Federal scrutiny of contracting continues

A new Federal Trade Commission (FTC) task force will include healthcare contracting among its priorities, according to attorneys.

The FTC Healthcare Task Force was announced in March to coordinate existing healthcare enforcement and advocacy efforts across the agency.

“Consolidation and anticompetitive conduct have distorted the economic landscape in many healthcare markets,” Andrew Ferguson, chairman of the FTC, wrote in an authorizing memo. “The results are disturbing: higher prices, decreased quality, less access and transparency and stifled innovation.”

The task force aims to coordinate and ease information‑sharing across the FTC’s bureaus and related offices but likely will have a modest impact on providers, according to a Hall Render analysis.

“The task force may facilitate closer coordination between merger review and nonmerger enforcement efforts, including scrutiny of related conduct such as contracting practices, data use or marketing claims,” stated the analysis.

Contracting also was identified in a McGuireWoods analysis as one of the areas likely to draw the new task force’s attention.

The announcement memo’s spotlighting of recent merger challenges and references to “distorted” healthcare markets “reinforces that consolidation will remain a core concern,” stated an analysis by Troutman Pepper Locke.

“Transactions involving hospitals, physician groups, payers, pharmacy benefit managers (PBMs), device manufacturers, and other healthcare players — especially those affecting innovation or vulnerable patient populations — are likely to receive sustained scrutiny,” stated the analysis.

Contracting focus

The new task force comes as the U.S. Department of Justice (DOJ) brought litigation against two health systems for anticompetitive behavior in contracting.

Among the contracting approaches DOJ targeted in its lawsuits are requirements for insurers to include the health system in all their health plans, including in favored benefit tiers. The DOJ states that such approaches constrain the ability of insurers to guide members toward cost-effective providers, including lower-cost sites of service, through products and approaches such as narrow networks, tiered-network plans, centers of excellence and site-of-service steering.

In both cases, the DOJ sought bans on anti-steering and anti-tiering clauses as negotiated by the two health systems.

A November 2018 settlement was cited as “the leading case against anti-steering and anti-tiering clauses in healthcare contracts,” according to a 2020 legal analysis.

The new lawsuits differ from many prior hospital antitrust cases in that they apply to contracting practices specifically rather than focusing on a health system’s market share more broadly.

Historic role

Previously, the FTC has taken few actions to oversee nonmerger anticompetitive practices among not-for-profit health care providers, such as any use of contract clauses deemed anticompetitive, according to a KFF analysis.

That lack of action likely reflects legal limits that exclude not-for-profit entities from FTC’s authority to challenge and regulate nonmerger anticompetitive practices, according to the analysis. However, it did note FTC actions in some nonmerger instances, such as cases alleging price fixing among separate physician groups.

The new FTC task force aims to expand participation to other government entities, including the DOJ, which does enforce nonmerger anticompetitive practices, according to its launch memo.

“Increased interagency coordination with HHS and DOJ also suggests the commission may have more resources at its disposal, including greater access to data, which may increase the likelihood of parallel inquiries,” stated the McGuireWoods analysis.

Legislative push

The focus on hospital and health system contracting also was echoed in recently introduced legislation.

In March, Sen. Jon Husted (R-Ohio) introduced the Healthy Competition for Better Care Act, which aims to ban anticompetitive clauses in healthcare contracting between payers and healthcare providers and hospitals. Specifically banned contracting provisions were:

• All-or-nothing clauses, which require payers to include all providers and hospitals in an organization’s network
• Anti-steering and anti-tiering clauses, which can eliminate low-cost providers
• Most-favored-nation clauses, which require that certain insurers get the best price
• Gag clauses, which bar providers from sharing cost information for comparison shopping

Identical legislation was introduced in the House with bipartisan support by Rep. Jodey Arrington (R-Texas), chairman of the powerful Budget Committee. Arrington currently is crafting the instructions for a new reconciliation bill. The reconciliation law enacted last year, the One Big Beautiful Bill Act, included extensive healthcare provisions.

“The Healthy Competition for Better Care Act proposes comprehensive reforms to improve our flawed system by increasing transparency, fostering greater competition, expanding access to quality care and lowering skyrocketing healthcare costs,” Arrington said in a press release.

The legislation would have the Treasury Department lead its enforcement.