Theres much disagreement as to whether all the trouble in the area comes from genuine uncertainty, as Leibenluft describes, or unwillingness on the governments part to punish the participants in the illegal activity rather than simply asking them to stop.
People keep pushing the boundaries, says Hyman, a professor of health law at the University of Illinois. If the worst thing that happens to you is youre told to go and sin no more, why wouldnt you?
Braun disagrees with the belief held by Hyman and others that the pitfalls are marked clearly enough already. Certainly there is much less written about clinical integration from the agencies and much less guidance on the topic, she says. As a result she often counsels clients to seek staff advisory opinions from the FTC before moving forward with integration plans. We want to make sure theyre not going to say, Nice trydont do it.
But Greaney, whose previous articles have criticized the record of the federal agencies and courts in policing anti-competitive behavior in healthcare, says the profusion of policy statements, speeches and willingness to provide advisory opinions has given the federal agencies a role as quasi-regulators, whether they like it or not. When youre wearing two hats, my argument is, the regulatory function and enforcement function sort of blur together, and maybe the message given there is everythings negotiable.
One physician group fighting the FTC in court is North Texas Specialty Physicians, Fort Worth. The commission in 2005 affirmed an administrative law judges determination that North Texas Specialty must end a variety of negotiating practices, including polling members for minimum fees they would accept, and refusing to entertain any offer from payers below the averages crunched from the poll results.
The 5th U.S. Circuit Court of Appeals in New Orleans heard oral arguments in that case in early March.
If the court reverses the FTC, that will be a major development, Leibenluft says.
The FTCs success so far in the Evanston acquisition has created another area of intense interest among lawyers and scholars. The Evanston decisions approach to defining an organizations relevant market could set an important precedent in defining healthcare markets if it survives full commission reviewand then the likely appealwhichever side prevails.
The administrative law judge in the Evanston case gave weight to the FTCs argument that payers needed to have at least one of two previously competing hospitals in their networks, a departure from a traditional analysis relying on broad geographic market definitions and predictions of how many patients might flee to other hospitals if prices are raised.
I think its recognizing some of the reality of whats going on in the marketplace, Greaney says of the innovation.
He describes the application of the typical market analysis to healthcare cases as Procrustean, a reference to a character in Greek mythology who cuts up or stretches his visitors to fit an iron bed. Hospitals differ widely in their quality and their locations, their sophistication of services. The idea that you treat them as identical substitutes for purposes of analysis is silly.
But the importance of how the Evanston case plays out goes beyond the decisions legal departures. The preliminary success in the case followed seven losing merger challenges litigated by the FTC and Justice Department.
If we dont have a viable merger challenge, that sends a whole set of signals to people in the industry, Hyman says. If they (the FTC) get closed out again, it will be very difficult for themnot impossible, but very difficultto bring another merger challenge.
But, as Majoras alluded in her Senate testimony, her agency is actively investigating other mergers, confirmed Mark Horoschak, a partner at Womble Carlyle Sandridge & Rice in Charlotte, N.C. I know that as a matter of fact, because Im involved in one, which I cannot discuss, Horoschak says. One might think that there would be a wait-and-see approach toward hospital merger enforcement until the commission rules on Northwestern. Whats interesting to me is in recent monthsIm not alone in this assessmenttheres been quite an uptick in hospital merger investigations. Ive heard this from several people.