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Government Antitrust Enforcement Against Health Care Providers: The Payor Victim's Perspective
Christi J. Braun
202-326-5046
cjbraun@ober.com
Co-authored with Kenneth T. Bowden, II, Esq., CIGNA HealthCare
Appeared in HMOs & Health Plans
Winter 2007
The dramatic increase over the past five years in federal antitrust enforcement activity against health care providers has drawn a great deal of attention. Legal discussions, however, have tended to focus on the facts of each case, the subjects of the investigations, or the actions of the federal enforcement agencies — the U.S. Department of Justice Antitrust Division ("DOJ") and the Federal Trade Commission ("FTC"). Yet, there are also many payor victims who are drawn willingly, or unwillingly, into these cases, and their role is rarely discussed. This article is intended to fill that void and provide guidance for the victim's legal counsel. The authors' key message for payor victims and their counsel is that "the government is not the enemy."
- Federal Antitrust Statutes
Although most payors' counsel have a basic understanding of the federal antitrust laws, few have a working knowledge of the laws and their application that can be tapped when the client, or the government, calls with antitrust-related questions. To counsel clients dealing with antitrust issues — whether raised by work situations or by the antitrust enforcers — it's helpful to understand what constitutes a violation under the antitrust laws.
When the FTC or the DOJ calls, they generally are asking about anticompetitive conduct by providers, which falls under Sherman Act §§ 1 and 21 and Federal Trade Commission Act ("FTC Act") § 5,2 or about proposed acquisitions, which are covered by Clayton Act §§ 7 and 7A.3 The Sherman Act, which the DOJ enforces, prohibits agreements that unreasonably restrain competition under § 14 and monopolization under § 2.5 Section 5 of the FTC Act, which allows the FTC to prosecute conduct that violates the Sherman Act,6 prohibits unfair methods of competition.7 Clayton Act § 7, which both the FTC and the DOJ enforce, prohibits mergers and acquisitions where the effect may be to substantially lessen competition or create a monopoly.8 Under § 7A of the Clayton Act, certain acquisitions must be reported to the agencies, which use the statutory notice period to interview consumers and competitors — health plans have been in both categories recently — to determine whether the proposed acquisition may violate § 7.9
The vast majority of health care antitrust investigations, in which health plans are the victims, involve agreements among competing providers that violate Sherman Act § 1. A §1 violation requires that (1) two or more distinct legal entities10 (2) entered an agreement11(3) affecting interstate commerce12 (4) that, if successful, would result in harm to competition.13 The illegal "agreement" generally is not a written document, but is merely a meeting of the minds.14 For example, in § 1 cases involving nonintegrated provider-controlled contracting networks, the illegal "agreement" is not a single-signature contract with a health plan; it is the unwritten agreement to collectively set the price of each individual provider's services.
Under §1 of the Sherman Act, price-fixing agreements are generally per se, or "automatically," illegal. A provider-controlled contracting entity, such as an independent practice association ("IPA") or physician-hospital organization ("PHO"), may avoid per se condemnation of its joint price setting by advancing legitimate justifications, such as the substantial financial or clinical integration of its providers' practices.15 If the IPA or PHO shows that the restraint (price fixing) is reasonably necessary to achieve the significant procompetitive benefits of the integration (i.e., reduced costs or improved quality), its conduct will be analyzed under the rule of reason.
To prove a rule of reason case, the plaintiff must show that the defendant has market power, or the ability to raise prices above competitive levels and profitably sustain that increase.16 Market power generally is proven through circumstantial evidence.17 To do so, the plaintiff must (1) define the relevant product and geographic markets, (2) establish that the defendant controls a dominant share of the market, (3) show that new competitors are unlikely to enter the market and current competitors are unlikely to expand their output to defeat defendant's price increase.18 For an IPA or PHO, the market power analysis begins by looking at whether the organization has a high percentage of particular types of providers within the geographic market.
The relevant product market includes products or services that are viewed by purchasers as substitutes, or are reasonably interchangeable.19 In most medical specialties, there is not much interchangeability, but there may be some overlap at the margins (e.g., an interventional radiologist and a cardiologist may perform some similar procedures but neither is considered a substitute for the other). As such, each medical specialty may constitute a separate physician service market.20 One exception is primary care physician ("PCP") services, which may include family practice, general practice, internal medicine, and sometimes pediatrics and/or gynecology.21 Product markets for hospital services are generally clustered into single relevant product markets, such as inpatient acute care or outpatient services, because "the services and resources that hospitals provide tend to be similar across a wide range of primary, secondary, and tertiary inpatient services."22
The relevant geographic market for health care services is very fact-specific and has historically been defined by analyzing patient-origin data and physician referral patterns to determine where patients could go to obtain services if providers decreased output or quality or increased price.23 Instead of performing detailed analyses, antitrust enforcers often do quick initial estimates based on how far patients may be willing to travel. For example, when defining a PCP market, they may start by looking at the number of PCPs, and the percentage of those PCPs participating in the IPA, within a five-mile radius around each practice. If this quick look reveals large participation percentages, then it is more likely the IPA has market power. 24 If the IPA's participation percentages are below 30 percent, the existence of market power is doubtful.
