On Feb. 3, 2023, the Department of Justice Antitrust Division (DOJ) announced that it has withdrawn what it considers to be “outdated” joint Federal Trade Commission (FTC) and DOJ guidance, including the 1996 Statements of Antitrust Enforcement in Healthcare (1996 Statements) along with predecessor 1993 guidance, and the 2011 Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program (2011 ACO Statement).
Countless healthcare providers have looked to these statements for guidance over almost three decades to understand the enforcement agencies’ perspective on structuring provider collaborations, group purchasing organizations, benchmarking programs and other arrangements. The press release follows Feb 2, 2023, remarks by Deputy Assistant Attorney General Doha Mekki (flagged in a Feb. 3 McGuireWoods legal alert) foreshadowing the withdrawal.
In the announcement, DOJ indicated that the withdrawal of the three policy documents was the “best course of action for promoting competition and transparency” regarding the DOJ’s current approach to healthcare antitrust enforcement. The press release acknowledged that, “since this guidance was first released, the healthcare landscape has changed significantly. As a result, the statements are overly permissive on certain subjects, such as information sharing, and no longer serve their intended purposes of providing encompassing guidance to the public on relevant healthcare competition issues in today’s environment” in light of increased concentration, vertical integration and other changes.
DOJ stressed that it will take a case-by-case enforcement approach informed by recent DOJ enforcement actions and advocacy in healthcare and that there is no plan to issue replacement guidance. There is broad speculation that the FTC will also withdraw the 1996 Statements and 2011 ACO Statement and that other joint guidance that incorporates aspects of the 1996 Statements (e.g., the 2016 Antitrust Guidance for Human Resources Professionals) may be withdrawn in the near term.
The Feb. 3 announcement is the latest in a string by DOJ highlighting that healthcare antitrust enforcement is a top priority. It should serve as notice to healthcare providers that antitrust compliance — including implementation of antitrust compliance protocols that require regular evaluation of antitrust risk associated with arrangements involving competitors — must be part of a broader healthcare compliance program and that antitrust risk should be factored into business planning.
What did the DOJ change and how should providers respond to the withdrawal of this guidance?
It is critical to note that DOJ’s decision to withdraw these policy documents and “safety zones” in favor of adopting a case-by-case approach to analysis and enforcement decisions does not mean that provider arrangements are categorically suspect, unlawful or lacking in pro-competitive benefits. Before, during and now after the period of time when these guidance documents were in place, it has been true that conduct may be deemed per se unlawful if it constitutes price fixing, market allocation, joint boycott or another serious antitrust violation; may be subject to a rule-of-reason analysis weighing the pro-competitive benefits and anti-competitive harms to determine the conduct’s lawfulness; or may be inherently unproblematic.
There is no doubt that legitimate provider arrangements with demonstrable potential to expand care delivery, generate efficiencies and reduce costs, and that result in higher-quality care and better patient experience without any undue anti-competitive downside, will continue to be an important part of the healthcare landscape.
However, withdrawal of this guidance creates an opportunity for any healthcare provider to assess the antitrust risk related to arrangements structured based on the 1996 Statements or the 2011 ACO Statement. They would need to confirm that the arrangements would pass muster under the antitrust laws in light of current enforcement norms and guidance; to identify strategies to bring them in line with these norms and guidance; or to determine whether it is in the best interest of the provider to cease participating the arrangement.
This is particularly true because the 1996 Statements and the 2011 ACO Statement contained “safety zones” with market share and other thresholds that DOJ has now disavowed as being indicative of an arrangement’s competitive significance. To the extent participants may have taken comfort in a particular arrangement’s compliance profile in light of these thresholds, it may be prudent to apply a more current analytical framework to assess the antitrust risk associated with collaborative activities. This is particularly true in light of the FTC and DOJ’s dramatically increased civil and criminal enforcement activity in the past few years, much of it focused on provider collusion and information exchange.
