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Legislative and Regulatory Update | Red Flags Rule

BCBS Case is a Lesson on Antitrust

Legislative and Regulatory Update | Red Flags Rule

BCBS Case is a Lesson on Antitrust

A U.S. district court judge recently questioned the reasonableness of the claims against BCBS that accuse the health plan of increasing coverage opportunities by eliminating competition.

Activities such as mergers and acquisitions, managed care contracting, medical staff privileges, peer review, shared services, and many others can raise antitrust red flags.


Litigation has been pending in various federal courts for more than six years to determine whether the Blue Cross and Blue Shield Association (BCBSA) and its member plans have violated the antitrust laws (Blue Cross Blue Shield Antitrust Litigation [MDL No. 2406], Master File No. 2:13-CV-20000-RDP, in the US. District Court for the Northern District of Alabama). Specifically, more than 50 healthcare providers, suppliers, and facilities allege that “the Blues” violated antitrust laws by, among other things, dividing and allocating U.S. health insurance markets among themselves to eliminate competition.

Although the BCBSA contests the allegations, the defendants were dealt a major blow in early April when the U.S. district judge overseeing the consolidated cases ruled that some of the claims should be reviewed as “per se” violations. The case is still in an early phase and has a long way to go, but it serves to remind us of the mine field that is antitrust law.

Per Se Violations

There are certain practices that, because of their pernicious effect on competition, are conclusively presumed to violate the Sherman Act—the main federal antitrust law. This principle of “per se” (automatic) unreasonableness avoids the incredibly complicated, prolonged, and expensive factual inquiry into actual market harm that is required in, for example, monopolization cases.

The four types of per se violations:

  • Agreements between competitors with respect to price (“price fixing”)
  • Division of markets (geographically or by product line)
  • Group boycotts
  • Tying arrangements

“Tying arrangements” are the least likely of these to occur in the healthcare sector. Each of the other three, however, is alleged in the BCBS case. And each can occur whenever there are discussions or agreements between individuals or institutions that are competitors in a market. Activities such as mergers and acquisitions, managed care contracting, medical staff privileges, peer review, shared services, and many others can raise antitrust red flags.

A Word of Caution

Beware of the pitfalls. The advice of experienced legal counsel is required whenever dealing with competitors.


J. Stuart Showalter, JD, MFS, is a contributing editor for HFMA.

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J. Stuart Showalter

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