Austin Medical Times
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Legal Matters Top Antitrust Issues in Physician-Hospital Alignment
By Matthew C. Hans, J.D. Herbert F. Allen, J.D. Polsinelli, PC
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great realignment is underway among America’s doctors. The shift away from independent practice towards full hospital employment or affiliation with a hospital system has been motivated by growing costs for independent practices, including rising physician salaries, and flat or declining reimbursement. The antitrust laws will play an important role in determining how this wave of physician and hospital alignment will play out. Hospital Acquisition of Physician Practice – Reduction in Competition? When a hospital acquires an independent physician practice or employs its doctors directly, the
antitrust laws treat the transaction as a merger between the hospital and the physician practice. Antitrust concern arises when the combination of the newly-hired physicians with physicians already employed by the hospital creates new market power that may substantially lessen competition, or tend to create a monopoly in violation of Section 7 of the Clayton Act. But how do courts and agencies determine whether or not an acquisition that has not yet occurred may substantially lessen competition at some point in the future? At a very high level, the analysis includes the following steps: 1. Geographic Market. This analysis focuses on patients’ willingness to travel for particular services, as well as the degree to which health plans need certain physicians in a geography to market a successful plan to employers. Generally, geographic markets for primary care doctors may be narrower than the market for specialists who perform elective procedures, since
patients may be willing to travel for elective procedures, while many patients prefer local access to a primary care service. Geographic market definition can be outcome-determinative in many antitrust cases, since it determines how many other physicians are included in the denominator when it comes to calculating market shares. 2. Market Share. Transactions that result in market shares of less than 30% have been held not to present competition concerns. On the other hand, very high market shares can be sufficient for a plaintiff to make out a prima facie case that the transaction will probably lead to anticompetitive effects. 3. Other Evidence. While courts recognize that market concentration statistics are of great consequence,
they are not conclusive indicators of anticompetitive effects. Other evidence might include documents from the parties about the motivations for the transaction and testimony from payers about any changes in bargaining leverage that might be attributable to the transaction, or evidence that the transaction will yield efficiencies that will enhance the merged firm’s ability and incentive to compete. Professional Services Agreements: “Employment Light” The professional services agreement (PSA) has become a very popular model for physician practices that wish to affiliate with a hospital, yet retain some degree independence. In the typical PSA, a hospital will see Legal Matters...page 14
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October 2020
