10 TH ANNUAL HEALTH CARE PRACTITIONER S ROUNDTABLE VBA HEALTH LAW SECTION

Transcription

1 10 TH ANNUAL HEALTH CARE PRACTITIONER S ROUNDTABLE VBA HEALTH LAW SECTION ANTITRUST SCRUTINY OF HEALTH CARE TRANSACTIONS HEMAN A. MARSHALL, III Woods Rogers, PLC marshall@woodsrogers.com November 14, 2014 WWW. W O O D S R O G E R S. C O M

2 THE BASICS: 1. Federal Antitrust Laws Most Frequently Encountered in the Health Care Industry: 1. The Sherman Act a) Section 1 The Conspiracy Statute (15 U.S.C. 1) b) Section 2 The Anti-Monopoly Statute (15 U.S.C. 2)

3 THE BASICS: 2. The Clayton Act Section 7 The Anti-Merger Statute (15 U.S.C. 18) 3. The Federal Trade Commission Act Section 5 - The Catch-all Statute (15 U.S.C. 45(a))

4 Sherman Act Section 1 THE BASICS: Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several states or with foreign nations, is hereby declared to be illegal.

5 Sherman Act Section 2 THE BASICS: Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several states shall be deemed guilty of a felony.

6 THE BASICS: Clayton Act Section 7 Makes unlawful any merger or acquisition which may tend to substantially lessen competition or create a monopoly...

7 THE BASICS: Clayton Act Section 7 Hart-Scott-Rodino Amendment requires pre-merger/acquisition notice to The Federal Trade Commission and U.S. Department of Justice with daily penalties for failure to file

8 THE BASICS: Federal Trade Commission Act Section 5 Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are hereby declared unlawful. 8

9 Enforcement Authorities THE BASICS: The U.S. Department of Justice, Antitrust Division (Criminal and Civil) The Federal Trade Commission (Civil and Administrative)

10 THE BASICS: Penalties/Liabilities 1. Federal Criminal and Civil Penalties a) Sherman Act Penalties up to $100 million for corporations - $1 million for individuals; or b) 2x s the amount of gain by conspirators or loss by the victims if greater than $100 million and up to 10 years jail term

11 THE BASICS: Penalties/Liabilities 2. Private Antitrust Suits Treble Damages + Attorney s Fees

12 THE BASICS: Injunctive Relief Violations can result in injunctive relief including mandated divestiture of assets in the case of an unlawful merger or acquisition

13 ELEMENTS OF THE SHERMAN ACT Section 1 Issues

14 It Takes Two ELEMENTS OF THE SHERMAN ACT Two or more separate economic entities are required for a Section 1 violation to be found

15 But Which Two? ELEMENTS OF THE SHERMAN ACT Two or more separate economic decision-makers Officers, directors and employees of a single entity cannot conspire Corporate parents cannot conspire with wholly-owned corporate subsidiaries

16 But Which Two? ELEMENTS OF THE SHERMAN ACT Wholly-owned corporate subsidiaries cannot conspire with one another Partially-owned subsidiaries can present issues the degree of control of each party is determinative see: Copperweld Corp. v Independence Tube Corp., 467 U.S. 752 (1984)

17 ELEMENTS OF THE SHERMAN ACT When Does an Agreement Exist? Contract, combination and conspiracy means simply proof of meeting of the minds No need for a writing No need for formality

18 ELEMENTS OF THE SHERMAN ACT When Does an Agreement Exist? May be proven by circumstantial evidence May be embodied in a knowing wink

19 ELEMENTS OF THE SHERMAN ACT When Does an Agreement Exist? May be inferred from parallel actions if additional plus factors are present see: United States v. General Motors Corp., 384 U.S.127 (1996); Twombly v. Bell Atlantic Corp., 425 F.3rd 99, 114 (2nd Cir. 2005)

20 ELEMENTS OF THE SHERMAN ACT But: Not All Agreements Among Competitors Are Unlawful Analyses to determine unlawful conduct: Rule of reason analysis Per Se analysis Quick Look analysis

21 The Rule of Reason Analysis Weighs pro- and anti-competitive effects Economic rationale for the conduct is relevant A plaintiff/the Government must affirmatively prove an adverse effect on competition

22 The Rule of Reason Analysis If, on balance, any effect is neutral or pro-competitive, no violation DOJ will not seek criminal penalties

23 The Rule of Reason Analysis Presumptively applied in most antitrust cases see: Chicago Board of Trade v. United States, State (1997); U.S. 231(1918); Oil Co. v. Khan, 522 U.S. 3, 10 Texaco, Inc. v. Daher, S. Ct (2006)

24 The Per Se Analysis Anti-competitive effect presumed No consideration of pro-competitive effects or economic rationale Criminal prosecution may be sought by DOJ see: Standard Oil Co. v. United States, 221 U.S. 1, (1911)

25 ELEMENTS OF THE SHERMAN ACT The Quick Look Test An intermediate analysis that bridges the gap between the Per Se and the Rule of Reason If the plaintiff demonstrates that restriction is inherently suspect need not present a full Rule of Reason Analysis

