State Attorney General Antitrust Hypothetical | gnh2104 | July 07, 2011


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State Attorney General Antitrust Hypothetical

You are an Assistant Attorney General with responsibility for antitrust issues. Indeed, you are the only Assistant Attorney General handling antitrust issues. The following case has landed on your desk.

In the largest city in the State, there are two hospitals. The largest hospital is a tertiary care facility, i.e., handling the most complicated cases. The other hospital is a community hospital. There are two cardiology practices in the city, and together they employ the lion’s share of the cardiologists in the area. The practices operate clinics in other rural communities where the payor mix is not as good, i.e., less profitable due to higher number of Medicare and Medicaid, and free care, patients. Currently, the practices accept all patients regardless of ability to pay. The practices supply the cardiologists for the two hospitals, e.g., the Chief of Cardiology for each hospital comes from the practices and the two practices staff the teaching clinics at the larger hospital. The practices work together to establish call coverage and the like.

The practices compete with each other to obtain referrals, but currently do not compete on the basis of price. All of the most complex cardiology services are provided only at the large hospital (although a number of other hospitals within two hours driving time also provide such services).

The two practices claim that they cannot continue to provide quality care in the current environment because the cardiologists’ income has remained stagnant or declined in the last 10 years due to the cuts in reimbursement, and the relative low income of the patient population (leading to more Medicare and Medicaid, and free care, patients). Increasing income would likely come from increased utilization of services, such as testing, which would add to cost of health care and is undesirable from a health care cost perspective. Recruitment has been difficult because cardiologists can make substantially more elsewhere, and this problem is particularly acute in staffing the outlying clinics. The large hospital is concerned that it won’t be able to get volunteers to teach the residents or participate in hospital or departmental meetings. Thus, the practices propose to merge and to become employees of the large hospital, increasingly the model elsewhere, e.g., Cleveland Clinic, Mayo Clinic. The proposal purports to include provisions to make sure that the community hospital won’t lose access to the cardiologists or that insurers will pay more for services.

In the administrative proceedings before the State Department of Health and Human Services, the Attorney General is a designated party, as is the Governor’s Health Care Policy Advisor. She likely will favor the proposal because greater integration likely will lead to better health care, particularly in the outlying communities, and besides, the proposal says that they will maintain these clinics and continue to accept all patients regardless of ability to pay.

As an antitrust lawyer, you have concerns about the proposal:

1. Will the community hospital really succeed if most of the cardiologists are employed by an affiliate of the larger hospital?

2. Will the new, integrated practice be in a position to negotiate higher rates with insurers if there is no prospect of competition?

3. If the hospital proposes to pay the cardiologists more, will that money come out of increased prices or other effects of decreased competition?

4. What are the other unknown effects of eliminating whatever competition that exists?

You also have nagging doubts that temper your approach. You are a lawyer, not a health care expert or an economist, and thus you wonder about your ability to assess the claimed health care benefits or costs of the proposal. That makes you hesitant to disagree with the Governor’s health care expert. You aren’t able to talk to the Assistant Attorney General who advises the Department responsible for health care because the office established a “Chinese Wall” in this proceeding.

You have extremely limited resources to evaluate the avalanche of documents. Under the statute, the entire administrative process must be completed within 90 days. You could seek the assistance of the FTC, which certainly has greater resources and is knowledgeable about antitrust, but likely has less knowledge and interest in the health care quality issues. And if the federal government does participate, you could lose control of the matter.

Finally, if you had a child who had cardiac surgery, you know that the debate between health care quality and competition would not just be academic.

What do you do to evaluate this proposal?

Who do you talk to in order to get advice on this proposal?

What do you do to address the lack of resources to evaluate this proposal?

Do you invite the FTC to participate?

Do you try to scuttle the proposal?

Do you try to slow down the process in order to get a better understanding even if that could lead to a collapse of the proposal?

Do you seek to negotiate different conditions and then agree to the proposal?

Do you use the prospect of antitrust violations to seek conditions that have nothing to do with competition?

Do you simply point out the competition issues and let the hearing officer of the State Department of Health and Human Services sort it out?


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June 11, 2013

attorney general antitrust

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