Spat between hospitals and feds signals antitrust tensions

A dispute between hospital groups and federal regulators over whether a recent workshop on competition was biased against hospitals signals mounting tensions between providers and the government over healthcare reform.

The American Hospital Association, the Federation of American Hospitals, the Association of American Medical Colleges, the Catholic Health Association and the Children's Hospital Association recently sent a letter to the Federal Trade Commission and the Antitrust Division of the Department of Justice accusing the feds of “hostility to hospitals” during a two-day workshop in Washington Feb. 24-25 titled “Examining Health Care Competition.”

“The workshop's apparent lack of objectivity and balance deprived policymakers of the opportunity to better understand the strides the hospital field is making in transforming the delivery of healthcare in response to many market factors, and how various types of transactions are essential to achieve that goal,” according to the letter. “We believe that the workshop did a disservice … to the entire hospital field and to the patients whose care benefits from the changes and innovations that are occurring.”

But the agencies rejected those claims. In a letter dated April 1, they wrote back that “achieving balance and diversity of viewpoints was and remains a high priority for the workshop planning team … The February workshop was but one step in engaging stakeholders in an ongoing discussion of competition in the health care industry.”

The dust-up comes amid a number of high-profile government challenges to provider consolidations, which are a response to regulatory and market pressure to form integrated delivery networks that can manage the health of enrolled populations.

But insurers, along with some policymakers and researchers, say such consolidations are driving up prices or have the potential to do so.

Healthcare providers and antitrust enforcement agencies have often disagreed, said Jeff Miles, of counsel with the law firm Ober Kaler. But, he said, “I can't recall anything quite this vociferous.”

St. Luke's Health System in Idaho recently asked the 9th U.S. Circuit Court of Appeals to rehear its case before a full panel of judges after a three-judge panel ruled in February that the system violated antitrust laws when it acquired a physician group and had to undo the deal. St. Luke's had argued the acquisition would help it improve care, while the plaintiffs, including the FTC, the state of Idaho and competing systems, said it would lead to higher prices. The FTC also recently said it needed more time and information to examine a proposed merger between Advocate Health Care and NorthShore University HealthSystem in Illinois.

In their letter to the FTC and the Justice Department, the hospital groups argued that the speakers at the February workshop failed to recognize the benefits of healthcare consolidation, focusing only on feared increases in prices or leverage. They said “there was hardly any mention” of consolidation benefits such as saving failing hospitals or quality improvements.

The groups also said the workshop included only one speaker representing a hospital system and only one economist who has worked closely with hospital clients.

The federal agencies replied that they invited 14 hospital systems and representative organizations to speak at the workshop, but many declined.

They also noted that workshop participants included a director of the Healthcare Financial Management Association, a senior executive at San Diego-based Sharp HealthCare and private attorneys who have represented hospitals.

“Even though a number of your members chose not to participate, the workshop included hospital perspectives,” the federal officials wrote.

Some antitrust law experts say the flap reflects current healthcare business tensions. The FTC and the DOJ “are looking for assorted ways to inject competition into healthcare markets, and it is never surprising that market leaders are generally unenthusiastic about the introduction of more competition,” said Barak Richman, a Duke University law professor.

Miles said he listened to the last two workshop presentations and felt they were biased toward antitrust enforcers. But if the workshop's organizers had indeed reached out to more hospital representatives without success, “you certainly can't blame the agencies,”he said.

Miles suggested that hospitals are worried about the antitrust regulatory environment as they seek ways to respond to Affordable Care Act pressures to improve quality of care and reduce costs.

“I think the AHA in particular is quite upset at the way these provider merger cases are coming out, and is very anxious to find some way to convince the agencies that they are overly aggressive,” he said.