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Antitrust Issues for Hospitals. Association of Washington Public Hospital Districts. Davis Wright Tremaine LLP. Presenters. Douglas Ross Davis Wright Tremaine, LLP. Dick Goldsmith Director, Legal Services and Health Policy AWPHD. Webcast Outline. Why worry about antitrust?

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Antitrust Issues for Hospitals

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Antitrust issues for hospitals l.jpg

Antitrust Issues for Hospitals

Association of Washington Public Hospital Districts

Davis Wright Tremaine LLP

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Douglas Ross

Davis Wright Tremaine, LLP

Dick Goldsmith

Director, Legal Services and Health Policy


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Webcast Outline

  • Why worry about antitrust?

  • What are the antitrust laws anyway?

  • What are typical antitrust issues hospitals face?

  • Are there any protections from the antitrust laws for hospitals?

  • What about additional protections for public hospital districts?

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Why Worry about Antitrust?

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  • A group of surgical specialists in Yakima was sued by:

    • The Federal Trade Commission

    • The State

    • A class of patients and payers

    • A former partner

  • And both Yakima hospitals were sued by the former partner as well

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  • McKenzie Hospital (114 beds) sued Sacred Heart (425 beds)

  • Sacred Heart’s conduct

    • Acquisition of “feeder” hospitals, MDs

    • Bundling

    • Contracts with Regence

  • Jury’s verdict

    • For Sacred Heart on all claims but one

    • Then awarded significant damages …

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    • Background

      • Providence: exclusive contract with group of anesthesiologists

      • Independent physician conducted procedure

      • Group protested

    • Lawsuit

      • Antitrust and other damages (over $1 million after trebling)

      • Fees for plaintiff’s lawyers

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    • Blue Cross/Blue Shield sued

    • Defendants

      • Only radiology group in Missoula

      • Imaging center joint venture between group and hospital

    • Alleged antitrust violation: joint venture

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    What Are the Antitrust Laws Anyway?

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    The Goal of the Antitrust Laws

    • Competition

      • Lower prices

      • Higher quality

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    Anticompetitive Activities

    • Agreements that harm competition

      • Sherman Act, Section 1: “contract, combination or conspiracy in restraint of trade”

    • Single entity actions

      • Sherman Act, Section 2: monopolization

    • Mergers and joint ventures

    • Price discrimination

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    Antitrust Enforcement

    • Federal

      • Federal Trade Commission

      • Antitrust Division, Department of Justice

    • State

    • Private

      • Class actions

      • Treble damages

      • Fees

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    Test Your Knowledge

    • Discussion: American Airlines and Braniff

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    • Is the previous example a violation of antitrust laws?

      • Yes

      • No

      • Not sure

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    What Are Typical Antitrust Issues Hospitals Face?

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    Antitrust Issues

    • Medical staff issues

      • MultiCare Health System

      • PeaceHealth St. John Medical Center

    • Price fixing or market division

      • Central Washington Hospital

    • Exclusive agreements with physicians

      • Kadlec Medical Center

    • Joint ventures with physicians

      • Missoula

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    Antitrust Issues (cont.)

    • Hospital referrals – affiliated DME, home health care services

      • Providence St. Peter Hospital

    • Payer contracting – provider networks

      • Yakima

    • Mergers and acquisitions

      • St. Joseph Hospital (Bellingham)

      • Providence Everett Medical Center

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    Other Antitrust Issues

    • Group purchasing

    • Fee, wage, salary surveys

    • Drug purchasing

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    Joint Provider Contracting

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    Joint Provider Contracting

    • Competitors collectively contract with a payer

      • Possible price fixing

    • Provider contracting on a risk basis

      • Take and share substantial financial risk

      • Integration: may set price jointly

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    Joint Provider Contracting:The Messenger Model

    • Use: if no risk sharing

      • Fee-for-service

      • Per diem

      • Case rates

    • Transmit offers between payer and each of the providers

    • Requirements:

      • Each provider determines own fees

      • Each provider determines whether to accept payer’s offer

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    Joint Ventures with Physicians






    Surgery Center

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    Joint Ventures with Physicians






    Surgery Center

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    Are There Any Protections from the Antitrust Laws for Hospitals?

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    Health Care Quality Improvement Act (HCQIA)

    • Credentialing and peer review

    • Response to Astoria case (1980s)

    • Purpose: encourage self-regulation and provide immunity

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    HCQIA Immunity

    • Action must be:

      • In reasonable belief that furthers quality health care

      • After a reasonable effort to obtain the facts

      • After notice and hearing

      • Warranted by the facts

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    Other Protections

    • Petitioning the government

      • Example: opposing a CON application

        • Northwest Kidney Centers

    • State Action

      • Can apply to private entities

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    Protections for Non-Profit Institutions

    • Exempt from price discrimination laws (Robinson-Patman)

      • For sales or purchases for their “own use”

      • Typically: pharmaceuticals

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    Antitrust Immunity Process

    • RCW 43.72.300

      • Used four times (mid-90s)

      • No procedures in place

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    What about Additional Protections for Public Hospital Districts?

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    Local Government Antitrust Act

    • Bars recovery of damages in antitrust cases from local governments and officials acting in official capacity

      • 15 U.S.C Sections 34-36

    • Actions for injunctions not blocked

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    Rural Public Hospital Districts

    • Cooperative agreements and contracts

      • Between rural PHDs

      • To provide for health care needs

      • RCW 70.44.450

    • Rural PHD

      • No city > 30,000 population

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    Rural Public Hospital Districts (cont.)

    • Permitted activities include:

      • Allocation of health care services

      • Combined purchases and allocations of medical equipment

      • Joint agreements for health care service delivery and payment

      • Other arrangements permitted under the Interlocal Cooperation Act

        • Chapter 39.34 RCW

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    For More Information

    Doug Ross

    Davis Wright Tremaine, LLP

    [email protected]

    Dick Goldsmith


    [email protected]

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    Thank you for participating!

    Please fill out the evaluation.

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