Even a provider contracting organization that has high participation percentages cannot exercise market power unless it is "exclusive." An organization is exclusive if it restricts the ability of its providers to contract directly, or through other networks, with payors, or if the providers, in practice refuse to contract outside the organization.25 When a provider organization is exclusive and possesses high participation percentages, it's improbable that the procompetitive benefits of the arrangement will outweigh the anticompetive effects.
- Enforcement in Health Care
In 1996, Robert Pitofsky, then Chairman of the FTC, explained the role of antitrust enforcement in healthcare:
Over the past two decades, federal antitrust enforcement has succeeded exceptionally well in facilitating the emergence of new and more efficient health care delivery systems by vigorously challenging anticompetitive efforts by health care providers to impede those innovations. This enforcement activity has been one crucial factor in the emergence of vigorous competition among health plans for the patronage of consumers and employers. The prospect of effective antitrust enforcement remains critical to the ability of the marketplace to develop better methods of responding to the demand for high-quality and cost-effective health care services. Let me emphasize that it is not the Commission's role — and neither is it our desire — to drive market developments in any particular direction. Rather, our goal is to deter private restraints that limit the range of options available, or raise prices, to consumers.26
Although health care markets have changed dramatically, collective action by health care providers to obstruct cost-containment efforts by purchasers unfortunately remains a threat to consumers.27 In the past five years, the FTC, the DOJ, and state attorneys general have brought numerous enforcement actions challenging price fixing and concerted refusals to deal by groups of physicians or other providers that banded together to resist innovative efforts at cost-conscious purchasing.28 These groups have often portrayed themselves as pro-competitive ventures (even including utilization review or quality assurance programs) — but in fact often have turned out to be nothing but sham efforts to forestall or undermine new forms of health care payment systems.
When explaining the antitrust laws to clients, it's often helpful to provide examples of conduct the government condemned and the reasons why they found it objectionable. The case of the North Texas Specialty Physicians ("NTSP") provides an example of a typical fact pattern involving a provider organization engaged in price-fixing activities.29
NTSP, an IPA of approximately 500 specialty physicians and PCPs, was founded as a financial risk-sharing joint venture. When its risk contracts significantly dwindled in 2001, NTSP began focusing on securing fee-for-service contracts. Many of its physician members are competitors (e.g., they are not part of the same medical group practice, and they compete to provide services within the same specialties). To join NTSP, each physician signed a physician participation agreement ("PPA") that granted NTSP the "right of first negotiation with payors."30 Member physicians were thus required to forward all payor contract offers to NTSP and refrain from pursuing those offers until NTSP discontinued its negotiations with those payors.
To determine the prices it would seek for its fee-for-service contracts, NTSP conducted annual polls of its members to determine the minimum prices they would accept from third-party payors. During contract negotiations, NTSP informed payors that it "would not enter into or forward to any of its physicians payor offers that were below the minimums."31
On more than one occasion, NTSP obtained powers of attorney from its members through which NTSP terminated, or threatened to terminate, contracts as a means of extracting price concessions from payors. Although payors did not want to engage in negotiations with NTSP, they did so because they were unable to contract directly with the physicians.32
In its decision, the FTC found: (1) the polls enabled NTSP's members to "telegraph[] their intentions about future prices," which had "a tendency to increase prices overall;"33 (2) the PPA made NTSP the sole bargaining agent of its members and facilitated the illegal agreement;34 (3) NTSP used the powers of attorney "to solidify its power as a bargaining agent;"35 and (4) NTSP "deviated from the accepted parameters of a lawful messenger model in a manner that amounts to horizontal price fixing."36 Therefore, NTSP's conduct was "inherently suspect" and had "a likely tendency to suppress competition."37
Based on its finding that NTSP's conduct had a tendency to restrain competition, the FTC looked at whether NTSP advanced legitimate justifications for its conduct. The FTC rejected NTSP's first argument that the efficiencies from its single risk contract spilled over to the fee-for service contracts, because there was no "logical nexus" between the activities that facilitated price fixing and the claimed efficiencies.38 It also rejected NTSP's second justification that the restraints in question had plausible benefits of their own. Because NTSP failed to establish a legitimate business justification for its conduct, the FTC determine there was no need to prove the existence of market power. NTSP's conduct violated Section 5 of the FTC Act.
A DOJ case that provides a significant amount of information for educational purposes is the most recent matter against the Federation of Physicians and Dentists (the "Federation").39 The DOJ's memorandum supporting its motion for partial summary judgment provides a fascinating "fly on the wall" view of government's perspective on the allegedly anti-competitive activities of the Federation, a union, in Ohio.40 This matter involves charges that more than 120 obstetrician-gynecologists ("OB-GYNs") in more than 40 practice groups joined the Federation to increase their reimbursement from payors. The DOJ has argued that Federation and its members acted collectively in a manner that constitutes a per se violation of Section 1 of the Sherman Act.
