[Congressional Record Volume 142, Number 15 (Monday, February 5, 1996)]
[Extensions of Remarks]
[Pages E158-E159]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




             ANTITRUST HEALTH CARE ADVANCEMENT ACT OF 1996

                                 ______


                           HON. HENRY J. HYDE

                              of illinois

                    in the house of representatives

                       Thursday, February 1, 1996

  Mr. HYDE. Mr. Speaker, today I am introducing legislation designed to 
ensure that the antitrust laws permit full utilization of private 
cooperative initiatives which can help make the Nation's health care 
system more efficient. H.R. 2925, the Antitrust Health Care Advancement 
Act of 1996, provides that when doctors, nurses, and hospitals form 
integrated joint ventures to offer health are services, their conduct 
will be reviewed on the basis of its reasonabless--rule of reason--for 
purposes of the antitrust laws. The end result of this case-by-case 
analysis will be to increase consumer choice while ensuring full 
competition in the marketplace.
  Health care provider networks, or HCPN's--those composed of doctors, 
hospitals, and other entities who actually deliver health care 
services--are potentially vigorous competitors in the health care 
market. Their formation will lead to lower health care costs and higher 
quality of care. Costs will be lower because contracting directly with 
health care providers would eliminate an intermediate layer of overhead 
and profit. Quality will be higher because providers, and particularly 
physicians, would have direct control over medical decisionmaking. 
Physicians and other health care professionals are better qualified 
than insurers to strike the proper balance between conserving costs and 
meeting the needs of the patient.
  Currently, however, there are obstacles to the formation of HCPN's. 
One of the most serious is the application of the antitrust laws to 
such groups in a manner which does not allow the network to engage in 
joint pricing agreements, regardless of whether its effect on 
competition is positive rather than negative. It is this obstacle, that 
H.R. 2925 will eliminate, by conforming agency enforcement practices to 
the manner in which courts have interpreted the law.
  Antitrust law prohibits agreements among competitors that fix prices 
or allocate markets. Such agreements are per se illegal. Where 
competitors economically integrate in a joint venture, however, 
agreements on prices or other terms of competition that are reasonably 
necessary to accomplish to procompetitive benefits of the integration 
are not unlawful. Price setting conduct by these joint ventures should 
be evaluated under the rule of reason, that is, on the basis of its 
reasonableness, taking into account all relevant factors affecting 
competition.
  The antitrust laws treat individual physicians as separate 
competitors. Thus, networks composed of groups of physicians which set 
prices for their services as a group will be considered per se illegal 
under the antitrust laws if they are not economically integrated joint 
ventures. In the typical provider network, competing physicians 
relinquish some of their independence to permit the venture to win the 
business of health care purchasers, such as large employers. These 
networks promise to provide services to plan subscribers at reduced 
rates. The ventures also achieve another central goal of health care 
reform: careful, common sense controls on the provision of unnecessary 
care.

  However, agreements among physicians who retain a great deal of 
independence but set fees for their services as part of a network bear 
a striking resemblance to horizontal price fixing agreements. These are 
the most disfavored and most quickly condemned restraints in antitrust 
jurisprudence. The key factual question which distinguishes an 
arrangement that is per se unlawful from one which, upon consideration 
of the circumstances, is acceptable because it is not anticompetitive 
in nature, is the degree of integration of the individuals who form the 
network.
  While the antitrust laws provide substantial latitude in the context 
of collaboration among health care professionals, there is an 
understandable degree of uncertainty associated with their enforcement. 
Because each network involves unique facts--differences not only in the 
structure of the network, but also in the market in which it will 
compete--the ability of providers to prospectively determine whether 
their arrangement will be considered legal is limited.
  In order to eliminate this uncertainty, and to encourage 
procompetitive behavior that would otherwise be chilled, the Department 
of Justice and Federal Trade Commission have established a mechanism 
for prospective review of proposed HCPN's. In 1993, the antitrust 
enforcement agencies jointly issued ``Statements of Enforcement Policy 
and Analytical Principles Relating to Health Care and Antitrust.'' 
These guidelines, which were amended in 1994, contain safety zones 
which describe providers network joint ventures that will not be 
challenged by the agencies under the antitrust laws, along with 
principles for analysis of joint ventures that fall outside the safety 
zones. A group of providers wishing to embark on a joint venture may 
request an advisory opinion from the agencies. The agencies, after 
reviewing the particulars of the proposed venture, then determine 
whether the network would fall within a safety zone, or otherwise not 
be challenged under the antitrust laws.
  The problem is that these enforcement guidelines articulate standards 
that are more restrictive than the realities of the agencies' 
enforcement practices and the current state of the law. They treat as 
per se illegal many more networks than the antitrust laws would 
require.
  The guidelines promise rule of reason treatment to ventures where the 
competitors involved are ``sufficiently integrated through the 
network.'' This is consistent with judicial interpretations of the law. 
See, e.g., Broadcast Music, Inc. v. Columbia Broadcasting Sys., 441 
U.S. 1, 19-20 (1979). Where the guidelines diverge significantly from 
current law, however, is in defining integration solely as the sharing 
of ``substantial financial risk.'' A network which integrates in any 
other way--regardless of the extent of that integration, or whether a 
court interpreting the antitrust laws would find it to be integrated--
cannot qualify as a legitimate joint venture. This means that the 
agencies would not proceed to examine the specific facts of these joint 
ventures to determine their likely impact on competition; the 
arrangement would be deemed per se illegal.
  This restrictive notion of what constitutes a legitimate joint 
venture discourages procompetitive ventures from entering the health 
care marketplace, under the guise of antitrust enforcement. It excludes 
potential provider networks which would mean an expanded set of 

[[Page E159]]
consumer choices and increased competition, and thereby, lower costs, 
for health care services.
  H.R. 2925 overcomes this barrier by requiring that the conduct of an 
organization meeting the criteria of a health care provider network be 
judged under the rule of reason. The result will be to permit a case-
by-case determination as to whether the conduct of that HCPN would be 
procompetitive, and thus permissible under the antitrust laws. It is 
important to understand, however, that this is not an exemption from 
the antitrust laws. In no event would providers be allowed to set 
prices or control markets if, in doing so, they have an anticompetitive 
effect on the market. The normal principles of antitrust law will 
continue to apply.
  Only an organization meeting specified criteria would qualify for the 
more liberal, rule of reason consideration. The network must have in 
place written programs for quality assurance, utilization review, 
coordination of care and resolution of patient grievances and 
complaints. It must contract as a group, and mandate that all providers 
forming part of the group be accountable for provision of the services 
for which the organization has contracted. If these criteria are not 
met, the entity could still be considered per se illegal.
  Rule of reason consideration would be extended not only to the actual 
performance of a contract to provide health care services, but also to 
the exchange of information necessary to establish a HCPN. An important 
limitation on the exchange of information is that it must be reasonably 
required in order to create a HCPN. Further, information obtained in 
that context may not be used for any other purpose.
  H.R. 2925 delegates to the Department of Justice and the Federal 
Trade Commission authority to specify how rule of reason consideration 
would be implemented under these circumstances.
  Mr. Speaker, the Antitrust Health Care Advancement Act of 1996 means 
greater choice for consumers regarding health care services and the 
delivery of quality health care at lower price. Later this month, on 
February 27 and 28, the full Judiciary Committee will be holding 
hearings on health care reform initiatives, both in the antitrust area 
and in the liability area. H.R. 2925 will be one of the proposals 
considered in those hearings.

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