An Active Year For Health Care Antitrust Enforcement


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All eyes were on health care in 2020, as the industry faced unprecedented challenges presented by the global coronavirus pandemic.

Stories and images of overburdened frontline health care workers dominated the news cycle for most of the year, and the rapid development of one or more seemingly effective vaccines has engendered a cautious optimism for a return to normalcy in 2021.

Along the way, the health care industry was at the center of a bevy of major governmental antitrust enforcement actions and private antitrust lawsuits that may have a lasting impact on market participants and health care consumers alike. We mercifully close the books on 2020 by addressing this year's major developments in health care antitrust and forecast what lies ahead in 2021.

The Federal Trade Commission pursued an active health care enforcement agenda in 2020, rigorously investigating numerous hospital transactions. While the nature and scope of many of the agency's investigations remain nonpublic, the FTC's pursuit of multiple lawsuits underscores an increased scrutiny of deals involving competing hospitals.

Commanding the most headlines was the agency's February suit to block Thomas Jefferson University's acquisition of Einstein Healthcare Network in Philadelphia.[1]

In the administrative complaint, the FTC alleged not only anti-competitive effects arising from the transaction in the market for inpatient general acute care services, but also in the market for inpatient rehabilitation services.[2]

This case marked the first instance of the FTC attempting to define inpatient rehabilitation services as a relevant product market.

On Dec. 8, the U.S. District Court for the Eastern District of Pennsylvania rejected the FTC's challenge to the transaction, holding that the government did not meet its burden of proving that local insurers would be forced to accept a price increase for health care services if the transaction was allowed to proceed.[3]

Displaying a skepticism of the testifying insurers' motives for opposing the deal, the court concluded that the FTC, which relied almost entirely on contested econometric models and testimony from Independence Blue Cross — the largest insurer in the area — failed to identify a relevant market and it therefore could not justify enjoining the transaction.[4]

While Jefferson and Einstein are undoubtedly celebrating the decision, the FTC is widely expected to appeal the ruling to the U.S. Court of Appeals for the Third Circuit, ensuring continued scrutiny of the potential transaction.

On the heels of the Jefferson suit, the FTC also sued to block Methodist Le Bonheur Healthcare's proposed acquisition of two Tenet Healthcare hospitals in Memphis, Tennessee.[5]

As with the Jefferson litigation, the FTC alleged anticompetitive effects in the market for inpatient general acute care services, but emphasized that the transaction is particularly problematic due to the prevalence of narrow health insurance networks in the Memphis area and the risk that health plans would have less choice in lower-cost coverage post-transaction.

And in early December, the FTC capped off the year by initiating a third suit blocking a recently announced hospital transaction.

Hackensack Meridian Health's proposed acquisition of the Englewood Healthcare Foundation's single hospital in Bergen County, New Jersey, has been alleged by the FTC to increase HMH's bargaining leverage with insurers — likely leading to an increase in prices — while removing the incentives Englewood and HMH once had to compete vigorously on quality.[6]

The market for inpatient general acute care services is FTC's primary concern given that HMH is one of the largest health systems in New Jersey with 12 hospitals across eight counties; and Englewood is one of the very few remaining independent hospitals. Like with the Jefferson and Methodist transactions, the parties have signaled their intention to defend the legality of the transaction in court.

Consolidation of health care providers is increasing due to market conditions exacerbated by the coronavirus pandemic and industry observers and health care providers should expect the high level of enforcement activity to continue.

The DOJ secured a $100 million penalty from Florida oncology provider for criminal antitrust conspiracy.

On April 30, the U.S. Department of Justice's Antitrust Division announced that it had brought a one-count felony charge against Florida Cancer Specialists & Research Institute LLC, an oncology group headquartered in Fort Myers, Florida, for conspiring with another provider group — referred to as Oncology Company A — to suppress competition by allocating cancer patients in Southwest Florida.[7]

According to the charge, the parties, among other things, agreed through conversations and communications that FCS would provide medical oncology services but not radiation oncology services and that Oncology Company A would provide radiation oncology services to the exclusion of medical oncology services.[8]

The conspiracy was alleged to have dated back to as early as 1999 and was in effect until at least September 2016. During the relevant time period, FCS — one of the largest private oncology practices in the country — generated more than $950 million in revenue. The DOJ alleged that the conspiracy to allocate services was a per se violation of the Sherman Act, meaning that the conduct at issue was conclusively presumed to harm competition.

The DOJ and FCS entered into a deferred prosecution agreement that includes, in part, FCS's agreement to pay a $100 million criminal penalty, the maximum allowable for violations of Section 1 of the Sherman Act.[9]

In addition, FCS agreed to pay the state of Florida more than $20 million in disgorgement of profits and abide by other terms of relief to resolve the state's investigation.[10] The DOJ indicated that it entered into the DPA as a means of lessening the disruption to FCS' patients and employees and in recognition of FCS' willingness to cooperate with the DOJ's pending investigation.

The DOJ signaled that this action is the first in a broader investigation of market allocation in the oncology industry. Given the extraordinarily high monetary and reputational stakes associated with this kind of enforcement action, providers are well-advised to maintain a robust antitrust compliance program.

Blue Cross Blue Shield reached a tentative settlement in an antitrust lawsuit brought by subscribers.

In October, subscriber plaintiffs and defendants Blue Cross Blue Shield Association and its member plans reached a landmark settlement of a multidistrict antitrust class action initiated in 2012.[11] The proposed settlement was likely precipitated by an earlier court ruling that the alleged conduct of the defendants would be governed by the per se standard of liability.