Although the Federation claimed to be acting as a "messenger" for the physicians, the government's brief contends that neither the Federation's activities, nor those of its members, comport with a proper messenger arrangement. For example, the DOJ alleges that the Federation provided the groups a sample letter to adapt and put on their letterhead that informed Anthem that the physicians wanted to use the Federation as their "messenger" for negotiations; advised Anthem of contract concerns, including rates; and threatened termination if Anthem didn't negotiation with the physicians and offer better terms. According to the DOJ, "nearly all Federation member OB-GYN groups adapted verbatim the enclosed sample letter to their own letterhead, signed it, and sent it to Anthem."41 The DOJ further alleges that when Anthem tried to deal with the physician groups directly, the Federation and its members first rebuffed these attempts and continued to make collective price demands through their Federation negotiator and, later, the physicians used the Federation to advise them in their individual contract negotiations, making identical written demands and threatening termination. The government's brief explains that, as a result of the perceived threat of the loss of more than 50% of its network, Anthem began negotiating with the OB-GYN groups, and, once some of the groups succeeded in obtaining higher rates, the Federation helped the smaller practice groups obtain the same fee increases. According to the DOJ, the Federation and its members used similar tactics with Humana, United Healthcare, and Medical Mutual. The DOJ's legal argument states that the Federation members' price-fixing agreements and concerted refusals to deal with the payors except upon collectively determined terms are per se illegal under Sherman Act § 1.
- Representing the Victim
When an organization believes that it is the victim of anticompetitive behavior, counsel may be asked whether the organization can, and should, bring the behavior to the attention of antitrust enforcement agencies. Clients, who are somewhat familiar with antitrust principals, often will raise the question after identifying evidence of a violation. However, a client who is simply frustrated with the course of arms length negotiations may also raise the question. Before making a referral to an antitrust agency, the organization must consider its other options, including the three discussed below.
One alternative to contacting the government is to simply acquiesce to the anticompetitive demands and incur higher costs. The risk in this is that initially modest demands may subsequently become exorbitant once the cartel or other anticompetitive player has secured its position.
Another option is to bring a private antitrust action. On its face, this may seem attractive because the successful victim plaintiff is entitled to treble damages and attorney's fees. However, in the context of provider-payor relationships, this option is less attractive than it might appear. If a payor initiates a private suit, its identity will be known, which means that the payor will be in the position of attempting to maintain a provider network with providers against whom it has filed a lawsuit. Also, antitrust actions are expensive, and an organization may be unwilling to invest the requisite resources. Finally, the organization must consider that if it succeeds in obtaining relief, the defendants may not want to continue participation in the payor's provider network. For these reasons, payors generally have not brought private antitrust actions against providers.
A third option, when faced with clearly anticompetitive activity, is for the victim client and counsel to aggressively confront the perpetrators by informing them their activities violate the antitrust laws. This approach may also involve refusing to negotiate or deal with the perpetrators and an invitation to discuss the issues with the actors and their antitrust counsel. If the actors have not received legal advice and are unaware of their precarious position, such an approach may result in the actors backing down. The advantage of this approach is that, if successful, the matter can be resolved in a matter of days or weeks. If unsuccessful, the actors are still on notice that their activities are unlawful. A disadvantage, if the actors proceed with their activities and there is a subsequent enforcement action, is that the victim who aggressively confronted the situation is likely to be perceived as the whistle blower, whether or not that is the case.
Before the client organization rejects the alternatives to making a referral to an antitrust agency, counsel should make certain the client understands what to expect from a government investigation. If the agency pursues a referral, relief will not be immediate. Multiple competing demands affect the agencies' priorities, and a particular matter may be set aside for a period of time while other matters are handled. The decision of whether to initiate an investigation, how to conduct the investigation, and how to resolve the investigation, belong exclusively to the enforcement agency. The investigative process is largely a one-way street in which the victim will be asked repeatedly for information, but will largely be in the dark about the investigation. At best, the victim will be able to draw an inference that the investigation is progressing from requests for more detail. Similarly, the victim may infer that settlement discussions are underway if it receives inquires as to whether particular forms of relief appear acceptable.
Additionally, the victim will need to devote only those resources necessary to marshal the facts for the initial referral and validate the referral. Such resources are far less than would be required to file and maintain a private antitrust action. Finally, the government may be viewed more favorably and deferentially than a private litigant and may be more successful in its efforts at restoring competition.
