Discussions among Physician Groups - Avoiding Antitrust Issues
By: Anthony Romano
Driven by Federal Health Care Reform and a desire to remain independent of hospitals and health care systems, physician groups are actively exploring different collaborative and alignment options, including the formation of independent practice associations (IPAs), integrated care networks (ICNs), and participation in accountable care organizations (ACOs). Various physician groups which otherwise compete are also discussing the possibility of merging or other integration strategies. These discussions are important and necessary in a health care environment that requires greater access to capital and a coordinated and accountable approach to health care in order to meet payor demands for quality and the implementation of new payment methodologies. However, physician practices need to be mindful that such discussions can raise antitrust concerns.
The Federal Antitrust statutes govern competition between competitors, including the formation and operation of joint ventures and other collaborative arrangements. In particular, Section 1 of the Sherman Act prohibits "[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States." Antitrust concerns associated with premerger coordination include: (1) the potential for merging parties to coordinate prices, markets, or some other competitively significant term during the premerger time period; and (2) if the transaction fails to close, the physician groups involved would be able to raise prices because, as a result of the information exchange, they have a better understanding of each other's cost structure and pricing information.
So, what does this mean in the context of two or more separate physician groups discussing the possibility of merging or forming an integrated network? As an initial matter, meetings of physician groups should be pursued only for pro-competitive reasons, including, for example, enhancing patient care services, creating efficiencies and promoting accountability in health care delivery, implementing health information technology, and responding to changes in the health care market. It is recommended that each meeting follow an appropriate, written agenda and that simple minutes are maintained. This will allow the participants, if ever questioned, to demonstrate that the purpose of the meetings were not anti-competitive within the meaning of the antitrust laws. As discussions progress, it can also be helpful to utilize the services of an outside third-party, such as a consultant or attorney. These individuals can help collect and manage competitive information from the participants, so as to avoid sharing that information directly among competitors, and help ensure that the discussions remain legally compliant.
Any discussions among legally separate physician groups should absolutely avoid agreements to fix prices or agreements to divide or allocate markets or patients (e.g., two, competing physician groups in Birmingham agree to work at different hospitals in order to divide the market). The agreement itself (written, verbal, or inferred from conduct) is per se illegal, even if the arrangement proves unsuccessful.
Competing physician groups are prudent to sign a confidentiality agreement prior to beginning discussions or exchanging information in connection with a potential merger or other integration transaction. However, do not allow having a confidentiality agreement in place to create a false sense of security that competitively sensitive information can then be discussed or exchanged without antitrust implications. Having a confidentiality agreement in place will not protect against the antitrust issues described above if competitively sensitive information is exchanged and used improperly.
For instance, the return or destruction of confidential information may not be enough to "unsee" a competitor's fee schedules, costs, or pricing information. If a merger fails to close and one party raises prices after learning of its competitor's pricing during negotiations, the return or destruction of confidential information pursuant to the confidentiality agreement will not resolve the antitrust issue. Therefore, regardless of having a confidentiality agreement in place, competing physician groups must carefully consider, for antitrust concerns, what information should or should not be discussed or disclosed prior to the closing of a merger or other integration transaction.
Following are a few other items to avoid when it comes to discussions among physician competitors:
Exploring various integration options in this challenging health care environment is a necessity. However, such discussions must be approached thoughtfully and with an understanding that certain agreements and collaborations, even if ultimately not successful, can be viewed as unlawful under the Federal Antitrust laws.
Anthony Romano is a Partner at Burr & Forman LLP practicing in the firm's Health Care Industry Group.