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Health Law Alert
2011: Issue 3 – Focus on Antitrust
Some Practical Lessons from the ProMedica Hospital Merger Decision
By: John J. Miles
On March 29, a federal district court in Ohio granted the FTC preliminary relief to prevent ProMedica Health System in Toledo, which had acquired nearby St. Luke’s Hospital, from further integrating St. Luke’s into the ProMedica system. The basic concern was that the merger would provide ProMedica with market power sufficient to raise the prices that both St. Luke’s and the other ProMedica facilities could obtain from commercial health plans.
In May 2010, ProMedica and St. Luke’s executed a “joinder agreement” by which ProMedica would become the sole member of St. Luke’s. The FTC opened an investigation in July. In August, the FTC and the parties agreed to a hold-separate order limiting ProMedica’s ability to control St. Luke’s, and the transaction closed in September.
Click to continue...Timing and Hold Separate Agreements in Mergers: When to Fold, Hold or Call
Merging hospitals, physicians, and other health care entities who are investigated by the Federal Trade Commission, Department of Justice Antitrust Division, or a state Attorney General typically face a dilemma relatively early in the investigation: whether to agree to the government’s request to delay closing the transaction and hold separate until the government’s investigation is completed (and thus risk the transaction falling apart due to the potentially long delay in completing the investigation and obtaining clearance), or to decline the request and move towards consummating the transaction (and potentially risk an immediate legal challenge and request for preliminary relief enjoining closing or subsequent dissolution or divestiture, or at a minimum, creating a more adversarial relationship with the investigating agency). Historically, merging parties have perceived litigation with the government as the greater risk, and almost uniformly selected the former option and agreed to the government’s request. Four recent health care mergers illustrate these risks and the considerations that may go into this decision, and perhaps signal a change from this historical risk-assessment.
Click to continue...Accountable Care Organizations: More Guidance, but at what Cost?
By: William A. Roach, Jr.*
Recognizing that clinical and financial integration among health care providers can lead to efficiencies that will benefit patients, the Patient Protection and Accountable Care Act of 2010 (ACA) delegated to the Centers for Medicare and Medicaid Services (CMS) the authority to approve accountable care organizations (ACOs) to participate in the Medicare Shared-Savings Program. ACOs are comprised of different types of health-care providers (e.g., teams of doctors, hospitals, and other health care providers) who join together to coordinate and improve care for Medicare patients. The benefits of ACOs to their participating providers are twofold: (1) the ability to share in the savings they create; and (2) the ability to jointly negotiate with commercial payers to provide health care services. To obtain approval from CMS to participate in the Shared Savings Program, ACOs must clinically integrate their providers in ways so they are likely to meet CMS’s quality and cost-savings standards.
Click to continue...Dominant Hospitals, Dominant Insurers, and Exclusionary Conduct
By: John J. Miles
While the FTC has focused on hospital mergers, the Antitrust Division seems more concerned with conduct by which dominant hospitals or health plans implement conduct to exclude their competitors from the market. By doing so, they may obtain or maintain substantial market power in their respective markets. In recent times, the Division has brought two particularly interesting enforcement actions, which, in a sense, are mirror images of each other.
In its case against United Regional Health Care, a dominant hospital in Wichita Falls, Texas, the Division alleged in a February 25, 2011 complaint that the hospital monopolized the market for inpatient hospital services by inducing health plans not to contract with the only other hospital in the city. It allegedly entered into agreements with a number of health plans by which it accepted drastically lower prices from them if they refused to add the town’s second hospital to their networks.
Click to continue...Early Retiree Reinsurance Program Compliance – Seven Ounces of Prevention
By: Virginia B. Evans and Christopher P. Dean
Health care providers and suppliers with employer-based health plans that participate in the Early Retiree Reinsurance Program (ERRP) should be mindful of the ongoing compliance obligations under ERRP. While many plans considered their compliance programs when submitting their applications to ERRP in 2010, now is a good time for those plans to review the effectiveness of their ERRP compliance programs.
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