- The Federal Antitrust Investigation
- How the Agencies Learn About Potential Violations
Potential complainants are often concerned that the alleged antitrust perpetrator will know that the investigation started with their referral. This concern is rarely justified. First, it is important to note that the agencies learn about potential health care antitrust matters from a variety of sources, including consumers (health plans, employers, buyer coalitions, and patients), competitors, current and former employees, trade journals and papers (e.g., Medical Economics, American Medical News, Modern Healthcare), and other government agencies (Internal Revenue Service and Centers for Medicare and Medicaid Services). Sometimes, during an informal interview, a witness will mention other potential antitrust problems to the FTC or the DOJ; although the witness may intend to bring the situation to the government's attention, that is not always the case, and a witness may not realize that the agency will treat the comments as a "complaint." Regardless of how the antitrust agency learns of the potential antitrust matter, it will not reveal the source to anyone, including the subject of the investigation. This policy allows individuals and businesses that refer matters to remain anonymous, unless they choose to reveal their identity.42
Anonymity is a significant advantage to a victim-payor considering whether to refer a complaint to an antitrust agency. If, as is generally the case, the anticompetitive activities affect multiple payors, the referring party's identity as the source of the referral will be further protected because the government will interview all potential victims. While the subjects of the investigation may suspect that a referral was made, they are unlikely to be able to identify which victim, or victims, made the referral.
Due to limited resources, the FTC and the DOJ cannot investigate every referral they receive. Therefore, before making a referral, counsel and the victim-payor should consider a number of factors that may affect the agencies' decision whether to pursue the referred matter or other future referrals by the payor.
The victim's motive in making the referral is, perhaps, the most important factor. It would not be appropriate for a payor to complain to the antitrust authorities simply to attempt to gain a negotiating advantage. 43 If the government perceived that a referral was based on this motive, the referral would be ill received, and the agency would be wary of future complaints filed by the purported victim. Credibility is extremely important when dealing with the enforcement agencies. It serves an organization well to make only substantial and verifiable complaints and develop a reputation as a credible, forthcoming, and reliable source of information because a referral by such an entity is more likely to be investigated.
Another very important consideration is whether the representatives of the complainant are willing to commit the resources necessitated by a successful referral. The agency to which the referral is made will need to conduct interviews of the individuals with first-hand knowledge and will want all documents relevant to the alleged violation, including e-mails and correspondence. Because antitrust investigations involve economic analyses, the agency may also want data to support or demonstrate the anticompetitive effects of the alleged behavior. In other words, an investigation is likely to result in expenditure of resources and time on the part of the victim if a referral is accepted for investigation. To gauge the client's level of commitment, counsel should ask the interested individuals to prepare a one or two-page summary of the facts and an analysis of the applicable market prior to any discussion of whether to make a referral. If the requested information is not forthcoming, it is questionable whether they have the degree of interest in the matter sufficient to justify making a referral.
Counsel should also assess the strength of the evidence it is presenting to the enforcement authorities. Even if a technical antitrust violation appears to exist, the government may decide not to pursue a case if the testimony and documents do not show blatant misconduct and substantial harm to consumers through higher prices, reduced output, or reduced quality. For example, if the allegation is concerted refusals to deal except on collectively determined price terms, 20 identical letters "written" by independent providers is a strong indicator of concerted activity (especially if the letters contain identical typographical errors). The stronger the evidence, the more likely the agency will pursue an enforcement action.
Finally, counsel should assess how clearly the harm to competition and consumers can be demonstrated. Inchoate harm is less likely to be of interest to enforcement officials than demonstrated harm. For example, attempts by independent competing physicians to jointly negotiate may be viewed as more serious when those attempts have succeeded, or if the competing physicians have engaged in such activities as coordinated contract terminations. In other words, the more demonstrable harm to competition is, the more likely a matter will result in an investigation.
- Investigative Powers of the DOJ and the FTC
Once the decision to make a referral is made, the next decision is to which federal agency the complaint should be directed. The FTC is statutorily limited to the prosecution of any individual or any corporation "organized to carry on business for its own profit or that of its members."44 As a result, the DOJ handles Sherman Act §§ 1 and 2 investigations of not-for-profit entities such as hospitals or health plans. To efficiently distribute the remaining civil work between the two agencies, they developed a "clearance" process to ensure that efforts are not duplicated and that staff and attorneys with appropriate expertise investigate each matter. Thus, even if a complainant has deliberately chosen one organization over the other, the agencies make the final determination as to who will handle the matter.
- Informal Collection of Information
After accepting a case for investigation, the antitrust agencies proceed informally, collecting information through voluntary requests to the purported victims (consumers and competitors) and the subjects of the investigations.45 These requests take the form of telephone interviews, meetings with staff, and document production requests. When collecting information, the antitrust agencies are very careful to preserve the confidentiality of all information, including the existence of the investigation. Thus, subjects of investigations may speak to the press about an investigation, but the government will "neither confirm nor deny the existence of an investigation."46
From the victim's perspective, the informal collection period begins when agency staff requests a telephone interview. When first contacted, counsel should inquire about the subject of the inquiry and whether the client organization is the target of the investigation, or merely a potential source of information about a third party. Generally, the FTC or the DOJ will voluntarily identify the subject of the inquiry at the outset of the initial contact.
