US DOJ eliminates healthcare “antitrust safety zones”

The most recent news eliminates from antitrust enforcement several safe zones that have provided decades-long certainty in the industry

The environment surrounding information sharing and transactions in the healthcare sector has grown less certain as the two US antitrust agencies—the Department of Justice's (DOJ) Antitrust Division and the Federal Trade Commission (FTC)—continue to alter the enforcement landscape. In the most recent action on February 3, 2023, the DOJ withdrew its support for three policies that created longstanding safe harbors from antitrust enforcement on which the healthcare industry has relied for nearly thirty years. The healthcare industry immediately should take note of this and work to structure transactions and collaborate in new ways.

The three joint policies of the Antitrust Division and FTC from which DOJ now has withdrawn are:

• A 1993 policy statement creating "antitrust safety zones" for (1) hospital mergers, (2) hospital joint ventures involving high-technology or other expensive medical equipment, (3) physicians' provision of information to purchasers of healthcare services, (4) hospital participation in exchanges of price and cost Information, (5) joint purchasing arrangements among healthcare providers and (6) physician network joint ventures. Under the policy, the agencies committed that—absent of extraordinary circumstances—they would not pursue antitrust enforcement in the above-noted circumstances;
• A 1996 policy statement that expanded and further clarified the "antitrust safety zones" and addressed physician network joint ventures; and
• A 2011 policy, issued in the wake of the Affordable Care Act, that applies to Accountable Care Organizations (ACOs) participating in the Medicare Shared Savings Program and provides an antitrust safety zone for ACOs, and antitrust guidance outside of the safety zone.

With the announcement, the safety zones and the certainty they have provided to the healthcare industry no longer exist. The Antitrust Division's top official criticized them as "outdated" in light of intervening changes in the healthcare landscape and "overly permissive on certain subjects, such as information sharing." The Division encourages the healthcare industry instead to take guidance from its "Recent enforcement actions and competition advocacy," and moving forward notes that it will take a "case-by-case enforcement approach" to evaluate mergers and other conduct in healthcare markets.

Among the most notable recent enforcement actions are those that concern information exchanges, which DOJ's announcement singled out. The Antitrust Division recently has acted aggressively against these information exchanges—including those facilitated by third parties—in several industries, which can facilitate potentially criminal conduct like price- and wage-fixing.

The policy withdrawals are only the most recent indicator of the DOJ and FTC's intent to reshape antitrust enforcement in the healthcare sector. At an April 2022 "listening forum" on healthcare mergers, for instance, the FTC Chair said that "The types of potential consolidation and monopoly problems that we may be seeing in healthcare aren't just isolated to one corner of the industry … it's really across the board and systematic in a way that we really need to be vigilant across the board."

Revised merger guidelines are expected soon and further will alter the landscape for healthcare transactions.

Both the announced and anticipated changes arrive as healthcare providers seek to create efficiencies to meet their contractual obligations and to provide more effective care and meet quality goals while achieving cost savings, and as rural providers seek affiliations with centers of excellence to reduce duplication of services and ensure access to care. Squaring the two disparate needs has become more complex, with greater demands to think carefully at the outset as to how to explore new affiliations and joint agreements.

The healthcare industry should appreciate the significance of these changes and the likelihood of more changes to come. Industry members should act now to avoid becoming the subjects of government actions in this new enforcement environment.