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Analysis

Nonprofit Hospitals and Antitrust Enforcement: Should FTC Have Jurisdiction?

By Steven Porter  
   September 17, 2019

'We ought to consider that,' said Sen. Chuck Grassley during a hearing with witnesses from FTC and DOJ regulators, who asked for more resources to protect competition.

Republican Sen. Chuck Grassley of Iowa reprised his concerns Tuesday over anticompetitive practices among healthcare providers, and he suggested that Congress should think about empowering more regulators to keep an eye on the industry's numerous nonprofits.

During an antitrust subcommittee hearing on Capitol Hill, Grassley asked witnesses from the Federal Trade Commission (FTC) and Department of Justice (DOJ) about a letter he wrote nearly a year ago calling for a formal antitrust review of the contracting practices among hospitals and insurers.

Quoting from a report in The Wall Street Journal on so-called "anti-steering clauses," his letter accused dominant hospital systems of using "secret contract terms to protect their turf" and thwart attempts to lower costs.

"Has the FTC looked into these practices in more detail since my letter last fall? Are they problematic?" Grassley asked during Tuesday's hearing. "What actions, if any, has the FTC taken?"

FTC Chairman Joseph Simons said his team would like to do more to address Grassley's concerns but that they are butting up against statutory limitations.

"We're very interested in looking at unilateral conduct by hospitals, that are problematic under the antitrust laws," Simons said. "But, generally when we do that, we find that they're nonprofits, and we don't have jurisdiction over them."

"That's another reason why we've been asking the Congress to eliminate our exemption for nonprofits," Simons said.

"Gosh, I never gave that any thought," Grassley replied. "We ought to consider that."

Unlike the FTC, the DOJ does have authority over nonprofits, said Makan Delrahim, assistant attorney general for the DOJ's antitrust division. The DOJ has exercised that authority in two enforcement actions to block anti-steering practices in healthcare, including one case involving Charlotte, North Carolina–based Atrium Health, he said.

"We were prepared to litigate. It had been in investigation for over three years," Delrahim said of the Atrium case during Tuesday's hearing. "We entered into a consent decree where the hospital system terminated those practices just this past year."

Furthermore, a working group within the Trump administration is currently assessing whether there is a regulatory means by which to address these anti-steering practices, Delrahim said.

The discussion comes as competition among providers is eroding amid widespread market concentration and the administration looks to force hospitals to disclose their negotiated rates, with healthcare spending on track to account for nearly one-fifth of the economy within a decade.

Related: Nearly 3 in 4 Healthcare Markets Highly Concentrated, as Competition Erodes

Related: Seema Verma's American Dream: Empower Consumers, Unleash Competition

Steven Porter is an associate content manager and Strategy editor for HealthLeaders, a Simplify Compliance brand.


KEY TAKEAWAYS

The senator sent a letter to antitrust regulators nearly a year ago, seeking a formal review of hospital contracting practices.

The conversation comes as the Trump administration looks to force hospitals to disclose their negotiated rates.


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