In late September, the Federal Trade Commission (FTC) submitted comments to the Virginia and Tennessee Departments of Health regarding each state’s proposed rules concerning hospital cooperation agreements. These proposed rules permit two or more hospitals to consolidate by merger or other combination of assets if, in the departments of health’s view, the benefits of the cooperative agreement outweigh any disadvantages caused by a reduction in competition. While the main purpose of the comments was to offer FTC assistance in the states’ evaluation of such agreements, the FTC re-iterated its position that “legislation purporting to grant antitrust immunity is un-necessary to encourage procompetitive collaborations among health care providers.” In fact, according to the FTC, such legislation is more likely to harm consumers.

The FTC believes the “antitrust laws are consistent with the laudable public policy goals of improving quality, reducing costs, and improving patient access for health care services.” With that position in mind, the FTC’s letters to the Virginia and Tennessee Departments of Health suggest that antitrust regulators should be focused on prohibiting agreements among providers that could harm competition rather than encouraging the creation of new agreements.  Specifically, the FTC stressed that “efforts to shield such conduct from antitrust enforcement are likely to harm [state] health care consumers, no matter how rigorous or well-intentioned the regulatory scheme may be.”

Under the proposed rules, the states must weigh the benefits resulting from the cooperation agreements against any potential disadvantages likely to result from a reduction in competition.  Both states’ rules specifically outline factors to be considered during the process. Potential benefits of cooperation agreements as noted in the FTC comments include the following:

• Enhancement in quality of care and population health status
• Preservation of hospital facilities to ensure access to care
• Gains in cost-efficiency of hospital services provided
• Improvements in utilization of hospital resources and equipment
• Avoidance of duplication of hospital resources
• Increases in access to hospital services for medically underserved populations
• Participation in the state Medicaid program
• Reductions in the total cost of care

Dis-advantages of such agreements that the states propose to consider include the following:

• The adverse impact on the ability of payers to negotiate reasonable payment and service arrangements with providers
• A reduction in competition among providers
• An adverse impact on patients in the quality, availability and price of health care services
• The availability of alternative arrangements that are less restrictive to competition and achieve the same benefits or a more favorable balance of benefits over dis-advantages

While these factors align with those that the FTC considers when reviewing a potential provider transaction, state authorities and the FTC differ on whether it is sound policy to encourage cooperation agreements among providers. The state legislators seek to allow cooperation agreements to move forward without fear of potential antitrust enforcement. Conversely, the FTC thinks legislation protecting provider cooperation agreements is un-necessary to encourage procompetitive collaborations and potentially harmful to the extent it shields anticompetitive collaborations from antitrust enforcement. In any event, providers entering such [...]

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