LEGAL LEANINGS: Is Your Physician Organization Complying With Antitrust Law?

By JESSICA RUSSELL & PAHL ZINN

It is not uncommon for a physician organization to act as an intermediary between its physician participants and third-party payers to facilitate the negotiation and acceptance of reimbursement rates and other payer contract terms.

However, when facilitation becomes negotiation and a PO accepts contracts with third-party payers on behalf of physician participants, also known as “single-signature contracting,” a PO may be unintentionally engaging in illegal “price-fixing” in violation of antitrust law.

Under Section 1 of the Sherman Act, it is illegal to engage in horizontal price fixing arrangements. This includes circumstances where PO physician participants, who are otherwise competitors in the market, collectively agree or disagree to a third-party payer’s terms. As a result, if a PO negotiates and unilaterally accepts or rejects rates on behalf of all its physician participants, it must proceed with caution and comply with Section 8 of the Department of Justice and Federal Trade Commission in their Statements of Antitrust Enforcement Policy in Health Care.

SAFETY ZONES

Single-signature contracting is not always a violation of antitrust law. The DOJ and FTC (the “Agencies”) specifically outline “safety zones” by which such conduct is permitted, provided that there are no extraordinary or unusual circumstances involved with respect to the arrangement. Such safety zones include:

Exclusive Networks: Exclusive POs are those where the PO’s physician participants are restricted in their ability to, or do not in practice, individually contract or affiliate with other POs or health plans. Exclusive POs generally will not be challenged by the Agencies if two conditions are met: (1) the PO’s physicians share in “substantial financial risk”; and (2) the physicians constitute 20 percent or less of the physicians in each physician specialty with active hospital staff privileges who practice in the relevant geographic market.

Non-Exclusive Networks: Non-exclusive POs are granted a similar safety zone, provided that the PO’s physician’s share substantial financial risk and they comprise 30 percent or less of the physicians in each physician specialty with active hospital staff privileges who practice in the relevant geographic market and share substantial financial risk.

There are a variety of well-accepted models that may be implemented by the PO to meet the financial risk requirement of the safety zones. These can include contracts containing capitated rates, services provided for a pre-determined percentage of a premium or revenue from a plan, or financial withholds. Whatever mechanism a PO selects to ration financial risk among its physician participants, it should be carefully structured and evaluated by the PO’s attorney to ensure compliance with the Agencies guidelines.

RULE OF REASON

If a PO engages in single-signature contracting and the PO is not within the requirements of a safety zone, it does not mean an antitrust violation is imminent. When no safety zone applies, single-signature contracting will be evaluated as to whether it is likely to produce procompetitive efficiencies, and whether those procompetitive efficiencies outweigh the anticompetitive effect which may result from the arrangement. This is known as the “rule of reason” analysis. There are two accepted circumstances when this analysis may be applied:

Substantial Financial Risk: If a PO falls outside of a safety zone, it may still satisfy the rule of reason if there is sufficient financial risk-sharing by the participating physicians. The Agencies recognize that substantial financial risk-sharing incentivizes physicians to strive for a common efficiency goal that may offset anticompetitive risks associated with the arrangement.

Clinical Integration: If the PO does not have significant financial risk-sharing, it may otherwise satisfy the rule of reason by establishing that the PO is likely to produce significant efficiencies. This includes having an active program within the organization that evaluates and modifies practice patterns of PO physician participants in order to improve cooperation among physician participants, decrease costs, and improve quality of care. Ultimately, any such program will be evaluated on the basis of whether the program: (1) establishes mechanisms to monitor and control utilization of health care services that are designed to control costs and assure quality of care; (2) selectively chooses PO physicians who are likely to further these efficiency objectives; and (3) provides for significant investment of capital, both monetary and human, in the necessary infrastructure and capability to realize the claimed efficiencies.

MESSENGER MODEL

If a PO does not fall within a safety zone and cannot satisfy the rule of reason analysis, a PO’s single-signature contracting arrangement could be determined to be per se illegal.

However, there is an acceptable alternative known as the “messenger model.” By strictly adhering to the processes required under a messenger model, the PO would most likely not face antitrust concerns nor be challenged by the Agencies.

