[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
ANTITRUST LAWS AND THEIR EFFECTS ON
HEALTHCARE PROVIDERS, INSURERS AND PATIENTS
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON COURTS AND
COMPETITION POLICY
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
SECOND SESSION
__________
DECEMBER 1, 2010
__________
Serial No. 111-157
__________
Printed for the use of the Committee on the Judiciary
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Available via the World Wide Web: http://judiciary.house.gov
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COMMITTEE ON THE JUDICIARY
JOHN CONYERS, Jr., Michigan, Chairman
HOWARD L. BERMAN, California LAMAR SMITH, Texas
RICK BOUCHER, Virginia F. JAMES SENSENBRENNER, Jr.,
JERROLD NADLER, New York Wisconsin
ROBERT C. ``BOBBY'' SCOTT, Virginia HOWARD COBLE, North Carolina
MELVIN L. WATT, North Carolina ELTON GALLEGLY, California
ZOE LOFGREN, California BOB GOODLATTE, Virginia
SHEILA JACKSON LEE, Texas DANIEL E. LUNGREN, California
MAXINE WATERS, California DARRELL E. ISSA, California
WILLIAM D. DELAHUNT, Massachusetts J. RANDY FORBES, Virginia
STEVE COHEN, Tennessee STEVE KING, Iowa
HENRY C. ``HANK'' JOHNSON, Jr., TRENT FRANKS, Arizona
Georgia LOUIE GOHMERT, Texas
PEDRO PIERLUISI, Puerto Rico JIM JORDAN, Ohio
MIKE QUIGLEY, Illinois TED POE, Texas
JUDY CHU, California JASON CHAFFETZ, Utah
TED DEUTCH, Florida TOM ROONEY, Florida
LUIS V. GUTIERREZ, Illinois GREGG HARPER, Mississippi
TAMMY BALDWIN, Wisconsin
CHARLES A. GONZALEZ, Texas
ANTHONY D. WEINER, New York
ADAM B. SCHIFF, California
LINDA T. SANCHEZ, California
DANIEL MAFFEI, New York
JARED POLIS, Colorado
Perry Apelbaum, Majority Staff Director and Chief Counsel
Sean McLaughlin, Minority Chief of Staff and General Counsel
------
Subcommittee on Courts and Competition Policy
HENRY C. ``HANK'' JOHNSON, Jr., Georgia, Chairman
JOHN CONYERS, Jr., Michigan HOWARD COBLE, North Carolina
RICK BOUCHER, Virginia JASON CHAFFETZ, Utah
CHARLES A. GONZALEZ, Texas F. JAMES SENSENBRENNER, Jr.,
SHEILA JACKSON LEE, Texas Wisconsin
MELVIN L. WATT, North Carolina BOB GOODLATTE, Virginia
MIKE QUIGLEY, Illinois DARRELL ISSA, California
DANIEL MAFFEI, New York GREGG HARPER, Mississippi
JARED POLIS, Colorado
Christal Sheppard, Chief Counsel
Blaine Merritt, Minority Counsel
C O N T E N T S
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DECEMBER 1, 2010
Page
OPENING STATEMENTS
The Honorable Henry C. ``Hank'' Johnson, Jr., a Representative in
Congress from the State of Georgia, and Chairman, Subcommittee
on Courts and Competition Policy............................... 1
The Honorable Howard Coble, a Representative in Congress from the
State of North Carolina, and Ranking Member, Subcommittee on
Courts and Competition Policy.................................. 2
The Honorable John Conyers, Jr., a Representative in Congress
from the State of Michigan, Chairman, Committee on the
Judiciary, and Member, Subcommittee on Courts and Competition
Policy......................................................... 24
WITNESSES
Mr. Richard Feinstein, Director, Bureau of Competition, Federal
Trade Commission, Washington, DC
Oral Testimony................................................. 25
Prepared Statement............................................. 28
Ms. Sharis A. Pozen, Chief of Staff and Counsel to the Assistant
Attorney General, Antitrust Division, U.S. Department of
Justice, Washington, DC
Oral Testimony................................................. 41
Prepared Statement............................................. 43
Ms. Melinda Hatton, Senior Vice President and General Counsel,
American Hospital Association
Oral Testimony................................................. 72
Prepared Statement............................................. 74
Mr. Arthur Lerner, Partner, Crowell & Moring LLP, on behalf of
America's Health Insurance Plans
Oral Testimony................................................. 84
Prepared Statement............................................. 87
Dr. Peter J. Mandell, M.D., Chair of the Council on Advocacy,
American Academy of Orthopaedic Surgeons
Oral Testimony................................................. 98
Prepared Statement............................................. 100
Dr. Michael P. Connair, M.D., American Federation of State,
County, and Municipal Employees, AFL-CIO
Oral Testimony................................................. 106
Prepared Statement............................................. 108
Mr. David Balto, Senior Fellow, Center for American Progress
Oral Testimony................................................. 114
Prepared Statement............................................. 116
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Material submitted by the Honorable Howard Coble, a
Representative in Congress from the State of North Carolina,
and Ranking Member, Subcommittee on Courts and Competition
Policy:
Prepared Statement of the Honorable Lamar Smith, a
Representative in Congress from the State of Texas, and
Ranking Member, Committee on the Judiciary................. 4
Prepared Statement of the National Community Pharmacists
Association................................................ 7
Prepared Statement of the American Medical Association (AMA). 9
APPENDIX
Material Submitted for the Hearing Record
Responses to questions posed during the hearing to Sharis A.
Pozen, Chief of Staff and Counsel to the Assistant Attorney
General, Antitrust Division, U.S. Department of Justice,
Washington, DC................................................. 134
Responses to Post-Hearing Questions from Richard Feinstein,
Director, Bureau of Competition, Federal Trade Commission,
Washington, DC................................................. 136
ANTITRUST LAWS AND THEIR EFFECTS ON HEALTHCARE PROVIDERS, INSURERS AND
PATIENTS
----------
WEDNESDAY, DECEMBER 1, 2010
House of Representatives,
Subcommittee on Courts and
Competition Policy
Committee on the Judiciary,
Washington, DC.
The Subcommittee met, pursuant to notice, at 10:30 a.m., in
room 2141, Rayburn House Office Building, the Honorable Henry
C. ``Hank'' Johnson, Jr. (Chairman of the Subcommittee)
presiding.
Present: Representatives Johnson, Conyers, Gonzalez, Polis,
Coble, and Goodlatte.
Staff Present: (Majority) Christal Sheppard, Subcommittee
Chief Counsel; Anant Raut, Counsel; and E. Stewart Jeffries,
Minority Counsel.
Mr. Johnson. This hearing of the Committee on the
Judiciary, Subcommittee on Courts and Competition Policy will
now come to order. Without objection, the Chair is authorized
to declare a recess.
Welcome to the final hearing of the Subcommittee on Courts
and Competition Policy in the 111th Congress. I want to start
by saying how much I have enjoyed working with my colleagues on
both sides of the aisle these past 2 years. We have had our
share of healthy differences, but we have also passed a number
of important pieces of legislation on a bipartisan basis.
In particular, I can't say enough about the Ranking Member
of the Subcommittee, the Honorable Howard Coble, and how
integral his presence and friendship has been to the success
that we have enjoyed together. Thank you, Howard.
Now, on today's hearing, doctors are under pressure from
all sides to find ways to coordinate patient care. Coordinated
care can help patients by reducing costs and improving
outcomes. It may involve sharing patient medical data, tracking
outcomes across a population, or jointly contracting to provide
a seamless continuum of care. But the question for many doctors
is: How do you coordinate patient care without violating the
antitrust laws?
One of my first acts as Subcommittee Chairman was to write
a letter to Chairman Leibowitz of the Federal Trade Commission
regarding the $19 billion in incentives for health industry--
excuse me, health information technology investments under the
American Recovery and Reinvestment Act of 2009. I asked him to
provide physicians with clear guidance on how to take advantage
of these incentives and integrate their practices in a way that
did not violate the antitrust laws.
In addition, I asked whether the FTC's enforcement
practices against physician collective negotiation have
resulted in any appreciable decrease in patient premiums or
increase in competition. I was gratified by Chairman
Leibowitz's prompt response assuring me that the FTC only
initiates actions against collective negotiations in situations
where there has been demonstrable harm to consumers in the form
of reduced competition and higher prices. But I am concerned
that the FTC and DOJ may be spending their resources going
after the small, easy cases instead of tackling the larger
systemic issues which actually result in greater societal harm.
According to an American Medical Association study, 96
percent of major metropolitan cities have a concentrated health
insurance market. While concentration can lead to efficiencies,
it can also create distortions in the market, resulting in
fewer choices and higher premiums. I am happy to see that the
DOJ recently announced an investigation into Blue Cross Blue
Shield of Michigan's alleged anticompetitive practices. While I
applaud the DOJ's efforts, I remain concerned about the many
other areas in this country where a single dominant health
insurer wields absolute power.
My goal in many areas as a legislator is to strike a
balance. I believe that that is the heart of competition
policy, and should be here as well. I am not blind to the
concern that providing physicians and hospitals with more
bargaining power can lead to higher healthcare costs. At the
same time, if we allow the status quo to continue, we risk
creating a long-term doctor shortage as physicians are driven
out of their specialties by the imbalance in bargaining power
and new doctors are discouraged from entering.
It is fine and good to say that we should respect the free
market, but the free market only works if the antitrust laws
are enforced evenly against both sides. In this past week
alone, articles in the Wall Street Journal, New York Times, and
the Washington Post highlighted the challenges and
opportunities that hospitals and healthcare providers will face
under the new healthcare laws. How the antitrust laws are
enforced against all parties involved will, in part, determine
how successful these initiatives turn out to be.
I now recognize my colleague Howard Coble, the
distinguished Ranking Member of the Subcommittee, for his
opening remarks.
Before I close, I must give kudos to my staff, who have
made me look taller in this Chair than I actually am. I want to
thank them publicly for their great work.
Now, Mr. Coble.
Mr. Coble. Thank you, Mr. Chairman. We are all obliged to
our staff, Mr. Chairman, so I share that.
I thank you, Mr. Chairman, for your generous words earlier.
I, too, have very much enjoyed serving as the Ranking Member of
this Subcommittee and commend you for having been a very good
Chairman with whom to work for the past 2 years. I thank you
for that. Thank you as well for calling this important and
timely hearing.
