Commentary: Feds weigh in on question of competition in health care

(This article originally ran in The Daily Record, Baltimore, MD, another Dolan Media publication.)

Last year, the Federal Trade Commission and the Department of Justice issued a joint report titled Improving Health Care: A Dose of Competition. The report is comprised of a detailed analysis of the state of health care in the United States today, recommendations for improving health care in the future, and several observations with respect to antitrust enforcement in health care.

Among the recommendations in the report are the following:

State regulatory reform

States with certificate of need (CON) programs should reconsider whether these programs best serve their citizens' health care needs. Currently, Maryland is one of 37 states that have CON programs that require regulatory approval before certain health care facilities and services are built, commenced or modified.

The FTC and Department of Justice believe that these programs are not successful in containing health care costs and that they pose serious anti-competitive risks that usually outweigh their purported economic benefits.

The report also recommends that states take steps to decrease the concentration of licensed providers on state licensing boards. Including representatives from the general public, and individuals with expertise in health administration, economics and consumer affairs may make it less likely that these boards will engage in anti-competitive behavior.

The report also recommends that states should consider implementing uniform licensing standards and reciprocity compacts to reduce barriers to telemedicine and competition from out-of-state providers who desire to move in-state. Uniform licensure and reciprocity standards would foster telemedicine's pro-competitive benefits and deter its potential harm to consumers.

Physician bargaining

The federal government should not enact legislation to permit independent physicians to bargain collectively. The federal agencies note that there are currently several ways in which independent physicians may work together to improve quality without violating the antitrust laws, such as clinically integrating their practices in a meaningful way. Allowing collective bargaining will harm consumers financially and is unlikely to result in quality improvements.

Insurance mandates

States should reconsider whether mandating insurance coverage for certain benefits serves their citizens' health care needs. The agencies note that mandates are likely to reduce competition, restrict consumer choice, raise the cost of health insurance and increase the number of uninsured Americans.

Consumer information

Private payors, providers and governments should improve measures of price and quality, and disseminate this information to the consuming public. For health care markets to operate efficiently, consumers must have reliable information regarding price and quality, and incentives to make health care decisions based on this information.

The report also sets forth a number of the agencies' observations with respect to antitrust enforcement in health care. Among the more notable are the following:

* Physician joint ventures.

Previously, the agencies determined that collaborations among physicians may avoid condemnation under the antitrust laws if the physicians in a joint venture are financially or clinically integrated. The report notes that the agencies will consider payment for performance arrangements, which tie compensation to best practices or patient outcomes, a form of financial integration. The report also provides additional guidance in analyzing a clinically integrated physician group.

* Hospital mergers.

The report notes that additional research is necessary to define product and geographic markets optimally for use in analyzing hospital mergers. The agencies observe that a hospital's nonprofit status will not be considered when analyzing a hospital merger, because the pricing behavior of nonprofit and for-profit hospitals is substantially the same once they achieve market power. Neither will the agencies accept community commitments (such as agreements to pass savings onto the community for a certain period of time after a merger) as a resolution to likely anti-competitive effects arising out of a hospital merger.

* Group Purchasing Organizations.

Previously, the agencies set a safe harbor for not challenging a group purchasing organization (GPO) if the amount purchased through the GPO is less than certain established amounts. The report observes that this safe harbor deals only with the creation of group purchasing organizations, and does not preclude the agencies from challenging any anti-competitive GPO activities, such as tying or bundling products or services, or joint refusals to deal.

Barry F. Rosen is the chairman and chief executive of the law firm of Gordon, Feinblatt, Rothman, Hoffberger & Hollander LLC in Baltimore, Maryland. He can be reached at 410-576-4224 or brosen@gfrlaw.com. Cynthia A. Shay is an associate in Gordon, Feinblatt's business and health care practice groups, and she can be reached at 410-576-4082 or cshay@gfrlaw.com. The opinions expressed are not necessarily those of this newspaper.

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