26 ELEMENTS OF THE SHERMAN ACT Burden shifts to the defendant to demonstrate plausible pro-competitive effects see: FTC v. Indiana Federation of Dentists, 476 U.S. 447 (1986); California Dental Ass n v. FTC, 526 U.S. 756 (1999)

27 The Big Three Per Se Conduct Includes: Horizontal price-fixing Horizontal market allocation Horizontal group boycotts among direct competitors see: United States v. Trenton Potteries Co., 273 U.S. 392 (1927); NYNEX Corp. v. Discon, Inc., 525 U.S. 128, 135 (1998)

28 Section 2 Issues

29 Monopolization Prohibited Prohibits monopolization, attempted monopolization and conspiracies to monopolize Includes acquiring, enhancing or maintaining monopoly prices through exclusionary conduct Monopoly Power - Power to control prices or exclude competitors United States v. E.I. duponte de Nemours & Co., 351 U.S. 377 (1956)

30 Monopolization Prohibited Monopoly Power is measured in terms of the: Relevant Product Market Relevant Geographic Market Market share (an analogue for power) in the relevant market

31 ELEMENTS OF THE SHERMAN ACT Monopolization Prohibited For Monopolization very high shares are required (generally 60%+) For attempted Monopolization Lower shares (35 50%) may suffice if there is a reasonable probability of success

32 CLAYTON ACT Clayton Act Section 7

33 CLAYTON ACT 7 Clayton 7 prohibits mergers or acquisitions that may tend to substantially lessen competition or create a monopoly Analysis of situations is similar to analysis under Sherman 2

34 CLAYTON ACT 7 Traditional analysis looks at the market concentration in the relevant product and geographic market

35 CLAYTON ACT 7 The Herfindahl-Hirschman Index ( HHI ) is used under DOJ Horizontal Merger Guidelines as initial analog for measuring market concentration Sum of the squares of the individual market shares of participants before and after merger 35

36 10,000 single firm market CLAYTON ACT moderately concentrated over 2500 highly concentrated Post-merger increase of 200+ in highly concentrated market presumed anticompetitive 36

37 CLAYTON ACT 7 Newer analyses are surfacing Example: Hospital Merger Simulation focuses on two-party bargaining between Hospitals and Payors considers that willingness to pay ( WTP ) certain prices as measure of market concentration So far seems unique to Hospital/Health Care Mergers see: ProMedica Health System v. Fed. Trade Comm n No (6th Cir. April 22, 2014)

38 Health Care Quality Improvement Act of 1986 (42 U.S.C )

39 THE HEALTH CARE QUALITY IMPROVEMENT ACT OF 1986 Creates immunity from antitrust damages (but not injunctions) for professional review actions by health care entities if actions taken: In reasonable belief that it was in furtherance of quality health care

40 THE HEALTH CARE QUALITY IMPROVEMENT ACT OF 1986 After reasonable effort to obtain facts After adequate notice and hearing procedures in which affected provider has right to counsel

41 THE HEALTH CARE QUALITY IMPROVEMENT ACT OF 1986 In reasonable belief action warranted by facts (42 U.S.C ) See: Hein-Muniz v. Aiken Regional Medical Centers, 905 F. Supp. 2d 729 (D.S.C. 2012), aff d 532 Fed. Appx. 342 (4th Cir. 2013)

42 Virginia Antitrust Act (Va. Code , et. seq.)

43 THE VIRGINIA ANTITRUST ACT Parallels the Sherman Act Act is to be applied and construed... in harmony with judicial interpretation of comparable federal statutory provisions. (Va. Code )

44 THE VIRGINIA ANTITRUST ACT Not a criminal statute but civil monetary damages up to $100,000 per violation Where violation is willful or flagrant, court may increase damages up to 3 times actual

45 THE VIRGINIA ANTITRUST ACT Attorney s fees reasonable by a substantially prevailing plaintiff Private cause of action exists

46 GOVERNMENT GUIDANCE Government Guidance (This is not an oxymoron!)

47 Government Guidance: The principal guidance specifically applicable to the health care industry: FTC/DOJ Joint Enforcement Policy in Health Care (1996) FTC/DOJ Statement of Enforcement Policy Regarding Accountable Care Organizations (2011)

48 Government Guidance General business guidance relevant to the health care industry: Horizontal Merger Guidelines (2010) Antitrust Guidelines for Collaboration Among Competitors (1999)

49 Joint Enforcement Policy GOVERNMENT GUIDANCE Addresses: Mergers Among Hospitals Hospital Joint Ventures Involving High Technology or Expensive Equipment Hospital Joint Ventures Involving Specialized Clinical or other Expensive Services

50 Joint Enforcement Policy GOVERNMENT GUIDANCE Collective Provision on Non-Fee Related Information to Purchasers of Health Care Services Collective Provision of Fee-Related Information to Purchasers of Heath Care Services

