Health Care: Federal and State Antitrust Actions Concerning the Health
Care Industry (Letter Report, 08/05/94, GAO/HEHS-94-220).
In response to a request to review antitrust enforcement actions
involving hospitals by the Department of Justice and the Federal Trade
Commission (FTC), GAO found that of 397 acute care hospital mergers
reviewed by Justice and the FTC in the 13 year period of fiscal year
1981 through fiscal year 1993, less than 4 percent were challenged. For
an additional 13 percent of these mergers, Justice or the FTC conducted
a preliminary investigation and then allowed the mergers to go forward.
The remaining 83 percent of cases involved no more than the required
initial filing of notice of proposed merger. Neither Justice nor the
FTC has ever challenged a hospital joint venture. GAO also found that
the hospital industry has actively sought enactment of state laws that
would confer antitrust immunity to collaborative actions by hospitals,
such as mergers, joint ventures, and sharing of patients and equipment.
Since 1992, 18 states have enacted regulatory programs for state
approval of hospital activities that can fall under antitrust statutes.
Such state laws are sought because under the state action immunity
doctrine established by the Supreme Court, certain anticompetitive
conduct regulated by the states may be immune from federal antitrust
enforcement action.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: HEHS-94-220
TITLE: Health Care: Federal and State Antitrust Actions Concerning
the Health Care Industry
DATE: 08/05/94
SUBJECT: Health care services
Hospitals
Antitrust law
Law enforcement
State-administered programs
State law
Restrictive trade practices
Federal/state relations
Competition
IDENTIFIER: Colorado
Florida
Georgia
Idaho
Kansas
Maine
Minnesota
Montana
Nebraska
New York
North Carolina
North Dakota
Ohio
Oregon
Tennessee
Texas
Washington
Wisconsin
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Cover
================================================================ COVER
Report to the Honorable
Fortney H. (Pete) Stark, House of Representatives
August 1994
HEALTH CARE - FEDERAL AND STATE
ANTITRUST ACTIONS CONCERNING THE
HEALTH CARE INDUSTRY
GAO/HEHS-94-220
Antitrust in the Health Care Industry
Abbreviations
=============================================================== ABBREV
AHA - American Hospital Association
DOJ - Department of Justice
FTC - Federal Trade Commission
MRI - magnetic resonance imaging
Letter
=============================================================== LETTER
B-252783
August 5, 1994
The Honorable Fortney H. (Pete) Stark
House of Representatives
Dear Mr. Stark:
One of the issues the Congress is concerned about as it debates
health care reform is how antitrust laws should be applied to the
health care industry. The prospect of national health care reform as
well as reforms occurring in a number of states is encouraging change
and consolidation in the health care industry. The health care
market appears to be evolving toward service networks, where
different types of health care providers (such as hospitals,
physicians, and allied health professionals) are integrated into
networks. Many experts believe that future competition in the health
care industry will be among networks, not among providers.
The nation's antitrust laws exist to protect free market competition.
Some in the health care industry have argued that competition among
hospitals for patients has led to a "medical arms race," which has
increased society's overall health care costs. On the other hand,
proponents of antitrust enforcement claim that promoting competition
has produced a sufficient quantity of high-quality services at
reasonable prices.
The American Hospital Association (AHA) has urged the federal
government to clarify its policy on hospital mergers and joint
ventures and has also urged state associations to promote state
action to immunize such agreements from federal antitrust scrutiny.
In a 1992 report,\1 AHA stated that there was a need for additional
guidance on how the antitrust laws are applied in investigations
involving hospital collaborations. A February 1993 memo from the
office of AHA's General Counsel to state hospital association
officers discussed several issues, including ongoing supervision and
the role of the state Attorney General, that should be considered in
drafting a statutory scheme intended to immunize hospital cooperative
transactions from federal antitrust laws.\2 AHA attached a copy of
Maine's "Cooperative Agreement" legislation to this memo. In March
1993,\3 AHA further claimed that the uncertainty of antitrust policy
and the threat of enforcement has had a "chilling effect" on attempts
by hospitals to merge providers or to engage in joint ventures.\4 AHA
says that additional joint ventures and mergers could promote greater
efficiency in the delivery of health care services and help reduce
the current oversupply of facilities. Further, AHA says that more
mergers and joint ventures will be needed if hospitals are to remain
competitive in the health care industry.
You asked us to obtain information on antitrust enforcement actions
involving hospitals taken by the Department of Justice (DOJ) and
Federal Trade Commission (FTC), the agencies with primary
responsibility for enforcing the federal antitrust laws, and to
review state legislation that creates regulatory programs for the
approval of mergers and joint ventures among health care providers.
(Details on our scope and methodology are in app. I.)
--------------------
\1 Hospital Collaboration: The Need for an Appropriate Antitrust
Policy, AHA (Chicago, Ill.: Nov. 1992).
\2 Memo dated February 19, 1993, from AHA's Office of General Council
to Allied Hospital Association Chief Executive Officers regarding
immunizing hospital cooperative ventures through state action.
\3 Statement of AHA for hearings on antitrust in the health care
industry before the Subcommittee on Antitrust, Monopolies and
Business Rights, Committee on the Judiciary, United States Senate
(Mar. 23, 1993).
\4 Joint ventures include agreements to share patients; personnel;
equipment; support services; and medical, diagnostic, or laboratory
facilities.
RESULTS IN BRIEF
------------------------------------------------------------ Letter :1
Of 397 acute care hospital mergers reviewed by DOJ or FTC during the
13-year period from fiscal year 1981 through fiscal year 1993, less
than 4 percent were challenged.\5
For an additional 13 percent of these mergers, DOJ or FTC conducted a
preliminary investigation and then allowed the mergers to go forward.
The remaining 83 percent of cases involved no more than the required
initial filing of notice of proposed merger; that is, DOJ or FTC did
not seek any further data about the mergers and allowed them to go
into effect. Neither DOJ nor FTC has ever challenged a hospital
joint venture.
Under the state action immunity doctrine established by the Supreme
Court, certain anticompetitive conduct regulated by states may be
immune from federal antitrust enforcement action. The hospital
industry has actively sought enactment of state laws that would
confer such antitrust immunity to collaborative actions by hospitals,
such as mergers, joint ventures, and sharing of patients and
equipment. Since March 1992, 18 states have enacted regulatory
programs for state approval of hospital activities that can fall
under antitrust statutes.\6
The 18 state laws vary considerably in the types of providers and
activities covered, the state authorities that approve activities,
the role of antitrust enforcement officials in approving and
monitoring activities, the questions and issues that must be
addressed before approval is granted, and the nature and extent of
postapproval monitoring or supervision by the state. The following
examples illustrate the variations. Oregon's law covers only
hospital joint ventures related to heart and kidney transplant
services, and each joint venture must include the state teaching
hospital. On the other hand, Minnesota's law covers a wide array of
providers and activities. Under Idaho's law, the state Attorney
General is the approving authority of joint ventures and cooperative
agreements among health care providers, while five other state
statutes give their Attorney General no specific role in regulating
mergers or joint ventures. In the monitoring area, laws in Nebraska
and Washington require annual reports and include procedures for
revoking the state's approval of agreements, but a number of other
state laws do not mention the extent and frequency of monitoring.\7
--------------------
\5 We considered a merger to be challenged if DOJ or FTC sought an
administrative action or a formal move in court to block a merger,
the parties agreed to a consent decree that prohibited the merger or
allowed the merger to proceed with certain modifications, or the
parties withdrew a proposed merger after receiving notice that DOJ or
FTC planned to issue a second request for information or file suit to
block the merger.
