DOJ withdraws guidance that bolstered antitrust safe harbors for GPOs, cost benchmarking and more
The removal of previously established “safety zones” means providers should take a close look at collaborative activities to ensure they do not veer into risky territory.
Potentially leading to stricter enforcement of antitrust policy in healthcare, the U.S. Department of Justice has withdrawn guidance that essentially promoted certain arrangements in the industry.
The Feb. 3 announcement from DOJ’s Antitrust Division amounts to a cancellation of so-called “safety zones” that were established in three sets of nonbinding guidance issued between 1993 and 2011. Those safe harbors allowed providers to engage in information sharing and group purchasing organizations, among other arrangements, while being reasonably assured they would not run afoul of antitrust law.
“After careful review and consideration, the division has determined that the withdrawal of the three statements is the best course of action for promoting competition and transparency,” according to a news release.
“Over the past three decades since this guidance was first released, the healthcare landscape has changed significantly. As a result, the statements are overly permissive on certain subjects, such as information sharing, and no longer serve their intended purposes of providing encompassing guidance to the public on relevant healthcare competition issues in today’s environment.”
With the guidance withdrawn, DOJ said it will take a case-by-case enforcement approach as it strives to “better evaluate mergers and conduct in healthcare markets that may harm competition.”
It is unclear whether the Federal Trade Commission will follow suit and withdraw from the previously issued guidance. Whereas DOJ tends to handle transactions that involve some form of vertical integration, the FTC usually reviews horizontal mergers such as those between hospitals.
In early 2022, however, both agencies announced they would be looking to revamp their merger-and-acquisition guidelines across sectors to better address issues that emerge in the modern economy.
Considerations for GPOs
As originally explained in 1996 guidance, one safety zone bolstered group purchasing organizations (GPOs) by stating that DOJ typically would not probe such an arrangement for antitrust issues if the GPO’s purchases account for less than 35% of any product’s sales in the market and if costs amount to less than 20% of any participating organization’s revenues.
A McGuireWoods, LLP analysis of DOJ’s announcement states that going forward, providers should consider documenting:
- Material pro-competitive reasons for the organization to participate in the GPO (e.g., supporting a lower total cost of care)
- Antitrust protocols that are in place among individual participants and the GPO vendor to ensure the arrangement remains pro-competitive
- Processes that are in place to periodically reassess the above factors
Considerations for information exchanges
The safe harbor for various types of information exchanges also was described in the 1996 guidance. It suggested DOJ would take a benign approach to such exchanges if they were managed by a third party and if the information provided by participants was at least three months old. Another criterion established that at least five providers should participate in the exchange, with a sufficient level of aggregation to ensure no participating organization could distinguish the data of any other.
These types of exchanges are used to conduct salary benchmarking, for example, and to establish that a provider’s compensation structure is in line with fair-market value. They also can provide market-level insight on volume and capacity, among other uses.
But DOJ has had concerns with criteria that allow for a hands-off antitrust approach to information exchanges, Doha Mekki, principal assistant attorney general for the department’s Antitrust Division, said during remarks this month at the GRC Live conference in Miami.
“Exchanges facilitated by intermediaries can have the same anticompetitive effect as direct exchanges among competitors,” Mekki said. “In some instances, data intermediaries can enhance — rather than reduce — anticompetitive effects.
“Likewise, the suggestion that data that is at least three months old is unlikely to be competitively sensitive or valuable is undermined by the rise of data aggregation, machine learning and pricing algorithms that can increase the competitive value of historical data for some products or services.”
She added, “Similarly, the Division’s enforcement actions and the case law itself demonstrate that having five or more participants in an information exchange is no guarantee that the exchange will not harm competition, especially in situations where the companies exchanging the information collectively have significant shares of the relevant market.”
According to the McGuireWoods analysis, providers should take the opportunity to “assess the soundness of ongoing information exchanges to ensure that they could not be construed to allow competitors or potential competitors to use data in an anticompetitive manner and to assess the pro-competitive basis for engaging in the information exchange (e.g., benchmarking for purposes of enhancing efficiency and enabling a lower total cost of care).”
Careful analysis required
Another safe harbor in the 1996 guidance helped pave the way for clinical joint ventures such as independent practice associations and clinically integrated networks. And a 2011 statement set forth that accountable care organizations participating in the Medicare Shared Savings Program likewise would be in good position to pass regulatory scrutiny in commercial ACO programs.
As with the other safe harbors that were retracted, providers in such arrangements should evaluate whether the venture would be considered acceptable in the current regulatory environment. If they think the answer is no, they should examine ways to modify or possibly exit from the arrangement, according to McGuireWoods.
Providers shouldn’t close the door on participating in any of the collaborative arrangements that have been permitted as part of the various safety zones.
The absence of safety zones “does not mean that provider arrangements are categorically suspect, unlawful or lacking in pro-competitive benefits,” according to McGuireWoods. “There is no doubt that legitimate provider arrangements with demonstrable potential to expand care delivery, generate efficiencies and reduce costs, and that result in higher-quality care and better patient experience without any undue anticompetitive downside, will continue to be an important part of the healthcare landscape.”