51 Joint Enforcement Policy GOVERNMENT GUIDANCE Provider Participation In Exchanges of Price and Cost Information Joint Purchasing Arrangement Physician Network Joint Ventures

52 GOVERNMENT GUIDANCE Joint Enforcement Policy Multiprovider Networks Safety Zones are provided for certain conduct

53 GOVERNMENT GUIDANCE Physician Network Safety Zone Exclusive Networks 20% or less of physicians in each specialty in geographic market If fewer than 5 physicians in the specialty Network may have 1 physician from the specialty on a nonexclusive basis

54 Non-Exclusive Networks GOVERNMENT GUIDANCE 30% or less of physicians in each specialty in geographic market If fewer than 4 physicians in the specialty may have 1 physician from that specialty Both Networks Must Share Substantial Risk

55 Multiprovider Networks GOVERNMENT GUIDANCE No specific Safety Zones But Analysis of Arrangement is Similar to Physician Networks

56 Joint Purchasing Safety Zone GOVERNMENT GUIDANCE Will not challenge participation in Joint Purchasing Organization where: Purchases account for less than 35% of total sales of the product or service in the relevant geographic market and

57 Joint Purchasing Safety Zone GOVERNMENT GUIDANCE The cost of the products or services purchased jointly accounts for less than 20% of the total revenues from all products and services sold by each competing participant

58 Hospital Merger Safety Zone GOVERNMENT GUIDANCE Will not challenge merger between two general acute-care hospitals where one Hospital: Has average of fewer than 100 licensed beds over most recent 3 years

59 Hospital Merger Safety Zone GOVERNMENT GUIDANCE Has average daily inpatient census of less than 40 over most recent 3 years and The Hospital is 5 years old or older

60 GOVERNMENT GUIDANCE Statement of Enforcement Policy Regarding ACO s Agencies will apply Rule of Reason Analysis to ACO activities Safety Zone Focuses on physician specialties, major diagnostic categories and outpatient categories

61 GOVERNMENT GUIDANCE Statement of Enforcement Policy Regarding ACO s Safety Zone (Cont d) Independent ACO participants providing the same service have combined share of 30% or less for such service in primary service area ( PSA )

62 GOVERNMENT GUIDANCE Statement of Enforcement Policy Regarding ACO s Safety Zone (Cont d) PSA is lowest number of zip-codes from which participant draws at least 75% of patients Hospitals and ASC s must be non-exclusive

63 GOVERNMENT GUIDANCE Statement of Enforcement Policy Regarding ACO s Physicians must be non-exclusive Rural exception share may be greater than 30% and still include one physician or group practice per specialty on a non-exclusive basis if located in a rural area

64 GOVERNMENT GUIDANCE Statement of Enforcement Policy Regarding ACO s If any ACO participant has a greater than 50% share in its PSA of any service that no other participant provides, such participant must be non-exclusive

65 GOVERNMENT GUIDANCE DOJ Horizontal Merger Guidelines Calculates the Herfindahl/Herschman Index ( HHI ) Numerical triggers where DOJ will not/ may / definitely will challenger merger

66 GOVERNMENT GUIDANCE DOJ Horizontal Merger Guidelines Numerous other factors are considered as well Barriers to entry ease and timeliness of entry Efficiencies generated (merger specific) Failing company/exiting assets

67 Antitrust on the Horizon:

68 RECENT CASES Mergers/Acquisitions Federal Trade Commission v. St. Luke s Health System, LTD, Case No. 1:13-cv BLW (D. Idaho Mar. 26, 2013) FTC v. St. Luke s Health System (2014 WL ) (D. Idaho) Trade Cases P 78,667

69 Mergers/Acquisitions RECENT CASES ProMedica Health System v. FTC, 749 F.3d 559, Trade Cases P 78,742 (6th Cir. Apr. 22, 2014) Steward Health Care System, LLC v. Blue Cross & BlueShield of Rhode Island 997 F. Supp. 2d 142 (Dist. Rhode Island 2014)

70 RECENT CASES Mergers/Acquisitions Medical Center at Elizabeth Place, LLC v. Premier Health Partners, Case: 3:12-cv TSB (S.D. Ohio Oct. 27, 2014)

71 THE FUTURE Edith Ramirez Chairman of the FTC Keynote Address, May 14, 2014 [A]ntitrust enforcement in the medical industry is a top priority. [The] ACA is not a free pass.

72 THE FUTURE Julie Brill Federal Trade Commission, Keynote Address 2014 Hal White Antitrust Conference, June 9, 2014 [T]he FTC s work and the ACA share the common goals of promoting high quality and cost-effective health care. Antitrust enforcement... is therefore just as crucial now as it was before the ACA in ensuring that our health care markets in the U.S. work well.

73 THE FUTURE Deborah Feinstein, Director of the Bureau of Competition, FTC speaking at the Accountable Care Organization Summit, June 19, 2014 [A]ntitrust concerns can arise if integration involves a substantial portion of competing providers... whether that market is a cluster of hospital services or a singe specialty....