\6 Other states may have regulatory programs that predate the current
flurry of activity in the hospital antitrust area. For example,
Maryland exempts mergers, consolidations, and joint ventures and
operations of major medical equipment from its antitrust laws if the
activity involved is approved by the state Health Resources Planning
Commission.
\7 Although the state laws do not mention specific monitoring
requirements, states may establish monitoring procedures through
rules or regulations.
BACKGROUND
------------------------------------------------------------ Letter :2
FEDERAL ANTITRUST LAWS
---------------------------------------------------------- Letter :2.1
The federal antitrust laws reflect a public policy principle that
free market competition protects consumers, checks private economic
power, and generally produces the best allocation of quality goods
and services at the lowest prices. Two major concerns of the
antitrust laws are "unreasonable" restraints on trade and monopolies.
Section 1 of the Sherman Act\8 prohibits all conspiracies or
agreements that restrain trade. As interpreted by the courts, this
prohibition applies to agreements that unreasonably restrain trade,
which may include agreements or conspiracies to fix prices, divide
market territories or groups of customers, boycott other firms, or
use coercive tactics with the intent and effect of injuring
competition. Section 7 of the Clayton Act\9 prohibits all mergers
and acquisitions of stock or assets that may substantially lessen
competition or that tend to create a monopoly.\10
Section 5 of the Federal Trade Commission Act\11 prohibits unfair
methods of competition.
--------------------
\8 July 2, 1890, c.647,1,26 Stat. 209, classified to 15 U.S.C. 1
(Supp. IV 1992).
\9 Oct. 15, 1914, c.323,7,38 Stat. 731, classified to 15 U.S.C. 18
(1988).
\10 A monopoly occurs when a single supplier has the power to control
prices or restrict output, including lowering quality, without fear
of competition.
\11 Sept. 26, 1914, c.311,5,38 Stat. 719, classified to 15 U.S.C.
45 (1988).
STATE ANTITRUST LAWS
---------------------------------------------------------- Letter :2.2
Historically, states took the lead in passing antitrust legislation
more than a century ago.\12 By 1890, when the Congress passed the
Sherman Act, 27 states had either a constitutional or statutory
provision banning monopolies or other restraints of trade. Today,
all states, with the exception of Pennsylvania and Vermont,\13 have
an antitrust law generally applicable to activity within the state.
Each of these state antitrust laws contains a provision analogous to
section 1 of the Sherman Act. Twelve states' laws have provisions
relating to mergers, but only half of those are analogous to section
7 of the Clayton Act.
--------------------
\12 This summary of state antitrust laws is condensed from "State
Antitrust Law and Its Application to Health Care: An Overview" (a
presentation by Michael F. Brockmeyer and Ellen S. Cooper before
the National Health Lawyers Association, Washington, D.C., Feb. 15,
1991).
\13 While they do not have a state antitrust law of general
applicability, Pennsylvania and Vermont incorporated the provisions
of section 1 of the Sherman Act into statutes applying to bid rigging
on governmental contracts.
APPLICATION OF ANTITRUST
LAWS TO HOSPITALS
---------------------------------------------------------- Letter :2.3
DOJ and FTC share responsibility for enforcing antitrust laws. DOJ
has responsibility for enforcing the Sherman Act, while FTC enforces
the Federal Trade Commission Act. Both agencies have jurisdiction
under the Clayton Act. Officials of both agencies told us that
certain actions, such as agreements among firms to fix prices or
divide markets, are on their face antitrust violations. These are
called "per se" violations. Actions not considered per se violations
are evaluated under the "rule of reason." (See app. II for more
details.)
A merger or joint venture between two or more hospitals may be
investigated by either DOJ or FTC under the Clayton Act. These
agencies have established a procedure for deciding, on the basis of
staff expertise, prior dealings with the parties involved, and case
load, which will investigate a particular merger or joint venture.
While either agency may investigate a merger or joint venture for
civil violations, once criminal conduct is suspected, the case is
referred to DOJ. Private parties and state Attorneys General may
also sue to block mergers or joint ventures under either the Sherman
or Clayton Act.
STATE ACTION IMMUNITY
DOCTRINE
---------------------------------------------------------- Letter :2.4
Depending on the degree of state supervision and control of hospital
activities, hospitals may be immune from federal antitrust
enforcement under the state action immunity doctrine. For private
anticompetitive conduct to be immune from federal antitrust liability
under this doctrine the state must (1) clearly articulate and
affirmatively express a policy to displace competition with
regulation and (2) actively supervise and control the private
anticompetitive conduct.
The state action immunity doctrine originated in 1943 with the
Supreme Court's decision in Parker v. Brown.\14 The doctrine has
been refined several times, most recently in 1992, in FTC v. Ticor
Title Insurance Co.\15 The Ticor case involved state rate approval
programs for title search and examination by real estate title
insurance companies. Two state programs allowed for approval of
rates through a negative option; that is, rates that were initially
set by private parties were deemed approved if they were not
disallowed by the state within a specific time frame. The Court
ruled that this negative option did not meet the active supervision
test.
--------------------
\14 317 U.S. 341 (1943).
\15 112 S. Ct. 2169 (1992).
FEDERAL ENFORCEMENT ACTIONS
------------------------------------------------------------ Letter :3
The Hart-Scott-Rodino Antitrust Improvements Act of 1976 (P.L.
94-435, Sept. 30, 1976)\16 requires that parties notify both FTC and
DOJ of certain mergers, acquisitions, joint ventures, or tender
offers before consummation of the agreements. This filing
requirement applies to all parties engaged in such activities,
including hospitals, and covers agreements in which the acquiring
hospital has net sales or total assets of at least $100 million and
the hospital being acquired has assets of at least $10 million.
Based on information provided in these filings, DOJ and FTC decide
whether to allow the proposed merger to proceed or to open a
preliminary investigation. If the preliminary investigation
indicates that a potential violation exists, FTC or DOJ may issue a
second request for additional information to review before deciding
whether to challenge the proposed merger or collaboration as a
potential violation of antitrust laws.