1996 Statements and “Safety Zones”
The now-withdrawn 1996 Statements used a framework based on “safety zones,” “which describe conduct that the [FTC/DOJ] will not challenge under the antitrust laws, absent extraordinary circumstances.” Simply because an arrangement fell outside the safety zones did not mean that it was likely to be challenged by the FTC or DOJ. Indeed, antitrust analysis is fact-intensive, and the 1996 Statements themselves “outline[d] the analysis the Agencies will use to review conduct that falls outside the safety zones.” It is also important to note that the statements never provided that any particular arrangement that fell within a safety zone was per se lawful.
The chart below summarizes the subject matter of each of the nine 1996 Statements, along with any safety zone or competitive analysis guidance for arrangements outside the safety zones. It also offers examples of common healthcare arrangements that may have been structured in light of the 1996 Statements.
| Statement Number | 1996 Statement | Former Safety Zone / Competitive Analysis Outside Safety Zone | Potentially Affected Arrangements |
| 1 | Hospital Mergers | Former Safety Zone: FTC/DOJ stated they were unlikely to challenge a hospital merger, absent extraordinary circumstances, where one hospital has under 100 licensed beds during the three most recent years and has an average daily inpatient census of fewer than 40 patients over the three most recent years. Competitive Analysis Outside Safety Zone: The competitive analysis referenced merger guidelines that were long ago superseded. | For several years, the framework for hospital merger analysis has been actively evolving and demanded a fact-specific analysis. The withdrawal of this safety zone and the accompanying competitive analysis does not represent a significant shift for most hospitals and health systems considering a merger, including transactions involving small hospitals as described in the safety zone. |
| 2 | Hospital Joint Ventures Involving High Technology or Other Expensive Healthcare Equipment | Safety Zone: FTC/DOJ stated they were unlikely to challenge where two or more hospitals form a joint venture to purchase or otherwise share the expense of, operation of or marketing of an expensive piece of equipment where only the number of hospitals necessary to support the equipment participate. Competitive Analysis Outside Safety Zone: The competitive analysis suggested that the FTC/DOJ would perform a rule-of-reason analysis on most arrangements of this kind, balancing the pro-competitive benefits with the anti-competitive harms. Of particular importance were the legitimacy of any cost-based business justifications for the arrangement and whether there were anti-competitive collateral agreements among the participants that unreasonably harmed competition. | Hospitals and health systems that are competitors or potential competitors and that jointly own equipment should consider conducting a review to document the pro-competitive benefits of the arrangement and to confirm that the justification for joint ownership still exists. In addition, confirming the absence of any tacit or express agreements not to compete by independently acquiring the relevant equipment (or an alternative) would also be prudent. |
| 3 | Joint Ventures Involving Specialized Clinical or Other Expensive Healthcare Services | The 1996 Statements did not include a safety zone for these arrangements. The agencies indicated a desire to gather more expertise. | Hospitals and health systems that are competitors or potential competitors and that jointly provide services should consider conducting a review to document the pro-competitive benefits of the arrangement and to confirm that the justification for joint provision of services still exists. In addition, confirming the absence of any tacit or express agreements not to compete by independently providing the relevant service would also be prudent. |
| 4 | Providers’ Collective Provision of Non-Fee-Related-Information to Purchasers of Healthcare Services | Safety Zone: FTC/DOJ stated they were unlikely to challenge joint sharing of clinical data to purchasers (e.g., payors) for purposes of making recommendations regarding coverage, practice parameters, etc., where there are no business-related agreements related to the arrangement (e.g., joint boycotts). | To the extent that any provider is part of a joint effort to influence a payor regarding recommendations (for instance, for coverage of new modalities of care) that are clinical in nature but that may have an impact on the terms of any agreements that a payor may have with each of the participants, the parties should confirm that the efforts are narrowly tailored to serve legitimate, care delivery-based goals and that there are no “spillover” anti-competitive effects from the communication among competitors and potential competitors. |
| 5 | Providers’ Collective Provision of Fee-Related Information to Purchasers of Healthcare Services | Safety Zone: FTC/DOJ stated they were unlikely to challenge exchanges of fee-related information where “reasonable safeguards” are employed:
