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Show AN EXAMINATION OF RECENTLY ISSUED ANTITRUST GUIDELINES FOR HEALTH CARE: REVOLUTION, EVOLUTION, OR BUSINESS AS USUAL? by Dan A. Fuller and Debra L. Scammon Introduction Health care providers, increasingly turning to collaborative agreements to deal with a number of trends developing in their industry, are finding antitrust officials attentive to the details of these agreements. For example, with the increasing prominence of managed care, providers are no longer negotiating for reimbursement of their services strictly as individuals, but rather as part of a larger group of providers who agree to reimbursement terms applicable to anyone who joins a particular managed care plan. If the decision to join the plan under specified terms is made collectively by providers however, antitrust authorities become suspicious of collusion. Hospitals are affiliating with insurers to create integrated systems for the financing and delivery of care. When such alliances threaten to hamper the ability of a non-integrated hospital to compete, those agreements may be scrutinized by antitrust authorities. A third example comes from the trend in the hospital industry toward the ownership of multiple hospitals by one entity. When those multiple hospitals are in one geographic market, when together the commonly owned hospitals comprise a dominant share of the market, and when the common ownership has been achieved through merger or acquisition (rather than de novo entry), the antitrust authorities may question whether there are likely to be negative effects on competition among the hospitals in that market Within the state of Utah, both state and federal antitrust authorities have recently challenged several agreements between health care providers. In the most publicized investigation, the Department of Justice examined several agreements and practices of the University of Utah Hospital and School of Medicine purportedly designed to contain costs. Three years of investigation during which approximately four million dollars of legal fees were incurred defending the School of Medicine culminated in a consent agreement concerning the sharing of information about nurses' wages, individual contracts with insurance companies for certain physician services, and allocating health services delivery between competitors (Department of Justice, March 14, 1994)1. In another recent intervention, the Federal Trade Commission announced it would challenge a proposed acquisition of Holy Cross Hospital, Jordan Valley Hospital, and St. Benedict's Hospital by HealthTrust, Inc., contending the acquisitions would stifle competition for acute-care services in the Salt Lake City area. For their part, the parties associated with the proposed merger argue that the combination is necessary to compete against Intermountain Health Care, which dominates many aspects of the health care market in Utah and contiguous areas.2 These current local investigations are exemplary of the conflict between health care practitioners who claim to pursue collaborative agreements as a way to achieve goals of cost containment or efficient delivery of health care, and the antitrust authorities who allege that some of these agreements stifle or injure competition and thus violate antitrust laws.3 Partially in response to 1 Hospitals are understandably nervous about the prospects of high costs (and poor publicity) of antitrust investigations. The costs and time of the University of Utah investigation are probably not unusual. For example, Elbert (1976) found that litigation based on Section 7 of the Clayton Act (merger .challenges) lasted about 3 years on average. 2 Antitrust challenges appear to reduce the value of a merger or takeover target by eliminating from the competitive bidding process potential acquirers who fear antitrust exposure. Jarrell (1985) found that shareholders of target firms with more than one takeover bid recieved a risk-adjusted return 17 percent higher than shareholders of target firms receiving only one bid. 3 Other recent examples which highlight the increased pressure between the health care industry and the nation's antitrust enforcement agencies include: i) a rejection by the FTC of the Pharmaceutical Manufacturers' Association request to let member companies cooperate in a voluntary program to limit price increases; ii) a successful challenge to a joint venture between 60 percent of the San Francisco Bay area pulmonologists and oxygen supply companies (Davidson, 1993); iii) an investigation of the Hill-Rom unit of Hillenbrand Industries for alleged anti-competititve practices in the patient-room bed and ancillary goods market (Anders, 1993); iv) recent FTC advisory opinions to five states requesting these states not to renew laws that prevent insurers from excluding physicians and hospitals willing to meet the conditions of PPOs (Felsenthal, 1993); v) an agreement between the FTC and a Jacksonville, Florida group of obstetricians who formed an IPA that the physicians would disband their joint marketing group; vi) the no contest plea by Dr. Alson, a Tucson, Arizona dentist, of organizing a letter-Utah's Health: An Annual Review 1994 103 |