After establishing that the FTC or the DOJ view the payor-client as a victim and potential witness, counsel must consider how to approach the government's inquiry. Some counsel may have a "knee jerk" reaction to treat an antitrust investigation in the same manner as a regulatory agency investigation of the client, offering the minimal cooperation that is legally required. Such an approach is not necessarily in the client's best interests. The antitrust authorities will be best served by receiving full, complete, and accurate information about the anticompetitive conduct, and the client is best served by having the government act to restore competition. If the client has been harmed by the conduct, then the investigation may result in relief that benefits the client. A grudging or stingy (i.e., less than cooperative) approach to an inquiry hampers the government's ability to fully assess the situation; it may contribute to a regulatory decision not to take action that could have benefited the client. For this reason, a fully cooperative approach should be taken. When approached by the FTC or the DOJ, counsel should identify representatives of the organization knowledgeable about the subject. Counsel should also gather any key documents, such as identical demand letters or termination letters from independent physicians or other health care practitioners. Such documents could be supplied voluntarily before the initial client telephone interview so the government's staff has them during the interview, making it more productive.47 It may also be valuable to have the client representatives prepare a summary of the facts or a timeline of important interactions with the government's targets prior to the initial interview.
Telephone interviews can be quite informal. Because these discussions are confidential, counsel and client can fully cooperate without concern that their cooperation will damage their relationship with the subjects of the investigation, with whom the client may be forced to have continued business dealings. An initial interview will generally take about an hour and will typically be conducted by staff attorneys, but may also include staff economists and paralegals. If the matter is one in which the client organization has been harmed, there generally are follow-up discussions and requests for documents. Counsel should request that clients document future dealings with the subjects of the investigation. This will make it easier for them to accurately respond to subsequent inquiries and, if the organization is the victim of the misconduct, increase the value of the client testimony in any subsequent proceedings.
It is appropriate for each participant including counsel to assist in a full presentation of the facts. For example, if counsel could better answer a question directed to the client, such as a question about corporate structure, then it is appropriate for counsel to respond to that question. Counsel may actively present their organization's view of the situation and advocate for actions that will protect the client's competitive interests. Counsel should also elicit information from the clients that is germane to the investigation, but which the government's questions did not address. If there are further developments with respect to the subject matter of the investigation, it is appropriate for counsel to contact the agency and bring these developments to the staff's attention. The subsequent contacts will be kept confidential in the same manner as an agency interview.
This is not to say that an attempt should be made to give the government only the information that seemingly supports the investigation or points to misconduct by the subject of the investigation. The antitrust agency would prefer an accurate, balanced picture of the situation so that it can make a decision about whether further action is warranted and whether to invest scarce investigative resources in the matter. If the client organization has not experienced the conduct that is the subject of the inquiry, does not feel that it has been harmed, or does not believe that a business combination would adversely harm its interests, it should make sure the government knows these facts. The ultimate goal should always be to provide a factually accurate view of the situation.
Depending on what information the antitrust agency already possesses, document requests issued to payors during the informal stage of an inquiry may be very broad, or fairly detailed and specific. If telephone interviews have been conducted prior to issuance of the document requests, the agency staff will attempt to tailor the request to obtain documents discussed during the interviews. Although the document requests are voluntary, counsel should resist the temptation to ignore the government's request, or to provide only documents discussed during telephone interviews. Some victims mistakenly believe that voluntary compliance with government document requests will some how competitively disadvantage them or cause additional problems for them with the subjects of the investigation. As a practical matter, refusal to comply may be short-lived if the government believes that escalating the investigation to a formal level and issuing a subpoena or civil investigative demand ("CID") is necessary. In addition, the government does not look favorably upon "victims" who must be forced to provide evidence of their harm. No one benefits if the government is forced to expend scare resources to issue formal document requests only to determine that the "victim" who refused to voluntarily provide documents has nothing of value to add to the investigation. The government and the client are best served by counsel discussing the document request with the agency's attorneys to determine what the agency is seeking and whether the client has, and can produce, such documents or data. The antitrust agencies will honor the confidentiality of documents produced voluntarily.
- Formal Information Collection
If government staff attorneys are unable to collect sufficient information through voluntary requests to determine whether prosecution is warranted, the staff will seek compulsory process, thus pushing the investigation to a formal level of fact-finding. Staff may also seek compulsory process where the information collected during the informal stage supports prosecution, but the agency believes a detailed, formal investigation is warranted. Compulsory process authority at the DOJ rests with the Assistant Attorney General for Antitrust ("AAG"), who must sign-off on the staff's use of compulsory process.48 At the FTC, the Commission issues a process resolution that then allows use of compulsory process.