Physicians have long been concerned with what they view as
increasing concentration among health insurers. This
concentration has led to lower reimbursement rates for
physicians. That, coupled with the high and continuing rising
cost of malpractice insurance, has caused many physicians not
only in my district but I think nationally to consider
abandoning the practice of medicine.
To combat these forces, many physicians and hospitals have
tried various forms of clinical integration to try and help
contain costs and negotiate better reimbursement rates from
insurers. Unfortunately, many of these clinical integration
schemes have come under antitrust scrutiny by the FTC and DOJ
as potential price-fixing arrangements.
The FTC and DOJ have provided some guidance on what types
of arrangements physicians can lawfully employ. However, these
healthcare guidelines were released in August 1996, and that
was almost a decade and a half ago. I know that there have been
a host of changes in medical malpractice since that time. I
have heard complaints from medical professionals that these
guidelines no longer reflect market realities. I would like to
ask Mr. Feinstein and Mrs. Pozen why these guidelines have not
been revised, and are there plans to do so?
In addition, it is my understanding that physicians can try
to obtain a business review letter from the agencies; however,
it is also my understanding that these letters can take a very
long, extended time to come to fruition and can cost thousands,
I am told, in legal fees. And this is not necessarily practical
for many physicians.
The discussion is particularly relevant, Mr. Chairman, it
seems to me, given the Department of Health and Human Services
is currently devising rules regarding accountable care
organizations, or ACOs. These ACOs have the potential to reduce
costs for consumers and to be beneficial for physicians as
well. However, some have raised concern that the ACOs could
also be used to facilitate price fixing. Physicians clearly
want and need clear guidance in this arena, and I am hoping
that HHS, along with DOJ and FTC, will be able to provide that
to them.
Physicians are not the only parties at issue here. The
guiding principle of antitrust law is that it is supposed to
promote consumer welfare through competition. This, of course,
means generally lower prices, better services, and greater
innovation in products and services. However, I feel that
patients often get lost in these discussions about healthcare.
What I would most like to hear from our witnesses, Mr.
Chairman, is whether they feel that current antitrust
enforcement truly serves the needs of patients, and, if it does
not, what can be done to improve that. I look forward to
hearing the answers to these and other questions, and yield
back the balance of my time, Mr. Chairman. But before doing so,
if I may, I would like unanimous consent to have introduced
into the record statements from the Ranking Member of the full
Committee Lamar Smith, the statement from the National
Community Pharmacists Association, and the American Medical
Association.
Mr. Johnson. Without objection.
[The prepared statement of Mr. Smith follows:]
Prepared Statement of the Honorable Lamar Smith, a Representative in
Congress from the State of Texas, and Ranking Member, Committee on the
Judiciary
__________
[The prepared statement of the National Community
Pharmacists Association follows:]
Prepared Statement of the National Community Pharmacists Association
__________
[The prepared statement of the American Medical Association
follows:]
Prepared Statement of the American Medical Association (AMA)
__________
Mr. Coble. I thank the Chairman.
Mr. Johnson. I thank the gentleman for his statement.
I now recognize John Conyers, a distinguished Member of
this Subcommittee and also the distinguished Chairman of the
Committee on the Judiciary.
Mr. Chairman.
Mr. Conyers. Thank you, Chairman Johnson, and Members of
the Committee.
I can't tell you how important this hearing is not to just
the Committee, but to the whole question of healthcare in terms
of the Health Care Reform Act just signed into law and the
struggle in America to insure some 50 million people that don't
have a dime's worth of insurance, and all that figures into the
rising costs of providing healthcare for all Americans.
Bringing in the Department of Justice and the Federal Trade
Commission is extremely important because we are in the process
of understanding just why there is a disparity between the way
doctors are threatened, or hassled, or prosecuted or threatened
to be prosecuted and the way, as Mr. Coble said, the health
insurance--this is the most powerful group of private
corporations in the country, and they don't have any problem
coming together to plan for what the rates will be and what the
rules will be. Nobody says much about that, to my knowledge. So
what this Committee is going to be doing even into the next
Congress is getting to understand how come this is so and what
can be done to make it come out differently.
Now, maybe somewhere during this hearing today somebody
will take issue with my saying that there is a disparity in
prosecutorial treatment, and I hope somebody can prove me
wrong. But it is pretty obvious doctors, every time they get
together, they are always worried about the laws, and what can
happen to them, and have they crossed the line or not.
But the insurance companies, how do they operate in real
time? Well, not that anybody here doesn't know, but when they
set the rates in a region, that is it. You are either in, or
you are out. And everybody knows it, especially the doctors and
the hospitals. So why didn't they violate antitrust? Well,
Chairman, that is just the way it goes. I mean, that is the way
it has always been.
As Chairman Johnson has pointed out, these laws, when this
first started 30 or 40 years ago, the healthcare insurers were
not as large, powerful, or numerous as they are now. We are
tracking down some of the merger activities, I think it was in
Arizona, where they have exceeding control over the way
medicine and healthcare delivery is practiced, and it is that
way almost everywhere else.
So we appreciate your witnesses here. I think we have got a
great set of panels. And I appreciate what everybody has done.
And since everybody is saying goodbyes and giving out
kudos, we are not going out of business, gang. We are just
going into a new session, and there is new leadership. I would
like to remind my colleague this has happened before and will
no doubt happen again.
Thank you, Mr. Chairman.
Mr. Johnson. Thank you, Mr. Chairman.
I can only hope that I can be around for as many years as
the Chairman so that I can experience the ebb and flow and ebb
again. Thank you. And I am not sad either. I am just
reminiscing. Sentimentalism, I guess, is eking out. But I am
happy for my colleagues on the other side of the aisle.
And I would ask, are there any other Members who wish to
make opening statements?
That being the case, other Members' opening statements will
be included in the record.
I am now pleased to introduce the witnesses for today's
hearing. Today's hearing will feature two panels. On our first
panel we have Richard Feinstein, Director of the Bureau of
Competition for the Federal Trade Commission.
Welcome back, Mr. Feinstein.
Mr. Feinstein. Thank you, Mr. Chairman.
Mr. Johnson. Our second witness is Sharis Pozen. She is
Chief of Staff for the Antitrust Division of the Justice
Department.
Welcome, Ms. Pozen.
Ms. Pozen. Thank you, Mr. Chairman.
Mr. Johnson. Thank you both for your willingness to
participate in today's hearing. Without objection, your written
statement will be placed into the record, and we ask that you
limit your oral remarks to 5 minutes. You will note that we
have a lighting system that starts with a green light. At 4
minutes, it turns yellow, then red at 5 minutes. After each
witness has presented his or her testimony, Subcommittee
Members will be permitted to ask questions subject to the 5-
minute rule.
Mr. Feinstein, would you begin, please?
TESTIMONY OF RICHARD FEINSTEIN, DIRECTOR, BUREAU OF
COMPETITION, FEDERAL TRADE COMMISSION, WASHINGTON, DC
Mr. Feinstein. Thank you very much, Mr. Chairman and
Ranking Member Coble, Members of the Subcommittee. I am Richard
Feinstein, Director of the Bureau of Competition at the FTC. I
very much appreciate the opportunity to testify today on behalf
of the FTC about the relationship between competition and
antitrust enforcement on the one hand and lower healthcare
costs and higher healthcare quality on the other hand.
I should note for the record that the prepared written
statement submitted for this hearing represents the view of the
FTC. My oral statement and answers to any questions today
represent my own views and not necessarily those of the
Commission or any individual Commissioner.
We are at an important point in the history of providing
healthcare in this country.
Mr. Johnson. Mr. Feinstein, if I might ask you to pull that
microphone a little closer.
Mr. Feinstein. A comprehensive healthcare reform bill has
become law. No one can foresee exactly how all the provisions
of the new law will mesh with the current system, but we
believe a continued effective antitrust enforcement is a
necessary component of any plan.
In the Bureau of Competition, protecting and promoting
competition in the healthcare sector is a number one priority.
We believe that antitrust enforcement improves healthcare in
two ways. First, it prevents or stops anticompetitive
agreements to raise prices, thus saving money for consumers.
Second, competition spurs innovation that improves care and
expands access.
For these reasons, the FTC has a long history of promoting
competition in the healthcare sector, broadly defined, of
course, to include not only hospitals and physicians, but also
pharmaceutical and medical device markets, among others. Just
this morning, for example, the Commission announced a case
challenging a clinical lab consolidation in southern California
which threatens to increase the cost of laboratory services
paid for by physician groups.
While the Commission's written prepared statement addresses
our merger activity in more detail, this morning I will briefly
describe our activities with respect to joint price
negotiations by healthcare providers that harm consumers and
our efforts to provide guidance on accountable care
organizations and clinical integration.
Some have suggested that the antitrust laws act as barriers
to healthcare provider collaborations that can lower costs and
improve quality. In my view, that is simply wrong. The FTC
plainly recognizes that joint conduct among healthcare
providers, such as clinical integration, can foster proconsumer
innovations in delivery of healthcare services.
Stated simply, what the FTC seeks to prevent are
anticompetitive agreements to fix the prices that healthcare
providers charge without benefits to patients. Such
arrangements typically involve competing providers agreeing to
charge the same high prices and collectively refusing to serve
the health plan's patients unless their fee demands are met.
These agreements are likely to raise prices for the provider's
services without improving care, and have routinely been deemed
to violate the antitrust laws.
However, we do not want enforcement of the antitrust laws
to impede new and potentially more efficient ways of delivering
and financing healthcare services. Antitrust standards properly
distinguish between price fixing by healthcare providers, which
is likely to increase healthcare costs, and effective clinical
integration among healthcare providers that has the potential
to achieve cost savings and improve health outcomes.
When analyzing these types of collaborations, we ask two
basic questions. First, does the proposed collaboration offer
the potential for proconsumer cost savings or quality
improvements in the provision of healthcare services; and, two,
are any price agreements or other agreements among participants
regarding the terms on which they will deal with healthcare
insurers reasonably necessary to achieve those benefits? If the
answer to both of those questions is yes, then the
collaboration is analyzed under the rule of reason rather than
the per se rule that otherwise applies to pricing agreements
among competitors. And as long as the collaboration cannot
exercise market power, it is unlikely to raise significant
antitrust concerns, because the collaboration has the potential
to benefit consumers rather than harm them.
