Federal Government Encourages Health Providers to Coordinate, Then Sues Them For Doing So

The Obama administration argued that last year’s health care overhaul was a necessary step toward restraining the growth of health spending. One of the ways it was supposed to do that was by encouraging medical providers -- physicians, specialists, and hospitals -- to find better ways to coordinate the delivery of health care. Highly integrated provider networks, encouraged and regulated by the federal government, would help make health care cheaper and better at the same time.

With the law’s incentives in place, some providers are indeed working on mergers intended to help coordinate care. But it turns out that in some cases, they’re running into resistance... from the federal government, in the form of Federal Trade Commission antitrust action. That's what's happening in Toledo, Ohio, where a hospital merger is taking heat from the FTC's antitrust enforcers. The New York Times looks at the latest round of docs-vs.-the-FTC and reports that ongoing legal battles illustrate “the risks that arise when competing health care providers try to collaborate, as they are racing to do all over the country, in part because of incentives built into the new health law.”

What are those risks? For providers, it’s that one arm of federal government will take them to court for following through on the collaboration incentives offered by another part of the federal government. For patients, it’s that, despite the Obama administration’s argument that coordinated care would make health care cheaper, integrated health networks afford providers new market power that in some cases can actually drive prices up. The New York Times reporteth:

Federal officials are seeing a wave of mergers, consolidations and joint ventures in the health care industry. More and more hospitals are buying up medical practices that competed with one another. Groups of doctors, with the same or different specialties, are merging their practices.

Patricia M. Wagner of Epstein Becker Green, one of the nation’s largest health care law firms, estimates that “50 percent to 60 percent of physicians and hospitals are exploring ways” to team up. The health care law encourages such alliances and joint ventures but provides no exemption from antitrust law, which bans mergers that may substantially “lessen competition.”

Matthew J. Reilly, a senior lawyer at the trade commission, and his team of 14 lawyers have been hammering away at the Ohio merger for more than two months. Armed with thousands of confidential e-mails and dozens of depositions, Mr. Reilly said the merger would increase ProMedica’s market share and “bargaining leverage,” so it could force health insurance plans to pay higher rates to St. Luke’s and to ProMedica’s other hospitals.

Wait a minute. Didn’t President Obama’s Department of Health and Human Services publish a novel-length regulatory treatise laying out, in great and highly prescriptive detail, the rules for ObamaCare’s new coordinated-care collectives? Does the federal government want doctors to coordinate or not? The answer seems to be yes. Except, but...no.  

...The trade commission says it is investigating at least a dozen cases in which competing groups of doctors are linking up with one another or with hospitals under a single corporate umbrella.

“Such arrangements have the potential to generate cost savings and quality benefits for patients,” said Richard A. Feinstein, director of the Bureau of Competition at the F.T.C. “However, in some cases, the arrangements can create highly concentrated markets that may harm consumers through higher prices or lower quality of care.”

So the federal government does want providers to coordinate! Well, sometimes. And only in the complex, overly restrictive ways prescribed by various federal regulators.

But in other cases, federal authorities frown on coordination. And from time to time, federal officials might take integrated provider networks to court for coordinating, even if those health providers take expensive steps to follow the legal directives that have been laid out for them to avoid antitrust prosecution. How will anyone know which coordination efforts are deemed acceptable and which aren’t? I guess the minders at the FTC will just have to decide, and then inform the providers of their decision, perhaps with an antitrust suit.

Skip Oliva wrote about the FTC's long-running war on doctors for Reason last December

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  • ||

    The official motto of the Obama presidency: Fuck you, that's why.

  • ||

    He's making Bush look like a dedicated constitutionalist.

  • ||

    "Unpredictability: it's just so good for business."

  • ||

    Seriously, how much has the uncertainty created by this government's haphazard actions and lawmaking affected the economy?

  • ||

    Uh...a fucking lot?

    They keep saying they want to fix the economy, and then go about wrecking it even worse. These bumbling retard clowns can't be out of office soon enough...to be replaced by more bumbling retard clowns.

    Oh, for someone who would just keep their hands off shit...

  • ||

    The Founders fucked up not including an undo button.

  • ||

    I thought that's what the Second Amendment was for.

  • ||

    Not enough. Maybe a mandatory revolution amendment?

  • Warty||

  • ||

    I guesstimated that it would cost our hospital system about $50,000 just to prepare the application for the FTC no-action letter for an ACO.

    That would be $50,000 that isn't spent, you know, healing people.

  • Tony||

    No it's a $50,000 testament to our ability to govern and govern effectively. Healing people was always been secondary to putting in place an effective method for administrating health care funds. It's not necessary that people are helped or their lives are improved as long as the mechanism is put in place to help them should the government decide to do so.

  • ||

    Every hospital system has Departments of Legal Affairs, Compliance, Claims (Insurance) Management, Audit, Risk Management, and more. These departments are all about making sure that the hospital system doesn't run afoul of law, regulation, court, etc. While clearly necessary in today's day and age, they aren't actually about, you know, treating patients.

  • Jeffersonian||

    Say what you want about Rand, but she had this shit nailed. It's all about creating enough uncertainty that one has to go hat in hand to the connected to find one's way through the forest of regulation.

  • Warty||

  • Bob||

    ObamaCare is such a clusterfuck that it's going to collapse under the sheer stupidity of the law. Maybe the Dems were trying to piss off as many people they could with this law? Obama and the Dems were so greedy in getting this law passed that it's going to turn generations of voters against big goverment.

