Eliminate the antitrust healthcare toll booth

But there is a difficult and sometimes misguided barrier to collaboration:  the application of the antitrust laws.  The administration and antitrust agencies face the crucial challenge of establishing new guidelines in order to permit the greater level of collaboration envisioned by Congress.

Antitrust agencies are always suspicious when competitors get together.  Nowhere is this truer than in healthcare.  In the past decade, the Federal Trade Commission (FTC) brought over 30 cases against groups of physicians for so-called price fixing.  Few of these matters seemed to involve significant consumer harm; in fact, none led to successful private antitrust litigation.   There was little evidence that, as a general matter, this type of alleged physician price fixing was a major cause of escalating health care costs.  At the same time, the agencies gave a free pass to health insurers and brought no cases attacking their competition or consumer protection violations.

Now, Congress has made clear that provider collaboration is essential to meaningful reform.  But the path to surviving antitrust scrutiny for healthcare collaborations is often murky, extremely costly and slow.  The FTC continues to follow guidelines on collaboration issued in 1996, standards that are based on a healthcare world that has changed substantially.  

Providers seeking collaboration can ask the FTC for an opinion letter approving their conduct.  In the past decade the FTC has approved only five of these ventures (a paltry number compared to over 30 ventures approved in the last 4 years of the Clinton administration).  

The burdens of the approval process are daunting.  In the six letters that the FTC issued in the past decade the average time for approval was 436 days (a range of 263 to 645 days), just slightly less than the period of time Congress considered and enacted healthcare reform.  (We don’t know how long other requests took where provider groups simply gave up because of the delay). Each of these ventures spent well over $100,000 for legal advice to secure approval.  That does not include the cost to the businesses in surviving the exhaustive FTC review.  Each of these matters resulted in an encyclopedic and Talmudic analysis of antitrust standards of over 25 single-spaced pages.  

This process seems disproportionate.  For agency advisory letters outside of healthcare, the Department of Justice (DOJ) typically responds in a short process that typically takes four to six months at most and costs a lot less.

And these delays pose a simple question – if these ventures were procompetitive, wasn’t the market harmed by delaying their entry for over one year?

It seems clear that the FTC is setting an unreasonably high bar for health care collaboration.  And even if they are calling balls and strikes correctly, the process is so slow and costly that it creates a significant obstacle to effective collaboration.

FTC Chairman Jon Leibowitz has suggested that the Commission is considering establishing safe harbors for some ACO's and is “considering whether [it] can put in place an expedited review process for those ACO's that fall outside of the safe harbors.”   Of course, when the FTC issued the 1996 guidelines they promised to respond to these requests within 90 to 120 days once all the evidence was in.  

Congress should not rely solely on the good intentions of the enforcement agencies.  The record to date does not instill confidence that the FTC can provide advice in a meaningful and timely fashion.  Congress should act to establish safe harbors and set deadlines for the FTC to issue advisory opinions in an expeditious fashion.  For example, if an ACO meets the standards set by CMS it should be evaluated under the antitrust rule of reason and the agencies should have to demonstrate a likelihood of competitive harm.  Moreover, Congress should provide guidance on the appropriate antitrust standards for ACO's to permit broader forms of collaboration and it should give the FTC a deadline to enact new guidelines.  Without these measures, antitrust regulation will become a toll booth on the road to meaningful reform that no one will be able to pass.

David Balto is a Senior Fellow for the Center for American Progress and the former Policy Director of the Federal Trade Commission.