To aid providers considering these types of collaborations,
the FTC and the Department of Justice issued statements of
antitrust enforcement policy in healthcare that provide
guidance about the antitrust analysis that would be applied to
various types of healthcare arrangements. The FTC staff also
issues detailed advisory opinions as well as routinely issuing
informal guidance on specific proposals when requested.
The FTC is actively working on policy questions concerning
accountable care organizations, or ACOs, which are encouraged
by the new healthcare law to integrate providers in order to
increase quality care and decrease costs. Many ACOs that will
be set up to serve Medicare patients pursuant to the Affordable
Care Act may wish to contract with payers in private healthcare
markets as well, which may raise competition issues.
To explore these issues, the FTC, CMS, and the HHS
Inspector General's Office hosted a workshop on October 5 to
obtain information from industry stakeholders who have an
interest in the development and operation of clinically
integrated healthcare groups. We will continue to work with
other government agencies, including, of course, our colleagues
at the Department of Justice, to develop
workable rules and regulations for ACOs.
I have just about 5 more seconds, with your permission.
We want to design rules for ACOs that are flexible enough
to allow collaboration in healthcare that will improve quality
and decrease costs without creating undue market concentration
and price fixing.
Thank you very much for the opportunity to share the FTC's
views on these vitally important issues. I, of course, look
forward to answering your questions.
Mr. Johnson. Thank you, sir.
[The prepared statement of Mr. Feinstein follows:]
Prepared Statement of Richard Feinstein
__________
Mr. Johnson. Ms. Pozen.
TESTIMONY OF SHARIS A. POZEN, CHIEF OF STAFF AND COUNSEL TO THE
ASSISTANT ATTORNEY GENERAL, ANTITRUST DIVISION, U.S. DEPARTMENT
OF JUSTICE, WASHINGTON, DC
Ms. Pozen. Mr. Chairman, Members of the Subcommittee, I am
pleased to be here today to talk about competition policy and
antitrust enforcement in healthcare. I will focus on two areas:
first, the Antitrust Division's role in ensuring that
coordination and integration among healthcare providers
encourages innovation and efficiency without harming
competition; second, the importance of measured and responsible
antitrust enforcement in the health insurance market.
Healthcare reform brings both areas to the forefront of
competition policy.
The Affordable Care Act allows for the creation of
accountable care organizations which, will provide integrated,
more efficient, higher-quality delivery and payment for
Medicare and Medicaid services and their beneficiaries. The act
also establishes competitive marketplaces and exchanges where
individuals and small employers can purchase health insurance.
The success of exchanges in ACOs will depend in part on
effective competition both among health insurers and providers.
Moreover, clear and accessible antitrust guidance will
contribute to the success of these organizations. The
Department is committed to providing efficient, quick review of
any new business model that plans to deliver integrated care.
ACOs are a good example of how providers might work
together to deliver more efficient, high-quality care without
inhibiting competition. ACOs are made up of providers that
coordinate care for Medicaid beneficiaries with a common set of
care protocols utilizing health ITs, investing in
infrastructure, and meeting quality targets. If the ACO meets
quality of care and cost targets, the ACO then shares those
savings with the public through reduced governmental
expenditures.
The Department is actively working with the Health and
Human Services and the Federal Trade Commission as the ACO
regulatory process evolves, and the Department intends to offer
whatever guidance and clarity may be needed to ensure that ACOs
do not run afoul of the antitrust laws. The Department will
provide expedited antitrust review to any ACO requesting our
assistance.
The Antitrust Division continues to undertake responsible
and measured enforcement to prevent
anticompetitive behavior in the healthcare industry. This
enforcement is driven by the Division's analysis of evolving
market forces, structures, and dynamics in the healthcare
industry. For example, the Department recently reviewed and
analyzed evidence that demonstrated that entry and expansion in
the healthcare industry faces strong barriers. This conclusion
is significant, given that the Affordable Care Act provides the
opportunity to reduce these barriers through newly formed
health insurance exchanges, which again offer individuals and
small businesses more affordable health insurance options.
The difficulty of successful entry makes it even more
important to preserve the choices already available,
particularly as the exchanges are formed. Therefore, the
Department of Justice will carefully review and challenge
mergers that are likely to substantially lessen competition in
the health insurance industry. The Justice Department will
carefully scrutinize and continue to challenge exclusionary
practices by dominant firms, whether for-profit or nonprofit,
that substantially increase the cost of entry or expansion.
For example, the Division recently filed a civil antitrust
lawsuit against Blue Cross Blue Shield of Michigan, joined by
the State of Michigan, alleging that Blue Cross used its
dominance to impose anticompetitive most favored nations
provisions in its agreements with approximately half of
Michigan's general acute-care hospitals; approximately 70
hospitals. The Blue Cross MFNs require a hospital either to
charge Blue Cross no more than it charges Blue Cross'
competitors or to charge the competitors up to 40 percent more
than it charges Blue Cross. These MFNs raise hospital prices,
prevent other insurers from entering the marketplace, and
discourage discounts, which inflate the cost of healthcare
services and insurance.
This action is significant for Michigan, but it has broader
implications. Any time a dominant provider uses
anticompetitive agreements, the market suffers. This cannot
be allowed in Michigan or anywhere else in the United States.
American consumers deserve affordable healthcare and
competitive prices, and the Antitrust Division will vigorously
pursue agreements and transactions that stand in the way of
achieving this goal.
Enforcement actions such as the Division's lawsuit against
Blue Cross work hand in hand with our efforts to prevent
illegal consolidation in the health insurance market. In March,
the Division informed the Blue Cross and Physician Health Plan
of Mid-Michigan, the two largest providers of commercial health
insurance in Lansing and their most significant rivals, that it
would challenge their plans to merge. The companies abandoned
the transaction. That transaction would have resulted in
substantial lessening of competition in the Lansing market for
commercial group health insurance and in the market for the
purchase of physician services.
In closing, the Justice Department believes that antitrust
has and will continue to play an essential role in healthcare.
To achieve the goals of healthcare reform, we must ensure that
are our healthcare markets are as competitive as possible. This
requires more than business as usual. We must provide
predictability through clear and accessible guidance to
healthcare consumers, providers, and payers. And the Antitrust
Division is up to this task.
Thank you.
Mr. Johnson. Thank you, Ms. Pozen.
[The prepared statement of Ms. Pozen follows:]
Prepared Statement of Sharis A. Pozen
__________
Mr. Johnson. We will now begin questioning, and I will
start with the first round.
What a dominant health insurance company in a market has
the clout to make a take-it-or-leave-it offer of below-cost
reimbursement rates, what is a sole practitioner or a small
physician group supposed to do? And this is a question first to
Mr. Feinstein and next to Ms. Pozen.
Mr. Feinstein. Well, I will, of course, defer to Ms. Pozen
on the premise regarding market power on the insurer side.
With respect to what physicians can do, there is no
question that it is difficult for a solo practitioner physician
to resist that situation alone. I don't think there is any
dispute about that. And if they choose to collaborate in order
to address that, there are ways that they can do that fully
consistent with the antitrust laws. And we have laid out in
great detail over the years ways that they can do that.
Mr. Johnson. Would you share with us some of those methods?
Mr. Feinstein. Well, for example, going back to the
guidelines that were issued in 1996, there have been--there is
a fairly extensive description in general terms of methods of
financial integration, of methods of clinical integration, both
of which have been elaborated upon subsequently in advisory
opinions. There are also opportunities for physicians to form
entirely merged groups, which has happened in many segments of
the country where individual physicians have formed unified
practice groups. All of that is genuinely welcomed under the
antitrust laws and certainly doesn't pose condition concerns.
What does pose concerns----
Mr. Johnson. If I might interrupt, how do those measures
apply to a physician's ability to contest a reimbursement rate
imposed by a dominant health insurance company in that market?
Mr. Feinstein. Well, if it could be demonstrated that the
rate that was being imposed by the insurance company was in
some sense below cost, if it was going to have the effect, and
it could be demonstrated that it was going to have the effect,
of reducing the supply of physician services in a properly
defined market, that may well be actionable under the antitrust
laws against the insurance company.
Mr. Johnson. That would require basically a private
lawsuit; would it not?
Mr. Feinstein. It could be a private lawsuit, or it could
take the form of enforcement by the Department of Justice or by
a State attorney general. Historically the FTC has deferred to
the Antitrust Division with respect to enforcement actions
involving the insurance industry.
Mr. Johnson. Can you cite to us any case where that has
occurred?
Mr. Feinstein. Where what has occurred?
Mr. Johnson. A small physician group or solo practitioner
who is told that you will be reimbursed at this rate, and that
rate is not profitable, it is below cost, and there has been a
complaint to DOJ or FTC, and action has been taken to address
the issue.
Mr. Feinstein. I would have to defer to Ms. Pozen about the
extent to which that issue has arisen in the form of
complaints.
Mr. Johnson. Do you know of any?
Mr. Feinstein. On those specific facts I think those
allegations have been raised from time to time, and I suspect
that they have been the subject of investigation from time to
time. I am not aware of a case on those particular facts.
Mr. Johnson. Okay. Well, let us hear from Ms. Pozen.
Ms. Pozen. Sure. Thank you, Mr. Chairman.
It is exactly the issue that we came upon when we were
looking at the Michigan Blue Cross Blue Shield acquisition of
PHP in Lansing. Not only did we have a concern about the
commercial group insurance markets because that merger would
have resulted in a 90 percent market share, by our estimation,
but we were also concerned about, as you put it, the purchase
of physician services there. We thought that kind of dominance
could affect the physicians and the kinds of rates that they
could negotiate. So that was precisely the issue in that case,
sir.
Mr. Johnson. Is that the first time that any action has
been taken with respect to a reimbursement schedule that was
published and imposed upon a solo or physician group?
Ms. Pozen. That potential harm, again, in the context of an
acquisition, was looked at previously, and again, an
acquisition of health insurance companies. When Aetna was
acquiring Prudential, that was part of the allegations in that
complaint, which ended in a consent agreement, and I believe in
other mergers.
Again, just as Mr. Feinstein pointed to, the reason that we
find this issue and have concerns and try to resolve those
concerns, just as we did in the Michigan Blue Cross Blue Shield
acquisition, is because we don't want to create dominant health
insurance who can then affect physician services.
Mr. Johnson. Thank you. My time has expired. I will now
yield to the Ranking Member.
Mr. Coble. Thank you, Mr. Chairman.
Good to have you both with us this morning.
