Beware Antitrust Laws When Considering Healthcare Mergers

The Antitrust Division of the Federal Trade Commission (FTC), the Department of Justice (DOJ), and state Attorneys General have been aggressively enforcing antitrust laws in the healthcare market. The FTC views the challenges to certain healthcare transactions as an important element in controlling the cost of healthcare where the transactions have, in its view, an anticompetitive affect on the market. Navigating the antitrust laws is important for healthcare systems, hospitals and physician practices that are looking at consolidation, mergers or other forms of collaboration as a means to meet the current economic constraints and other challenges in the healthcare industry.

The discussions and activities associated with entering into a merger or other collaboration between and among providers must comply with the antitrust laws, which prohibit any concerted action that suppresses, or that facilitates the suppression of, competition. A number of federal antitrust laws exist and are generally enforced by the FTC and the DOJ. State antitrust laws are enforced by the state Attorney General.

Transaction Discussion & Negotiation

The meetings, discussions and communications among providers in furtherance of a potential merger may constitute concerted action for antitrust purposes when they involve independently practicing physicians and physician groups or healthcare entities that may be viewed as competitors. Accordingly, any discussions or actions that could lead to anticompetitive conduct need to be avoided.

Areas that will create significant risk during the analysis and negotiation of a potential merger include:

1. Any discussion or dissemination of the current fees charged by providers, desired reimbursement levels or possible changes in those fees or levels;
2. Any agreement on a specific method of charging for services;
3. Any discussion of limiting the geographic area served, the entities to be solicited, the services provided by a provider or any discussion regarding market allocation;
4. Any suggestion of boycott of, or retaliatory action against, a managed care organization, insurer or other entity; and
5. Sharing of payer contracts that the providers have in common.

At the beginning of any merger analysis and negotiation, transaction and antitrust counsel should provide or facilitate an evaluation of the potential antitrust implications and may prepare and circulate a checklist that clearly identifies permissible and impermissible discussion topics.

Level of Integration

As providers face increasing challenges seeking reimbursement for services, many are looking for ways to collaborate to facilitate improved payer arrangements. Agreements on prices or price levels for patients are per se illegal under antitrust laws, but joint price negotiations by competing healthcare providers may be permissible if properly evaluated to determine (a) if there is sufficient financial and clinical integration and (b) if the agreement is reasonably necessary to accomplish the procompetitive benefits of the integration.