BATTEN: FTC could resolve antitrust concerns on health care reform

July 20, 2009
President Obama recently announced a cooperative initiative where health care industry leaders plan to work together to reform the ailing health care system. Shortly after that announcement, the national media machine spawned considerable concern among several health care groups that the cooperative effort might violate federal antitrust laws for collusion and price fixing among competitors.

In May, The New York Times published an article titled, “Antitrust Laws a Hurdle to Health Care Overhaul.” The article said, “Antitrust lawyers say doctors, hospitals insurance companies and drug makers will be running huge legal risks if they get together and agree on a strategy to hold down prices and reduce the growth of health spending.”

Is this antitrust concern truly a roadblock to fixing our health care system? As in all businesses, each group within the industry is concerned with its own bottom line and is motivated to present arguments in its best interest for how health care should be reformed.

Many will claim that certain reform measures cannot be done because of existing laws or for economic reasons. Sometimes these arguments are legitimate roadblocks, but sometimes they are mere speed bumps that allow a group to slow reform efforts and divert attention from solutions it dislikes.

Federal antitrust laws generally make it illegal for business competitors to share pricing information and strategies. The laws are intended to prevent competitors from working together to fix their prices and eliminate competition. If there is no competition, consumer prices are driven higher.

Some groups in the health care industry argue that having the entire industry collaborate on a plan to reduce health care costs would violate federal antitrust laws.

So how do the parties know whether activities they are about to enter into are illegal? The Federal Trade Commission might issue an opinion that could help settle the question.

The FTC, one agency that enforces certain antitrust laws, has a process that allows parties to seek guidance as to whether an arrangement may be illegal, before entering into it.

The parties may submit their proposed arrangement to the commission to receive an agency Advisory Opinion on whether the agreement would violate the law, and why.

A favorable opinion can provide written assurance from the government that, if the parties enter into the described collaboration, the government will not deem them in violation of the law. Some activities are deemed violations on their face, and others require a detailed analysis.

Those who state the current health care reform initiatives may violate antitrust laws would likely argue that prior proposals submitted to the government regarding arrangements to control health care prices were viewed to potentially violate antitrust laws.

However, those cost-cutting arrangements include older health care reform initiatives from the Clinton and Carter administrations. The federal government has evolved its way of thinking since then.

Traditionally, when competitors have agreed to establish prices based on shared information, it has been deemed illegal. However, the FTC and the Department of Justice indicated in their 1996 publication “Enforcement Policy on Provider Participation in Exchanges of Price and Cost Information” that not all price-sharing activities are illegal on their face.

The agencies indicated that, if competitors could demonstrate that the collaborations would increase efficiency and decrease costs, the agencies would not consider the activities illegal. Instead, they would analyze the situation using “the rule of reason,” which looks at the benefits of the arrangement and compares them to the risk for harming competition.

An arrangement that can demonstrate adequate efficiencies with minimum risk to competition is generally not penalized by the agencies.

In the present situation, the entire health care industry would be subject to the same cost-cutting and pricing-reform measures. No one competitor would be put in a worse situation than any other.

Also, the consumer and government would save money. Based on the need for collaboration in order to meet current health care reform goals, a prospective Advisory Opinion likely would conclude that those efforts would not violate federal antirust laws for collusion and price fixing.

Various groups within the health care industry likely will continue to find reasons the industry cannot progress toward reform. If industry leaders are concerned about violating the law, requesting an Advisory Opinion could remove at least one roadblock (or speed bump) to improving our health care system.•


Batten is an attorney at the Indianapolis law firm of Kroger Gardis & Regas. Views expressed here are the writer’s.


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