FTC Testifies on Competition in Group Health Care

The Federal Trade Commission today told the Senate Judiciary Committee that the agency protects health care consumers from anti-competitive conduct by enforcing antitrust laws, and that the FTC is committed to working with physicians and other providers to give them guidance to avoid antitrust pitfalls as they respond to market challenges.

“The agency will bring enforcement actions where necessary to stop activities that harm consumers by unreasonably restricting competition,” David P. Wales, Deputy Director of the FTC’s Bureau of Competition, told the Committee.

“For the past 25 years,” the testimony noted, “the Commission has challenged naked price fixing agreements and coercive boycotts by physicians in their dealing with health plans. These arrangements largely consist of otherwise competing physicians jointly setting their prices and collectively agreeing to withhold their services if health care payers do not meet their fee demands. Such conduct is considered unlawful because it harms competition and consumers, raising prices for health care services and health care insurance coverage, and reducing consumers’ choices.”

“It is important to consider what can happen when health plans are forced to accept the collective demands of health care providers for higher fees that are not reasonably necessary to achieving significant efficiencies. The effect is not simply on the health plans that must pay more. Experience with antitrust enforcement over the years shows that the effects can extend to various parties, and in various ways, throughout the health care system, including :

• Consumers and employers face higher prices for health insurance coverage, potentially forcing some employers to reduce or drop health benefits for their employees.
   
• Consumers also face higher out-of-pocket expenses, such as increased co-payments.”

“It also is important,” the testimony noted, “to remember that much joint conduct by physicians can be pro-competitive, and that neither the antitrust laws, nor the enforcement agencies treat it as an antitrust violation. As pressure to control health care costs and assure quality continues, there has been increasing interest in encouraging efforts to achieve the efficiencies that can come about through cooperation and collaboration. . . The FTC supports initiatives to enhance quality of care, reduce or control ever-escalating health care costs, and ensure the free flow of information in health care markets, because such initiatives benefit consumers.”

“To help allay physicians’ and other health care providers’ concerns about potential antitrust issues regarding collaborative activity, and to encourage the development of potentially pro-competitive and lawful arrangements, the Commission has undertaken a broad and proactive effort to inform and educate participants in the health care area,” the testimony noted. “For example, the FTC and the Department of Justice jointly developed and published Statements of Antitrust Enforcement Policy in Health Care.

“These Statements describe and explain at length how otherwise competing physicians may collaborate through arrangements that have the potential to lower costs, improve quality, and benefit consumers, without running afoul of the antitrust laws. . . The Commission staff also has provided considerable detailed guidance about potentially pro-competitive forms of physician integration.”

The Commission vote to approve the testimony was 5-0.

The FTC’s Bureau of Competition, in conjunction with the Bureau of Economics, seeks to prevent business practices that restrain competition. The Bureau carries out its mission by investigating alleged law violations and, when appropriate, recommending that the Commission take formal enforcement action. To notify the Bureau concerning particular business practices, call or write the Office of Policy and Coordination, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, DC 20580, Electronic Mail: antitrust@ftc.gov; Telephone (202) 326-3300. For more information on the laws that the Bureau enforces, the Commission has published “Promoting Competition, Protecting Consumers: A Plain English Guide to Antitrust Laws,” which can be accessed at http://www.ftc.gov/bc/compguide/index.htm.