In a quiet yet shocking announcement on February 3, 2023, the Antitrust Division of the U.S. Department of Justice (DOJ) withdrew three major antitrust policy statements (collectively, the “Statements”) that have served for years as mainstays of health care antitrust enforcement guidance. Specifically, DOJ withdrew the following statements: Department of Justice and FTC Antitrust Enforcement Policy Statements in the Health Care Area (September 15, 1993); Statements of Antitrust Enforcement Policy in Health Care (August 1, 1996); and Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in Medicare Shared Savings Program (October 20, 2011).
For years, health care organizations have relied on the Statements to guide and set guardrails for collaborative activities including the structuring and composition of Group Purchasing Organizations, clinically integrated networks and, more recently, Accountable Care Organizations (“ACOs”). Health care providers have looked to the Statements consistently for guidance, despite DOJ’s assertion in the recent announcement that the Statements “no longer serve their intended purposes of providing encompassing guidance to the public on relevant healthcare competition issues in today’s environment.” Nevertheless, and without elaboration, DOJ proclaimed that the withdrawal of these Statements would best promote competition and transparency, noting that the health care landscape has changed since the original issuance of this guidance. Despite arguing that the withdrawal of the Statements would promote transparency, the DOJ seemingly contradicted itself by decreeing that the Statements are “overly permissive on certain subjects such as information sharing . . . .” Interestingly, the 2016 Antitrust Guidance for Human Resource Professionals (which also denounced the use of non-poaching agreements) relied on the same information sharing structure for allowing information exchanges. It is unclear whether DOJ intends to withdraw that 2016 guidance as well.
While the Statements were never seen as overly permissive, as discussed below, the 1996 Statement did provide nine statements and seven safety zones, all of which seemed to protect and encourage smaller providers, encourage the generation of efficiencies, and (perhaps most importantly) foster quality improvement activities. It is unclear why, in a time where there is increased overhead, aging infrastructure, and the need for the development of clinical guidelines and practice parameters, the DOJ would suddenly withdraw its support in favor of a case-by-case enforcement approach. Similarly, the withdrawal seems contrary to the Center for Medicare & Medicaid’s (“CMS’s”) push for ACOs, including the most recent ACO initiative, the ACO Realizing Equity, Access, and Community Health (“ACO REACH”).
As a reminder of the pro-competitive structures outlined in the 1996 Statement:
Statement 1 for Mergers of Small Hospitals
This Statement included a safety zone that provided that “absent extraordinary circumstances” the DOJ and Federal Trade Commission (collectively the “Agencies”) would not challenge a merger where one of the hospitals in the three (3) most recent years had both: (1) “an average of fewer than 100 licensed beds” and (2) “an average daily census of fewer than 40 patients.” In justifying this safety zone, the Agencies noted that such a small hospital “does not compete in any significant way with other hospitals” and that such hospitals, particularly in rural areas, would be “unlikely to achieve the efficiencies that larger hospitals enjoy”.
Statement 2 for Hospital Joint Ventures to Purchase High Technology Health Care Equipment
This Statement included a safety zone with the recognition that high-technology health care equipment was so expensive that smaller hospitals may not be able to support purchasing the technology on their own. This safety zone allowed hospitals to collectively purchase and market such technology through a joint venture, thus allowing the hospitals the ability to provide a service, and to compete, with larger systems that could more easily support the investment in such technology on their own. Indeed, the safety zone explicitly excluded joint ventures where one hospital could support the technology on its own, but partnered with another.
Statement 3 for Joint Ventures Involving Specialized Clinical Care
Much like Statement 2, this Statement recognized that efficiencies could be gained for some specialized and clinical care “such as the recruiting and training of specialized personnel – that a single hospital may not be able to support.” There is no question that, for some specialized services, having a sufficient volume of cases is critical for maintaining the expertise of the specialists (in addition to being critical for recruitment purposes). While this Statement did not include a safety zone (noting that the Agencies needed further information before doing so), the Statement did note that “in many cases, these collaborative activities could create procompetitive efficiencies that benefit consumers, including the provision of services at a lower cost or the provision of a service that would not have been provided absent the joint venture.”
