1. Antitrust Review of Hospital-Physician Consolidations Antitrust Practice Group Mid-Year Luncheon February 11, 2013
This presentation was prepared from public sources. The views expressed herein are solely those of the authors and do not necessarily reflect those of the
Federal Trade Commission.
David A. Argue, Economists Inc.
Douglas C. Ross, Davis Wright Tremaine LLP
Christine L. White, Federal Trade Commission 1

2. Purpose of Merger Laws Merger laws protect competition
Clayton Act § 7 prohibits mergers or acquisitions that may substantially lessen competition or tend to create a monopoly.
Sherman Act § 1 prohibits contracts or combinations that unreasonably restrain competition.
Competition benefits consumers
Lower prices, better quality products
Increased choice, selection, convenience, and innovation 2 2

3. Recent Federal and State Investigation and Enforcement
California Attorney General Investigation
Issued subpoenas to hospital systems and health plans in California
Investigation reportedly focuses on whether hospital systems’ acquisitions of physician groups are creating market power and leading to higher prices
Wall Street Journal, “Doctor, Hospital Deals Probed” (Sept. 13, 2012) 3 3

4. Recent Enforcement, cont’d
Providence/Spokane Cardiology (FTC)
Acquisition of 2 cardiology groups announced 7/2010
Deal abandoned 2/2011, each group subsequently acquired by nearby hospitals
FTC’s first public announcement re: physician investigation 4/2011
Renown Health (FTC and NV AG)
In 2 separate transactions, Renown acquired 2 largest physician cardiology practice groups in Reno
Employed 88% of total 30 physicians (3/2011)
2012 Consent releases =<10 physicians from non-competes 4 4

5. Recent Enforcement, cont’d
Urology of Central PA (PA AG)
Consummated 2005 merger of only 5 independent urology practices in Harrisburg
Alleged 84% share and reduction in provision of less expensive services
2011 Decree requires group to negotiate in good faith with health plans; disclose treatment options to patients; pay $100,000 to uninsured prescription fund
Maine Health Medical Center (ME AG)
Proposed acquisition of 2 largest cardiology groups in S. Maine
2011 Consent governing payment rates, use of restrictive employment agreements and exclusivity 5 5

6. Business Rationale/ Government Rationale
What is driving the consolidation?
Business rationales for integration
Quality improvement
Cost savings/efficiencies
Payment realities (billing and coding)
Why do antitrust enforcers care?
Market power 6 6

7. Physician Competition
FTC Model: Two-Stage Hospital Competition
Providers and payors bargain in Stage I
Patients choose providers in Stage II
System competition among integrated hospital-physician entities 7 7

8. Merger Analysis Market Definition Market Power Competitive Effects
Relevant product market
Relevant geographic market
Market Power
Calculating market shares
Ease of entry
Competitive Effects
Distinguishing anticompetitive price increases from “integrated system” or “regulatory” price increases
Efficiencies 8 8

9. Remedies Structural Behavioral “Divestiture” – Renown
Behavioral – Urology of Central PA, MaineHealth 9 9

10. “Take-Aways”
The government is investigating and challenging physician consolidation enforcement actions
Non-reportable transactions don’t necessarily escape scrutiny
Fact of consummation does not shield a deal
Customer views can play important role
Contemporaneous documents matter
No antitrust exemption for “ACOs” 10 10