2020 has been an eventful year in the world of healthcare antitrust. The year began with the announcement of the unprecedented settlement of the California Attorney General’s action against Sutter Health and ended with the settlement of a multidistrict antitrust lawsuit against the Blue Cross Blue Shield Association (and its member Blues). Along the way, Congress passed legislation repealing the antitrust protections health insurers had enjoyed for 75 years under the McCarran Ferguson Act, the Federal Trade Commission lost its first hospital merger challenge in many years. and the Justice Department’s Antitrust Division has succeeded in its threats to bring criminal antitrust lawsuits in the healthcare sector. After such a hectic year, what new developments is likely to bring in 2021? Look for these issues to dominate healthcare antitrust headlines in 2021:
- A new administration brings new leadership to federal antitrust authorities. President Biden will quickly be able to establish a new agenda for federal antitrust enforcement with the appointment of new leaders to both the Justice Department’s Antitrust Division and the Federal Trade Commission. While the departure of Makan Delrahim, who headed the Antitrust Division, was anticipated, the decision of Joseph Simons, chairman of the Federal Trade Commission, to resign was not so certain. Simons’ term was not due to expire for several years, and while President Biden could certainly have appointed another commissioner for the presidency, Simons could have remained commissioner. However, his decision to step down, along with the announcement that another commissioner – Rohit Chopra – will also step down as chairman of the Consumer Financial Protection Board means the FTC will also see significant leadership changes in 2021.
- Repercussions of McCarran’s repeal. For 75 years, the McCarran Ferguson Act granted health insurers an exemption from federal antitrust laws for conduct that constituted “insurance business,” so long as it was “subject to state regulation” and did not constitute an act of “boycott, coercion or intimidation”. With President Trump’s signing of the “Competitive Health Insurance Reform Act” on January 13, the exemption no longer exists. And, while the scope of this exemption has been watered down, to some extent, over the past decade, its existence has not only served to chill the filing of many potential antitrust cases against health insurers, but has also often constituted a winning defense against those who have been deposed. So look for a possible increase in antitrust cases against health insurers in 2021.
- Increased attention to health care provider mergers at the state level. In 2020, legislation was introduced in California (SB 677) that would have required Attorney General approval of mergers between healthcare providers. Had the bill passed, California would have joined only Washington and Connecticut as states requiring such approval. In the first few weeks of 2021 alone, similar legislation was introduced across the country — in Indiana, for example, as HB 1421 — that would require prior approval from the state attorney general for healthcare mergers. Look for more states to consider such legislation in the future, and even in states that do not have such laws, expect state antitrust authorities to be active in this space, at the both in collaboration with the federal authorities and on their own initiative.
- Retrospective reviews of completed deals. In the spring of 2020, the FTC announced that further study of previously entered into healthcare agreements was warranted to determine whether, in fact, these transactions had anticompetitive consequences. To that end, the FTC recently announced that it has sent information requests to several health insurers, seeking information on the prices providers charge for their services. In particular, the FTC said it wanted to determine whether vendor mergers in local markets had led to higher prices. Expect more on this issue as health insurers begin providing requested information to the FTC and its economists analyze the data received.
- Penal measures in the field of health. Over the past few years, the DOJ’s antitrust division has repeatedly warned that “hardcore” violations of healthcare antitrust laws will result in criminal action, and in the spring of 2020, as the COVID-19 crisis began , the DOJ’s antitrust division issued guidance that included a warning that they were also closely monitoring healthcare labor markets for anti-competitive behavior. True to its word, the Antitrust Division filed its first healthcare antitrust criminal cases in the second half of 2020. After “breaking the ice” on such actions in 2020, look for additional enforcement in this area by 2021.
- BCBSA settlement implications. In November 2020, a proposed settlement of the Blue Cross Blue Shield Association’s multi-district antitrust litigation received preliminary court approval, ending 8 years of litigation over whether the restrictions contained it. BCBSA’s licensing agreements with its Blue Cross licensees were anti-competitive. While the settlement does not include any admission of liability on the part of the Blues, it does contain injunctive provisions that are intended to stimulate Blue vs. Blue competition in local markets (among other things). Final approval of the settlement is expected in the spring of 2021, so watch how health insurance markets work later this year.
- Will the FTC bounce back from its loss in the hospital merger challenge? As noted above, in November the FTC lost its challenge to the merger of the Thomas Jefferson/Albert Einstein Hospital in North Philadelphia. This was the FTC’s first loss in a hospital merger challenge in many years (while the FTC lost a trial-level challenge several years ago, that loss was overturned on appeal and the disputed merger was subsequently abandoned by the parties). Over the past decade, the FTC’s use of detailed economic evidence to support its merger challenges has been singled out as a significant contributing factor to the success of its lawsuit, but the Court in the North Philadelphia case appeared to be much less interested in such evidence than the parties’ documents outlining the rationale for the agreement. Will the FTC change its approach to hospital merger litigation in 2021, or will it view the North Philadelphia case as an anomaly? In 2021, we should learn the answer to this important question.
- Continued focus on contractual practices of “dominant” health systems. While antitrust laws have always been, and will continue to be, focused on alleged agreements between competitors that negatively impact consumers, in recent years more attention has been paid to the behavior of a single company that has anti-competitive effects. For example, the Antitrust Division filed suits against Blue Cross of Michigan and Carolinas Health System (now Atrium) for allegedly using contract practices in an anti-competitive manner. More recently, the California Attorney General has just settled its action against Sutter Health which raised similar arguments. Particularly with even greater focus on single-company conduct in high-tech industries, expect federal and state regulators to continue to pay attention to the competitive effects of actions taken by security systems. “dominant” local and regional health.
Given all of these issues, expect healthcare antitrust to continue to be a priority for federal and state antitrust authorities in 2021 and that private actions based on these same theories/issues will return. also with a vengeance. Stay tuned.