For the 13-year period covering fiscal year 1981 through fiscal year
1993, DOJ and FTC received 397 Hart-Scott-Rodino filings involving
acute care hospital mergers and acquisitions. After initial review
of the filings, the two agencies conducted preliminary investigations
in 68 cases, or about 17 percent of the total filings. Less than
half of these resulted in second requests for information. The final
disposition of these cases showed that fewer than 4 percent of all
Hart-Scott-Rodino filings actually resulted in court challenge or
consent decree, or were withdrawn by the interested parties. This is
summarized in table 1.
Table 1
Acute Care Hospital Merger Enforcement
Actions Taken by Department of Justice
and Federal Trade Commission, Fiscal
Years 1981-93
Hart-Scott- No challenge; Court or
Fiscal Rodino Act Preliminary Second requests transaction allowed administrative Parties agreed to Hart-Scott-Rodino Act
year filings investigations for information to proceed challenge consent decree filing withdrawn
------ --------------- --------------- --------------- --------------------- --------------------- --------------------- ---------------------
1981 15 5 1 1
1982 9 2 1 1
1983 20 4 1 1
1984 29 4 1 1
1985 32 2 1 1
1986\c 27 3
1987 30 5 4 2 2
1988 43 5 1 1
1989 35 3 1 1
1990 36 9 8 7 1
1991 31 4 2 1 1
1992 42 9 3 2 1
1993 48 13 4 2 2
=====================================================================================================================================================
Total 397 68 28 13 7\d 3 5
-----------------------------------------------------------------------------------------------------------------------------------------------------
\a Because little information is retained about transactions in which
there was no competitive overlap between the acquiring and the
acquired companies, some transactions involving companies in the
health care industry that did not involve the acquisition of a
general acute care hospital may be included in the total number of
transactions. The table does not include transactions unless they
were subject to the premerger notification reporting requirements of
the Hart-Scott-Rodino Act.
\b The final disposition of a matter is entered in the year in which
the preliminary investigation is opened, even though the final
disposition may occur in a later fiscal year.
\c Data for total filings in fiscal year 1986 are estimated because
FTC changed its merger records system, and the information from that
year was not put into retrievable form.
\d Of these cases, the federal enforcement agencies won or obtained
settlements for all but one case.
The information in table 1 only reflects mergers. Officials at DOJ
and FTC told us that the agencies have never sought to block a
hospital joint venture.
--------------------
\16 15 U.S.C. 18a.
DOJ AND FTC ISSUED ANTITRUST
ENFORCEMENT POLICY STATEMENTS
FOR THE HEALTH CARE INDUSTRY
------------------------------------------------------------ Letter :4
In September 1993, DOJ and FTC issued a joint statement regarding
their enforcement policies for mergers and various joint activities
by providers in the health care industry.\17 This statement provided
information about six "antitrust safety zones" to lessen providers'
uncertainty about antitrust enforcement. These policies describe the
circumstances under which the agencies will not, as a matter of
prosecutorial discretion, challenge the conduct.
The policy statement includes safety zones for (1) certain types of
hospital mergers, (2) hospital joint ventures involving
high-technology or other expensive medical equipment, (3) physicians'
provision of information to purchasers of health care services, (4)
hospital participation in exchanges of price and cost information,
(5) joint purchasing arrangements among health care providers, and
(6) physician network joint ventures. Each of the safety zones is
described in appendix II.
The agencies also recognized that, in the light of anticipated health
care industry changes, additional antitrust guidance might become
desirable. Consequently, the agencies indicated that they would
issue additional policy statements as warranted.
AHA officials stated that the guidance in the September 1993 policy
statement was a helpful step in recognizing the importance of
antitrust issues to hospitals. AHA believes additional guidance is
needed and has raised this with DOJ and FTC officials.
Officials of state hospital associations and antitrust attorneys we
spoke with in the states we visited also believed that the policy
statements were helpful. Some antitrust attorneys also stated that
most of the information contained in the policy statements was not
new, with the exception of the safety zone for mergers involving
hospitals with fewer than 100 beds. In addition, most
representatives of state Attorneys General we spoke with said that
the information was not new.
--------------------
\17 "Statements of Antitrust Enforcement Policy in the Health Care
Area," issued by DOJ and FTC
(Sept. 15, 1993).
STATES ACT TO PROVIDE IMMUNITY
FROM ANTITRUST LAWS
------------------------------------------------------------ Letter :5
Since March 1992, 18 states have attempted to provide immunity from
federal and state antitrust laws for some activities of hospitals and
other health care providers. As of May 1994, 12 states had passed
legislation creating regulatory programs for hospitals forming joint
ventures, 5 states created programs for joint ventures and mergers,
and the regulatory program in the 18th state covers only mergers.
State hospital associations have actively promoted the establishment
of these state programs. All of these state programs appear to have
been enacted with the expectation that they would provide an
exemption from state antitrust laws and also provide immunity from
federal antitrust enforcement under the state action immunity
doctrine. None of the states' laws give automatic protection to any
specific type of agreement. Each of the laws establishes a voluntary
regulatory process,\18 which allows eligible providers to request
approval by the designated state regulatory authority.
As of May 1994, Maine, Oregon, and Washington each had approved one
agreement. In Maine, two hospitals and an affiliate of one of the
hospitals agreed to jointly operate a magnetic resonance imaging
(MRI) machine. In Oregon, two hospitals agreed to jointly operate a
kidney transplant program. In Washington, eight rural public
hospital districts agreed to send their nonemergency laboratory work
to a central laboratory. As of July 1994, Minnesota had one
agreement under review.
All 18 state programs cover at least some kinds of hospitals, and 10
states cover other health care providers, generally defined as any
person or health care facility licensed, registered, or certified by
the state to provide health care services. This would generally
include physicians, nursing homes, and ambulatory surgical centers.
In addition to health care providers involved in the direct delivery
of care, laws in Colorado and Nebraska cover negotiations to allocate
or consolidate referral of patients, services, or facilities.
Oregon's legislation is the least inclusive because it covers only
collaboration for kidney and heart transplant services and limits the
hospitals that may participate. Key elements of the state programs
are summarized in table 2, and appendix III presents more detailed
information on each state law.
