Twists and turns in the brief life of Washington state's healthcare antitrust exemption law prompted providers to file at least seven exemption applications in the days immediately before an exemption moratorium took effect on May 8.
That's nearly double the number of applications filed by providers over the first two years of the law.
"A lot of folks came out of the woodwork who believe they need legal protection," said Lance Heineccius, assistant director for policy with the Washington Health Services Commission.
The rush for antitrust immunity was the result of the repeal of major portions of Washington state's 1993 healthcare reform act (May 1, p. 18). The state Legislature passed the repeal bill on April 24, and Gov. Mike Lowry signed it into law on May 8.
However, Lowry also signed legislation that saves the antitrust immunity program while imposing a moratorium on applications.
A provision of the original Washington Health Services Act of 1993 created a state antitrust exemption for collaborative ventures among healthcare providers that met specific criteria, such as lowering costs or improving quality.
Under the 1993 scheme, hospitals, physicians and other providers could file exemption petitions with the Washington Health Services Commission, a five-member agency charged with implementing the new state reform law.
After obtaining an advisory opinion from the state attorney general's office, the commission would weigh possible anti-competitive effects of a venture against the proposed consumer benefits and render a decision.
If the commission granted an exemption petition, it would monitor the progress of the venture in meeting its community-benefit goals through annual reports submitted by providers.
The state law, in theory, also would protect ventures from federal antitrust scrutiny under the state action immunity doctrine. Under the legal doctrine, which has developed through case law, activities that are permitted and actively supervised by the state are exempt from federal antitrust scrutiny.
Prior to the move to repeal the state reform law, four sets of providers submitted exemption applications:
Two Spokane hospitals-Sacred Heart Medical Center and Deaconess Medical Center-sought to consolidate their competing rehabilitation programs at a new 102-bed site located on the campus of Deaconess' sister facility in Spokane, the Deaconess Rehabilitation Institute. The attorney general's office said the deal would substantially lessen competition for rehabilitation services in the market. But the Health Services Commission approved the exemption petition on April 7, ruling that the benefits of the deal outweigh the risks to competition.
Two orthopedic physician practices in Spokane with a total of nine doctors Antitrust
wanted to jointly negotiate with third-party payers. The attorney general said that without further economic integration between the practices, what they wanted to do constituted illegal price fixing. The physicians withdrew their exemption petition.
Two border hospitals-Pullman (Wash.) Memorial Hospital and Gritman Medical Center in Moscow, Idaho-and 34 of their physicians are seeking antitrust relief for a physician-hospital organization to jointly contract with third-party payers. The attorney general said the Palouse Health Care Network would represent an attempted monopoly as well as a vehicle to fix prices. The commission has scheduled a June 13 hearing to review the case.
Six primary-care physicians practicing in and around Colfax, Wash., want to merge their practices. The attorney general said such a merger would substantially lessen competition for primary-care services in the market. The commission has yet to schedule a hearing in the matter.
But the critical eye of the attorney general's office didn't deter other providers from filing another seven exemption petitions when faced with the chance of losing the law altogether.
"There was a feeling (among) people considering applications that it was now or never," said Douglas Ross, a healthcare antitrust attorney with the Seattle office of Davis Wright Tremaine.
He represents three PHOs in Washington that filed exemption applications with the state just before the moratorium took effect.
The legislation Lowry signed on May 8 repealed a number of provisions in the original state healthcare reform legislation, including the antitrust exemption, and it eliminated the Health Services Commission effective June 30. But Lowry simultaneously signed a piece of supplemental legislation that blocked the repeal of the antitrust exemption by placing an immediate moratorium on new exemption applications through July 1, 1996.
"A few legislators said, `Let's not throw everything out at the same time,"' Ross said.
During the moratorium, the attorney general's office will study whether such legal immunity is necessary, said Duane Thurman, assistant attorney general in the office's antitrust section.
Also, any applications submitted before the May 8 deadline will be reviewed by the attorney general's office and forwarded to a new five-member state agency-the Washington Health Care Policy Board-for approval.
Claudia Sanders, director of policy analysis for the Washington State Hospital Association, said the hospital group supported the exemption law and its continuation, but "a moratorium is better than a repeal."
Sanders also said the association will work with the state attorney general's office to ensure that the group's views are heard during the office's study of the exemption issue.
Given the office's opinions in the cases so far, that may be a tough task.
"The tone of the opinions surprised me a little," Ross said. "They were much harsher than I would have expected."
Washington state antitrust exemption results so far
The attorney general's office says four proposed provider ventures may violate antitrust laws, but the new state commission has approved at least one of them anyway
Venture Attorney general opinion Commission ruling
Hospital rehabilitation venture May violate law Petition approved
Orthopedic contracting network May violate law Petition withdrawn
Hospital contracting network May violate law Hearing scheduled
Primary-care merger May violate law No hearing scheduled
Source: Washington state attorney general's office