DOJ Withdraws Health Care Antitrust Policy Statements

Signaling a fundamental change in its approach to antitrust issues in health care markets, on Friday, February 3, the Department of Justice (DOJ) withdrew three policy statements related to health care antitrust enforcement. The DOJ described the statements, published in 1993, 1996, and 2011, as “overly permissive on certain subjects, such as information sharing,” stating that they “no longer serve their intended purposes of providing encompassing guidance to the public on relevant healthcare competition issues in today’s environment.” The move increases uncertainty and puts an emphasis on case-by-case consideration of conduct in the health care markets.

The 1993 policies established “antitrust safety zones” to resolve “uncertainty that might deter beneficial mergers or joint ventures that promise to reduce healthcare costs.” These safety zones described circumstances under which the DOJ and the FTC would not challenge hospital mergers, hospital joint ventures involving high-technology or other expensive medical equipment, physicians’ provision of information to purchasers of health-care services, hospital participation in price and cost information exchanges, joint purchasing agreements among health care providers, and physician network joint ventures.

For example, “absent extraordinary circumstances,” the DOJ and FTC would not challenge “a merger in which one of the merging hospitals has less than 100 licensed beds and an average” of less than 40 patients per day. At the time, enforcers noted that this “safety zone will be especially helpful for small rural hospitals, who consider a merger necessary in order to continue providing services, but who fear the cost of an expensive” federal antitrust investigation. In the same vein, the policies also established a safety zone for “joint ventures among rural hospitals to share MRIs or other expensive equipment and agreements among community hospitals to operate helicopter or other expensive services jointly[.]” The 1996 policies, for the most part, lightly modified the 1993 statement.

Among the most widely relied upon safety zones set forth in 1993 policy statement are those related to information sharing. Companies and organizations, both in the health-care space and in the other markets, have long relied upon the safety zones when establishing guidelines for information sharing. Indeed, some courts looked at the policy statement in assessing whether an information exchange was reasonable under the rule of reason. Notably, DOJ has not withdrawn its support for the 2016 Antitrust Guidance for Human Resource Professionals which sets forth guidance on when an information exchange may be lawful. The 2011 policy statement explained how the agencies would assess health-care providers looking to form accountable care organizations, or ACOs, under the 2010 Affordable Care Act and its Medicare Shared Savings Program. The statement had established a new safety zone based on independent ACO participants’ shares of a common service in their primary service areas. But, recognizing that “under certain conditions ACOs could reduce competition and harm consumers through higher prices or lower quality of care,” the statement also provided guidance for when ACOs would be analyzed under the rule of reason.

The withdrawn statements provided antitrust safety zones for provider networks involving sufficient financial risk-sharing arrangements and additional guidance for ventures that lacked sufficient financial integration. The statements facilitated certain provider network joint agreements related to pricing without risk of antitrust enforcement, even if the arrangement lacked substantial financial risk-sharing. They also supplied examples and guidance for multiprovider network joint ventures regarding certain contracting arrangements among providers that would not necessarily be considered to be illegal price fixing. Providers participating in network arrangements will need to monitor the extent to which, if any, the agencies pursue enforcement activity related to long-standing practices developed under the withdrawn statements.

The policy statements were jointly issued by the DOJ and the FTC. While the FTC has not formally withdrawn the statements, both agencies are currently run by enforcers who have signaled that they are seeking to aggressively utilize the antitrust laws to meet enforcement priorities under the new paradigm of an interconnected, dynamic economy. As Assistant Attorney General Jonathan Kanter remarked, “The healthcare industry has changed a lot since 1993, and the withdrawal of that era’s out of date guidance is long overdue. . . . The Antitrust Division will continue to work to ensure that its enforcement efforts reflect modern market realities.”

Now that the DOJ has withdrawn policies offering safety zone protection to myriad health care transactions, the industry should prepare for even more scrutiny at all organizational levels and phases of patient care, and any organization participating in information exchanges should reexamine the contours of those exchanges. Health care organizations should reassess the practices they follow in connection with transactions, including their due diligence and clean team practices, to ensure they comply with current best practices, rather than outdated guidance.

The attorneys in Ballard Spahr’s Antitrust and Competition Group represent clients in health care and other markets in assessing the antitrust implications of planned business combinations, acquisitions, and collaborations; securing antitrust clearances; and developing a cogent competition strategy that will hold up in court, at the negotiation table, or before an antitrust agency. Attorneys in our Health Care Group at Ballard Spahr represents clients in a cross section of the industry and counsel on regulatory, compliance, transactional, financing, benefits and compensation, and labor and employment matters.

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