Table 2
Key Features of State Regulatory
Programs Concerning Antitrust
Enforcement
Activities Providers
State covered covered Approval agency Limitations
------ ---------------- ---------------- ---------------- ------------------
Colora Joint ventures Hospitals Cooperative Program to sunset
do and agreements Health Care in July 1998
for the Agreements Board
allocation,
consolidation,
or referral of
patients,
services, and
facilities
Florid Joint ventures Certified rural Agency for Antitrust
a hospitals and Health Care exemptions apply
other certified Administration only to rural
rural health health care
care providers networks\a
Georgi Mergers Specified Governing Applies only to
a hospitals authority of the county hospital
county and a authorities in the
majority of each same county
hospital board
Idaho Joint ventures Hospitals, Attorney General
physicians, and
other health
care providers
Kansas Mergers and Hospitals, Secretary of the \
joint ventures physicians, and Department of
other health Health and
care providers Environment
Maine Joint ventures Hospitals Department of Program to sunset
Human Services in July 1995
Minnes Mergers and Hospitals, Commissioner of
ota joint ventures physicians, and Health
other health
care providers
Montan Joint ventures Hospitals, Health Care
a physicians, and Authority
other health
care providers
Nebras Joint ventures, Hospitals, Department of
ka and allocation, physicians, and Health
consolidation, other health
or referral of care providers
patients,
services, and
facilities\b
New Joint ventures Hospitals, Commissioner of Applies only to
York physicians, and the Department rural health care
other health of Public Health networks\a
care providers
North Joint ventures Hospitals Director of the
Caroli Department of
na Human Resources
North Joint ventures Hospitals, Department of
Dakota physicians, and Health and
other health Consolidated
care providers Laboratories
Ohio Joint ventures Hospitals Department of
Health
Oregon Joint ventures Hospitals Department of Applies only to
Human Resources heart and kidney
transplant
services, and must
include services
at the state
teaching hospital
Tennes Joint ventures\c Hospitals Department of
see Health
Texas Joint ventures Hospitals Department of
Health
Washin Joint ventures\d Hospitals, Health Services Different rules
gton physicians, and Commission\e apply to rural
other health public hospital
care providers districts\f
Wiscon Joint ventures Hospitals, Department of
sin physicians, and Health and
other health Social Services
care providers
--------------------------------------------------------------------------------
\a A rural health care network means an affiliation of health care
providers serving a rural area that plans, coordinates, provides, or
arranges for the provision of health care services. In Florida, a
rural health network must include a hospital and local rural
providers as certified by the state Agency for Health Care
Administration; New York defines a rural area as a county with a
population less than 200,000.
\b Although not specifically stated in the legislation, an official
of the Nebraska Association of Hospitals and Health Systems said the
legislation also covers mergers.
\c Although not specifically stated in the legislation, the Notice of
Proposed Rulemaking states that the law covers hospital mergers.
\d It is unclear whether the legislation covers mergers. A
representative of the state Attorney General told us that this will
have to be clarified in the implementing rules being drafted by the
Washington Health Services Commission.
\e Unless the agreement covers services or facilities that a state
agency has constitutional or statutory control over, agreements among
rural public hospital districts do not need to be approved by a state
agency; however, copies of all agreements must be filed with the
county auditor and Washington's Secretary of State.
\f A rural public hospital district is one that is authorized as a
hospital district and does not include a city with a population
greater than 30,000 within its geographic boundaries.
Most state hospital association officials and private antitrust
attorneys we interviewed believed these programs were necessary to
alleviate the perceived fear of antitrust liability among hospital
officials. The programs are also intended to encourage collaboration
among hospitals. Also, one state hospital association representative
said that hospital officials sometimes cite fear of antitrust
litigation as an excuse for not cooperating, and these state programs
eliminated that excuse.
--------------------
\18 If providers do not submit agreements for regulatory review, the
agreements receive no protection under these laws and run the risk of
being challenged on antitrust grounds.
VARIATION IN STATE LAWS
------------------------------------------------------------ Letter :6
In addition to the variation illustrated in table 2, the state laws
exhibit variation in the questions or issues to be addressed before
approval is granted. Maine's legislation provides a list of five
advantages and four disadvantages that must be considered by the
state agency before approval of a joint venture. Florida's law
states that any approved cooperative agreement must reduce costs and
provides five other criteria for evaluating proposed agreements;
however, Florida's law mentions no disadvantages to be considered.
Montana's law simply states that the Montana Health Care Authority
must weigh the extent to which the proposal is likely to result in
lower health care costs, greater access, or greater quality of health
care than would occur without the agreement. Georgia's law is silent
about advantages and disadvantages to be evaluated before approval of
a merger.
Another area in which state laws differ is the role articulated for
the state Attorney General. Idaho's law provides that the state
Attorney General is the approving authority for cooperative
agreements. North Carolina's law includes the state Attorney General
in the review process and gives him/her veto power over proposed
agreements. Minnesota's legislation gives the state Attorney General
an advisory role, permitting him/her to review all applications and
to provide written comments to the regulatory agency. The laws of
Georgia, Kansas, New York, Oregon, and Wisconsin provide no specific
role for the Attorney General in reviewing or approving proposed
agreements.
Finally, provisions in the state laws for monitoring approved
activities varied from extensive to little or none. Nebraska's law
requires the parties to any agreement to report annually on their
activities, and the state Department of Health can revoke its
approval of agreements if it determines that the likely benefits no
longer outweigh the disadvantages. North Carolina's law details the
information that the parties to an approved arrangement are required
to report to the Department of Human Resources every 2 years. Both
Maine's and North Dakota's laws are silent on the extent and
frequency of monitoring requirements; however, in each state, the
approving state agency may cancel an agreement under certain
conditions. Although Tennessee's law does not mention specific
monitoring requirements, it states that the Attorney General and the
Department of Health are entrusted with active and continuing
oversight. The laws in Georgia and Montana do not contain any
provisions dealing specifically with monitoring approved activities.
SUMMARY
------------------------------------------------------------ Letter :7
The hospital industry and others in the health care sector have
actively sought the enactment of state laws that would grant immunity
from federal and state antitrust enforcement actions related to
mergers, joint ventures, and other agreements that could fall under
the antitrust statutes. Since March 1992, the states have been
relatively active in this area, with 18 states passing laws that have
established regulatory programs for a variety of activities in the
health care industry as replacements for antitrust enforcement.
These laws exhibit considerable variation in their key provisions,
ranging from the types of activities covered to the extent of
required monitoring of activities that are approved under the laws.
Whether compliance with a regulatory program established under any of
the state laws will in fact confer federal antitrust immunity is
subject to interpretation by the courts. Moreover, such judicial
interpretation is necessarily dependent upon litigation being
brought; we are not aware of any such court challenges of these state
laws.
---------------------------------------------------------- Letter :7.1
Details on our scope and methodology are in appendix I. We did our
work between November 1992 and June 1994 in accordance with generally
accepted government auditing standards. We discussed a draft of this
report with representatives of DOJ and FTC. They generally agreed
with the facts as presented, and their comments are reflected in this
report where appropriate.
As arranged with your office, unless you publicly announce its
contents earlier, we plan no further distribution of this report
until 10 days after its issue date. At that time, we will send
copies to interested congressional committees; the Director, Office
of Management and Budget; the Secretary of Health and Human Services;
the U.S. Attorney General; and the Chairman, Federal Trade
Commission. We will also make copies available to other interested
parties on request.
If you have any questions, please call me at (202) 512-7119. The
major contributors to this report are listed in appendix IV.
