New Mich. network must tread carefully to avoid antitrust scrutiny

Together Health Network, a new clinically integrated network of doctors and hospitals in Michigan, was formed with the intention of reaching a huge swath of Michiganders without raising the hackles of antitrust regulators. And experts say that's possible if the new entity steps carefully.

Together Health will combine hundreds of physicians' offices and outpatient centers with two dozen hospitals owned by two large competing health systems, Ascension Health and CHE Trinity Health. Insurance plans with the network will soon be sold on the state insurance exchange, and the partners estimate that 75% of state residents will live within 20 minutes of an in-network provider from Together Health.

It's an interesting development in a state with a history of antitrust scrutiny in healthcare.

Traditionally, it would be illegal for competitors such as Ascension and Trinity to jointly negotiate prices with insurers—what's known as price-fixing. And the Federal Trade Commission has declared a special focus on healthcare in recent years, including challenging hospital mergers and even litigating an Idaho hospital's acquisitions of large physician practices in Nampa.

But the FTC also has long allowed competing providers (PDF) to coordinate prices provided they can show that they are truly working in concert to improve care. That would include jointly buying health information technology, setting common clinical protocols across different providers, and sanctioning people or entities that break the rules.

“Collaboration leads to innovation,” said Patricia Maryland, president of healthcare operations and chief operating officer of Ascension Health. “There are a lot of things that we're doing already, but we can learn” from CHE Trinity.

She said the organizations were looking forward to working together on population-health and coordinated-care models that require sophisticated analytical infrastructure. The new group will also disseminate innovations across its service lines, including ways to address public health concerns and multiple chronic conditions in patients.

“Instead of creating a financially integrated model, what we're really trying to do is to virtually achieve the same thing using a collaborative partnership model,” said Kevin Sears, vice president for payer and product innovation at CHE Trinity.

The antitrust analysis doesn't end with integration, however.

“The second question you would ask is, do you have market power?” said Douglas Ross, a partner with Davis Wright Tremaine in Seattle and the past chairman of the American Health Lawyers Association's antitrust practice group.

Market clout would be the ability to force insurance companies to contract with Together Health, which would give the network the ability to unilaterally raise prices because it's a “must-have” provider.

Officials with Together Health say that won't be an issue for them for two reasons. First, only a small number of Together Health providers overlap in geographic markets, so the removal of competition isn't a factor. And second, the network will be “non-exclusive,” which means that the providers will still be able to negotiate contracts with insurers outside the network.

“Antitrust issues arise when you have combinations of competitors that involve a large share of a market and create concerns regarding market power. Here you don't get past the first question,” said Detroit antitrust attorney David Ettinger, who represents CHE Trinty. “This is pro-competitive. It offers customers better coverage.”

A spokeswoman with the state attorney general's office said an e-mail from a reporter was the first time the office had heard of the new entity. And Together Health officials said approval from the FTC would not be needed because the new organization is not an asset merger.

Meanwhile, insurers in the state are likely to watch the development closely.

The state's dominant insurer, Blue Cross and Blue Shield of Michigan, commended Ascension and CHE Trinity for embracing Blue Cross' approach improving the value of healthcare by focusing on population health and care quality.

“As a result of healthcare reform, we are seeing hospital systems coming together to collaborate on more effective ways to provide quality care at affordable costs,” said Sue Barkell, senior vice president, healthcare value, at the Michigan Blues company. “This trend has the potential to benefit patients, consumers and businesses—and we will be watching to see what Ascension and Trinity achieve here in Michigan.”

Follow Joe Carlson on Twitter: @MHJCarlson

Follow Melanie Evans on Twitter: @MHmevans



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