Assignment 2 MHA 612 PDF

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1 ANTI-TRUST

Anti-Trust Abigail Justice MHA 612: Financial & Managerial Accounting Professor: Dr. Robert Smiles June 15, 2020

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Given my management status and 5 years of experience, I have been tasked to write a report for the senior management team on how the firm can avoid the threat of a Federal Trade Commission investigation if we were to merge with other health care organizations. Within this paper I will review the United States et al. v. The Charlotte-Mecklenburg Hospital Authority, d/b/a Carolinas Healthcare System lawsuit for information. This paper will summarize the charges and rebuttal or mitigation of the charges along with lessons learned. Finally, I will propose actions that can be taken by our management team to avoid any similar anti-trust actions in the proposed merger. Anti-Trust Law Anti-trust laws are there to promote a free marketplace. They are there to protect the public from the adverse effects of monopoly power. Most state governments along with the federal government have antitrust laws. They reflect a public principle that viable markets protect patrons, produce quality of goods and services at lowest prices, and restrains economic power. There are three main federal antitrust laws: 1. Sherman Act: This act is a federal statute that prohibits activities that restrict commerce and competition in the marketplace. It applies to all businesses along with healthcare providers. It condemns any conduct that can cause incompetence that end in higher prices or lower quality to the consumer. Price-fixing is a concern that can arise within the healthcare setting. This is where physician organizations, hospital organizations or other networks negotiate with payers as a group. While it is ok to share price information if the healthcare providers are all owned by the same parent. It becomes an issue when negotiations are done between independent providers doing so as a unit and are not

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meeting the acceptable requirements needed. The enforcement of these laws is shared by both the Department of Justice and the FTC [ CITATION Cle11 \l 1033 ]. 2. Clayton Act: The Clayton Act was passed by U.S. Congress in 1914. It defines any unethical business practices like monopolies and price-fixing. It upholds various rights of labor. There are four main principles: a. price discrimination; b. Sales; c. Mergers and acquisitions; d. any person being a director of two or more competing corporations. Any joint ventures between two or more hospitals can be investigated by the FTC or Department of Justice under the Clayton Act. They also have the right to regulate all mergers and give discretions to give approval. 3. Federal Trade Commission Act: This Act outlaws any unfair methods of competitions. It also outlaws’ unfair acts and practices that may affect commerce. It enforces federal antitrust laws that prohibit business practices that can lead to higher prices and fewer choices [ CITATION Enf20 \l 1033 ]. United States et al. v. The Charlotte-Mecklenburg Hospital Authority, d/b/a Carolinas Healthcare System In 2016 a civil antitrust lawsuit was filed by the United States and the State of North Carolina against The Charlotte-Mecklenburg Hospital Authority, formerly known as Carolinas Healthcare System, now doing business as Atrium Health. The lawsuit was filed to prevent them from using steering restrictions in agreements with health insurers in the area. The complaint alleged that Atrium’s steering restrictions are anticompetitive and violate Section 1 of the Sherman Act [CITATION Uni19 \l 1033 ]. Atrium is the largest health system in North Carolina with over 40 hospitals.

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ANTI-TRUST The complaint that was filed alleged that providers were using anticompetitive, anti-

steering clauses in their contracts with insurers. This was prohibiting commercial health insurers in the area from offering financial benefits to their patients to use less-expensive services for healthcare that was offered by CHS’s competitors. These restrictions also prevented insurers the ability to provide information on cost and quality of alternate health plans to employers and consumers [ CITATION Jus18 \l 1033 ]. The Antitrust Division of the U.S Department of Justice along with the North Carolina Department of Justice conducted a comprehensive and thorough investigation as well as 2 years of litigation regarding their use of steering restrictions in their contracts with health insurers. The restrictions expressly prohibited insurers from steering members away from Atrium or allowed Atrium to terminate the contract if the insurer steered members away. The United States was able to conclude, based off of the evidence from the litigation and investigation, that their restrictions were anticompetitive, and they did violate Section 1 of the Sherman Act.

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concluded that they used their market power in order to protect their high price and dominant share. This also allowed them to require the insurers in the area to accept the contract terms that would restrict insurers from steering members to lower-cost competitors. It reduced hospital competition, prevented consumers the ability to benefit from lower prices, and stopped transparency in how communication was done around quality, cost and patient experience. The final judgment placed effective remedies/components by instructing Atrium to: 1) enforcing provisions in insurer contracts that will restrict steering; 2) obtain or seek contract provisions with an insurer that prevents or penalizes the insurer from using steering methods; 3) penalizing any insurer for the use of steering methods; 4) There are robust mechanisms that allow the

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United States and the Court to monitor effectiveness and enforce compliance [ CITATION Uni19 \l 1033 ].

Lessons Learned It is important as healthcare costs rise that antitrust enforcement is in place to help protect consumers. There must be restrictions that help ease comparison shopping and interfere with competition among providers. Antitrust actions allow consumers to benefit from competition when making those important choices in their health care. It is also important to understand and respect your state and regulatory authority and limits. It is important to be prepared, monitor all documents to make sure comments and descriptions are neutral or pro-competitive, and never assume you will be safe from being reviewed and challenged. Proposed Actions In order for our organization to avoid any similar anti-trust actions in the proposed merger there are three basics steps that can be followed to stay in compliance with the antitrust laws. 1. Make sure the organization has a clearly written antitrust compliance policy that includes a ban on steering-type clauses. 2. Mandate training for employees who are in a position that would allow them the opportunity to run afoul of antitrust laws. Make sure to also include those who negotiate with payer-provider parties. 3. Make sure all policies and contracts are reviewed by an antitrust counsel before signing. Agreements should allow all parties to make decisions based on the health issues, price

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and quality of service and not off contract restrictions or market power [ CITATION Hen16 \l 1033 ]. In conclusion, the scope of federal antitrust regulation is universal and almost all businesses fall within its reach. The provisions are simple and expressed in a language which is easily comprehendible to all. Over many years, government and private enforcement have added many great substantial details. Violations of these laws however can be huge, so it is vital for an organization to have an understanding of the antitrust laws and make sure that they have the proper documentation, and review contracts thoroughly before signing.

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References Cleverley, W. O., Cleverly, J. O., & Song, P. H. (2011). Essentials of Health Care Finance. Retrieved from https://ashfordcollege.vitalsource.com/#/books/9781449621988/cfi/6/6!/4/36/2/2@0:85.2 Enforcement. (2020). Retrieved from Federal Trade Commission: https://www.ftc.gov/enforcement Federal Register. (2019). Retrieved from Federal Register the Daily Journal of the United States Government: https://www.federalregister.gov/documents/2019/04/11/2019-07195/unitedstates-et-al-v-the-charlotte-mecklenburg-hospital-authority-dba-carolinas-healthcaresystem#:~:text=On%20June%209%2C%202016%2C%20the,restrictions%20in%20its %20agreements%20with Henry, J. (2016, June 14). You can't do that in healthcare: Antitrust compliance paramount in avoiding patient-steering suits. Healthcare Dive. Retrieved from https://www.healthcaredive.com/news/you-cant-do-that-in-healthcare-antitrustcompliance-paramount-in-avoiding/420891/ Justice News. (2018, November 15). Retrieved from The United States Department of Justice: https://www.justice.gov/opa/pr/atrium-health-agrees-settle-antitrust-lawsuit-andeliminate-anticompetitive-steering

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