Statement 4 for Providers’ Collective Provision of Non-Fee-Related Information
This Statement created a safety zone for the collection of non-fee related information, such as the collection of medical data. One of the examples provided by the Agencies was a “medical society’s collection of outcome data from its members about a particular procedure that should be covered by a purchaser and the provision of such information to the purchaser.” Further, the safety zone provided protection for the “development of suggested practice parameters – standards for patient management developed to assist providers in clinical decision making. . . .”.
Statement 5 for Providers’ Collective Provision of Fee-Related Information
This Statement created a safety zone for the collection of fee-related information. In order to meet the safety zone, the information had to be: (1) collected by a third party; (2) only include data that was more than three (3) months old (unless sharing with purchasers); and (3) include the data of at least five (5) providers, none of which could account for more than 25 percent of the result. The Agencies noted that the three criteria “represent[ed] a careful balancing of a provider’s individual interest in obtaining information useful in adjusting the prices it charges or the wages it pays in response to changing market conditions against the risk that the exchange of such information may permit competing providers to communicate with each other” inappropriately.
Statement 6 for Providers’ Exchange of Price and Cost Information
Similar to Statement 5, this Statement was intended to capture provider participation in surveys managed by third parties. To meet the safety zone, the survey needed to meet the same three (3) criteria outlined in Statement 5.
Statement 7 for Joint Purchasing Arrangements
This Statement addressed joint purchases, for example, the purchasing of items through a GPO. To meet the safety zone, two (2) conditions had to be met: (1) “the purchases account for less than 35 percent of the purchased product or service in the relevant market;” and (2) “the cost of the products and services purchased jointly accounts for less than 20 percent of the total revenues from all products or services sold by each competing participant in the joint purchasing arrangement.”
Statement 8 for Physician Network Joint Ventures
This Statement created a safety zone for physician networks. To meet the safety zone, of an exclusive network, the participants needed to “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.” Non-exclusive networks could meet the safety zone if the participants “shared 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.” The Statement specified the requirements to demonstrate “substantial financial risk,” noting that such risk sharing “provides incentives for the physicians to cooperate in controlling costs and improving quality by managing the provision of services by network physicians.” This Statement also introduced the concept of clinical integration and provided an example of when clinical integration would not cause competitive concern.
Statement 9 for Multiprovider Networks
This Statement recognized the development of networks that could include both competing providers as well as providers offering “complementary or unrelated” services. While not issuing a safety zone for these types of arrangements, the criteria the Agencies noted would create efficiencies, including sharing substantial financial risk and other efficiencies that might result.
The Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in Medicare Shared Savings Program draws heavily on the 1996 Statement and provides a safety zone for those entities operating an ACO within the CMS Shared Savings Program. In order to qualify for the ACO safety zone, competing independent ACO participants must represent 30 percent or less of the market in a defined primary service area. In a nod to understanding the challenges of rural care, the safety zone also provides for a rural exception. Further, to address the implication of dominant participants in the marketplace, any dominant participant participating in an ACO must do so on a non-exclusive basis. In drafting this Statement, the Agencies noted “ACOs may generate opportunities for health care providers to innovate in both Medicare and commercial markets and achieve for many other consumers the benefits Congress intended for Medicare beneficiaries through the Shared Saving Program.”
Given the pro-competitive rationales discussed in the Statements, and described above, it is perhaps not surprising that the DOJ’s withdrawal provided limited elaboration on its current rationale. There is no indication that DOJ is working on “updated” guidance, and while the Federal Trade Commission has not formally withdrawn its support for these Statements (as it must do so by vote), it is likely only a matter of time before that occurs. In the interim, health care providers should prepare for unpredictable DOJ enforcement in this area.
- Member of the Firm
- Member of the Firm
- General Counsel / Chief Privacy Officer