DOJ Withdraws Support of Health Care Anti-Trust Safety Zones
On February 3, 2023, the Antitrust Division of the Department of Justice (DOJ) withdrew its support for longstanding antitrust enforcement safe harbors in the health care industry. Prior to this withdrawal, from 1993 to the date of withdrawal, when engaging in collaborative efforts or potential mergers or acquisitions, the health care industry was able to rely on a number of Policy Statements published by the DOJ and Federal Trade Commission (FTC). These Policy Statements provided “safety zones” for specific types of activities and transactions in the health care sector that, if followed, would insulate the arrangement from prosecution. With the withdrawal of this support, health care transactions may be subject to greater scrutiny, review and enforcement actions by the DOJ. This pronouncement is sure to increase the anti-trust risk with, and may in fact stymie, health care collaborations and transactions moving forward.
The 1993 Policy Statement. In 1993 the FTC and DOJ set forth six (6) separate safety zones covering the topics of: (i) hospital mergers; (ii) hospital joint ventures involving high-technology or other expensive medical equipment; (iii) the provision of information to purchasers of health care services; (iv) hospital participation in exchanges of price and cost information; (v) joint purchasing arrangements among health care providers; and (vi) physician network joint ventures. This Policy Statement detailed the requirements of, and gave examples for, each type of arrangement. The Policy Statement was intended to promote transactions that could reduce health care costs or increase competition by setting forth guardrails that, at the time, policy makers believed sufficiently protected consumers of health care services against anti-competitive behavior.
The 1996 Policy Statement. After the agencies issued the 1993 Policy Statement they realized further guidance was necessary to clarify the existing safety zones and enforcement policy and to expand the reach of their pronouncements. This resulted in adding safety zones addressing (i) hospital joint ventures involving specialized clinical or other expensive health care services, (ii) providers’ collective provision of fee-related information to purchasers of health care services, and (iii) multi-provider networks.
The 2011 Policy Statement on Accountable Care Organizations. Finally, the agencies released what would be the final Policy Statement, which created a safety zone for accountable care organizations (“ACOs”) participating in the Medicare Shared Savings Program.
Rescission of the Policy Statements. The DOJ’s decision to reverse course from the Policy Statements is consistent with the Biden administration’s overall tenor towards matters of competition, as evidenced by the recently proposed FTC rules related to the prohibition of non-compete arrangements in employment agreements. In rescinding the Policy Statements, the DOJ stated it believed the Policy Statements were antiquated and were no longer the best course of action to promote competition and transparency in the health care sector. This change gives the DOJ greater latitude to review and bring enforcement actions against health care transactions and collaborations. Now, health care entities will be subject to scrutiny from the DOJ in ways that have not been experienced since the Policy Statements were published three decades ago.
How will the DOJ approach specific types of transactions? It remains to be seen, but the DOJ’s announcement encourages the review of recent enforcement actions and competition advocacy as the most illustrative guidance for its future approach to enforcement. Whether this leads to a rise in enforcement actions against health care providers, insurers or ACOs should become apparent in the near future. Nonetheless, this shift in the DOJ’s enforcement approach undoubtedly adjusts the landscape for future transactions and collaborations within the health care industry. Only time will tell whether the DOJ will assert greater scrutiny to specific types of transactions and whether the rescission of the safety zones will have any impact on health care transactions and collaborations. But, parties should proceed cautiously moving forward and pay special attention to the impact of anti-trust enforcement on potential transactions and arrangements that involve parties or entities outside of their respective organizations.