Federal Trade Commission, Justice Department Revise Policy Statements on Health Care Antitrust Enforcement

As part of an ongoing effort to encourage efficient arrangements for delivering health care, the Federal Trade Commission and the Department of Justice today announced revisions to the agencies’ enforcement policy statements regarding health care provider networks. These changes expand upon the guidance contained in the agencies’ prior joint Statements of Antitrust Enforcement Policy in Health Care, last revised in 1994, in order to ensure that uncertainty about the antitrust laws does not deter the formation of new types of networks that could benefit competition and consumers. The most important changes make clear that a wider range of physician networks will receive more flexible antitrust treatment than was spelled out in previous policy statements. While the new guidelines represent an effort by the agencies to promote innovation in the industry, the agencies stressed that they will not be lessening their scrutiny of anticompetitive health care arrangements.

In recent speeches and Congressional testimony, FTC Chairman Robert Pitofsky has outlined how antitrust enforcement has been vital to maintaining competitive health care markets. The revisions announced today address how physician network joint ventures (Statement 8) as well as the broad range of multiprovider networks generally (Statement 9) will be reviewed under the antitrust laws.

“As health care markets undergo rapid change, federal antitrust officials must assure consumers they will receive the benefits of new innovative arrangements, while continuing to be protected from anticompetitive activity,” Chairman Pitofsky said. “These revisions to our enforcement policy statements provide important new guidance to the health care industry, ensure that antitrust laws do not unnecessarily impede market developments, and continue to prevent anticompetitive conduct that would limit the range and quality of health care options available to consumers or lead to higher prices.”

The revised statements provide additional guidance on how the agencies determine whether agreements among competing providers on the prices they will charge through a net work should be condemned as “per se” illegal price fixing or analyzed instead under “rule of reason.” Rule of reason analysis examines whether a particular activity may have anticompeti tive effects that outweigh any procompetitive benefits. The “per se” rule of illegality is reserved for certain types of conduct that have been found so inherently detrimental to competition that they are presumed illegal without further examination. The 1994 Statements provided that such agreements were analyzed under the rule of reason if the physicians shared substantial financial risk or if the combining of the physicians into a joint venture enabled them to offer a new product producing substantial efficiencies.

Today’s statements expand the discussion of agreements that receive rule of reason treatment. As the health care industry has evolved, there has been increasing interest in exploring new arrangements to meet the needs of purchasers of health care services. In particular, the agencies have given expanded treatment to their analysis of networks in which the participating providers do not share financial risk, but cooperate to contain costs and assure quality of care, and networks in which participants share financial risk in additional ways beyond those specifically set forth in the earlier statements.

Today’s statements also provide more guidance on how the agencies apply the rule of reason to provider networks. In addition, the revisions give further attention to the particular issues raised by rural markets, explaining how market conditions in rural areas may justify certain health care arrangements that might raise antitrust concerns in other areas.

The previous statements established “antitrust safety zones” for certain physician networks. Because some in the industry have misinterpreted these as defining the only physician networks that the agencies would consider lawful, the revisions further emphasize that networks falling outside the safety zones may be lawful. The revisions provide additional examples of risk-sharing arrangements that can fall within the safety zones, but do not change the scope of the safety zones.

The statements issued today continue the agencies’ commitment to expedited treatment for requests from the health care industry for antitrust guidance about specific proposed conduct concerning matters addressed by the policy statements.

The Commission vote to approve the revised policy statements was 5-0. Commissioner Christine A. Varney issued a statement in which she said she believed the revisions address her previous concerns that the guides should “reflect greater receptiveness to new and innovative forms of provider arrangements that do not necessarily involve financial risk sharing and suggesting factors that should be taken into account in reviewing provider arrangements that fall outside the safety zones.” Varney also said she invited continued input from interested parties so “that the Agencies can continue to provide appropriate and relevant antitrust guidance.”

Copies of the DOJ/FTC “Statements of Antitrust Enforcement Policy in Health Care” [HTML, PDF] will be available after 12 Noon today on the Internet at the FTC’s World Wide Web site at: http://www.ftc.gov and from the FTC’s Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710. FTC news releases, FTC advisory opinions and other materials also are available on the Internet at the FTC’s World Wide Web site.

(FTC File No. P96503)