Sincerely yours,
Sarah F. Jaggar
Director, Health Financing
and Policy Issues
SCOPE AND METHODOLOGY
=========================================================== Appendix I
We obtained the following information from DOJ and FTC for fiscal
year 1981 through fiscal year 1993:
the number of acute care hospital mergers that were reported to the
agencies under the Hart-Scott-Rodino Act,
the number of mergers that were subject to a preliminary
investigation,
the number of mergers for which a second request for information
was issued, and
the disposition of those merger cases for which a second request
for information was issued.
The scope of our work included joint ventures, but neither DOJ nor
FTC has ever challenged a hospital joint venture on antitrust
grounds.
Since March 1992, 18 states have passed legislation to create a
program whereby hospitals and, in some cases, other health care
providers may request state review and approval of joint ventures or
mergers. For some states, such as Minnesota and Washington, these
programs were part of broad health care system reform legislation.
For other states, such as Maine, these programs were specifically
tailored for joint ventures. All of these state statutes were
adopted with the expectation that the state program would confer
immunity from federal antitrust scrutiny for activities covered by
the state program, under the Supreme Court's state action immunity
doctrine.
As agreed with your office, we reviewed hospital exemption
legislation and various materials describing programs for the 18
states. Descriptions of state laws are current through May 1994. We
compared and contrasted the state programs on these elements:
the purpose for which the program was created;
the types and scope of activities covered;
the approval agency(ies);
the standards used for evaluating the proposed activity, including
both the advantages and the disadvantages evaluated;
the role and authority of the state Attorney General;
the monitoring program for approved activities; and
the provisions for issuing rules and regulations.
Among the states that passed legislation to create a state regulatory
program, we visited Colorado, Maine, Minnesota, Oregon, and
Washington. During such visits, we met with representatives of the
state government (including representatives of the office of the
Attorney General), representatives of the state hospital association,
and hospital administrators to discuss the background, purpose, and
expected operation of the state program. For all states except
Oregon, we also met with officials from the agency or agencies
involved in reviewing and approving joint ventures and mergers to
discuss the background, purpose, and expected operation of the state
program. In addition, in Colorado, Oregon, and Washington we met
with private attorneys specializing in antitrust issues to discuss
the background, purpose, and expected operation of the state program.
Because these state programs are relatively new, there was little
history of operations to review. Also, we are not aware of any court
challenges testing whether the state programs qualify for exemption
from federal antitrust scrutiny under the state action immunity
doctrine. The other states with a regulatory program enacted since
March 1992 are Florida, Georgia, Idaho, Kansas, Montana, Nebraska,
New York, North Carolina, North Dakota, Ohio, Tennessee, Texas, and
Wisconsin.
We also met with representatives of DOJ, FTC, the American Hospital
Association, the Federation of American Health Systems, and the Joint
Commission on Accreditation of Healthcare Organizations to obtain
their views and perspectives on the issues surrounding antitrust
scrutiny of mergers and joint ventures within the health care
industry.
In August 1993, the Massachusetts Attorney General published
antitrust guidelines for reviewing hospital mergers. We reviewed
those guidelines and met with representatives of the office of the
Attorney General and the Massachusetts Hospital Association to
discuss the background, purpose, and expected effect from the
implementation of the guidelines.
APPLICATION OF ANTITRUST LAWS TO
HOSPITALS
========================================================== Appendix II
Antitrust laws, as they apply to hospitals, are intended to promote
an efficient and competitive hospital industry in which each hospital
has an opportunity to compete on the basis of price, quality, and
service. In general, potential antitrust violations are analyzed
under one of two rules, depending on the type of conduct or
arrangement involved: (1) the "per se" rule and (2) the "rule of
reason."
PER SE RULE
------------------------------------------------------ Appendix II:0.1
"Per se" violations involve certain business arrangements that are so
unlikely to produce redeeming consumer benefits that the conduct is
presumed illegal. As set out by the Supreme Court, the per se rule
applies to "agreements or practices which because of their pernicious
effect on competition and lack of any redeeming virtue are
conclusively presumed to be unreasonable and therefore illegal
without elaborate inquiry as to precise harm they have caused or the
business excuse for their use."\19
Examples of such agreements include price fixing and agreements to
divide markets. Outside legitimate joint ventures, hospitals cannot
agree to allocate services or customers among themselves based on
location or the types of service provided, even if the allocation is
supported by consumers and the business community.\20
--------------------
\19 Northern Pacific R. Co. v. United States, 356 U.S. 1, 4-5
(1958).
\20 Hospitals may participate in legitimate joint ventures that could
result in the allocation of services or customers if the joint
venture creates a new product or other efficiencies that benefit
consumers and outweigh any anticompetitive effects. A legitimate
joint venture involves financial risk sharing.
RULE OF REASON
------------------------------------------------------ Appendix II:0.2
Most joint arrangements to achieve market efficiencies, including
mergers, acquisitions, and joint ventures, are evaluated under the
"rule of reason,"\21 not the per se rule. This distinction arises
because mergers and joint ventures involve full or partial
integration of ownership and a sharing of economic risk, which might
provide incentives for efficiencies that may benefit consumers.
Under rule of reason analysis, DOJ and FTC weigh all the factors
surrounding an activity to determine whether the arrangement promotes
or suppresses competition, and, on balance, is more beneficial than
harmful to consumers.
Market power is a principal measure used to determine whether
competition will be unduly harmed by joint activities. Market power,
often measured by market share and market concentration, exists when
a party can increase price above, or decrease services or quality
below, competitive levels. Where no market power exists, antitrust
risk is remote. To the extent market power is created or enhanced by
a collaborative arrangement, if that arrangement is challenged, the
parties have the burden of proving that other factors (such as the
creation of efficiencies that will benefit consumers) outweigh the
threat to competition posed by the increased market power.
--------------------
\21 This description of the rule of reason is condensed from Hospital
Collaboration: The Need for an Appropriate Antitrust Policy, AHA
(Chicago, Ill.: Nov. 1992).
DOJ AND FTC HEALTH CARE POLICY
STATEMENTS
-------------------------------------------------------- Appendix II:1
To lessen some uncertainty about antitrust enforcement in the health
care industry, DOJ and FTC jointly published policy statements on
September 15, 1993. According to the "Statements of Antitrust
Enforcement Policy in the Health Care Area," the agencies intended to
educate the health care community and to reiterate that they will
continue to enforce the antitrust laws to protect consumers from
truly anticompetitive behavior.\22 The policy statement includes
guidelines describing the circumstances under which the enforcement
agencies would not, as a matter of prosecutorial discretion,
challenge mergers and various joint ventures in the health care
industry.
The guidelines highlight six "antitrust safety zones." DOJ and FTC
will not challenge conduct described in these safety zones as
violations of the antitrust statutes unless extraordinary
circumstances exist:\23
1. Hospital mergers. A merger of 2 general acute care hospitals
will not be challenged if 1 of the hospitals is at least 5 years old,
has had an average of fewer than 100 licensed beds over the 3 most
recent years, and has been averaging fewer than 40 inpatients a day
over the 3 most recent years.
