FTC's Pitofsky Outlines How Antitrust Enforcement can Adapt to Rapidly Changing Health Care Arena.

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Federal Trade Commission Chairman Robert Pitofsky said today that further guidance under existing laws rather than statutory directives being considered by Congress are the best way to aid further development of procompetitive provider-directed health plans. Pitofsky made his remarks in testimony before a Congressional panel today.

The FTC is reviewing how factors beyond sharing financial risk by the providers in a network might legitimately justify a more extended antitrust analysis of those networks that directly set or affect prices for their services. Pitofsky said the FTC would complete the inquiry, begun several months ago, including its discussions with state-level antitrust enforcers, and would work with the Department of Justice to provide additional guidance concerning the application of antitrust laws to provider networks within six months. Therefore, Pitofsky said, while the FTC agrees with the goals of the proposed legislation, it recommends against enactment of a bill currently being considered by the panel. Clarification of existing guidelines is a better way to achieve useful results, he said.

The hearing on health care reform issues at which Pitofsky presented the FTC testimony was held by the House Judiciary Committee, which is considering H.R. 2925, the Antitrust Health Care Advancement Act of 1996, and related bills.

According to the Commission testimony, legislative directives might allow clearly anticompetitive conduct of the type previously challenged by the Commission as harmful to consumers to escape the presumption that it is illegal. The legislative approach "would rigidify the development of physician networks in the sense that organizers would seek to establish networks that fall within the technical requirements of the legislation rather than those networks that ensure maximum patient benefit."

Pitofsky also noted that federal antitrust enforcement has been a key factor in the emergence of new and more efficient health care delivery systems over the past two decades and will continue to be important in the future. "Although health care markets have changed dramatically, collective action by health care providers to obstruct cost-containment efforts by purchasers unfortunately remains a significant threat to consumers," he said, citing the numerous cases that the FTC and Justice Department have brought in recent years challenging price fixing and boycotts that raise health care prices.

In addition to bringing cases, the agencies have published guidelines, and responded to individual requests for guidance, to help the industry understand how antitrust laws apply in certain situations. Despite favorable treatment of most provider organizations in that guidance, the Commission said it recognizes concerns expressed by some that the agencies may have been too restrictive, and that H.R. 2925 grew out of those concerns. The current review by the agency is inteded to identify those factors that might justify more lenient antitrust treatment of provider networks.

H.R. 2925 would specify that certain kinds of health care provider networks would not be subject to the presumption of illegality, but rather would have to be judged "on the basis of [their] reasonableness, taking into account all relevant factors affecting competition...." While the Commission supports the goals of the legislation, "[o]ur experience persuades us that health care markets are changing far too quickly to assess the potential efficiencies of provider collaboration on the basis of any single set of fixed criteria," Pitofsky said.

"In addition, the proposed legislation presents a risk of immediate consumer harm from anticompetitive conduct. . . . The per se prohibition on certain forms of highly anticompetitive conduct -- such as price fixing and market division -- is an important tool . . . that seeks to avoid unnecessary, complex, prolonged, and costly inquiries concerning conduct where the potential harm to competition is clear, and the conduct has, at best, only limited potential to create substantial efficiency benefits for consumers."

The Commission vote on the testimony was 5-0. Copies of the testimony are available from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 202-326- 2502. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710. FTC news releases and other materials also are available on the Internet at the FTC's World Wide Web site at: http://www.ftc.gov

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