Feds flex regulatory muscle on health care mergers, board authority

Based on a partnership with Urology Times, articles from the American Association of Clinical Urologists (AACU) provide updates on legislative processes and issues affecting urologists. We welcome your comments and suggestions. Contact the AACU government affairs office at 847-517-1050 or info@aacuweb.org for more information.

With increasing frequency, the Federal Trade Commission (FTC) exerts its influence on issues that impact the practice of medicine and patient access to care, including health system and payer mergers, facility regulation, and non-physician provider scope of practice. All of this activity falls under the agency's strategic goal to maintain competition by preventing anticompetitive mergers and exploitative business practices.

The ability of state medical boards to regulate the profession was thrown into flux when the U.S. Supreme Court upheld an FTC challenge to the North Carolina Board of Dental Examiners' authority to prohibit non-dentists from offering tooth-whitening services. The Court's 2015 decision declared that professional regulatory boards are immune from antitrust disputes only if their regulations directly coincide with state law and the board itself is "actively supervised.”

While the Supreme Court ruling left many questions unanswered, October 2015 FTC guidance has since shed light on what it means to be actively supervised by the state. The FTC stated that, in addition to being comprised of members with no financial interest in the decision, the supervising entity must obtain all relevant facts, collect data and evidence, and receive public comment.

According to the FTC, a professional regulatory board cannot be supervised by an entity that:

falls under the control of the board

lacks authority to disapprove board actions

includes members who serve on the board.

Also see: States attempt to limit importance of MOC

Deviation from these directions does not necessarily mean that a board's action will be considered anticompetitive and state regulators are stepping very gingerly when it comes to restricting the activities of non-physician providers. Already, telemedicine companies, pain clinics, and others have filed at least five antitrust lawsuits against health licensing boards since the Supreme Court decision.

Next: "State lawmakers also hear from the FTC during the legislative process"

State lawmakers also hear from the FTC during the legislative process, before scope-of-practice rules become legally binding. In April 2013, the American Medical Association summarized FTC comments on legislation in five states over a 2-year period. In each case, the FTC unsuccessfully opposed attempts to expand non-physician providers' clinical practice. (Also see the American Medical News article, “When the FTC weighs in on scope-of-practice bills.”)

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When it comes to high-profile hospital system and health insurance mega-mergers, the FTC has been forced into action as a result of industry consolidation precipitated by the Affordable Care Act. The FTC typically challenges a hospital merger when the merged entity will be able to unilaterally raise prices above a competitive level because there will be an insufficient number of competitive alternatives for consumers. Hall Render, a highly regarded health law practice, noted several themes that emerged from three hospital merger challenges issued by the FTC over the course of 6 weeks in late 2015.

First, when determining the geographic market of a potentially merged hospital system, the FTC defines these jurisdictions "narrowly," expecting patients to stay in their hyper-local area and not travel within their region to obtain care. Since the two hospitals are located in a small geographic area, the FTC argues that taking one or the other out of the competition negates potential benefits to patients and payers. Hall Render attorneys also find that the FTC is relying heavily on commercial payer interviews and testimony, while dismissing agreements with state and local officials, as well as claims of post-merger efficiencies. (Also see, “Hospital merger transactions recently challenged by the FTC.”)

Facility regulation and the expansion of services in local health care markets have likewise been scrutinized by federal officials in recent months. In a Jan. 11, 2016 letter to South Carolina Gov. Nikki Haley, the FTC encouraged the state to repeal laws that require some health care providers to get state approval before opening new facilities or services and making certain large purchases. The letter warned that certificate of need (CON) laws stifle innovation and competition. New businesses that could provide newer, cheaper, more convenient, or higher-quality services can be deterred with the delay and cost of state approval.

The FTC and Department of Justice frequently urge states to repeal CON programs. Since 2007 alone, the agencies issued formal recommendations to lawmakers in Alaska, Florida, Georgia, North Carolina, and Virginia, among others. In each instance, the agencies cited similar concerns as those in their South Carolina recommendation.

Health care industry consolidation intensified by the Affordable Care Act holds both promise and concern for physicians, patients, and payers. The FTC has stepped up its investigation of proposed transactions "to prevent business practices that are anticompetitive or deceptive or unfair to consumers." A very steady hand will be required to, pursuant to its mission, "accomplish this without unduly burdening legitimate business activity.

Next: Hospital merger transactions recently challenged by the FTC

Hospital merger transactions recently challenged by the FTC

St. Mary’s Medical Center and Cabell Huntington Hospital; Huntington, WV; Nov. 6, 2015

Penn State Hershey Medical Center and PinnacleHealth System; Harrisburg, PA; Dec. 9, 2015

Advocate Health Care Network and NorthShore University Health System; Chicago, IL; Dec. 18, 2015

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