Integration

With all the talk about using accountable care organizations (ACOs) and other ventures to integrate and coordinate health care services, reduce costs, increase efficiency, and move from volume to value, laboratories and other providers must be aware that one government enforcement entity is watching this shift with concern. The Federal Trade Commission (FTC) is charged with protecting competition and has been focusing on the potential anti-competitive effects of changes in the health care industry for many years. This month it is hosting a workshop titled “Examining Health Care Competition” to “study recent developments related to health care provider organization and payment models that may affect competition and consumer protection in the provision of health care services.” The agenda for the latest workshop focuses on five topic areas: >Accountable Care Organizations, >Alternatives to fee-for-service payment, >Provider consolidations, >Provider networks and insurance benefit packages, and >Health insurance exchanges. A Washington, D.C., antitrust lawyer, Jeff Miles of Ober Kaler, thinks this current activity may be an indication that the FTC wants “an opportunity to defend itself against those claiming there is tension between the ACA [Affordable Care Act] and antitrust law.” Whatever the reason, he indicates the FTC’s concern and focus on health care and competition is a good thing, “for the simple reason that market power generally results in increased healthcare cost.” Prior workshops and guidance The FTC’s last workshop was held in 2014 and focused on quality, price transparency, regulation of health care professionals, and innovation. Prior to the 2014 workshop, hearings and public comment in the early 2000s resulted in a joint FTC and Department of Justice (DOJ) 2004 report Miles credits as “very beneficial.” That report emphasized: “Vigorous competition promotes the delivery of high quality, cost-effective health care, and vigorous antitrust enforcement helps protect competition.” More than 10 years ago, that report highlighted the same concerns and issues currently being discussed: cost, utilization, quality, accessibility of information, and price transparency. Some of the recommendations in that report are still being pursued today as well: incentives to lower cost and improve quality, providing greater transparency of pricing for patients/consumers, and reducing barriers to telemedicine. ACOs The FTC says in its federal register notice regarding the Workshop that “[s]ome health policy experts and economists have raised concerns that ACOs might increase the ability of providers to obtain and exercise market power.” This concern is increased if the ACO requires merger of some providers. In the workshop notice, the FTC refers back to its 2011 joint policy statement with the DOJ regarding antitrust enforcement and ACOs in the Medicare Shared Savings Program. That policy statement explained how the DOJ and FTC would review ACOs under antitrust analysis, including when a rule of reason analysis would be applied, the parameters of a “safety zone” for ACOs that are “highly unlikely to raise significant competitive concerns,” and anticompetitive conduct to avoid such as sharing confidential and sensitive pricing information (that could lead to collusion), exclusive contracting and tying purchase of ACO services to services provided outside the ACO. Finally, the policy statement offered a 90-day expedited antitrust review to newly formed ACOs. Some concerns expressed in the FTC’s workshop notice include potential that Medicare ACOs will promote development of commercial market ACOs and cost-shifting from Medicare ACOs to commercial ACOs. Some of the questions to be addressed at the workshop include whether ACOs do achieve efficiencies and cost savings and what strategies are employed to achieve these successes. Are the changes in cost and quality achieved via competition among providers participating in ACOs? There’s been no antitrust activity thus far regarding ACOs, notes Miles, and “both agencies [FTC and DOJ] have been very welcoming and very lenient about these ACOs.” New Payment Models With regard to new payment models, the FTC asks for public comment on the alternatives that should be considered and who bears the risk in these alternate payment models, how prices will be established, and whether competition will be “a significant factor in establishing prices.” The FTC notice indicates a focus on the “competitive implications of this shift away from traditional fee-for-service reimbursement” and asks for evidence that alternative payment methods can increase competition, improve care and reduce costs. Consolidations in response to ACA The FTC notes some providers have raised a concern that the Affordable Care Act (ACA) requires consolidation to achieve the desired cost reduction and quality improvement. It highlights hospital physician practice consolidations and hospital mergers involving different geographic or service markets and finally, provider-payer consolidations. In all these, the FTC is concerned about the ability of consolidated entities to affect pricing. “A merger is the optimal way to achieve benefits,” notes Miles. However, the downside is the merged entity’s potential ability to raise prices—which is the FTC’s concern. “Increased integration and coordination is important but you don’t have to do a merger to achieve those effects. If there is some less restrictive method to achieve the integration and coordination” the FTC will be less concerned with pursuing those methods, Miles advises. “A merger might maximize the benefits from integration and coordination, but the concern is that the merger’s anticompetitive effects from the increase in market power will likely outweigh the marginal benefit from a merger over an arrangement that can achieve most of the same benefits while less restrictive of competition,” he explains. Because many hospital markets are so concentrated, he notes it may be difficult for any hospital to make horizontal acquisitions without running into antitrust issues. And niche programs likewise may have problems collaborating with local specialists but less problem merging with physicians and specialists they recruit from outside the geographic service area, he adds. Payer’s participation networks and benefit plans At the workshop, the FTC also will be seeking feedback about the competitive effects of limiting the number of providers in a network, whether concentrated health insurance markets enhance competition, and whether “regulatory or legislative interventions may enhance or undermine innovative network and benefit design strategies” (such as any willing provider legislation and price transparency requirements). Health Insurance Exchanges Finally, the last item on the FTC’s agenda is the health insurance exchanges. The FTC is considering the types of plans available, who is buying them and how state and federal exchanges differ, and the impact on health care insurance competition and pricing of insurance. Comments regarding competition and changes in the health care industry may be filed online or in person until April 30, 2015. See the FTC and DOJ Notice in the Feb. 2, 2015 Federal Register for more detailed instructions for submitting comments. Note that comments will be made public. Sources Federal Trade Commission, Announcement for Public Workshop, “Examining Health Care Competition,” Federal Register, Vol. 80 No. 21, Feb. 2, 2015, pp. 5533-5537. Federal Trade Commission & Department of Justice, Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program; Notice, Federal Register, Vol. 76, No. 209, Oct. 28, 2011. Improving Health Care: A Dose of Competition: A Report by the Federal Trade Commission and the Department of Justice (July 2004) Takeaway: As the industry focuses on ways to shift away from fee-for-service, decrease costs and increase efficiencies, the effect on competition can’t be overlooked.