Asked where he sensed healthcare antitrust enforcement is headed, Jeff Miles, a principal in the law firm Ober, Kaler, Grimes & Shriver, responds: Left.
Doctors and hospitals for years have voiced frustration that the Federal Trade Commission has targeted their business arrangements with costly and time-consuming investigations and enforcement actions while health insurance companies have been unchecked other than requests by the Justice Department that minor business units be divested as a condition of large mergers. Both the American Hospital Association and AMA have made fresh overtures to the agencies since the Obama administration took over in hopes those goals will be better received.
Thats a pissing contest, Miles says. So much of this is politics to make sure the other guys ox gets gored before mine does. Americas Health Insurance Plans, the industrys trade group, responded to the AHAs calls for tighter scrutiny of its members with a letter encouraging the Justice Department to examine the roots of rising hospital, physician and drug costs.
Back in 2003 as an attorney in private practice, a former FTC commissioner named Christine Varney represented the AHAs point of view during joint hearings of the FTC and Justice Department on healthcare competition. In the days after his inauguration, Obama chose Varney, who had been counsel to his transition team, as assistant attorney general at the top of the antitrust division.
In March, Obama elevated sitting commissioner Jon Leibowitz to be chairman of the FTC. Leibowitz, a Democrat and the most liberal member of the commission, Miles says, had been vice president for congressional affairs for the Motion Picture Association of America, when President George W. Bush appointed him in 2004. He has taken an aggressive interest in policing the pharmaceutical industry. Leibowitz, in turn, picked former FTC staffer Richard Feinstein to be director of the Bureau of Competition. Feinstein had led the bureaus healthcare shop from 1998 to 2001.
Its going to be a very interesting time, Miles says. We can certainly expect more aggressive enforcement, but until things shake out its not clear where that enforcement is going to be. Pharmaceuticals are going to be No. 1; health plans No. 2. Some of how it shakes out, he adds, depends on if and how the competitive universe of providers and payers is realigned through a massive healthcare overhaul in the works in Congress.
Miles and other leading lawyers in healthcare antitrust believe the Justice Department will indeed take a harder look at insurance companies and that both agencies will be going after pharmaceutical companies. But they also expect the FTC will continue to bring price-fixing cases against physicians and closely scrutinize hospital mergers with no significant change in course.
On May 11, Varney made her first public appearance as assistant attorney general at the liberal Center for American Progress, delivering a speech in which she attributed the countrys economic woes in part to inadequate antitrust oversight. She made news in the speech by withdrawing a report the department issued late in the Bush administration which outlined the governments interpretation of provision of antitrust law that restricts predatory and exclusionary conduct by monopolies.
Criticsincluding the FTCcomplained the report was essentially a wink to powerful companies indicating that they can do whatever they want (the other side of that argument is that the government shouldnt drag down successful companies in order to protect weakling competitors).
The concept could come into play in healthcare, when dominant hospitals and payers wield tactics such as exclusive contracts or predatory pricing to kill off competitors.
The same day as Varney delivered the speech, the AHA sent and publicized a letter and report to the new assistant attorney general asking that her division mount a review of past mergers among health plans, convene public hearings to better understand the lack of competition among health plans and its analytical approach to health insurance mergers and conduct.
The AHA declined to be interviewed for this story. We recently met with the DOJ to follow up on our letter, and we are encouraged that they will be more aggressive in looking into the often anti-competitive practices of insurance companies, beyond looking at the next big merger, a spokeswoman said in an e-mail. The Justice Department would say only that the division is aware of the request.
President Bill Clinton appointed Varney to the FTC in 1994, and after leaving the government in 1997 she focused her work in private practice on matters of online privacy and technology. She represented Netscape when the Justice Department alleged that Microsoft Corp. was illegally trying to kill off the Internet-browser company. Yet she also is intimately knowledgeable about healthcare and specifically no stranger to the AHA, which hired her when she was in private practice with the law firm Hogan & Hartson.
If the antitrust agencies are serious about determining whether competition policies or antitrust enforcement have a constructive role to play in understanding the cost of health insurance premiums, they must have a broader horizon than simply hospital consolidation, Varney said on behalf of the AHA during the 2003 competition hearings. A retrospective analysis of hospital mergers is meaningless if not undertaken in the context of all the changing market factors. If the federal antitrust agencies truly seek to contribute in a positive way to understanding rising healthcare costs, we believe equal time and resources need to be dedicated to all sectors of healthcare, not just hospitals.
Toby Singer, a partner in the law firm Jones Day, says she thinks that bit of history probably means only that Varney is likely to extend a full hearing to hospitals. I think her prior representation of the American Hospital Association certainly means she will understand the concerns providers have, Singer says. I dont think that means she will be taking sides in any particular way.
David Balto, a senior fellow at the Center for American Progress, where Varney delivered her speech, has made similar calls for the Justice Department to get tougher on health insurance companies and conduct a review of the marketplace that would guide a revamped approach to dealing with the industry. He believes it will happen. Yes, they are going to grapple with it, Balto says.