Risky Business: Proposed Reform of the Antitrust Laws as Applied to Health Care Provider Networks

By Marjancik, Natalie | American Journal of Law & Medicine, January 1, 1998 | Go to article overview

Risky Business: Proposed Reform of the Antitrust Laws as Applied to Health Care Provider Networks


Marjancik, Natalie, American Journal of Law & Medicine


Natalie Marjancik^

OVERVIEW

Because the health care industry comprises over thirteen percent of the American economy, law enforcers increasingly apply antitrust law to all aspects of health care delivery and financing.l Through antitrust enforcement, consumers receive the benefits of lower health care costs and improved health care services.2 To achieve further cost savings, health care providers are forming, as well as joining, many different types of provider network joint ventures.3 Providers form networks,4 expecting "them to generate efficiencies, reduce excess capacity, improve utilization, permit greater specialization and enhance quality."5 However, because they organize competing physicians and enable them to collaborate on prices and set fee schedules, provider networks raise serious antitrust concerns.6 Consequently, the federal government and courts are increasingly focusing their antitrust enforcement efforts on the formation and anticompetitive activities of provider networks.

In Part I, this Note addresses the degree to which network providers must be economically and financially integrated to legally collaborate and set prices. Part II briefly explains the procedures one may use to enforce the federal antitrust laws. Following this explanation of antitrust enforcement procedures, Part III discusses the relevant statutory and case law applicable to health care provider networks. Within Part III, this Note introduces two recent legal developments in antitrust enforcement, the Antitrust Health Care Advancement Act of 1997 (AHCAA)7 and the federal antitrust enforcement agencies' 1996 Policy Statements.8 Part IV discusses arguments made in favor of the AHCAA and the enforcement agencies' new antitrust polices. After evaluating the arguments presented in Part IV, Part V examines the ramifications of easing antitrust scrutiny of the formation and collaborative activities of nonfinancially integrated provider networks. Lastly, in Part VI, this Note recommends alternatives to enacting the current version of the AHCAA. As summarized in Part VII, this Note concludes that if Congress enacts any legislation in this area, it should impose a risk-sharing requirement on all network providers who collaborate on prices. Alternatively, Congress should require that all network providers that are merely clinically integrated implement a messenger model system to receive rule of reason treatment.

II. ANTITRUST ENFORCEMENT PROCEDURES

There are four processes available to enforce the federal antitrust laws.9 To begin, private plaintiffs who have suffered from anticompetitive practices or a state's attorney general can bring a lawsuit in federal court.ii Alternatively, the Department of Justice (DOJ) and the Federal Trade Commission (FTC)2 may bring an enforcement action against the same defendant(s) regarding the same matter(s).13

To avoid duplication and inconsistent enforcement, only one of the enforcement agencies conducts an investigation and an enforcement action if an antitrust problem is handled administratively rather than judicially.14 The DOJ usually enforces the federal antitrust laws15 by bringing criminal prosecutions and civil actions for injunctive relief in the federal courts.16 In contrast, rather than bringing lawsuits in federal court, the FTC generally conducts its own administrative hearings and adjudications, which the parties may later appeal to the full Commission and the federal courts.17 In addition to commencing formal actions, the enforcement agencies use less formal measures, such as business review letters18 or advisory opinions,l9 to educate the public about the agencies' enforcement policies. For example, if a group of doctors wants to form a provider network, the doctors can write to either one of the enforcement agencies, detailing their plans to form the network. In responding to the inquiries it receives,20 the enforcement agency publicly releases the written request, either stating the enforcement agencies' current enforcement policy relating to the proposed activity or stating that the enforcement agencies decline to review the request. …

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