  • Barack Obama||

    Sorry, Peter, Michelle and Hillary are taken turns blowing me for winning the war in Libya...What was it you said?

  • My brain hurts||

    NO NO! The brain in my HEAD!

  • ||

    I want to see that "under the doctor" movie.

  • Ska||

    Or at least whoever that red-head is supposed to be.

  • Joe Bar||

  • Old Mexican||

    "Such arrangements have the potential to generate cost savings and quality benefits for patients," said Richard A. Feinstein, director of the Bureau of Competition at the F.T.C. "However, in some cases, the arrangements can create highly concentrated markets that may harm consumers through higher prices or lower quality of care."


    So mergers can be good... except when we decide they are not.

    Besides, why is there only ONE Bureau of Competition?

  • ||

    Actually, you will be relieved to learn that there are two Bureaus of Competition. One at the FTC, and one at the DOJ.

  • adam||

    "Besides, why is there only ONE Bureau of Competition?"

    Interestingly, there are two. The DOJ Anti-Trust division is the other center of competition policy in the federal government. The two don't really compete though.

  • ||

    Damn you, adam. Damn you to hell!

  • fish||

    The two don't really compete though.

    Collusion then! Good to know.

  • ||

    Healthcare competition and antitrust is kind of my racket. I waiting to hear back on an FTC gig at the moment actually, lol.

    http://www.ftc.gov/reports/hea.....arerpt.pdf

    Great Backgrounder

    Provider consolidation is a huge threat (horizontal and vertical integration) ...improved provider coordination would be a great thing (getting fucking docs to talk to each other to drive case management)? Does this binary distinction makes sense?

    My five cents:

    Institute all payer rate setting (not ideal but temporary measure).

    Health plans institute tiered networks based on quality metrics with reduced FFS baseline. Real price and quality based competition.

    Drive costs down ~20% nearly across the board and then fold medicare and medicaid into private plans based out of the exchange system (much like the german sickness funds).

    This would be a lot fucking easier if LBJ and his asshats weren't deceitful fucks and suppressed the initial medicare and medicaid budget projections. Or if Congress had not continued to pass retarded legislation (EMTALA, etc.) in the area of healthcare for decades after the fact, perpetuating inflationary market distortions.

  • Barack Obama||

    There are those who say: "Hey, its a free country."

    Let me be clear: All y'all my bitches now!

  • CatoTheElder||

    As long as everybody does exactly as they are told, there won't be any trouble. Obviously some folks are showing initiative, and that is prohibited.

  • ||

    This administration couldn't organize a fucking rock fight.

  • Business As Usual||

    Top. Men.

  • Jennifer||

    I remember at my first newspaper job, I had to attend a zoning board meeting where one guy applied for a variance: he wanted to build a fire escape on the side of his small apartment building (indeed, the fire escape was required by code), but doing so would violate the code requiring all construction to be at least X feet from the property line.

    When complying with on law requires you to break another, there's too damned many laws.

  • cynical||

    But he could have easily complied with the code by tearing down his apartment building and rebuilding it such that it didn't come as close to the property line.

  • ||

    these guys make a whole lot of sense man. Wow.

    www.web-anon.at.tc

  • ||

    This article is completely misleading. First of all, this is not a case of two branches of government going in different directions. The FTC and Department of Justice have been working closely with HHS on the issue of physician and hospital collaborations. Second, the FTC and DOJ have issued draft guidance (with final guidance forthcoming) explaining when such collaborations would be permissible under the antitrust laws and when they "go too far." In other words, the FTC is not condemning all collaborations among physicians and hospitals. Third, the article completely ignores the fact that not all collaborations among physicians and hospitals are the same. Some such collaborations are merely a vehicle for physicians and hospitals to jointly negotiate with payors in order to extract higher prices; without clinical or financial integration, however, they will fail to achieve the objectives HHS has established for these ventures -- providing higher quality care at lower costs. For those organizations that do clinically and financially integrate, we still need to be concern about their size. There's a big difference between 20% of the physicians in a market coordinating with one another and 80% doing so. In the later case, the venture could demand high prices from payors, which means any cost savings from coordination would NOT be passed along to consumers but kept as higher profit for the physicians.

  • Ken||

    I'm sorry, but this whole article is intellectually dishonest and unreasonable. I say that as a registered libertarian.

    There is a massive difference between coordinated care and financial merges and this is an intentionally deceptive conflation of the two. Coordination is an electronic medical record you take from doctor to doctor. It's specialists who don't necessarily work for the same company simply discussing patient outcomes together.

    In no way, shape, or form is coordinated care related to financial merges. You can have two independent doctors coordinating care, while at the same time, you can have two doctors in the same practice who fail to coordinate at all.

    I think Reason needs a mea culpa here. This whole blog post is wrong, intentionally deceptive, and downright manipulative without a single valid point whatsoever.

  • Nike Dunk Shoes||

    thanks

GET REASON MAGAZINE

Get Reason's print or digital edition before it’s posted online

  • Progressive Puritans: From e-cigs to sex classifieds, the once transgressive left wants to criminalize fun.
  • Port Authoritarians: Chris Christie’s Bridgegate scandal
  • The Menace of Secret Government: Obama’s proposed intelligence reforms don’t safeguard civil liberties

SUBSCRIBE

advertisement