| Perhaps the most notable aspect of the withdrawal of the 1996 Statements is FTC/DOJ’s disavowal of this test for the exchange of competitively sensitive information, which has been applied broadly in all industries, including healthcare. Although the safety zone originally covered provider fee-related information, it has been applied to all types of competitively sensitive data, including wage and salary data, capacity/volume data, and other types of information. Some examples of healthcare provider arrangements that may have been structured based on the information exchange safety zone include provider industry association benchmarking programs; third-party consultant database services that “report out” anonymous rate or compensation information; and some other multiparty joint venture arrangements. The withdrawal of the safety zone and accompanying competitive analysis provide a good opportunity to assess the soundness of ongoing information exchanges to ensure that they could not be construed to allow competitors or potential competitors to use data in an anti-competitive manner and to assess the pro-competitive basis for engaging in the information exchange (e.g., benchmarking for purposes of enhancing efficiency and enabling a lower total cost of care). In conducting this assessment, and to the extent possible, providers participating in industry association data programs or purchasing data from third parties may consider asking the administrators of those databases for a description of their antitrust compliance protocols. After gathering sufficient information about all information exchanges that involve competitors or potential competitors, providers should consider documenting that, as to their individual organization, there continues to be a material pro-competitive reason to continue to participate in the information exchange; that sufficient antitrust protocols and protections are in place within the providers’ own business teams, and at any organization or vendor administering a database, such that there is a high degree of confidence that the information could not be used in an anti-competitive manner; and that there is a system in place to periodically revisit this assessment. |
| 6 | Provider Participation in Exchanges of Price and Cost Information | Safety Zone: FTC/DOJ stated challenge would be unlikely, absent extraordinary circumstances, where “reasonable safeguards” are employed:
| Elimination of this safety zone is in line with the FTC and DOJ’s increased enforcement focus in recent years on employer and buy-side collusion. The withdrawal of the safety zone and accompanying competitive analysis provide a good opportunity to assess the soundness of ongoing information exchanges to ensure that they could not be construed to allow competitors or potential competitors to use data in an anti-competitive manner and to assess the pro-competitive basis for engaging in the information exchange (e.g., benchmarking for purposes of enhancing efficiency and enabling a lower total cost of care). Providers who participate in industry associations that provide cost and wage benchmarking or survey data may wish to consider assessing their participation in these programs, including by asking program administrators for a description of their antitrust compliance protocols. After gathering sufficient information about all information exchanges that involve competitors or potential competitors on the employer and buy side, providers should consider documenting that, as to their individual organization, there continues to be a material pro-competitive reason to continue to participate in the information exchange; that sufficient antitrust protocols and protections are in place within the providers’ own business teams, and at any organization administering a data program, such that there is a high degree of confidence that the information could not be used in an anti-competitive manner; and that there is a system in place to periodically revisit this assessment. |
| 7 | Joint Purchasing Arrangements Among Healthcare Providers | Safety Zone: FTC/DOJ stated they were unlikely to challenge these exchanges, absent extraordinary circumstances, where these two conditions are present:
| The withdrawal of the safety zone relating to group purchasing will affect many group purchasing arrangements structured to comply with the 1996 Statements. Providers that participate in group purchasing, arrangements that involve competitors on the buy side, may consider conducting an assessment of the arrangements, including getting information on any antitrust protocols maintained by the organization administering the purchasing. Providers should consider documenting that, as to their individual organization, there continues to be a material pro-competitive reason to continue to participate in the group purchasing arrangement (e.g., lower transaction costs associated with procurement or lower costs of goods and services that result in lower total cost of care); that sufficient antitrust protocols and protections are in place within the providers’ own business teams, and at any organization or vendor administering a group purchasing arrangement, such that there is a high degree of confidence that the arrangement is pro-competitive and does not involve “spillover” anti-competitive effects related to information exchange; and that there is a system in place to periodically revisit this assessment. |
| 8 | Physician Network Joint Ventures | Safety Zone: FTC/DOJ stated they were unlikely to challenge physician joint ventures, absent extraordinary circumstances, where certain conditions were met:
| Physician joint ventures have been the subject of several agency business advisory letters over the years, which put a finer point on what the agencies consider to be sufficient “financial integration” (e.g., sharing of “substantial financial risk” through capitation, bundling or other risk-based contracting strategies) and sufficient “clinical integration” to justify joint contracting among competitors in the context of a joint venture or other network such as an independent physician association or clinically integrated network (CIN). The withdrawal of this safety zone (in line with the withdrawal of the 2011 ACO policy Statement, described below) also reflects a move away from rules of thumb, with respect to market share and the enforcers’ focus on alternative frameworks for assessing competitive effects, including cross-market effects. Providers that participate in financially or clinically integrated arrangements that involve competitors or potential competitors may wish to assess whether the competitive dynamics within the service areas in which these arrangements operate present any undue antitrust risk for participants. As part of that assessment, they may want to request a description of any antitrust compliance protocols in place and assess any changes to participation agreement terms and integration-related efforts to confirm that the arrangement is, on balance, resulting in pro-competitive efficiencies such as higher quality of care or lower cost of care and there are no anti-competitive “spillover” effects relating to bringing competitors or potential competitors within the same network. |
| 9 | Multiprovider Networks | FTC/DOJ did not establish a safety zone for multiprovider networks, given their complexity, but the statement sets forth that “multiprovider networks will be evaluated under the rule of reason, and will not be viewed as per se illegal, if the providers’ integration through the network is likely to produce significant efficiencies that benefit consumers, and any price agreements (or other agreements that would otherwise be per se illegal) by the network providers are reasonably necessary to realize those efficiencies.” | Providers participating in multiprovider networks (e.g., CINs that involve hospitals and other facilities in addition to physician services) may wish to assess whether the competitive dynamics within the service areas in which these arrangements operate present any undue antitrust risk for participants. As part of that assessment, they may want to request a description of any antitrust compliance protocols in place and assess any changes to participation agreement terms and integration-related efforts to confirm that the arrangement is, on balance, resulting in pro-competitive efficiencies such as higher quality of care or lower cost of care and there are no anti-competitive “spillover” effects relating to bringing competitors or potential competitors within the same network. |
2011 ACO Statement and “Safety Zones”
In connection with the final rule establishing accountable care organizations, in 2011, FTC/DOJ promulgated the Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program. The 2011 ACO Statement applied to “collaborations among otherwise independent providers and provider groups that are eligible and intend, or have been approved, to participate in the Shared Savings Program.”
It indicated that the eligibility criteria for participating in the Shared Savings Program “are broadly consistent with the indicia of clinical integration that the Agencies previously set forth in the Health Care Statements [specifically Statements 8 and 9]” and, therefore, even ACO arrangements involving contracts with private commercial payors would be subject to a rule-of-reason analysis. With the withdrawal of Statements 8 and 9, it is no surprise that the 2011 ACO Statement was also withdrawn.
The 2011 ACO Statement established its own safety zone, stating that particularly in light of ongoing regulatory monitoring of ACOs, “ACOs that meet the CMS eligibility criteria for and intend, or have been approved, to participate in the Shared Savings Program and are highly unlikely to raise significant competitive concerns” would not be challenged by the antitrust agencies, absent extraordinary circumstances. To qualify for the safety zone, ACO participants providing the same service within the ACO were required to have, combined, no more than 30% of that service in each participant’s primary service area. In addition, whether a particular provider was rural, exclusive to the ACO or nonexclusive was relevant to the safety zone analysis, depending on that provider’s characteristics.
Although ACOs historically have not been a focus of antitrust enforcement, as these entities grow in size, they may become subject to increased scrutiny. Recently announced coordination between DOJ and the Department of Health and Human Services, with an aim of improving antitrust enforcement (flagged by McGuireWoods this 2022 alert), also may lead to competitive concerns regarding ACOs coming to DOJ’s attention through CMS regulators.
McGuireWoods’ team of antitrust attorneys have extensive experience in the healthcare industry, including designing and implementing antitrust compliance programs aimed at detecting, assessing and mitigating antitrust enforcement risk and delivering practical business-planning advice. The team is available to respond to your questions about the effect of these announcements on your business.