When a hospital has significant market power, the hospital can use that market power to harm competing independent physicians. This can violate the federal antitrust laws.
Physicians face significant challenges in modern healthcare markets. The electronic medical records revolution, complex federal and state healthcare payment programs, and compliance with regulatory programs and requirements all eat up time and money that could be better spent on patient care.
In today’s market, these issues are compounded by an even bigger threat: the consolidation of healthcare markets and the squeezing out of local private practices.
The consolidation of hospital markets and the integration by locally dominant hospitals into physician services has made operating a private physician practice difficult. The older paradigm— in which a hospital granted independent physician’s privileges and independent physicians then managed the hospital’s medical staff—has largely been replaced with hospitals employing a broad range of medical specialties who answer to hospital administrators. As a result, employed physicians have become profit and loss centers for hospitals, making hospitals warry of independent physician practices and the competition they bring. As a result, relationships between hospitals and independent physicians have become strained, and in some cases, dominant hospitals are actively working to drive independent practices out of the market or force them into employment relationships.
In competitive markets, competition between hospital-employed physicians and independent physicians can benefit consumers, giving patients more options. But when a hospital has significant market power, the hospital can use that market power to harm competing independent physicians. This can violate the federal antitrust laws.
The federal antitrust laws are designed to protect the competitive process, and thereby protect consumers, by prohibiting the misuse of market power by dominant firms. These laws are critical because a hospital with market power can harm independent physicians in different ways. For example, a dominant hospital can:
Suing a hospital under the antitrust laws for anticompetitive conduct is an option, but such lawsuits are expensive and can take a long time to work their way through the court system.
An alternative is to file a complaint with one of the two relevant federal antitrust enforcement agencies: the Antitrust Division of the United States Department of Justice or the Federal Trade Commission (FTC).
However, filing a complaint with one of these agencies is not as easy as filling out a form. These agencies enforce the antitrust laws in many different industries, which makes getting their attention its own challenge.
A physician group filing a complaint must carefully prepare a position paper that contains the type of information the Antitrust Division and FTC would need to evaluate whether the identified improper conduct violates the antitrust laws.
Key to this is understanding that the Antitrust Division and FTC employ both attorneys and economists. Because the underlying theory of the case will be that a particular hospital has market power and has used that power to harm competition, hiring an economist is a crucial step. This person provides the research and analysis needed to build a consumer harm narrative. A strong theory of consumer harm is the backbone of a healthcare antitrust case, as the Antitrust Division and FTC are concerned about how a hospital’s role in the local market may be negatively impacting everyday patients.
Preparation of the claim must also include interviewing members of the physician practice and other related parties on topics including the:
The facts uncovered by the investigation and the analysis prepared by the economist are then integrated into a position paper that is sent to the relevant enforcement agency.
The antitrust enforcement agencies receive many complaints and must prioritize their limited resources when determining what to investigate. Developing a strong position paper with a solid economic analysis increases the chance that the Antitrust Division or the FTC will consider your case.
George M. Sanders, JD, is an antitrust attorney who has represented physician practices in antitrust matters across the country. As a litigator for more than 30 years, he has spent a considerable portion of his practice working on a broad range of complex litigation matters including antitrust, trade secrets, consumer fraud, and civil RICO. More at www.sandersantitrust.com.