2. Hospital high-technology joint ventures. A joint venture among
hospitals to purchase, operate, and market high-technology or other
expensive medical equipment (for example, a magnetic resonance
imager) is permissible if the joint venture involves no more
hospitals than are necessary to support use of the equipment.
3. Physicians' collective provision of information. Physicians'
collective provision of underlying medical data that may improve
purchasers' resolution of issues relating to the mode, quality, or
efficiency of treatment is unlikely to raise any significant
antitrust concern. For example, a medical society's collection of
outcome data from its members about a particular procedure they
believe should be covered by a purchaser and the provision of such
information to the purchaser will not be challenged.
4. Exchanges of price and cost information among hospitals.
Hospital participation in surveys about the prices they charge and
the compensation they pay staff will not be challenged, provided that
the surveys are managed by a third party, at least five hospitals are
included, no hospital represents more than 25 percent (on a weighted
basis) of the total for any category of data reported, data are
aggregated in a manner that cannot be identified with any particular
hospital, and the data are more than 3 months old.
5. Joint purchasing arrangements among health care providers. Joint
purchasing arrangements among institutions are protected from
prosecution if (1) the purchasing arrangement accounts for less than
35 percent of the total sales for the items in the relevant market
and (2) the cost of the products and services purchased jointly
accounts for less than 20 percent of each competing participant's
total revenues.
6. Physician network joint ventures. Physician network joint
ventures will not be challenged if (1) the joint venture includes no
more than 20 percent of the physicians in a specialty with active
hospital staff privileges practicing in the relevant geographic
market and (2) the physicians share substantial financial risk.
--------------------
\22 DOJ and FTC (Sept. 15, 1993).
\23 DOJ and FTC did not define "extraordinary circumstances," but
they said they expect that such circumstances would be rare.
MAJOR FEATURES OF STATE ANTITRUST
LEGISLATION
========================================================= Appendix III
We obtained copies of the laws passed since 1992 concerning mergers
or joint ventures among health care providers by the 18 states that
have created a regulatory program covering such activities. Each of
the laws establishes a voluntary regulatory process that allows
eligible providers to request approval by the state regulatory
authority. All of these state programs appear to have been enacted
with the expectation they would provide an exception from state
antitrust laws and provide immunity from federal antitrust laws under
the state action immunity doctrine. None of the states' laws give
automatic immunity to any specific type of agreement. Certain key
features of those state laws are summarized in this appendix.
Descriptions of the state laws are current through May 1994.
Although we attempted to ensure the accuracy of these descriptions,
they were not reviewed by state officials.
COLORADO
------------------------------------------------------- Appendix III:1
TITLE AND EFFECTIVE DATE OF
LEGISLATION
----------------------------------------------------- Appendix III:1.1
The Hospital Efficiency and Cooperation Act, July 1993
(1993 Colorado Sess. Laws p. 1888; Colorado Rev. Stat. sec.
24-32-2701 (1993))
STATED PURPOSES OF
LEGISLATION
----------------------------------------------------- Appendix III:1.2
The legislation made the following declaration. The normal forces of
competition have not been effective in controlling increases in
health care costs or inefficient duplication of services.
Additionally, state and federal regulations have constrained the
ability of hospitals to acquire and develop improved equipment and
methods of service. Federal and state antitrust laws have inhibited
the formation of cooperative health care agreements; however,
cooperative agreements are likely to foster improvements in the
delivery, quality, or cost effectiveness of health care; improve
access to needed services; enhance the likelihood that rural
hospitals in Colorado will remain open to serve their communities;
and provide flexibility for local communities to design, foster, and
develop programs to meet their specific health care needs. Such
cooperative agreements would also facilitate the formation of
treatment facilities and the acquisition of needed equipment, promote
economies of scale, and prevent the inefficient duplication of
services.
The legislation provides a limited exemption and immunity from the
antitrust laws to encourage the development of cooperative health
care agreements and limits regulation to specific cooperative health
care agreements that have been submitted voluntarily for approval.
Further, it regulates cooperative agreements and displaces any
competition that might otherwise exist.
SCOPE OF COVERAGE
----------------------------------------------------- Appendix III:1.3
The legislation covers "cooperative agreements," defined as joint
ventures or other agreements involving one or more hospitals for the
purpose of sharing, allocating, consolidating, or referring
patients, personnel, instructional programs, support services and
facilities;
medical, diagnostic, or therapeutic facilities, services, or
procedures; and
other services traditionally offered by health care providers.
APPROVAL AGENCY
----------------------------------------------------- Appendix III:1.4
Cooperative Health Care Agreements Board, an 11-member board
STANDARDS FOR EVALUATING
PROPOSED AGREEMENTS
----------------------------------------------------- Appendix III:1.5
The agreement will be approved if the agreement is likely to improve
the cost effectiveness, availability, quality, or delivery of
hospital or health care services and is consistent with other state
statutory health care policies and programs.
ADVANTAGES EVALUATED
--------------------------------------------------- Appendix III:1.5.1
The Board must consider whether the agreement would
enhance the availability or quality of hospital or health care
provided to Colorado citizens;
preserve hospital or other health care facilities or services
within geographic proximity to the communities traditionally
serviced by such facilities;
reduce service costs and/or increase the efficiency with which
services are provided by the health care providers involved;
avoid unnecessary duplication and improve the utilization of health
care resources and capital equipment;
provide services that would not otherwise be available;
affect patients and employees of parties to the agreement; and
affect competition in the health care system, including a
consideration of the benefits of any reduction or elimination of
competition and whether such benefits equal or exceed the
disadvantages of any such reduction or elimination of
competition.
In addition, the Board must consider the extent of community support
for the agreement.
DISADVANTAGES CONSIDERED
--------------------------------------------------- Appendix III:1.5.2
The legislation does not list any disadvantages that must be
specifically evaluated except for the disadvantages of reduced
competition mentioned in the previous section.
ROLE AND AUTHORITY OF THE
ATTORNEY GENERAL
----------------------------------------------------- Appendix III:1.6
All application agreements must be submitted to the Attorney General
for review and approval. Within 30 days after receiving an
application for approval, the Attorney General may become a party to
any proceedings by filing a written statement with the Board. The
Attorney General may request the Board to modify or terminate
approval of a cooperative agreement, or appear before the Board in a
hearing regarding any request to modify or terminate approval. The
Attorney General may request an audit of the documents or of the
activities pertaining to the agreement.
MONITORING REQUIREMENTS
----------------------------------------------------- Appendix III:1.7
The Board may terminate or modify approval of an agreement. The
Board will review annual reports to evaluate the agreement's effect
on the availability, cost effectiveness, quality, and delivery of
hospital or health care services and to determine whether the parties
have complied with the terms of the agreement.