The DOJ's use of compulsory process entails issuance of CIDs, which can be used to require the recipient to produce documents, answer written interrogatories, give sworn oral testimony, or furnish a combination of the three. The FTC generally will issue subpoenas duces tecum (for documents and sometimes testimony regarding those documents) or ad testificandum (for testimony alone), but also has the ability to issue CIDs. Both agencies have the ability to serve their compulsory process demands any where in the United States and can obtain judicial enforcement if a recipient refuses to comply with the request.49
As part of its formal investigation, the government may wish to take the sworn testimony of the victim client's representatives pursuant to a CID or subpoena. Again, the more usual "don't volunteer information, answer only the question asked" approach is not the most productive or beneficial when giving such testimony. At this stage of the proceedings, the client organization has been identified as a victim of conduct alleged to violate federal antitrust laws. Thus, full cooperation generally is in the client's best interests. Because the government's and victim's interests are aligned, the taking of such testimony should be viewed as a collaborative effort. For example, the organization's counsel will, at times, be in a better position to elicit the facts in an orderly manner because counsel is more familiar with the organization and its business operations. The organization's counsel is also more likely to be familiar with the facts and with the scope of each witness's knowledge. Consequently, counsel for the victim can greatly assist the government in framing questions to elicit clear, responsive testimony. For example, counsel should ask to go off the record to suggest framing a question in a particular manner, or to suggest documents helpful in refreshing a witness's recollection.
Similarly, victims should work with the agency on document and information requests issued through CIDs or subpoenas duces tecum. The government agencies do not intend to make such requests overly burdensome and are usually willing to negotiate modifications of both the requests and the due dates — generally agreeing to a "rolling production" of documents over a mutually agreeable time period. Although the antitrust agencies generally settle or litigate matters in which they have obtained compulsory process authority, they will close an investigation, without taking any action, if the evidence is insufficient or inconclusive. Therefore, where the client has truly been harmed, it is important for counsel to ensure that all available evidence of that harm is produced. In addition, the information the victim provides may help the government in determining the appropriate remedy. Therefore, it is in the client's best interests to comply with formal information requests to the best of its representative's abilities.
- Resolution
Most matters are resolved by the enforcement agencies during the investigative phase through the entry of voluntary consent orders simultaneous to filing the complaints. Making a referral, or participating actively as a witness, offers no assurance that the enforcement activity will fully vindicate the victim's rights. Remedies typically negotiated in the FTC and the DOJ enforcement activities do not involve restitution to victims. Any relief is likely to be injunctive and prospective only. However, the victim, through counsel, may advise the enforcement agency appropriate provisions to prevent further harm.50
If the government and the subject of the investigation are not able to resolve the matter through a voluntary consent decree, the government will likely bring a formal action. The DOJ will file such actions in federal court, while the FTC files most actions with the Commission and proceeds through administrative litigation. At this point, testimony and documents are no longer automatically treated as confidential. The government will be required to provide the defendants copies of all correspondence, documents, CID responses, and testimony transcripts. The DOJ may also be forced to provide in its Rule 26 disclosures descriptions of the information collected through informal interviews. Although the government agency will go to great lengths to protect its witnesses' confidential information and will seek an appropriate protective order, victims' counsel must also do their part in determining how best to protect the clients' confidential information. Generally, a judge will provide several levels of confidentiality in the protective order, but use of the highest levels of confidentiality, which require in camera treatment of certain documents and testimony, is generally limited by the court and must be formally requested and legally justified by victims' counsel.
As part of litigation discovery, the defendant deposes the government's witnesses, which generally include the victims. Counsel for each victim's representatives should meet with the government attorneys prior to the depositions to review the government's complaint and the documents the defendant's counsel is likely rely upon during the deposition.
If the case proceeds to trial, the victim's representatives will likely be asked to testify. This presents opportunities for counsel to work with the government attorneys when preparing for direct and cross examination while pursuing the victim client's best interests.
- Conclusion
For payors who are victims of anticompetitive activities by provider-controlled organizations, federal antitrust agencies' enforcement actions can provide relief and protection. However, if payors and their counsel approach such investigations as burdensome and offer minimal cooperation, this opportunity may be lost or limited. The interests of the victim payor will be best served by working cooperatively with the antitrust agency during an investigation.
Notes
115 U.S.C. § 1-2.
215 U.S.C. § 45.
315 U.S.C. § 18.
415 U.S.C. § 1.
515 U.S.C. § 2. The DOJ may prosecute violations of Sherman §§ 1 and 2 either civilly or criminally. This article focuses only on civil enforcement, as payor victims are unlikely to be involved in criminal enforcement actions.
6See FTC v. Superior Court Trial Lawyers Ass'n, 493 U.S. 411, 422 (1990).
715 U.S.C. § 45.
815 U.S.C. § 18.
915 U.S.C. §18a. Although this article focuses on provider conduct violating Sherman Act § 1, half the time an antitrust enforcer calls a health plan, the questions relate to a proposed merger or acquisition. The advice in section IV. of this article, about being honest with the agencies and providing relevant information, applies in the merger context as well. If a proposed merger would adversely affect the client's competitive position in the marketplace, then a grudging approach to the government's inquiry will deprive the client of a chance to have its views fully considered by the government.