Under the messenger model, an agent of the PO or neutral third-party will act as an intermediary between each individual physician participant and the third-party payer. A critical distinction between the messenger model and single-signature contracting is that the messenger model requires that each physician participant makes independent, unilateral decisions regarding the rates or terms he or she is willing to accept, reject, or counter-offer. The “messenger” in this circumstance cannot interfere with that independence. Some circumstances that may undermine a compliant messenger model structure and result in a per se illegal arrangement include circumstances where is the messenger shares information among physician participants, fails to deliver offers to physicians or counter-offers to third-party payors, or the messenger gives suggestions to physician participants regarding whether or not the physician participant should accept or reject an offer.

Regardless of whether a PO adheres to single-signature contracting or a messenger model, careful consideration and consultation with counsel is a must to ensure the PO’s compliance with antitrust laws.

Jessica L. Russell is an attorney in Dickinson Wright’s Healthcare Practice group. She advises corporate clients on matters related to corporate governance, contracting, regulatory compliance, and licensing. Jessica regularly counsels clients in highly regulated industries and is experienced in resolving compliance and licensing matters with state and federal regulatory agencies. Some of Jessica’s notable experience includes representation of clients in the health care industry.

L. Pahl Zinn is a member in Dickinson Wright’s Healthcare Practice group. His extensive counseling and litigation experience includes successfully representing clients in complex commercial litigation, antitrust/trade regulation lawsuits, corporate compliance and internal investigations. Pahl’s unique cross-section of experience distinctively positions him to counsel health care clients as they navigate complex antitrust, intellectual property and/or trade regulation issues.

Vaccination Choice Advocates Take Their Shots At DHHS

The Department of Health and Human Services would be barred from crafting future immunization-related rules, meaning any age- or dose-related updates would need legislative approval, under a pair of bills debated in committee Nov. 30.

HB 5162 and HB 5163 comes as parents with objections to child immunization told the House Oversight Committee how state and local health officials have been “overly zealous” in pursuing a pro-vaccination agenda by belittling those seeking a state exemption.

Joel Dorfman, of Michigan for Vaccine Choice, said DHHS has used the administrative rules process to “eviscerate” a state law that is neutral on child immunizations by treating citizens who don’t want to give their kids shots as “deviants who need coercion to mend their way.”

“(The bills) would send a message to DHHS that they can’t use the rules process to eviscerate the law,” Dorfman said.

Rep. Steve Johnson (R-Wayland Twp.) said HB 5162 and HB 5163 don’t change any current requirements. It only makes it clear that moving forward, DHHS can’t make any administrative rules regarding immunization. That includes alterations to vaccination schedules.

“This issue is so deeply personal that it should be made by a body that follows a Democratic process,” Johnson said.

Bob Swanson, DHHS’ program director of immunizations, walked the committee through the expansive administrative rules process that includes a trip through the Joint Committee on Administrative Rules reform, where lawmakers are free to raise objections.

He then discussed the technical nature of mapping out which vaccine should be given at which age as a detail “that shouldn’t need to go through the legislative process.”

Swanson said his job is ensuring the public’s health and “these bills would hinder us from doing our job and impact the health of the people in the state of Michigan.”

As it stands, Michigan is one of only a few states that allow immunization exemptions for medical, religious or philosophical reasons. Those who don’t want their children to receive the vaccines can already object, he said.

Rep. Joseph Graves (R-Argentine Twp.), chair of the House Oversight Committee, raised questions about whether all local public health departments were signing out of the same hymnal when dealing with anti-immunization parents. He held up a thick stack of cards from people who showed up to today’s meeting in support of the bills.

No action was taken on the bills and Rep. Kevin Hertel (D-St. Clair Shores) questioned whether there should be. He noted Johnson is the House chair of JCAR and if he has a problem with DHHS’ rules, nobody is in a better position to do something than he.

“To say that bureaucrats are running is amuck with no legislative oversight is disingenuous,” Hertel said.

This story presented in cooperation with MIRS, a Lansing-based news and information service.

Report Outlines ACA Repeal Affect On Hospitals

The American Hospital Association and the Federation of American Hospitals Dec. 6 released a report that details the impact a repeal of the Affordable Care Act would have on hospitals and health systems and the patients and communities they care for.

