February 8, 2011
Health Law Provision Raises Antitrust Concerns
By ROBERT PEAR

WASHINGTON — The new health care law encourages collaboration by doctors and hospitals for cost savings, but a split has developed here as to just how far they can go without running afoul of antitrust laws.

An influential Republican member of the Federal Trade Commission, J. Thomas Rosch, said that without “vigorous antitrust enforcement,” the new alliances of health care providers could reduce competition and increase costs to consumers.

Mr. Rosch set forth his concerns in private letters to the White House and the federal Medicare agency. The letters, obtained by The New York Times, reveal a struggle between the Justice Department and the commission over who should police the market.

The internal debate creates uncertainty about antitrust enforcement policy at a moment when scores of hospitals, clinics and doctor groups are eager to band together and test innovative ways of delivering care. That uncertainty threatens to slow collaboration by health care providers. President Obama and other proponents say such cooperation could cut costs and improve care for millions of people.

When competitors collaborate, economists say, they can produce enormous efficiencies, but they may also be tempted to engage in monopolistic practices. The risk tends to be greatest in small- and medium-size communities dominated by one or two hospitals or health care systems, experts say.

David A. Balto, a private antitrust lawyer with close ties to the Obama administration, said the disagreement between the Justice Department and the Federal Trade Commission was “extremely unfortunate.”

“The commission has demonstrated unreasonable skepticism toward collaboration by health care providers,” Mr. Balto said.

The antitrust division of the department, under Christine A. Varney, an assistant attorney general, is widely seen by hospitals as more sympathetic to their efforts to band together with doctors and negotiate jointly with health insurance plans.

Officials of the two agencies, which normally share responsibility for enforcing antitrust laws, are trying to devise a joint statement explaining how they will evaluate proposed collaborations by doctors and hospitals. The agencies said, in response to questions, that their goal was to have one consistent policy, but they refused to give details of their talks.

The new health care law encourages joint ventures, known as accountable care organizations, in which doctors and hospitals take collective responsibility for the care of Medicare beneficiaries.

“The creation and operation of accountable care organizations potentially conflict with the antitrust laws,” Mr. Rosch wrote. “The Supreme Court long ago prohibited competing providers from jointly contracting to provide their services, except in specified circumstances.”

Mr. Rosch, an antitrust lawyer for more than 35 years, said he was speaking only for himself. But his views on antitrust policy in the health care industry generally reflect the views of the commission’s nonpartisan professional staff, based on numerous advisory opinions issued to health care providers over the last 15 years.

Unless doctors and hospitals share some degree of financial risk, Mr. Rosch said, the new entities are unlikely to achieve the promised cost savings. In recent years, independent doctors and hospitals have often come together to coordinate care but have been reluctant to pool resources and share the risks of financial losses.

The fragmentation of the health care system, in which patients often shuttle from doctor to doctor, is widely seen as a major problem. Under the new health care law, doctors and hospitals can earn financial rewards if they improve the care of Medicare patients while holding costs below benchmarks set by the federal government.

Dr. Donald M. Berwick, the administrator of the Centers for Medicare and Medicaid Services, said he would soon issue rules for these groups of health care providers. If a group becomes so powerful in a market that it can raise prices without fear of losing business to rivals, it could be required to seek review from one of the antitrust agencies, administration officials said. The health care law does not displace the antitrust laws or provide any exemption for the new entities.

Mr. Rosch said the government must set clear goals for Medicare savings and measure the performance of accountable care organizations with respect to both Medicare and the private insurance market.

“Otherwise,” Mr. Rosch said, “there will be a real risk that the savings accruing to Medicare will just come at the expense of private insurers.” In other words, he suggested, a network of doctors and hospitals could offset a loss of Medicare revenue by charging more to privately insured patients.

In recent years, the Federal Trade Commission has taken the lead in analyzing joint ventures by health care providers. Citing this experience, Mr. Rosch said his agency should also be responsible for policing compliance with the antitrust laws by accountable care organizations. This approach, he said, would “avoid time-consuming turf battles” with the Justice Department.

Health care providers said Mr. Rosch and the Federal Trade Commission were making a power grab that could jeopardize the success of accountable care organizations. As part of the Obama administration, they said, Ms. Varney and the Justice Department have a bigger stake in the success of the new entities.

As a member of the commission in 1996, Ms. Varney said the government should be receptive to new types of collaboration among health care providers, a view she has voiced lately as assistant attorney general. In 2003, as a lawyer in private practice, she testified “on behalf of the American Hospital Association,” one of her clients, at a hearing held by the Justice Department and the commission.

In discussions between the two agencies, Mr. Rosch said, the department has taken the position that health care providers should be free to choose which agency would review their plans. Such an arrangement, he said, could lead to “a lack of regulatory consistency,” with the two agencies applying different standards. Justice Department officials declined to comment.

Mr. Balto, a senior fellow at the Center for American Progress, a liberal research and advocacy group, said: “The standards applied by the F.T.C. are out of date. For health care providers to get approval from the commission for a joint venture or other form of collaboration is an exhaustive, expensive process that typically takes more than a year.”

But another antitrust lawyer in Washington, Katherine I. Funk, said, “The commission has more experience and expertise analyzing the clinical integration of health care providers — a key goal of accountable organizations.”

More in Money & Policy (2 of 37 articles)
Under Banner of Fiscal Restraint, Republicans Plan New Abortion Bills

Read More »
Close