10The persons or entities composing a single, integrated business generally lack the capacity to "conspire" with each other or the business. See, e.g., Copperweld Corp. v. Independence Tube Co., 467 U.S. 752 (1984).
11Section 1does not require an overt act in furtherance of the agreement. Merely the existence of an anticompetitive agreement need be proven. See Summit Health, Ltd. V. Pinhas, 500 U.S. 322, 330 (1991).
12There is no specific amount of interstate commerce required, but it must be more than de minimis. See United States v. LSL Biotechs., 2002 WL 31115336, at *5, No. 00CV529 (D. Ariz. 5-28-02).
13Liability under Sherman Act § 1 "may be established by proof of either an unlawful purpose or an anticompetitive effect." Summit Health, 500 U.S. at 330 (citing United States v. U.S. Gypsum Co., 438 U.S. 422, 436 n. 13 (1978)).
14The evidence should tend to exclude the possibility that the defendants were acting independently. See Matsushita Elec. Indus. Co., Ltd. V. Zenith Radio Corp., 475 U.S. 574, 588 (1986) (citing Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752, 764 (1984)).
15For discussions of what constitutes substantial financial and clinical integration, see U.S. DEP'T OF JUSTICE & THE FED. TRADE COMM'N, IMPROVING HEALTH CARE: A DOSE OF COMPETITION, Chapter 2: Industry Snapshot and Competition Law: Physicians, IV.B. at 34-41 (July 2004), available at http://www.usdoj.gov/atr/public/health_care/204694.htm; U.S. DEP'T OF JUSTICE & THE FED. TRADE COMM'N, STATEMENTS OF ANTITRUST ENFORCEMENT POLICY IN HEALTH CARE, Statements 8 & 9 (August 1996), available at http://www.usdoj.gov/atr/public/guidelines/1791.htm (hereinafter, "Statements").
16See Rebel Oil Co., Inc. v. Atlantic Richfield Co., 51 F.3d 1421, 1434 (9th Cir. 1995), cert. denied 516 U.S. 987 (1995).
17"If the plaintiff puts forth evidence of restricted output and supracompetitive prices, that is direct proof of the injury to competition which a competitor with market power may inflict, and thus, of the actual exercise of market power." Id. See also FTC v. Indiana Fed'n of Dentists, 476 U.S. 447, 460-461 (1986).
18See Rebel Oil Co., 51 F.3d at 1434; Coastal Fuels of P.R., Inc. v. Caribbean Petroleum Corp., 79 F.3d 182, 197 (1st Cir. 1996).
19See United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 404 (1956); United States v. VISA U.S.A., Inc., 163 F. Supp.2d 322, 334 (S.D.N.Y. 2001), aff'd, 344 F.3d 229 (2d Cir. 2003).
20See Letter from Charles A. James, Assistant Attorney General, Antitrust Division, to Patrick R. Gordon (Aug. 29, 2001) (Business Review Letter to Rio Grande Eye Associates, P.A.) (limiting product market to ophthalmologists); Letter from Robert F. Leibenluft, Assistant Director, Bureau of Competition, FTC, to William T. Harvey (May 19, 1998) (Staff Advisory Opinion Letter to Phoenix Medical Network, Inc.) (accepting each specialty as a separate product market).
21See Letter from Joel I. Klein, Assistant Attorney General, Antitrust Division, to Robert M. Langer (July. 30, 1997) (Business Review Letter to Vermont Physicians Clinic). But see, Letter from Anne K. Bingaman, Assistant Attorney General, Antitrust Division, to Steven J. Kern (Mar. 1, 1996) (Business Review Letter to Children's Healthcare, P.A.) (finding that general and family practitioners may be substitutes in terms of providing some of the same care, but are not considered substitutes by health plans for the purpose of creating a marketable health plan provider network).
22California v. Sutter Health Sys., 130 F. Supp.2d 1109, 1119 (N.D. Cal. 2001). See also, Evanston Northwestern Healthcare Corp., Dkt No. 9315 (FTC, Oct. 20, 2005) (initial decision) at 132-135, available at http://www.ftc.gov/os/adjpro/
d9315/051021idtextversion.pdf, argued on appeal May 17, 2006 (hereinafter, "Evanston Northwestern").
23See FTC v. Tenet Healthcare Corp., 186 F.3d 1045, 1055 (8thCir. 1999); FTC v. Freeman Hosp., 69 F.3d 260, 268-269 (1995). But see Evanston Northwestern at 139 (rejecting the traditional analysis and looking only to where patients would willingly travel).
