Mid-Atlantic Health Law TOPICS

Background hero atmospheric image for Antitrust Guidelines

Antitrust Guidelines

In 1996, the Department of Justice and the Federal Trade Commission (the Agencies) updated their joint Statements of Antitrust Enforcement Policy in health Care (the Statements). These revisions to the Statements, originally issued in 1993, and revised once before in 1994, clarify the Agencies’ approach toward determining whether health care networks (such as IPOs and PHOs) violate the antitrust laws.

As with earlier versions of the Statements, the most recent Statements maintain the distinction between “per se” treatment and “rule of reason” analysis. Under general antitrust principles, certain types of agreements among competitors, such as price fixing and group boycotts, are considered to be inherently anticompetitive and thus “per se” illegal. Other types of arrangements are analyzed under the “rule of reason,” which allows the participants to establish the legality of the arrangement by showing that the procompetitive benefits of the arrangement outweigh its anticompetitive effects.

The 1994 Statements focused on the sharing of substantial financial risk as the determinant of whether a health care network fell under “rule of reason” analysis. If, in addition to sharing substantial financial risk, a physician-only network also fell within certain size limitations, the network was deemed to be in an “antitrust safety zone” and immune from antitrust scrutiny, absent extraordinary circumstances.

The 1996 Statements provided expanded guidance as to what constitutes the sharing of substantial financial risk. Moreover, the 1996 Statements provide that certain types of non-financial integration may also produce sufficient efficiencies to bring the network’s activities under “rule of reason” analysis.

A. Forms of Financial Integration

The 1994 Statements cited the two most common means of substantial financial risk sharing, capitated rates and the use of payment withholds that are distributed only if specified cost containment goals are met, but did not foreclose the possibility that substantial financial risk could be shared in other ways. The 1996 Statements provide an expanded list of arrangements through which participants in a health care network can share substantial financial risk, as follows:
1. The network’s acceptance of capitated rates for its services;

2. The network’s acceptance of a predetermined percentage of premium or revenue from a health plan for the network’s services;

3. The network’s use of significant financial incentives for network participants to achieve specified cost containment or utilization goals, such as (a) withholding of a substantial amount of the compensation due to network participants with distribution of the withheld amount based upon group performance in meeting the specified goals, or (b) making network participants subject to subsequent substantial financial rewards or penalties based on group performance in meeting the specified goals; or

4. The network’s acceptance of a fixed, predetermined payment for providing a complex or extended course of treatment that requires the substantial coordination of care by physicians in different specialties.

As with the 1994 Statements, the 1996 Statements expressly state that the Agencies will consider other arrangements through which network participants may share substantial financial risk.

B. Non-Financial Integration

The 1996 Statements also recognize that health care networks may be entitled to “rule of reason” analysis, even without the sharing of substantial financial risk, if the network achieves sufficient non-financial integration through practice efficiencies. In the Agencies’ view, such non-financial integration involves implementing an active and ongoing program: to evaluate and modify the practice patterns of the network participants; and to create a high degree of interdependence and cooperation among the participants to control costs and ensure quality.

The Statements suggest that such a program may include:

1. Establishing mechanisms to monitor and control utilization of health care services;
2. Selective choice of network participants that will be likely to further the network’s efficiency objectives; and

3. Significant investment of monetary and human capital to create the infrastructure necessary to realize the claimed efficiencies.
Again, the Agencies expressly state that they will consider other arrangements that may evidence non-financial integration, but caution that their analysis will focus on “substance, rather than form” when evaluating the network’s likelihood of producing significant efficiencies.

C. Other Factors

As with previous Statements, integration is not the final word to antitrust analysis under the 1996 Statements. The Agencies will also consider market share, exclusivity, the purpose for the creation of the network, and other available means to achieve the claimed efficiencies. In general, the greater the evidence of any of these additional factors, the more likely that the network will present antitrust concerns.

D. Conclusion

The 1996 Statements do not dramatically alter the antitrust analysis for health care provider networks. The safety zones and the basic analysis remain the same. The contributions of the 1996 Statements, however, are no less important for their subtlety.

From a practical standpoint, the 1996 Statements have confirmed that a number of alternative network structures demonstrate sufficient integration to evidence likely efficiencies, and have provided a firmer foundation for the evaluation of the next generation of health care provider networks. From a policy perspective, the 1996 Statements represent the Agencies’ continued responsiveness to health care providers’ need for timely guidance in a dynamic market environment.


June 21, 1997




Rosen, Barry F.


Health Care