RULES AND REGULATIONS
----------------------------------------------------- Appendix III:1.8
The Board must promulgate rules requiring parties to an agreement to
submit annual reports. The Board shall review applications in
accordance with the standards listed above and any additional
procedures prescribed by its regulations.
FLORIDA
------------------------------------------------------- Appendix III:2
TITLE AND EFFECTIVE DATE OF
LEGISLATION
----------------------------------------------------- Appendix III:2.1
Health Reform Act of 1993, April 1993
(1993 Florida Laws ch. 93-129)
STATED PURPOSES OF
LEGISLATION
----------------------------------------------------- Appendix III:2.2
The purposes of the legislation are
to foster the development of rural health networks, replacing
competitive market forces with state regulation;
to provide immunity from state antitrust laws for consolidations of
hospital services or technologies and cooperative agreements
between members of rural health networks when these arrangements
improve the quality of health care, moderate cost increases, and
are made between members of rural health networks; and
to protect these arrangements from federal antitrust laws, subject
to the approval of the Agency for Health Care Administration.
SCOPE OF COVERAGE
----------------------------------------------------- Appendix III:2.3
The legislation provides for cooperative agreements or joint ventures
to consolidate services or technologies among providers who are
members of certified rural health networks.
APPROVAL AGENCY
----------------------------------------------------- Appendix III:2.4
Florida Agency for Health Care Administration
STANDARDS FOR EVALUATING
PROPOSED AGREEMENTS
----------------------------------------------------- Appendix III:2.5
The likely benefits resulting from the agreement must outweigh any
disadvantages attributable to any potential reduction in competition.
ADVANTAGES EVALUATED
--------------------------------------------------- Appendix III:2.5.1
The Agency must determine if the agreement would reduce or moderate
costs and meet any of the following criteria:
consolidate services or facilities in a market area used by rural
health network patients to avoid duplication;
promote cooperation between rural health network members in the
market area;
encourage cost sharing among rural health network facilities;
enhance the quality of rural health care; or
improve utilization of rural health resources and equipment.
DISADVANTAGES CONSIDERED
--------------------------------------------------- Appendix III:2.5.2
The legislation does not list any disadvantages that must be
specifically evaluated except for disadvantages attributable to a
reduction in competition.
ROLE AND AUTHORITY OF THE
ATTORNEY GENERAL
----------------------------------------------------- Appendix III:2.6
The Department of Legal Affairs (state Attorney General) has an
advisory role. It may be consulted when the Agency is reviewing an
application for approval.
MONITORING REQUIREMENTS
----------------------------------------------------- Appendix III:2.7
The Agency is to review each approved agreement at least once every 2
years to determine if state approval should be continued or
proceedings started to terminate the agreement.
RULES AND REGULATIONS
----------------------------------------------------- Appendix III:2.8
The legislation does not mention specific rules and regulations.
GEORGIA
------------------------------------------------------- Appendix III:3
TITLE AND EFFECTIVE DATE OF
LEGISLATION
----------------------------------------------------- Appendix III:3.1
The Hospital Authorities Law, July 1993
(1993 Georgia Laws p. 1020)
STATED PURPOSES OF
LEGISLATION
----------------------------------------------------- Appendix III:3.2
Purposes of the legislation applicable to hospital mergers are
to provide for the merger of certain local governmental hospital
authorities and to specify the terms, conditions, and effects of
such merger and
to provide that, in the exercise of certain powers, these hospital
authorities are acting pursuant to state policy and are immune
from antitrust liability to the same extent as the state.
SCOPE OF COVERAGE
----------------------------------------------------- Appendix III:3.3
The legislation provides for the merger of specified local
governmental hospital authorities in the same county.
APPROVAL AGENCY
----------------------------------------------------- Appendix III:3.4
The merger must be approved by both the governing authority of the
county and a majority of the board of each hospital authority
involved in the merger. The resolution adopted by each board must be
filed with the state.
STANDARDS FOR EVALUATING
PROPOSED AGREEMENTS
----------------------------------------------------- Appendix III:3.5
The legislation does not specifically list any advantages or
disadvantages that must be evaluated.
ROLE AND AUTHORITY OF THE
ATTORNEY GENERAL
----------------------------------------------------- Appendix III:3.6
The legislation does not mention any role or authority for the
Attorney General.
MONITORING REQUIREMENTS
----------------------------------------------------- Appendix III:3.7
The legislation does not mention any monitoring requirements.
RULES AND REGULATIONS
----------------------------------------------------- Appendix III:3.8
The legislation does not call for separate rule-making; however, the
legislation requires the following terms and conditions:
a merger is not effective until the governing authority of the
merging hospitals' county of operation properly appoints the
board of the surviving hospital and
a county whose hospital authorities have merged under the authority
shall not thereafter be prohibited from activating another
hospital authority.
The legislation further specifies that when a merger takes effect
each hospital authority that is a party to the merger merges into
the surviving hospital authority, and the separate existence of
such hospital authorities (except the surviving hospital
authority) ceases;
the ownership of and authority to operate the hospitals owned by
each hospital authority, and the title to all real estate and
other property owned by each hospital authority that is a party
to the merger, is vested in the surviving hospital authority;
the surviving hospital authority assumes all liabilities and
obligations of each hospital authority that is a party to the
merger; and
a proceeding pending against any hospital authority that is a party
to the merger may be continued as if the merger did not occur,
or the surviving hospital authority may be substituted in the
proceeding for the hospital authority whose existence ceased.
IDAHO
------------------------------------------------------- Appendix III:4
TITLE AND EFFECTIVE DATE OF
LEGISLATION
----------------------------------------------------- Appendix III:4.1
Session Law Chapter 283 Regarding Idaho Health Care Planning Act,
July 1994
(1994 Idaho Sess. Laws ch. 283)
STATED PURPOSES OF
LEGISLATION
----------------------------------------------------- Appendix III:4.2
The purposes of the legislation are
to provide to all Idaho residents a quality health care system for
a reasonable cost;
to prevent the deterioration of the system by the duplication of
services or the introduction of new categories of services that
are not necessary;
to promote cooperation among health care providers in health
planning activities;
to provide access to necessary care for all who require it;
to declare that it is in the public interest of the state to
provide for relief from penalties of state and federal law to
those cooperative health care planning activities that are
likely to benefit the residents of the state; and
to require the state, through the office of the Attorney General,
to provide direction, supervision, and control over approved
agreements in order to provide state action immunity under
federal antitrust laws to participating health care providers.
SCOPE OF COVERAGE
----------------------------------------------------- Appendix III:4.3
The legislation provides for cooperative agreements and agreements
for joint ventures involving the sharing, allocation, or referral of
patients or the sharing or allocation of personnel, instructional
programs, support services and facilities, procedures, or other
services customarily offered by health care providers. Health care
provider includes any person or health care facility officially
recognized by the state to provide health care services.