24See, e.g., FTC's allegations regarding two contracting organizations composed of primary care physicians operating in suburbs of Denver, Colorado. Physician Integrated Serv. of Denver, Inc., Dkt No. C-4054 (FTC, July 16, 2002) (consent order), available at http://www.ftc.gov/os/2002/05/pisdcmp.pdf (hereinafter, "PISD"); Aurora Assoc. Primary Care Physicians, L.L.C., Dkt No. C-4055 (FTC, July 16, 2002) (consent order), available at http://www.ftc.gov/os/2002/05/auroracmp.pdf (hereinafter, "AAPCP").
25Statements 8 § A.3.
26Robert Pitofsky, Chairman, Federal Trade Commission, "Testimony of the Federal Trade Commission Concerning H.R. 2925, and the Application of the Antitrust Laws to Health Care Provider Networks," text of remarks before The Committee on the Judiciary, United States House of Representatives (Feb. 27, 1996) available at http://www.ftc.gov/speeches/pitofsky/pithtl.htm.
27See Timothy J. Muris, Chairman, Federal Trade Commission, "Everything Old is New Again: Health Care and Competition in the 21st Century," text of remarks before the 7th Annual Competition in Health Care Forum (Nov. 7, 2002) available at http://www.ftc.gov/speeches/muris/
murishealthcarespeech0211.pdf.
28See Health Care Services & Products Division, Federal Trade Commission, "FTC Antitrust Actions in Health Care Services and Products," available at http://www.ftc.gov/bc/0608hcupdate.pdf (providing a comprehensive review of health care antitrust cases brought by the FTC); Antitrust Division, Department of Justice, "Summary of Health Care Cases," available at http://www.usdoj.gov/atr/public/health_care/0000.htm (summarizing the DOJ's cases between 1983 and 2000).
29See North Tex. Specialty Physicians, 2005-2 Trade Cas. (CCH) 75,032 at 103,477 (FTC 2005), available at http://www.ftc.gov/os/adjpro/d9312/051201opinion.pdf, appeal filed No. 06-60023 (5th Cir. 2006) (hereinafter "NTSP").
30Id.
31NTSP at 20.
32See, e.g., Id. at 19, 20, and 22.
33Id. at 18.
34See id. at 21.
35Id. at 22.
36Id. at 24.
37Id. at 26.
38Id. at 29.
39See United States v. Federation of Physicians and Dentists, No. 1:05CV431 (S.D. Ohio 2005), available at http://www.usdoj.gov/atr/cases/indx26_b.htm. The DOJ's first case against the Federation was filed in 1998 and settled in 2002. United States v. Federation of Physicians and Dentists, Inc., No. 98-475 (D. Del. Nov. 6, 2002), available at http://www.usdoj.gov/atr/cases/f1800/1880.htm.
40See Department of Justice, Antitrust Division, "Plaintiff United States' Memorandum Supporting Its Motion For Partial Summary Judgment Of Liability Against The Federation Of Physicians And Dentists And Lynda Odenkirk" (S.D. Ohio Jan. 26, 2006), available at http://www.usdoj.gov/atr/cases/f215400/215421.htm.
41Id. at 11.
42One cautionary note: if a matter proceeds to litigation, the government agency must turn over all correspondence and documents received from third parties. If the complaint to the government is written, it will be discoverable. Therefore, if the complainant desires to remain anonymous regardless of how far the case proceeds, it is best to make the complaint via telephone or in person and either wait for the government to request documents, or send documents without a cover letter after calling the staff to notify them to expect the shipment.
43See FTC Rule 2.3, 16 C.F.R. § 2.3 (stating that the FTC will only act in the public interest and will not take any action "when the alleged violation of law is merely a matter of private controversy").
4415 U.S.C. § 44.
45See FTC Rule 2.4, 16 C.F.R. § 2.4, stating that the FTC encourages voluntary cooperation, but, where necessary, the Commission will adopt a resolution authorizing the use of compulsory process.
46Information requests submitted under the Freedom of Information Act, 5 U.S.C. § 552, will generally yield little because the government agencies can withhold "records or information compiled for law enforcement purposes" under 5 U.S.C. § 552(b)(7) where release of the information could "interfere with enforcement proceedings," or "could reasonably be expected to reveal the identity of a confidential source."
47Documents submitted voluntarily, in lieu of a subpoena, and appropriately marked as "confidential" will be afforded the protections of 16 C.F.R. § 4.10 and 15 U.S.C. §§ 46(f) and 57b-2(f).
48The AAG is responsible for issuing all civil investigative demands issued in the DOJ's antitrust investigations.
49See 15 U.S.C. § 1312(d) and 1314(a); 16 C.F.R. § 2.7 and 2.13.
50Most FTC orders contain very similar provisions. The order in the FTC's case against the Piedmont Health Alliance includes significant, unusual provisions and is an example of what the government can do when victim payors express their concerns and provide helpful comments about remedies. See Piedmont Health Alliance, Inc., Dkt No. 9314 (Oct. 5, 2004) (Consent Order), available at http://www.ftc.gov/os/adjpro/d9314/041005do0210119.pdf.
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