Mr. Feinstein, some physicians complain that the process
for obtaining business review letters for cost-sharing
arrangements is too costly and burdensome to be practicable for
most physician groups. Do you have any practical suggestions as
to how physicians could obtain a more prompt guidance from the
FTC?
Mr. Feinstein. Yes, I do. Thank you, Mr. Coble.
First of all, I think that there is a substantial amount of
guidance in the form of letters that have already been issued
and in the form of informal advice through speeches, through
inquiries that are made to our healthcare shop. At the
conference that was held last October, which was focused to
some degree on accountable care organizations, what I alluded
to in my opening statement, a number of the representatives of
physician groups indicated their belief that the guidance that
is out there right now is well understood. And I believe that
there are many, many groups of physicians who are able to rely
on that guidance and go forward without being challenged, but
also without seeking a formal advisory opinion or business
review. In some instances, they elect to do that. When they do,
we have the obligation to make sure we understand the facts
carefully and issue a reasoned letter.
But I believe it is frequently the case that organizations
are relying on the guidance that is out there in going forward
without seeking formal advisory opinions. And I base that in
part on my own experience in private practice.
Mr. Coble. Thank you, sir.
Mr. Feinstein, does the FTC plan to revise its 1996
healthcare guidelines?
Mr. Feinstein. Do we have plans to revise them; is that the
question? At the moment we do not have plans to revise them
beyond the extent to which they have already, in my judgment,
been enhanced through the letters that have been issued over
the years and the speeches that have been given, et cetera. We
obviously are open to revising them as that is deemed to be
appropriate, but when they were written, they were written
rather broadly, and there is a substantial body of advice that
has been issued over the last 14 years which I think takes the
form, in effect, of updating the guidelines.
Mr. Coble. I thank you.
Ms. Pozen, let me put a three-part question to you, if I
may. How many antitrust actions has DOJ brought against
physicians in the last 10 years; how many actions against
hospitals; and how many actions against health insurers in that
same timeframe?
Ms. Pozen. I don't know that I can give you precise
numbers, but I can provide your staff those figures if you
would like them. The Antitrust Division looks at all aspects of
the healthcare industry. Since I have been at the Division, we
have brought one case involving physicians and two cases
involving health insurance companies. We have reviewed many and
have many ongoing investigations.
Mr. Coble. If you can give us the detailed numbers, I would
appreciate that.
One more question, if I may, Mr. Chairman.
We have heard complaints from physicians that the messenger
model is cumbersome and outdated. If you would, Ms. Pozen,
define the messenger models. And can you give us an example of
how a lawful messenger model would work, and what benefits
would a helpful messenger model bring to physicians who use it?
Ms. Pozen. Sure. I think, as Mr. Feinstein pointed out,
there are a number of ways that physicians can collaborate and
work together jointly. One of those ways is through the
messenger model, as you pointed out. The idea is that
physicians, like any other entities, are otherwise competitors.
And so one concern is that when physicians join together in
ways that abut and run afoul of the antitrust laws, it can be
considered price fixing.
The messenger model is one way to avoid such allegations
and not run afoul of the antitrust laws. The idea is using
sometimes a third party or another means whereby you can
negotiate with the insurance companies, but make sure that
there isn't price fixing among the physicians. So that is the
messenger model, and that is how it can operate.
Mr. Coble. Thank you, Ms. Pozen.
Thank you both.
Thank you, Mr. Chairman. I yield back.
Mr. Johnson. Thank you, Mr. Coble.
Next, we will have questions from Mr. Conyers.
Mr. Conyers. Thank you.
Nobody has talked about the concentration of the health
insurance markets. Would you say something about that?
Ms. Pozen. The question is to me, sir? I hope I was
addressing such issues, sir, by ensuring that we vigorously
enforce the antitrust laws, that we prevent further undue
concentration in----
Mr. Conyers. That doesn't say anything about a
concentration. It tells me how good you think you work over at
DOJ. Let us talk about the concentration.
Ms. Pozen. Okay. Well, I think in our Michigan Blue Cross
Blue Shield MFN case, there we did find undue concentration,
and we found that there were contracting methods and techniques
that Blue Cross Blue Shield of Michigan was using.
Mr. Conyers. Besides that case.
Ms. Pozen. Well, as I made clear, and I think as we made
clear when we announced that case, that if we find health
insurance companies with dominance use
anticompetitive methods, anticompetitive contracting
methods, that we will stop them, and we will prosecute. And we
will try to prevent further concentration through our merger
enforcement.
Mr. Conyers. Well, what about is there concentration?
Ms. Pozen. We have found that there is concentration.
Mr. Conyers. How much concentration?
Ms. Pozen. Well, in the particular enforcement actions that
I mentioned, we found that the----
Mr. Conyers. Well, that is three.
Ms. Pozen. There are a variety of studies out in the public
documenting concentration in the health insurance area.
Mr. Conyers. What if you came across a statement that said
there have been over 400 healthcare mergers in the last 10
years? Would you accept that as correct?
Ms. Pozen. I would trust you, sir.
Mr. Conyers. Well, what about you, though? I don't work
over there with you every day. Matter of fact, this is the
first time we have ever met. Have you ever heard of that
statement before?
Ms. Pozen. Yes, sir, I have.
Mr. Conyers. Well, then, why haven't you told the Committee
when I have asked you about four times about the nature of the
concentration of healthcare insurers in the market, and you
named three cases?
Ms. Pozen. Well, since I have been at the Antitrust
Division, those have been three significant cases that we have
brought in that area in the time that we have been there. The
other acquisitions that go on, some of them can raise serious
competitive issues, and some of them do not. And some of them
provide for efficiencies, and some do not. We will take each
case as it comes and evaluate it on its facts, and we will
vigorously enforce the antitrust laws.
Mr. Conyers. But you look into the past, don't you? I am
not holding you responsible for the past history. You have been
in this job a year. Do you believe that there have been over
400 healthcare mergers in the last 10 years? You don't know for
sure?
Ms. Pozen. I would take that as a fact. I don't know the
precise number, no, sir.
Mr. Conyers. Well, would you examine that for me?
Ms. Pozen. Yes, sir.
Mr. Conyers. And we are going to be writing--there will be
communication after the hearing--about whether or not there
have been that many mergers. Does that seem like a large amount
to you, if it is accurate?
Ms. Pozen. I wouldn't be able to comment on that.
Mr. Conyers. You are not sure. But you are going to find
out for the Committee?
Ms. Pozen. Yes, sir.
Mr. Conyers. Okay. Now I will go on to the next sentence.
The American Medical Association reports that 95 percent of
insurance markets in the United States are now highly
concentrated, and the number of insurers have fallen by just
under 20 percent since 2000. Have you ever heard that statement
before?
Ms. Pozen. Yes, I have, sir.
Mr. Conyers. Do you believe it?
Ms. Pozen. I don't doubt its veracity in the context in
which you are raising it, sir.
Mr. Conyers. Well, now wait a minute. Do you believe it or
not?
Ms. Pozen. I don't have the statistics.
Mr. Conyers. You don't know.
Ms. Pozen. Exactly.
Mr. Conyers. You will have to study this.
Ms. Pozen. Yes, sir.
Mr. Conyers. And you will include that in our
communications.
Ms. Pozen. Absolutely.
Mr. Conyers. All right. Do you know that the President of
the United States has said that he would step up and
reinvigorate antitrust enforcement in the area of healthcare?
Ms. Pozen. Yes, sir.
Mr. Conyers. You heard that?
Ms. Pozen. Yes, sir.
Mr. Conyers. You know that.
Ms. Pozen. Yes, sir.
Mr. Conyers. And you are doing that.
Ms. Pozen. Yes, sir.
Mr. Conyers. Because you have cited me three cases
repeatedly this morning.
Ms. Pozen. Yes, sir.
Mr. Conyers. Do you know how many other cases that could be
prosecuted?
Ms. Pozen. I don't have those figures. I can tell you the
cases that come to us, or that we look for, or that we find,
and that we vigorously prosecute those who violate the
antitrust laws.
Mr. Conyers. Well, if you believe that there have been 400
healthcare mergers in 10 years, and you know that the President
wants to step up antitrust enforcement, it seems like some of
those might be subject to review. I mean, what I sense is that
you are really on the case from this point forward, but you
sort of act, Ms. Pozen, as if there is no history of antitrust
law in healthcare, that this is a new subject. And you keep
citing me three lousy cases as a proof that you are on the job,
and you brag about the Department of Justice's effectiveness in
this area.
Now, what about the mergers--well, let me just close. My
time has expired. Do you know that there is a concentration of
merger activity in our economy that has been going on for at
least a dozen years or more?
Ms. Pozen. I do, sir, and I have only been at the Antitrust
Division for a short time in the Obama administration, and as I
said, we are vigorously enforcing the antitrust laws. We are
mindful of the past, the present, and the future, and doing
what we can to ensure that either dominant firms don't abuse
that dominance or that further dominance doesn't occur.
Mr. Conyers. Well, just allow me just this one question.
Thank you very much for this. But if you are vigorously
enforcing antitrust laws, and you know that we are in the wave
of an--that mergers are going on, and have been, at an
unprecedented pace, how can you prosecute if you are not
reviewing the past cases?
Ms. Pozen. In terms of the cases that we have looked at in
the mergers that come forward, we are carefully analyzing them.
We are looking at the facts and applying the law. Not every
merger is anticompetitive. I will assure you of that. But I
will assure you that those that are anticompetitive, we will
prosecute.
Mr. Conyers. All right. I thank you very much.
I will have to send you, Mr. Feinstein, the questions that
we would have engaged in.
Thank you, Mr. Chairman.
Mr. Johnson. Thank you, Mr. Chairman.
Next, Mr. Goodlatte.
Mr. Goodlatte. Thank you, Mr. Chairman. Thank you for
holding this hearing, and I want to thank both of our witnesses
for being here today.
Mr. Feinstein, I want to follow up on the questions of the
Ranking Member Mr. Coble, who asked about some of the concerns
that doctors have about obtaining business review letters for
cost-sharing arrangements. How long does it normally take the
FTC to produce a business review letter?
Mr. Feinstein. It really depends entirely on the scope of
the request. We react to specific requests.
I want to emphasize, by the way, before I address formal
letters, there is a lot of informal guidance that goes on where
folks call up our staff and get informal guidance. It may not
take the form of writing, but they can take some comfort from
that.
