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White House Gets FTC to Heel

 |  By Philip Betbeze  
   October 08, 2010

It's been several months since the Patient Protection and Affordable Care Act, otherwise known as health reform, was passed by Congress. It was President Obama's key legislative achievement and was trumpeted from the halls as a new era in healthcare. Yet some of its key provisions, including the encouragement of healthcare providers to band together to improve the quality and continuity of care, seemed to directly conflict with the Federal Trade Commission's targeting of hospitals and health systems in antitrust actions.

The conflict was especially troubling if one entity wanted to own all these parts and pieces. Essentially, you had the government telling hospitals and health systems to band together on one hand, and threatening them with punishment for that action with the other hand.

I've talked to numerous CEOs about this issue in informal conversations since health reform legislation was passed, and none really had an answer for how this dichotomy might be addressed. They did, however, privately acknowledge it was a problem. Roughly six months later, we have our answer—and it's a big flip-flop from where we were only a month or so ago.

A couple of days ago, the FTC finally spoke. The upshot: They're looking for ways to relax its  enforcement of antitrust actions against healthcare providers in order to facilitate the formation of so-called accountable care organizations. But what took so long? In a climate in which an industry already hidebound by regulation is facing such drastic changes—from structures of care to reimbursement—time is of the essence.

In case you hadn't noticed, the FTC has gotten quite good at undoing hospital and health system acquisitions that they deem anticompetitive—all while the nation's health insurers have  gained enviable market clout through the same strategy, with little more than light regulatory pressure from the FTC to maintain competitive markets. Perhaps they were looking for the wrong bogeyman.

Insurers compete with each other to a degree, but they compete with hospitals and health systems more acutely. Except in the few cases where a hospital or health system has enough market clout to ensure higher reimbursement per patient, many standalone and small hospital systems are  unable to break even under that reimbursement scheme.

In any case, the story, in which the FTC promised to waive certain antitrust laws if they hindered the creation of effective ACOs, was welcome news for hospital and health system leaders who are trying to figure out what services and employees to cobble together to form ACOs. Much of the reform legislation becomes real in 2014, but hospitals and health systems need as much lead time as possible to try to innovate through a maze of conflicting government regulatory relationships and federal turf battles. This is just one glaring example of many more that undoubtedly fly under the radar.

Although the announcement could be interpreted as the president calling off the dogs, it's a little more complicated than that. Look for new regulations (who knows when those will be out) that will provide a safe harbor, or several, so that doctors, hospitals and other medical professionals will know exactly how they are able to collaborate and how they are not.

But it won't be that simple. It never is when government regulations come into play. The agency further suggested it might develop an expedited review process for the ACOs that fall outside the safe harbors, whatever they may permit.

The rhetoric is welcome. The proof will come later.

Editor's note: This is only one potential regulatory landmine, but there are others. I'd be interested to hear about any you know of that need to be fixed so that the admirable goals of healthcare reform aren't ultimately undone by the rules of the game. The only way to get them changed is to shed light on them—the sooner the better. Please email me at the address below.

Philip Betbeze is the senior leadership editor at HealthLeaders.

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