The plaintiffs, health insurance subscribers consisting of employers and individual policyholders throughout the country, alleged that BCBSA and its member plans (e.g., Blue Cross and Blue Shield of Alabama) violate federal and state antitrust laws through, among other things, licensing agreements that allocate geographic territories, restrict competition among the member plans, and restrict member plans' ability to be sold to non-BCBSA companies.

As a result of the alleged suppression of competition among the member plans, subscribers allegedly are saddled with fewer choices for health insurance and higher premiums.

In addition to creating a $2.67 billion settlement fund to resolve the subscribers' monetary claims, the proposed settlement agreement includes injunctive relief intended to enhance competition in health insurance markets. Key relief includes:

  • Relaxing rigid bidding rules that will permit certain national accounts to seek bids from more than one BCBSA member plan;
  • Permitting self-funded customers to contract directly with nonprovider vendors for ancillary services, such as analytics, benchmarking or concierge services;
  • Loosening contractual restrictions on the acquisition of member plans;
  • Limiting usage of most-favored-nations provisions in contracts with providers; and
  • Eliminating BCBSA's "national best efforts" rule, a revenue cap requiring that two-thirds of each member plan's national health care revenue come from Blue-branded services (as opposed to non-Blue revenue, i.e. services marketed through affiliate companies not using BCBS trade names or marks).

The proposed settlement empowers a monitoring committee to track compliance with the injunctive relief for a period of five years after the court issues a final order. By chipping away at the Blues' complex web of business practices developed over the course of many decades, the injunctive relief is intended to foster additional competition in markets where its plans hold a dominant position.

The DOJ takes aim at partial hospital acquisition in Pennsylvania.

On Aug. 5, the DOJ filed a lawsuit in the U.S. District Court for the Middle District of Pennsylvania challenging Geisinger Health System's recent transaction with a competing hospital, Evangelical Community Hospital.[12]

Pursuant to an agreement executed in February 2019, self-styled as a collaboration agreement, Geisinger acquired a 30% interest in Evangelical while committing to invest $100 million in that hospital.

In return, Geisinger received rights of first offer and first refusal with respect to Evangelical's future competitive initiatives. Geisinger also secured power over Evangelical's use of such funds.

Post-transaction, the parties would operate five of the eight hospitals in a six-county area in central Pennsylvania and, combined, would account for 71% of inpatient general acute care discharges in that area. The case is in early pleading stages.

Meanwhile, Geisinger and Evangelical are subject to a hold-separate agreement entered into in October 2019.

According to the complaint, Geisinger's partial acquisition of Evangelical was undertaken in lieu of a full acquisition because the parties recognized that a full acquisition would pose a substantial antitrust risk.

In structuring the transaction, the parties sought to mitigate any concerns about potential competitive harm by agreeing to negotiate separately with commercial health plans. Nonetheless, DOJ concluded that the transaction was, on balance, anticompetitive because it reduced the parties' incentive to compete going forward as well as facilitated collusion through the sharing of competitively sensitive information between them.

This case is a departure from traditional antitrust enforcement in that it focuses on the alleged dampening of competition from a partial acquisition, notwithstanding a transactional structure that does not combine the price-setting function, which traditionally has been the primary determinant of accretive market power.

In an industry marked by many forms of competitor collaboration aimed at achieving efficiencies and improving financial health ­— including joint ventures, joint operating agreements and the like — the outcome of this case is likely to impact how competing providers approach future affiliations. 


2020 was an extraordinary year for the health care sector, and the antitrust enforcement landscape was no exception. As demonstrated by the BCBS and FCS cases, private litigation and even criminal prosecution remain effective means of restoring and preserving competitive health care markets.

Moreover, federal review of hospital transactions — on both a retrospective and prospective basis — is likely to remain active in 2021 and beyond. The FTC announced in September that it has revamped its merger retrospective program aimed at studying the effects of consummated mergers.[13]

Among other things, the FTC will reassess whether the screening devices traditionally employed in the merger review process, such as price pressure measures, have been too permissive.

The FTC also intends to study competitive issues that rarely have been examined in the course of merger review, such as how combinations impact labor markets. It is a virtual certainty that the lessons learned through the merger retrospective program will shape the agency's enforcement agenda for years to come.

The financial and operational challenges caused by the pandemic will undoubtedly drive competing providers to pursue various forms of consolidation, including mergers.

However, as it pertains to prospective antitrust enforcement, the FTC and DOJ have made clear that, notwithstanding the hardships caused by COVID-19, they intend "to responsibly enforce the antitrust laws to protect the health, safety, and welfare of all Americans."[14]

Accordingly, hospital providers pursuing high-risk transactions should not expect leniency from either agency, even if the parties' rationale for combining is largely related to the effects of the pandemic. Those transactions that have historically raised competitive issues will continue to face intense scrutiny.

As we usher in a new administration in 2021, there should be no expectation of a slowdown on the antitrust enforcement front. Key members of President-elect Joe Biden's transition team have said as much.[15] We fully expect the health care industry, once again, to be at the center of these initiatives.

Republished with permission. This article, "An Active Year For Health Care Antitrust Enforcement," was first published by Law360 on December 15, 2020. The original article can be accessed here.



[3] Federal Trade Commission v. Thomas Jefferson University, 2:20-cv-01113-GJP (U.S. District Court for the Eastern District of Pennsylvania December 8, 2020).

[4] Id. at 60-61.







[11] In re Blue Cross Blue Shield Antitrust Litigation, MDL 2406 (N.D. Ala.).





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