Mr. Goodlatte. If they are going to make a major business
decision about whether they can proceed with an arrangement,
they probably want something more formal.
Mr. Feinstein. Yes. And when that happens, they have an
obligation to describe pretty completely the facts surrounding
their proposal, and we have an obligation to make sure we
understand those facts. It is an iterative process. Often they
come to us with a proposal. We may have questions about how it
is going to be implemented.
Mr. Goodlatte. Is there an average amount of time?
Mr. Feinstein. If there is an average amount of time, I
haven't calculated it.
Mr. Goodlatte. Could you calculate it and provide it to the
Committee?
Mr. Feinstein. We can certainly do that, yes.
Mr. Goodlatte. This is pretty important because if you are
making a decision that potentially is going to affect your
ability to continue your business, redesign your business,
expand your business, and you need to have guidance about
whether or not you can do it, you want to proceed quickly. When
you go in the private sector to get advice from attorneys, and
accountants, and consultants and so on about the decisions you
make, you get pretty prompt replies. And it is important that
the government understand that and the importance of giving
prompt replies as well. So if you could provide that
information to the Committee, I would appreciate it.
Mr. Feinstein. I certainly share that goal of giving prompt
replies.
Mr. Goodlatte. Thank you.
Does the FTC have a role in examining mergers among health
insurers?
Mr. Feinstein. No. Historically we have deferred to the
Department of Justice. I think largely that is because years
ago most of the insurers, particularly the Blue Cross and Blue
Shield organizations, were set up as nonprofits originally.
Some of them have converted to for-profit status. But because,
as you probably are aware, there are some limitations on our
jurisdiction with respect to the activity of nonprofit
entities, over the years a tradition unfolded whereby the
Justice Department took the lead on health insurance mergers.
And there have occasionally been matters that the FTC has
looked at in the last 15 or 20 years, but it has been quite
rare, and none that I can think of in the last decade or more.
Mr. Goodlatte. Are there any statutory impediments to
bringing actions by the FTC with regard to health insurance
mergers?
Mr. Feinstein. Other than the one I alluded to, no. We
enforce section 7 of the Clayton Act. That can be applied to
health insurance mergers. There is, of course, the
McCarran-Ferguson exemption for the business of insurance,
but I think it is pretty widely recognized that that does not
shield health insurance mergers from antitrust scrutiny by
either agency.
Mr. Goodlatte. Does the FTC plan to revise its 1996
healthcare guidelines?
Mr. Feinstein. As I said, we don't have current plans to
revise them. I am not saying that it won't happen, I'm just
saying we don't have a current plan to do that. The principal
reason for that is that we believe that it is, in effect, a
living document with the updating taking the form of the
advisory opinions that have been issued over the last 14 years.
That is not to say that there may not be an occasion to do it.
And I would also note that we are, as both, I think, Ms.
Pozen and I addressed--we are, of course, looking at the
question of providing guidance with respect to accountable care
organizations in real time. That is something that the agencies
are working together on right now. And I think it is reasonable
to assume that to some degree that guidance will be relevant to
clinical integration otherwise, although there are some
distinctions that will have to be kept in mind.
Mr. Goodlatte. Let me interrupt you and ask one more
question here. With regard to the new healthcare bill, what are
some the antitrust safe harbors that the FTC might be
considering with respect to the formation of the accountable
care organizations that have been created by that legislation?
Mr. Feinstein. Well, that is very much a work in progress.
I think just as there are safe harbors that are in the current
guidelines relating to market share, for example, and certain
types of conduct, those are the types of issues that we and the
Justice Department are considering. It would be premature for
me to make a definitive statement about what form that will
take, because it is literally something that we are discussing
between the two agencies and with CMS on a weekly basis.
Mr. Goodlatte. Under the law, when can accountable care
organizations come into being? Is there a timetable for that?
Mr. Feinstein. My understanding--and I will defer to Ms.
Pozen if she has a clearer understanding--my understanding is
that CMS intends to issue regulations early next year.
Is that correct?
Mr. Goodlatte. Could they be formed right now if the
regulations existed?
Mr. Feinstein. I assume that the answer to that question is
yes.
Mr. Goodlatte. I know there are various phase-ins of
various aspects of the bill. Your understanding is they could
occur right now. So, again, the sooner you have information
available, the sooner these organizations might be formed.
Mr. Feinstein. Well, I think there is an expectation that
some of the antitrust issues and the way they will be analyzed
will be reflected in the regulations to be issued as well an
additional statement to be made by the antitrust enforcement
agencies.
Mr. Goodlatte. Ms. Pozen, do you want to add anything to
that?
Ms. Pozen. As I indicated in my statement, we are committed
to providing guidance and providing expedited review of ACOs.
We have a business review process that today if an ACO is
forming, they can come in and seek our guidance on an informal
or formal basis.
I hope that answers your question.
Mr. Goodlatte. Are there regulations that DOJ is going to
issue at some point that would give guidance as to whether or
not it is desirable to form one of these in terms of what kind
of safe harbors, antitrust safe harbors, might be available?
Ms. Pozen. Well, the ACOs that are being formed to take
Medicare and Medicaid funding are subject to CMS regulations,
as Mr. Feinstein indicated. That is an ongoing process and an
ongoing discussion that we have with CMS and the FTC regarding
how to provide antitrust guidance in that context so that, just
as you said, ACOs have guidance going forward in order to
receive those funds through CMS. So that is an ongoing process
now, but, as I said, in the interim we have a business review
process. If ACOs need advice, we are happy to give it to them.
Mr. Goodlatte. Thank you.
Thank you, Mr. Chairman.
Mr. Johnson. Next we will hear from Mr. Gonzalez.
Mr. Gonzalez. Thank you very much, Mr. Chairman. I want to
thank the witnesses for their testimony. The first question
is--if you will just answer yes or no, it makes it a lot
easier--do we have a competitive health insurance industry in
the United States today? Mr. Feinstein. Just yes or no. And
remember, I know these are your personal opinions and not the
Department or Commission.
Mr. Feinstein. Well, it is hard for me to answer that yes
or no because my agency doesn't focus on that issue to the
extent that the Department of Justice does. I think it really
varies, candidly, market by market. There are some markets that
are more competitive than others, I would say. I don't know
that I would be comfortable answering the question on a
national basis.
Ms. Pozen. I would echo Mr. Feinstein's answer. I know
there are some areas where there is vigorous competition and
there are some areas where I presume there isn't. And if those
areas are subject to a merger where there will be, you know,
more concentration created as a result of the merger or a
dominant firm is using that market power in an illegal way, we
will prosecute.
Mr. Gonzalez. I am not sure--the answer for all of us has
to be no. And that is the reality and that is where we find
ourselves. And I am not sure that any of us had anything to do
with the direction things took and where we find ourselves
today. But it is a precautionary tale maybe going forward. And
the reason I say that is, what I am looking at, insurance
market concentration ranked as of 2007. So this is old
information. I only suggest it has probably gotten worse. But
if we go State by State, combined market share percentage of
the top two insurers in every State in this Nation, and I don't
get to--at 48 percent, where basically two insurers comprise 48
percent, some may say, Wow, that may be acceptable. I am not
sure that is really acceptable. But that is like number 40 in
the ranking. Everyone else has anywhere from 53 to 98 percent
of the market share by two insurers.
Now how can anyone in good faith today not answer my
question as ``no''? I mean, maybe it is just out of necessity
and that is the way things grew and that is what you are going
to have. And we have to abandon the goal of competition in
order to achieve competition. That is the whole thing about--
remember with TARP, we had to abandon free market principles in
order to save the free market. Well, maybe we do that all the
time, Mr. Chairman. I am not sure.
So let's talk about doctors quickly. Doctors are at a
tremendous disadvantage. My own observation is that they are
just not as organized as the insurance industry or as the
hospitals. They are rather busy practicing medicine. That
occupies all of their time. I also believe that, you know, they
are not as unified because of the specialties today. But
nevertheless we are asking them to do something to make health
care reform a reality. So I am just going to ask you--and I
know I am going to revisit some of this. But if I was a
physician and I am looking to be part of these ACOs and I don't
want to expose myself out there and I don't have all of the
lawyers and the big firms, lobbyists, advocates, and so on that
are the organizations but I want to be part of the answer in
this solution, what assurances can you give these doctors that
they are not going to run afoul?
So you are telling me that there is coordination among the
FTC, the Department of Justice, and the Inspector General over
at HHS. That is correct, isn't it? Y'all are coordinating your
efforts. So you are going to provide guidelines. And I strongly
suggest that guidelines can't be given in some speech or some
conference or some convention. That just doesn't work in the
real world. They have to be black letter. They have got to be
able to see it. Because my fear is, you have a lot of
discretion and wiggle room to pass judgment on these things
after the fact.
To what extent do you provide beyond guidance but something
more in the manner of preclearance? So I am not familiar how
you do this or how the HHS and the Inspector General does it.
But if I am a doctor or a group of doctors and I am trying to
do this, what assurance can you give me that it is a safe thing
to do and that I am not going to be penalized down the road?
Mr. Feinstein.
Mr. Feinstein. I think there are--and I think you are going
to see this as a result of the ongoing ACO effort that is
underway. I certainly think there is certainly a recognition in
the enforcement agencies that this is a circumstance where safe
harbors with a clear expression of the boundaries of the safe
harbors is appropriate, and also a clear expression that
circumstances that are outside the precise boundaries of the
safe harbor aren't necessarily going to violate the law. From
the standpoint of an individual physician, something that I
think is important to remember is that, you know, if what they
are hoping to accomplish is something that is likely to lead to
more efficient delivery of care and higher quality, something
that is going to serve the interests of consumers, we are not
going to get in their way. We want that to happen. Where we
step in are the circumstances where there is nothing going on
other than increased prices. I am happy to report that in the
last--you know, in recent years, we haven't seen as much of
that. We haven't brought as many of the cases. Our resources
overall in the health care sector are not disproportionately
directed at the physician segment of the market. We spend a
great deal more of our time these days on the pharmaceutical
sector and on hospitals. But that doesn't mean that there
aren't areas where, just as there may be markets where health
insurers have market power, there may also be specific markets
where hospitals have market power or where you know there are
must-have groups of physicians. That is different of course
from the individual physician. But I would go back to four sort
of first principles. If the goal is to do something that is
going to improve care and ideally even lower costs, we are not
going to--we are going to bless that as quickly as we can.
