United States: FTC Says New York’s Medicaid Redesign Program May Promote Anticompetitive Behavior

Last Updated: May 9 2015
Article by Dionne Lomax, Steve Weiner and Nili S. Yolin

In an April 22, 2015 letter to the New York State Department of Health (DOH), the Federal Trade Commission (FTC) cautioned that part of the State's Medicaid reform program may sanction anticompetitive behavior. The FTC's concern stems from the Certificate of Public Advantage (COPA) regulations, which offer federal antitrust immunity for certain collaborations among providers participating in the Delivery System Reform Incentive Payments (DSRIP) program. Specifically, the FTC expressed its "strong concern" that COPAs immunize collaborative activities that otherwise may be impermissible under federal antitrust laws, and may "lead to increased health care costs and decreased access to health care services for New York consumers."

Despite the FTC's warning, DOH is pressing forward with DSRIP. At the heart of the FTC and DOH's divergent viewpoints is the mounting tension between health care reform (at both the state and national levels), which focuses on transformative health care models that seek to curb costs and improve care through coordinated and integrated systems, and antitrust laws, which seek to protect the consumer — i.e., the recipients of health care — from anticompetitive pricing. While the FTC continues to insist that the fundamental goals of healthcare reform and antitrust policy are aligned, recent action by the FTC, like its letter to DOH, arguably suggest otherwise.

Background

In 2011, Governor Cuomo formed the Medicaid Redesign Team (MRT) to address health care cost and quality issues in the State's Medicaid program. The MRT was tasked with transforming a payment system that was bleeding money by rewarding providers for keeping people healthy through improved quality care, which in turn would rein in spending. The MRT developed a multi-year action plan, and last year announced that it had finalized a waiver amendment with the federal government that will allow the State to reinvest $8 billion in federal savings generated by MRT reforms, $6.42 billion of which will be used for DSRIP.

The primary goal of DSRIP is to reduce avoidable hospital admissions by 25% over 5 years. In order to receive payment from the state, collaborating "safety net providers" are required to achieve results in system transformation, clinical management and population health. Hospitals and non-hospital providers that meet Medicaid patient volume and other criteria can become participants in, and share in the potential performance payments of, a Performing Provider System (PPS) within DSRIP.

DOH allows providers to participate in more than one PPS, and expects there to be collaborative efforts among PPSs in the same region since they are likely to have similar patient populations. In this regard, if a PPS can show that a potential collaboration among PPS providers will benefit the community, the PPS can apply for a COPA in order to shield itself from antitrust scrutiny. According to the COPA regulations, parties that receive a COPA are provided state action immunity under federal antitrust laws and immunity from private claims under state antitrust laws. They also may negotiate, enter into, and conduct business pursuant to a Cooperative Agreement or a planning process covered by a duly issued COPA. A COPA will be granted if it appears that the benefits of the proposed PPS collaboration will outweigh its anticompetitive effects. DOH will make this determination in consultation with the Office of the Attorney General, and together they will conduct a competitive analysis of the market and the potential competitive and anticompetitive impact of the arrangement.

The FTC Letter

On October 10, 2014, the New York Health Plan Association (NYHPA), joined by other health plans and trade organizations, wrote a letter to the FTC expressing its concern that providers would utilize the blanket of protection offered by a COPA to join forces in order to extract higher reimbursement rates from health plans. Such tactics, the NYHPA argued, would "create disproportionate negotiating leverage for providers and systems over Medicaid plans whose rates are determined by DOH and over commercial insurers who, while negotiating Medicaid rates, will be forced to reveal pricing and cost data to various competing hospitals (and other providers)." The FTC appears to agree.

According to the FTC, the COPA regulations "are based on two fundamentally flawed premises: that efficient, procompetitive collaborations among otherwise independent health care providers are prohibited under the antitrust laws, and that COPA regulations are necessary to encourage such collaborations." The FTC explained that competitive collaborations can in fact be procompetitive, and that the antitrust laws do not obstruct the kind of collaborative arrangements contemplated by health care reform at the federal or state level. Rather, the FTC will only oppose an arrangement when there is a likelihood that it will "substantially lessen competition." The FTC believes that, by encouraging providers to share pricing information and conduct joint price negotiations, the COPA regulations will lead to higher costs to the detriment of consumers, thereby "undercutting the very objectives they aim to achieve."

Discussion

Under the antitrust laws, price-fixing, group boycotts, and other collusive activity among competing providers is strictly prohibited. Thus, joint pricing among providers is only permissible if it occurs in the context of an efficiency-enhancing arrangement such as a clinically or financially integrated entity or similar joint venture where the procompetitive benefits of the arrangement are likely to outweigh the anticompetitive effects. Joint conduct among providers that collectively control a substantial share of the market in a particular service or specialty raises significant concerns among antitrust authorities, who seek to ensure that provider collaborations do not eliminate price competition or otherwise allow providers to gain increased leverage over managed care plans.

While the FTC acknowledged that it had not conducted an independent antitrust analysis into the structure and operation of the three DSRIP PPS networks that applied for COPAs, it noted that all three of the networks at issue "appear to involve substantial portions of competing health care providers in their respective geographic regions, thereby increasing the potential for anticompetitive harm." Moreover, the FTC has routinely expressed its objections to federal and state attempts to create antitrust exemptions for collective provider negotiations, asserting, as it does here, that "no special 'exemption' or 'immunity' from existing antitrust laws is necessary to ensure that such procompetitive collaborations occur."

The antitrust enforcement agencies emphasize that there is no inconsistency between the goals of antitrust enforcement and the goals of health care reform. They believe that health care reform objectives can be achieved within the current framework of antitrust policy. But that seems increasingly not to be the case. The recent decision by the United States Court of Appeals for the Ninth Circuit in Nampa, Inc. v St. Luke's Health System, which, in effect, rejected arguments based on the goals of health care reform as being insufficient to counter perceived anticompetitive behavior, as well as the FTC letter to DOH regarding DSRIP, act to inhibit providers undertaking the cooperative actions that are needed for them to transition from a fee-for-service world to one in which alternative payment methodologies dominate, which is a key goal of health care reform.

Alternative payment methodologies require the ability to coordinate care horizontally and vertically, and yet it is just this behavior that antitrust enforcement seems to be deterring. If there is wariness about cooperative clinical affiliation arrangements, then formal governance consolidation could be a legally safer route for providers. At least the antitrust rules are somewhat clearer there than they are relating to clinical affiliations and clinical integration. Yet the antitrust enforcers also indicate a clear preference for clinical affiliation over formal consolidation. This is a paradox that these agencies will need to address and resolve, based on a clearer understanding of facts on the ground, if the goals of health care reform and antitrust enforcement are truly to be consistent.

Conclusion

In light of the FTC's position on the COPA regulations and its warning that it "will continue to challenge defenses based on asserted state action immunity where the state fails to provide adequate active supervision," it is critical for hospitals and providers to work with legal counsel to ensure that the collaborations and efficiencies they seek to achieve align with antitrust principles. While antitrust immunity is currently afforded under the COPA regulations, PPS participants should not overlook the FTC's authority to investigate and challenge relationships that may, in fact, be anticompetitive.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions