FTC Opposes Bill that Would Grant Antitrust Exemption for Health Care Providers

Federal Trade Commission Chairman Robert Pitofsky today presented Commission testimony to a House Committee opposing proposed legislation that would create an exemption from the antitrust laws for health care professionals. The legislation, the Chairman said, could harm consumers and raise health care costs.

The Commission's testimony before the House Committee on the Judiciary concerns H.R. 4277, "Quality Health Care Coalition Act 1998," which would create an exemption from the antitrust laws to enable health care professionals to negotiate collectively with health plans over fees and other terms of dealing. The testimony states that in addition to potentially harming consumers and raising health care costs, the "immunity that would be granted by H.R. 4277 is unnecessary to protect legitimate collaboration among competing health care providers ... would immunize anticompetitive activities that could diminish the effective functioning of health care markets ... and would likely encourage those in other industries to seek similar special interest exemptions."

Chairman Pitofsky noted that as health care markets undergo rapid and far-reaching changes, many health care providers have expressed concerns about how to ensure the quality of patient care. However, he pointed out that an antitrust exemption for anticompetitive activity that could harm consumers is not the best way to address those concerns.

The Commission testimony discusses the role of antitrust law enforcement in the health care system and states that "[a] key focus of the Commission's efforts in the health care area has been to help assure that new and potentially more efficient ways of delivering and financing health care services can arise and compete in the market for acceptance by consumers." Pitofsky gave examples of how the Commission has addressed instances of collective activity by health care providers. "Although health care markets have changed dramatically over time, and continue to evolve, collective action by health care providers to block innovation and interfere with cost-conscious purchasing remains a significant threat to consumers," he said.

In opposing H.R. 4277, the testimony notes that the "broad exemption from the antitrust laws ... is unnecessary for health care providers to effectively express their concerns about the quality of managed care plans, or to offer to consumers what they believe to be a superior alternative." Health care professionals can organize joint ventures and negotiate collectively with health plans under existing antitrust laws as long as they produce procompetitive benefits for consumers, Pitofsky explained.

The testimony discusses the FTC and the Department of Justice's widely-cited health care guidelines, which reduce uncertainty and encourage innovation by providers that benefits consumers. The Commission said that, since the guidelines were revised in 1996, the agencies have issued 15 advisory opinions and business review letters concerning provider networks --all of which have been favorable.

Pitofsky also discussed how the antitrust exemption language could injure consumers. The bill, he said, would authorize a broad range of anticompetitive joint conduct by physicians and other health care professionals that could seriously harm consumers and undermine efforts to offer and promote high quality, cost-effective health care for consumers. "For example, the bill would permit otherwise competing health care providers to jointly agree to raise their prices and increase their payments from insurers and other payers, at the expense of consumers," the Chairman noted.

In addition, the testimony states, "[t]he bill could also make it harder to develop innovative approaches to health care delivery and financing." This effect would undermine the purposes of the proposed legislation, if thwarted market entrants could have been competitive alternatives to the larger health plans, the Commission said. "Allowing providers to enter agreements that restrict the price/quality mix of health care services available to consumers in the market, even if motivated in part by genuine quality-of-care concerns, removes that choice from consumers. Moreover, it could force many consumers to forgo health care coverage altogether ... , " the testimony warns.

The testimony concludes by stating that "[c]ompetition is the basic approach that our nation increasingly is relying upon to control costs and assure quality in the delivery of health care services, with resort to regulatory intervention only as needed to address specific problems that the market cannot cure." Noting that this is a difficult and ongoing problem in a complex and dynamic sector of our economy, Pitofsky said that the solution "does not lie in eliminating competition and granting health care providers the right collectively to raise their prices and jointly agree on the terms and conditions under which their services will be available in the market." H.R. 4277 would do that by erasing more than 20 years of effort to allow health care markets to function competitively so as to better meet the needs and wants of consumers, the Chairman said. The testimony suggests that continued enforcement of the antitrust laws -- with the goal of ensuring that collaborative efforts by health care providers offer alternatives that lower cost and assure quality for consumers -- is the correct approach.

The Commission vote to approve the testimony was 4-0.

Copies of the testimony as well as other information about the Commission's activities are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202-382-4357); TDD for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-327-2710.