Mr. Gonzalez. Ms. Pozen.
Ms. Pozen. As I said, we are committed to guidance. We are
working with CMS, HHS, and the Federal Trade Commission on what
that guidance will precisely be to address the issues that you
have pointed out. We want these organizations to go forward, to
feel comfortable integrating, to feel comfortable innovating
and not stand in the way and not inhibit that. It is an
iterative process at this point, as CMS develops its
regulations, but we do want there to be guidance, potentially
safe harbors, and an expedited review as part of that.
Mr. Gonzalez. Thank you very much. Thank you, Mr. Chairman,
for your indulgence.
Mr. Johnson. Thank you, sir. And with another question, I
will recognize Chairman Conyers.
Mr. Conyers. Just a closing question. Had either of you
heard about the concentration of health insurers in this
country by State that Judge Gonzalez referred to when he was
talking with you?
Ms. Pozen. Yes.
Mr. Conyers. You had heard about that?
Ms. Pozen. Yes. And it is one of the reasons, as I
mentioned in my statement, we wanted to figure out how that
happened. Just getting to exactly your question. How could that
happen? And what we found was, when we focused on entry and we
found that there are barriers, as I indicated in my statement,
there are barriers to new entry. New insurers can't come in and
take on some of these dominant players. So that learning that
we did right off the bat when we got into office is infusing
all of our thoughts and all of our investigations on this
issue.
Mr. Conyers. So why couldn't you answer ``no'' to his
question? Come on. You can tell us. What is the real reason?
Ms. Pozen. Well, I think that when you look at health
insurance markets, you can look at them on a statewide basis,
you can look at them on an MSA basis, and on a local basis.
Mr. Conyers. But you end up with the same answer every
time. They are all concentrated.
Ms. Pozen. And we are----
Mr. Conyers. Aren't they, Ms. Pozen? Now, look, this is
your job.
Ms. Pozen. I know, and we are trying to figure out why, I
can assure you of that. And we are trying to do what we can not
to allow more of it, and we are trying to assure that those
insurers that are dominant aren't using that dominance in an
anti-competitive way.
Mr. Conyers. But why didn't you answer ``no''?
Ms. Pozen. Why didn't I answer ``no'' to the question of
whether or not----
Mr. Conyers. You know what the question was.
Ms. Pozen. Yeah. Because I hate to say it. We are lawyers,
and we always want to say it depends. I don't mean to be flip,
sir. I really am not. I do understand the gravity of the issue
and respect the----
Mr. Conyers. Mr. Feinstein, why couldn't you answer ``no''
to his question?
Mr. Feinstein. Let me be clear about my personal view on
this.
Mr. Conyers. That is what I want.
Mr. Feinstein. I accept the proposition that there are some
markets----
Mr. Conyers. Do you know of any market not concentrated in
health insurance?
Mr. Feinstein. The level of concentration varies from
market to market.
Mr. Conyers. Do you know of any market? Just answer the
question.
Mr. Feinstein. Do I know of any market that is not
concentrated? With all due respect, it depends on what you mean
by concentrated. There are certainly markets that have high
concentration----
Mr. Conyers. Oh, I see. I get it. I get it. I get it.
Mr. Feinstein. But there is variation. The question was
nationally.
Mr. Conyers. Let me just close with this. Do you know how
many people in America do not have insurance? You nod your
head. What is the answer?
Ms. Pozen. Millions do not have insurance.
Mr. Conyers. Millions? How many millions?
Ms. Pozen. I don't have the exact figure.
Mr. Conyers. What about you, Mr. Feinstein?
Mr. Feinstein. I don't know a precise number. I will just
say too many.
Mr. Conyers. Okay. Thank you, Mr. Chairman.
Mr. Johnson. Well, it is true it is about 40 million, isn't
it?
Mr. Conyers. 50 million.
Mr. Johnson. 50 million? 50 million people.
I would like to thank the FTC and DOJ for appearing before
our Subcommittee today. You are excused. Thank you very much.
Mr. Feinstein. Thank you, Mr. Chairman.
Mr. Johnson. And I will invite the second panel to take its
place.
Ladies and gentlemen on our second panel, we have Melinda
Hatton, Senior Vice President and General Counsel to the
American Hospital Association. Welcome, Ms. Hatton.
Next witness is Arthur Lerner, a partner at the law firm of
Crowell & Moring LLP, on behalf of America's Health Insurance
Plans. Welcome, Mr. Lerner.
Next to Mr. Lerner is Dr. Peter Mandell on behalf of the
American Association of Orthopaedic Surgeons. Welcome back,
sir.
Our next witness is Dr. Michael Connair on behalf of the
American Federation of State, County, and Municipal Employees.
Welcome, sir.
Dr. Connair. Thank you.
Mr. Johnson. And finally we have David Balto, Senior Fellow
with the Center for American Progress. Welcome back, Mr. Balto.
Mr. Balto. Thank you very much.
Mr. Johnson. Ms. Hatton, please proceed with your
testimony.
TESTIMONY OF MELINDA HATTON, SENIOR VICE PRESIDENT AND GENERAL
COUNSEL, AMERICAN HOSPITAL ASSOCIATION
Ms. Hatton. Thank you, Mr. Chairman. I am Melinda Hatton,
General Counsel and Senior Vice President for the American
Hospital Association. On behalf of our more than 5,000 member
hospitals, health systems, and other health care organizations
and the nearly 200,000 employed physicians, the AHA thanks you
very much for the opportunity to discuss the impact of the
antitrust laws on our Nation's hospitals and our hospitals'
efforts to improve quality and efficiency.
Our antitrust concerns are twofold. First, we support
timely, user-friendly guidance from the antitrust agencies on
how the laws will be applied to clinical integration efforts
among health care providers. Second, we urge the Department of
Justice to be increasingly vigilant about anti-competitive
behavior on the part of health insurers and we commend the
Department for its recent stepped-up enforcement.
Our health care delivery system is fragmented. A typical
Medicare patient sees two primary care physicians and five
specialists, working in four different practice settings in a
single year. The numbers escalate greatly for those with
chronic conditions. Most health care providers work alone in
small groups or in specialty practices. Most physicians still
don't work for hospitals. Care is provided in multiple
locations, from free-standing ambulatory clinics to post-acute
settings to patients' homes. Some of these settings may be
affiliated with a hospital while many are not. It is an
insufficient system that is hard for any patient, particularly
a sick patient, to navigate. Lack of coordination also makes it
more likely that tests will be duplicated and adverse drug
interactions will not be caught in time.
We know the patients get real benefits when caregivers work
together to provide more coordinated, more efficient, higher
quality care. The AHA has, since 2004, been seriously engaged
in efforts to advance clinical integration among health care
providers by, among other efforts, tackling legal and
regulatory barriers. At its heart, clinical integration is
really teamwork--hospitals, doctors, nurses, and other
caregivers working together to make sure our patients get the
right care at the right time in the right setting. To do so
effectively, we do need user-friendly guidance from the
antitrust agencies on how the laws and policies will be applied
to clinical integration.
A bipartisan group of lawmakers who sit on the Committees
of jurisdiction have agreed that the best solution to tackle
these antitrust laws as a barrier to clinical integration is to
issue user-friendly, officially backed guidance that clearly
explains to caregivers what issues they must resolve in order
to embark on a clinical integration program. In three separate
letters to the antitrust agencies over 7 months, lawmakers
clearly called for such guidance. We continue to urge those
agencies to act quickly to provide it.
In addition to guidance, we have urged the Department of
Justice's Antitrust Division to be increasingly vigilant about
anti-competitive conduct on the part of entrenched health
insurers. In May of 2009, when the Administration first came
into office, the AHA called upon DOJ to reexamine and bolster
enforcement as it applies to health care plans. Hospitals are
held accountable for the care they provide to their
communities, with quality and patient satisfaction routinely
measured and publicly reported on a government Web site.
Hospitals also have been subject to intense antitrust scrutiny
by the Federal antitrust agencies.
Conversely, insurers have not faced nearly as much public
antitrust scrutiny or oversight. Patients receive higher
quality, more efficient care when caregivers work together.
That is the path we are on and one that holds the greatest
promise for fixing a fragmented delivery system. The antitrust
laws can make a real contribution if the agencies enforcing
them are willing to exercise the same kind of leadership and
foresight that led to the issuance of the statements on
antitrust enforcement and health care in the early 1990's.
User-friendly guidance for clinical integration and more
vigilance in the health insurance sector are important steps
not just for hospitals but for the future health and vitality
of the Nation's health care delivery system.
Mr. Chairman and distinguished Members of the Committee,
thank you for the opportunity to discuss these issues with you
today. America's hospitals look forward to working with you and
all of those who are committed to improving the quality and
efficiency of care for patients in every one of your
communities. We believe that clinical integration is a proven
strategy for achieving these aims and that the efforts of
health care providers to improve delivery should not be impeded
by unnecessary barriers, like the antitrust laws.
[The prepared statement of Ms. Hatton follows:]
Prepared Statement of Melinda Hatton
__________
Mr. Johnson. Thank you, Ms. Hatton.
Next, Mr. Lerner.
TESTIMONY OF ARTHUR LERNER, PARTNER, CROWELL & MORING LLP, ON
BEHALF OF AMERICA'S HEALTH INSURANCE PLANS
Mr. Lerner. Chairman Conyers, Chairman Johnson, Ranking
Member Coble, and Members of the Committee, I am Arthur Lerner
partner in the Washington, D.C. office of the Crowell & Moring
law firm. I am testifying today on behalf of America's Health
Insurance Plans, a national association representing
approximately 1,300 health insurance plans, providing coverage
to over 200 million Americans.
I was very pleased to be invited to testify today by
Chairman Conyers. After completing my undergraduate education
at the University of Michigan, as did both of my parents and
both my brothers and my wife--I only have one of those--and
then attending law school, I began my legal career in 1976 in
the Health Care Division of the Bureau of Competition as an
antitrust trial attorney. I then worked as an assistant to the
Director of the Bureau of Competition as attorney adviser to
FTC Chairman Pertschuk from 1978 until 1981, as Deputy
Assistant Director and then Assistant Director in charge of the
FTC's Health Care Antitrust Program from 1981 to 1985 and have
been in private practice since then. I am former Chair of the
Antitrust Practice Group of the American Health Lawyers
Association and of the Federal and Civil Enforcement Committee
of the Antitrust Section of the ABA.
I am testifying today on behalf of AHIP and not on behalf
of any other client or organization. And I am well aware of the
history of antitrust enforcement in the health care sector,
since that has been my life for the last 35 years. I appreciate
this opportunity to testify in enforcement of our Nation's
antitrust laws and the importance of preserving and expanding
competition for the benefit of consumers.
I am going to talk principally about two things. My written
statement goes on at somewhat greater length. First, antitrust
enforcement to ensure competition in the health care provider
community; and second, antitrust enforcement in the health
insurance marketplace.
By way of introduction, I think the antitrust laws and
antitrust enforcements do not and should not take sides, other
than it being on the side of the consumer. Antitrust
enforcement should not be and has not been for or against
health insurance companies or for or against physicians or
hospitals or any other industry. Whether an entity runs into
antitrust trouble will and should depend on what it does.
On the physician side, the discussion today has seemed to
focus on two things. One, whether physicians should be able to
band together to sort of level the playing field and get a
better deal for themselves. And I go into this at somewhat
greater length in my statement. But it has never been a solid
defense in the antitrust world to say, Well, I can't get paid
the rate that I would like to be paid in the marketplace.
Therefore, I should be allowed to fix prices to deal with that.
That is a fundamental and blatant antitrust violation and has
been viewed as such by Administration after Administration, by
the courts through every Administration going back many, many
years. On the other hand, if providers are trying to get
together and work to improve outcomes and to improve health
care delivery, there is lots of room under the antitrust laws
for them to do so today. And the FTC and DOJ have given out
lots of guidance about how that can be done.
It is a difficult task sometimes to be in private practice,
to advise clients, and I have advised clients that include not
only health plans but also health care providers. When
providers come and say, How much more of this integration stuff
do I have to do so I can fix prices, it puts the lawyer in an
awkward spot because the question then is not, How can I
integrate; and if I integrate, what am I allowed to do along
with that to make it work? But if the question is, How do we
raise prices, if that is all it is about, then antitrust has a
lot to say and properly so.
On the other hand, if what physicians and hospitals are
trying to do is to actually expand and increase the quality of
care to improve health care outcomes to be accountable for the
costs, there is a lot of room for them to do so under the
antitrust laws. Health plans are working across the country
with many provider organizations in various kinds of projects
both with organizations, you know, that are now being called
accountable care organizations but for many, many years have
taken other forms to try to improve health care and reduce
costs.
There is always reason for the antitrust agencies to be up
to date, for the antitrust agencies to look at the evolving
marketplace and try to decide if clarification of their
guidance is appropriate. But it would not be appropriate to
radically alter the guidance that has been out there, so as
either to permit blatant price fixing or to allow integration,
which is, in a sense, a good thing to become sort of a talisman
that allows providers to break the antitrust laws. There is
room to do the former without having to do the latter.
On the hospital side, there are a lot of reasons for
wariness and concern that we just make sure that hospital
combinations and hospital consolidations do not raise
inappropriate antitrust problems. The FTC and DOJ have been
active in policing mergers in that area and need to be able to
continue to do so.
Finally, on the health insurance side--I realize I have
rambled through my time pretty quickly here, but I know that
you are interested in hearing about health insurance and
whether the antitrust laws should be enforced there. So if you
let me, I will go on for another minute or so about that or I
can wait and take it in questions.
Mr. Johnson. I think it might be good to let you go ahead.
Mr. Lerner. I will just talk briefly about it.
The Federal Trade Commission and the Department of Justice
had a lengthy 27 days of hearings in 2004 and resulted in a
conclusion that there is not a significant nationwide problem
in terms of monopsony or power buying or health plans or paying
providers less than what it costs to deliver health care. In
fact, most health plans pay well more than the Medicare and
Medicaid programs. There is data out there about concentration
levels in health care. Some of that data is deeply flawed, the
way it is counted, the way it is measured. But the most
important thing to take note of is that the vigor of
competition in some of these markets does not correspond with
notions of, you know, what are the current shares. Sometimes
these markets are quite competitive, even if concentrated.
And the other thing I would probably want to emphasize
today is that if you look at the mergers that have occurred in
health care insurance plans, they typically do not account for
whatever structure we now see in the health insurance
marketplace. Typically it seems that companies who do the work
better, have been better at it, have historically been large
and significant in a local market are still the ones who are
large and significant in a local market and that mergers have
not typically involved the creation of the kind of structure
that we are talking about. And I can say that when we have done
mergers--and I have represented a number of clients--we get
investigated extremely thoroughly and extremely acutely by Ms.
Pozen's staff or the other people at the Department of Justice.
Sometimes these raise difficult questions, where a merger
might involve the number eight competitor in a market merging
with the number six competitor, where neither of them is going
anywhere in particular, and the number one and two firms are
very, very strong, so the Justice Department has to make some
discerning judgments. So in our view, you know, every company
always wants to think it is going to fare well. But my
experience has been that the Department of Justice is quite
thorough in their inquiries into health insurance mergers.
[The prepared statement of Mr. Lerner follows:]
Prepared Statement of Arthur Lerner
__________
Mr. Johnson. All right. Thank you, Mr. Lerner. I am anxious
to determine whether or not your extensive contacts with the
State of Michigan will save you from the heat that I expect to
be generated.
Mr. Lerner. I am actually from Toledo, so we paid out-of-
State tuition for 12 years without my brother.
Mr. Johnson. All right. Thank you, sir.
Dr. Mandell.
TESTIMONY OF PETER J. MANDELL, M.D., CHAIR OF THE COUNCIL ON
ADVOCACY, AMERICAN ACADEMY OF ORTHOPAEDIC SURGEONS
Dr. Mandell. Chairman Conyers, Chairman Johnson,
distinguished Members of the Committee, thank you for having me
here this morning. I am Pete Mandell, Chair of the Council on
Advocacy of the American Association of Orthopaedic Surgeons. I
am also a practicing orthopedist on the San Francisco Peninsula
and have done that for about 35 years now. On behalf of our
organization and my orthopedic surgeon colleagues across the
country, thank you for inviting us to talk about antitrust laws
as interpreted by the U.S. Department of Justice and the
Federal Trade Commission and their effects on patients and
physicians.
As we talked about all morning, health insurance markets
are highly concentrated; and for the most part insurers possess
market shares that are associated with monopsony power, the
ability to present physicians with take-it-or-leave-it
contracts that harm the quality and supply of physician
services in this country. Moreover, because health insurers are
virtual monopolies, whatever savings are generated by those
take-it-or-leave-it contracts are not provided to the
beneficiaries of their insurance, also known as our patients.
Because of these indisputable facts, AAOS believes that the
antitrust laws should be changed to allow physicians to
collectively negotiate with health plans and that the McCarran-
Ferguson Act should be amended to change the anti-competitive
practices of insurance companies and establish negotiating
equity among health plans and physicians. The fact that health
insurers possess monopsony power and the physicians are
powerless in their negotiations with health plans should not be
news to anyone. For a decade now, the AMA has provided studies
that report that unequivocally, physicians across the country
have virtually no bargaining power with dominant health
insurers, and those health insurers are in a position to exert
monopsony power.
Antitrust enforcement by the DOJ and FTC has been
ineffective in halting health insurer market concentration.
However, it has been effective in preventing physicians from
jointly negotiating with insurers. In this way, antitrust
enforcement has actually augmented the negotiating power of
insurers. Physicians, we think, should be allowed to share
information and negotiate collectively with health insurance
plans.
Currently, the DOJ and FTC allow a restrictive form of
bargaining that we talked about a little while ago called the
third-party messenger model which has been used with only
spotty success around the country. It is labor-intensive,
cumbersome, and costly to implement safely. It has also proven
an easy target for insurers because they know that the DOJ and
FTC have a low threshold for alleged physician collusion and
for initiating expensive antitrust investigations and
litigations.
Let me give you two examples. In Delaware, a dozen years
ago, a health insurance plan unilaterally instituted massive
cuts. Almost all the 47 orthopedic surgeons and many other
physicians in that State dropped out of the plan. The
physicians negotiated, using a union and using the third-party
messenger model. While the insurer reversed the cuts, the DOJ
ultimately investigated and prosecuted the physicians and the
union. Approximately 80 subpoenas were issued. Depositions were
taken in four States. The union itself incurred about $1.5
million 1998 dollars in legal fees. It is more like $2 million
now. In the end, the consent decree allowed the use of the
third-party messenger model anywhere in the United States
except for Delaware and by anyone in the United States except
for that union for a period of 5 years. One orthopedic surgeon
colleague lost his partnership in a medical practice. Another
was threatened with imprisonment by the DOJ.
The second example involves a case that was finalized
earlier this year in Idaho where the Idaho Orthopedic Society
and other orthopedists were charged by the DOJ with antitrust
violations. Although resolved by consent decree, the defendants
incurred more than $1 million in legal fees and expenses.
Several Idaho colleagues report that the final decree bears no
resemblance to the actual events that went on in Idaho, which
they found quite frustrating. For example, at no point during
the investigation were the accused physicians interviewed or
deposed.
Antitrust laws send a clear message of what fair
competition means--or should send a clear message of what fair
competition means. Instead, the message we hear, as physicians,
loud and clear is the Hobson's choice of ``just lie down and
take it.'' If physicians object, they are exposed to charges of
antitrust violation.
This is why the AAOS supports legislation like the Quality
Health Care Act of 2000, sponsored by Congressman Conyers and
former Congressman Tom Campbell. Such an act would extend to
all health care providers--not just doctors, but all health
care providers--the right to collectively negotiate with health
insurance companies.
AAOS supports the Subcommittee's efforts to address the
issue of equal application of antitrust laws to both physicians
and health insurance plans.
AAOS is pleased to have had the opportunity to share with
you our thoughts but, more importantly, the experiences of our
colleagues on the effects of DOJ and FTC antitrust enforcement.
Maintaining quality care while ensuring fair competition in
today's market should be our ultimate goal, and we thank you
for giving us the opportunity to present this morning and look
forward to working with you further on this in the future.
[The prepared statement of Dr. Mandell follows:]
Prepared Statement of Peter J. Mandell
__________
Mr. Johnson. Thank you, Dr. Mandell.
Next, Dr. Connair.
TESTIMONY OF MICHAEL P. CONNAIR, M.D., AMERICAN FEDERATION OF
STATE, COUNTY, AND MUNICIPAL EMPLOYEES, AFL-CIO
Dr. Connair. My name is Dr. Michael Connair. Thank you for
this honor. And thank you, Peter, for your comments, with which
I agree.
Mr. Johnson. And if you would pull that microphone up. Is
it on?
Dr. Connair. It is not on.
Mr. Johnson. There is a button down there.
Dr. Connair. I am an orthopedic surgeon in solo practice in
Connecticut, and I am the Vice President of the National Union
of Hospital and Health Care Employees and the Federation of
Physicians and Dentists, both are affiliates of AFSCME. I speak
to you this morning as a physician and from a labor union
perspective.
Unions represent the largest block of organized consumers
in the Nation and have a significant stake in the quality of
health care. Too often, the quality has been compromised
because insurers, rather than physicians, inappropriately
dictate the care a patient receives. Contracts between insurers
and physicians of course regulate reimbursement for physicians
but, more importantly for consumers, greatly affect the quality
and availability of care that we, physicians, provide for our
patients every day.
For the past 14 years, my unpaid union role has been to
educate physician members in lawful ways to obtain fairer
contractual terms from insurers. Physicians in three of the
groups that I helped organize, alluded to by Dr. Mandell, were
sued by the Department of Justice for alleged antitrust
violations despite Herculean efforts to follow the third-party
messenger model outlined by the DOJ FTC. The doctors in these
three groups had simply refused to be coerced into contracts
that would have resulted in a 20 percent or more decrease in
reimbursement. The contractual relationship of doctors to
insurers is similar to the weak position that unorganized
service workers face when they are up against an employer
intent upon maximizing profit.
There is much more at stake though in physician insurance
contracts than physician finances. Bad contracts give insurers
the legal right to limit care and impose substandard care on
patients. As a practical matter, insurers possess monopsony
power in virtually all U.S. markets, and doctors have no choice
but to participate in these contracts or go out of business.
The ability of a physician to obtain a fair contract from
an insurer grows more difficult every year. A lack of antitrust
enforcement against insurers and prosecution of about 35 cases
against physicians have made insurers downright dictatorial in
their treatment of physicians and patients.
This is a stack of 33 of the 35 cases either description or
consent decree. Typically, these cases are about physicians
seeking to unfix insurance company price fixing. Insurance
consolidation and the Federal antitrust enforcement pattern has
had a chilling effect on physicians' willingness to resist
substandard provider agreements either for their own financial
survival or to protect the quality of patient care. The
unprecedented antitrust enforcement has allowed insurers to
intimidate physicians into accepting low fees or even giving up
the practice of medicine altogether.
There is a pressing need to grow the ranks of primary care
providers, but insurance company practices are inhibiting this
growth by undervaluing the work of these doctors, often paying
them less for a visit than a plumber or a vet.
When it comes to physicians and patients, insurers act with
impunity because they perceive they have immunity. Insurance
companies get a free pass on antitrust with respect to
physicians and a free pass from patient lawsuits under ERISA.
Health care benefits are provided in lieu of additional
wages. Unopposed monopoly pricing of insurance products robs
workers and employers of value. When a third of health care
dollars are diverted away for patient care, workers are
shortchanged.
A false semblance of market stability results when
intimidated doctors stop fighting and begin signing substandard
contracts. The one-sided antitrust prosecutions and forced
consent decrees are always, always against doctors and never--
not once in the history of the U.S. that we can find, and they
are often unfair and incomplete.
Some blame goes to the courts. Federal judges are mandated
by the 2004 amendments to the Tunney Act to review antitrust
consent decrees for fairness and impact on the public. This is
not routinely done, and it has been discouraged by the DOJ.
During the debate on the 2004 amendments, then Chairman
Sensenbrenner commented that the amendments were to ensure
judicial review beyond ``the mockery of justice standard.''
True health care reform requires antitrust reforms; that
is, a rebalancing of the contractual power between doctors and
insurers so that patients are guaranteed access to the best
medical care. Antitrust legislative reforms must include a
reconsideration of the right of physicians to collectively
negotiate with payers, as proposed by Campbell and Conyers.
Antitrust regulatory reforms must include an update of the 1996
antitrust guidelines consistent with current market realities
and the right for physicians to develop and participate in
quality initiates without threat of prosecution.
And finally, antitrust enforcement reforms must start and
end with an even-handed application of the rules of competition
by the DOJ and the FTC, consistent with the intent of the 1890
Sherman Act. That includes independent review of the last 35
consent decrees for fairness. The Sherman Act, you will
remember, was written as a short and general outline of
fairness principles with the expectation that regulators and
the courts would tailor the details to the specific market
situations. Current antitrust enforcement in health care fails
to treat physicians and consumers fairly.
I would like to thank Chairman Conyers, Chairman Johnson,
Ranking Member Coble, and Members of this Subcommittee and
their staff for holding this hearing. I will be pleased to
answer any questions.
[The prepared statement of Dr. Connair follows:]
Prepared Statement of Michael P. Connair
__________
Mr. Johnson. Thank you, Dr. Connair. We have got a series
of votes, six of them, which we will go to after we hear from
Attorney Balto. Please proceed, sir.
TESTIMONY OF DAVID BALTO, SENIOR FELLOW,
CENTER FOR AMERICAN PROGRESS
Mr. Balto. Thank you very much, Mr. Chairman.
You know, I want to compliment the Committee and its staff
for all the work you have done. Justice Brandeis said that
sunlight is the best disinfectant. And if he was here today, he
would really applaud you for all the work the Committee has
done in bringing attention to important competitive issues.
I am the former FTC Policy Director, and I usually
represent consumer groups. And I asked myself the question, who
represents the consumer? I think that is what this whole debate
comes down to, who represents the consumer? Over the past
decade, the FTC and the Department of Justice has said, in
health care the insurance company represents the consumer; and
they are wrong.
What has been the result of that misplaced set of
priorities? 31 or 35 cases against doctors. Zero, zero cases
against health insurers' anti-competitive conduct. Zero cases
against deceptive and fraudulent conduct by the agencies.
Massive consolidation leading to highly concentrated markets. I
am a little worried. I don't know about you folks. You just
went through a year-long, exhaustive debate on health care
reform, and the representatives of the government couldn't tell
you that the markets were overly concentrated. That is
something to worry about.
What is the result of the misplaced priorities? 35 cases
against doctors. I did look at all those cases. I examined
them. Relatively few say that there was some harm. And the harm
was insurance companies couldn't get the rates they wanted.
Nothing about consumers in those complaints. Of those 35 cases,
in only one case was the insurance company upset enough to file
a private antitrust suit. Give me the money back. Nope. They
have the FTC to do that. And they don't care about--there is no
money to get because there is no harm. Did consumers file suits
in those 35 cases? Zero. Not a one because consumers weren't
harmed.
At the same time, what happens when doctors try to get
together? Well, you have these 1996 guidelines which I helped
author; and if you think those guidelines are up to date, if
you think the health care world is the same as it was in 1996,
you should bet on the Minnesota Gophers beating the Wolverines
in football. The standards applied are so egregious it is
impossible for doctors to get advice in a timely fashion.
Member Goodlatte asked us how long these letters take. I am
surprised they didn't have the answer. The answer is on page 9
of my testimony. I went back and looked at the last six
letters. I talked to the lawyers and doctors who had submitted
letters to the FTC. The time period is between 245 to 645 days.
The cost, over $100,000 in each case. The letters, exhaustive.
When you go outside of health care and you want the advice from
the government, it takes something like 2 to 3 months. Now the
agency committed to a 90- to a 120-day period to get these
letters done. This is clearly out of whack and needs to be
reformed.
What is the result of this? Skyrocketing insurance
premiums, record numbers of uninsured, diminishing
reimbursement for these doctors, these dedicated doctors who
are dedicated to serving the public, who are often forced into
assembly line care.
Who suffers? Ultimately the patients suffer. What is the
solution? First, we need vastly stronger health insurance
enforcement and on both sides, looking both at consumers and on
physicians.
There is a really important decision by the Third Circuit
Court of Appeals on page 3 of my testimony that came out just
this Tuesday. A large insurance company tried to exploit a
hospital; and it said, We are not to blame in an antitrust
sense. We are getting lower premiums. And the court said, You
are wrong. Maybe you are giving them lower premiums, maybe you
are not; but the way you are getting lower premiums is by
giving consumers worse health care. You have to look at the
total equation, look at the impact on patient quality, look at
the impact on these doctors.
Second, the FTC should only bring cases against doctors and
other providers if there is clear evidence of competitive harm.
These 31 cases that they brought under their per se rule of
illegality just didn't make a hill of difference and took the
limited government resources away from more important things,
like prosecuting health insurance companies.
Third, there needs to be new guidelines, and they need to
have clear safe harbors. I have suggested one for pharmacies.
Finally, in terms of mergers, both Member Gonzalez and
Member Conyers posed about how highly concentrated the market
is. What can you do about that? Well, there is something you
can do; and the FTC did it for hospitals in this last decade.
Go back, do a study of consummated mergers, and attack those
consummated mergers that have harmed consumers. You can
challenge a merger even if it has been consummated.
I applaud the Committee's focus on these efforts, and I
will look forward to trying to assist the Committee in trying
to lead to sensible antitrust enforcement in the health care
area.
[The prepared statement of Mr. Balto follows:]
Prepared Statement of David Balto
__________
Mr. Johnson. Thank you, Mr. Balto. One of the issues being
pro-consumer price savings versus doctors' abilities to eke out
an honest and profitable occupation or profession is very
important. And you have struck upon a couple of interesting
points that I would love to follow up on today. However, with
the six votes, it is going to take us some time to be able to
return here, and then there are other things on our agenda for
this afternoon. So we will have to reschedule this hearing, and
we will adjourn it today.
Thank you for coming.
And by the way, before I adjourn, without objection,
Members will have 5 legislative days to submit any additional
written questions which we will forward to the witnesses. You
have not had any questions yet. So we will have you back. Thank
you.
[Whereupon, at 12:11 p.m., the Subcommittee was adjourned.]
A P P E N D I X
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Material Submitted for the Hearing Record
Responses to questions posed during the hearing to Sharis A. Pozen,
Chief of Staff and Counsel to the Assistant Attorney General, Antitrust
Division, U.S. Department of Justice, Washington, DC
Responses to Post-Hearing Questions from Richard Feinstein, Director,
Bureau of Competition, Federal Trade Commission, Washington, DC