The report finds that, under the most recent repeal-without-replacement bill, H.R. 3762, hospitals across the nation would suffer losses amounting to hundreds of billions of dollars.

Rick Pollack, AHA present and CEO, and Chip Kahn, FAH president and CEO, observed that, “Losses of this magnitude cannot be sustained and will adversely impact patients’ access to care, decimate hospitals and health systems’ ability to provide services, weaken local economies that hospitals help sustain and grow, and result in massive job losses. As you know, hospitals are often the largest employer in many communities, and more than half of a hospital’s budget is devoted to supporting the salaries and benefits of caregivers who provide 24/7 coverage, which cannot be replaced.”

In letters sent Dec. 6 to President-elect Trump and congressional leaders, Pollack and Kahn outlined the findings of the report and their concerns about the potential impact on patients and communities. They also expressed their commitment to working with the Trump administration and Congress as they begin reconsideration of the ACA and reiterated the importance of properly funding hospital services.

The report, which was commissioned by the AHA and FAH, was prepared by the health care economics firm Dobson | DaVanzo. A copy of the executive summary and full study can be found by visiting http://www.aha.org.

Ascension Rebrands Michigan Facilities to Reflect Collaboration

As it works to integrate its national health system, Ascension facilities in Michigan and Wisconsin will be first to adopt the unified name of Ascension. The hospitals and other sites of care that are part of the current systems of Ascension Michigan – Borgess in the Kalamazoo region; Crittenton in suburban Detroit; Genesys serving the Flint/Grand Blanc area; St. John Providence in metro Detroit; St. Joseph in Tawas City; and St. Mary’s with services in Saginaw and Standish – will adopt the Ascension identity. Similarly, the hospitals and other care sites of the current systems of Ascension Wisconsin – Ministry Health Care, Columbia St. Mary’s and Wheaton Franciscan Healthcare, serving residents across the state – will now use the Ascension name.

The moves are intended to make it clearer and easier for patients to access care and to navigate their health through the Ascension system.

“We have an obligation to provide high-quality, affordable care, and quality outcomes, with an enhanced experience for our patients and our providers,” said Anthony R. Tersigni, EdD, President and Chief Executive Officer of Ascension. Adopting a unified Mission statement and creating a clear and consistent identity reflect our collaborative national system and move us in this direction.”

Collaboration among Ascension’s hospitals across the country has enabled them to participate in the Veterans Choice Program, more than 3,000 military veterans who were waiting for care through the U.S. Department of Veterans Affairs have been able to access Ascension hospitals, clinics and doctors across the country, according to Ascension.

“Having a unified identity that connects the care we provide in our communities will help patients and their caregivers coordinate and navigate their care, supporting our efforts to deliver high-quality, affordable care for everyone with special attention to those most in need,” said Nick Ragone, Chief Marketing and Communications Officer for Ascension.

By organizing the system’s areas of expertise within two divisions – Healthcare and Solutions – Ascension intends to enhance internal collaboration, better support its physicians and other caregivers, and provide affordable, high-quality care for its patients across much of the nation.

Ascension’s new Healthcare Division includes the organization’s hospitals and related sites of care, as well as community clinics, Ascension Senior Living, the home care and hospice partnership Ascension At Home, Ascension Clinical Holdings, and the nation’s second largest doctor-led physician practice, Ascension Medical Group.

Ascension’s newly organized Solutions Division brings together a number of existing subsidiary organizations that support the delivery of coordinated, high-quality healthcare services. These Ascension subsidiaries provide a variety of solutions including clinical care management, information services, contracting through Ascension’s provider-sponsored group purchasing and business transformation organization, biomedical engineering, venture capital investing, and an SEC-approved investment management company. A number of these solutions already offer services to other healthcare providers.

“For the past several years, Ascension has been on a journey to create what we call ‘One Ascension,” said Robert J. Henkel, Executive Vice President, Ascension, and President and Chief Executive Officer, Ascension Healthcare. “As we work together to sharpen our focus on clinical quality and safety, we also are expanding beyond traditional hospital-based approaches, collaborating with community partners to build clinically integrated systems of care to eliminate health disparities and improve the health of communities.”