APPROVAL AGENCY
----------------------------------------------------- Appendix III:4.4
Idaho Office of the Attorney General
STANDARDS FOR EVALUATING
PROPOSED AGREEMENTS
----------------------------------------------------- Appendix III:4.5
Applicants must demonstrate by clear and convincing evidence that the
likely benefits resulting from the agreement outweigh any
disadvantages attributable to a reduction in competition that may
result.
ADVANTAGES EVALUATED
--------------------------------------------------- Appendix III:4.5.1
The Attorney General must weigh the extent to which the agreement
would
enhance the quality of health care provided to the consumers in the
state,
preserve hospitals and other health care facilities that
customarily serve the communities in the area likely to be
affected by the cooperative agreement,
improve the cost efficiency of services provided by the parties to
the cooperative agreement, and
avoid duplication and improve the utilization of health care
resources and equipment in the area likely affected by the
cooperative agreement.
DISADVANTAGES CONSIDERED
--------------------------------------------------- Appendix III:4.5.2
The Attorney General must also evaluate the disadvantages
attributable to any reduction in competition likely to result from
the cooperative agreement, including the extent to which the
agreement might
adversely affect the ability of health maintenance organizations,
preferred provider plans, hospital provider organizations,
persons performing utilization review, or other health care
payers to negotiate optimal payment and service arrangements
with hospitals and other health care providers;
result in a reduction in competition among physicians, allied
health professionals, or other health care providers; and
be more restrictive to competition than other arrangements that
could likely achieve substantially the same or more favorable
benefits than those achieved from reducing competition.
ROLE AND AUTHORITY OF THE
ATTORNEY GENERAL
----------------------------------------------------- Appendix III:4.6
The Attorney General establishes rules, conducts reviews of
applications, and issues the certificate of public advantage for
approved agreements. The legislation intends that the Attorney
General provide direction, supervision, and control over approved
cooperative agreements, including revocation of initial approval.
MONITORING REQUIREMENTS
----------------------------------------------------- Appendix III:4.7
The Attorney General may request periodic progress reports, at
intervals of not less than 90 days, of an approved cooperative
agreement.
RULES AND REGULATIONS
----------------------------------------------------- Appendix III:4.8
The legislation authorizes the Attorney General to adopt rules
necessary for the implementation of the law, including rules
establishing procedures and criteria for the review and evaluation of
proposed cooperative agreements.
KANSAS
------------------------------------------------------- Appendix III:5
TITLE AND EFFECTIVE DATE OF
LEGISLATION
----------------------------------------------------- Appendix III:5.1
Health Care Provider Cooperation Act, House Bill 2709, April 1994
(1994 Kansas Sess. Laws 153)
STATED PURPOSES OF
LEGISLATION
----------------------------------------------------- Appendix III:5.2
The legislation makes the following findings. Cooperative agreements
among health care providers concerning the provision of services can
foster further improvements in the quality of health care for Kansas
citizens; moderate increases in costs; and avoid duplication of
resources and improve access to needed services in rural areas. In
addition, because cooperative agreements may require health care
providers to collaborate on the provision of services, thereby
raising the issue of antitrust effects, the legislation finds that
regulatory oversight of cooperative agreements is necessary to ensure
that the benefits of agreements outweigh any disadvantage
attributable to any reduction in competition resulting from such
agreements.
The legislation provides that cooperative agreements approved under
the legislation articulate and implement the policy of the state to
improve and protect the quality and availability of health care to
Kansas citizens and that continued active supervision by the state
over all aspects of such agreements will provide protection to the
public, offsetting the loss of protection otherwise provided by
competition.
SCOPE OF COVERAGE
----------------------------------------------------- Appendix III:5.3
The legislation provides for cooperative agreements between two or
more health care providers for the sharing, allocation, or referral
of patients, personnel, instructional programs, support services and
facilities; medical, diagnostic, or laboratory facilities or
procedures; or other services traditionally offered by health care
providers. It also applies to mergers.
APPROVAL AGENCY
----------------------------------------------------- Appendix III:5.4
The Secretary of Health and Environment will evaluate agreements. A
state advisory committee appointed by the legislature and the
Governor will advise the Secretary on matters concerning the
administration of the law and make recommendations to the Secretary
concerning applications for approval and termination of agreements.
STANDARDS FOR EVALUATING
PROPOSED AGREEMENTS
----------------------------------------------------- Appendix III:5.5
ADVANTAGES EVALUATED
--------------------------------------------------- Appendix III:5.5.1
In evaluating the agreement the Secretary shall consider whether one
or more of the following benefits may result:
enhancement of the quality of health care provided to Kansas
citizens;
preservation of health care facilities or providers, or both, in
geographical proximity to the communities traditionally served
by those facilities or providers, or both;
increased cost efficiency of services provided by the health care
providers involved;
improvements in the utilization of health care resources and
equipment; and
avoidance of duplication of resources.
DISADVANTAGES CONSIDERED
--------------------------------------------------- Appendix III:5.5.2
The Secretary must also weigh any disadvantages attributable to a
reduction in competition likely to result from the agreement,
including, but not limited to the following:
the extent of any adverse effect on the ability of health
maintenance organizations, preferred provider organizations,
managed health care service agents, or other health care payers
to negotiate optimal payment and service arrangements with
hospitals, physicians, allied health care professionals, or
other health care providers;
the extent of any reduction in competition among health care
providers or other persons furnishing goods or services to, or
competing with, health care providers that may result directly
or indirectly from the cooperative agreement;
the extent of any adverse effect on patients in the quality,
availability, and cost of health care services; and
the availability of arrangements that are less restrictive to
competition and achieve the same benefits or a more favorable
balance of benefits over disadvantages attributable to any
reduction in competition that may result from the agreement.
ROLE AND AUTHORITY OF THE
ATTORNEY GENERAL
----------------------------------------------------- Appendix III:5.6
The legislation does not mention any role or authority for the
Attorney General.
MONITORING REQUIREMENTS
----------------------------------------------------- Appendix III:5.7
If the Secretary determines at any time that an agreement no longer
meets the requirements of the act, the Secretary may initiate
proceedings to terminate the agreement. Any agreement approved under
the legislation must be reviewed annually by the Secretary.
RULES AND REGULATIONS
----------------------------------------------------- Appendix III:5.8
The legislation does not mention rules or regulations.
MAINE
------------------------------------------------------- Appendix III:6
TITLE AND EFFECTIVE DATE OF
LEGISLATION
----------------------------------------------------- Appendix III:6.1
Hospital Cooperation Act of 1992, April 1992
(1991 Maine Laws c. 814, sec. 1; Maine Rev. Stat. Ann. ch.
405-D
(West 1993))
STATED PURPOSE OF
LEGISLATION
----------------------------------------------------- Appendix III:6.2
The legislation does not contain a specific statement of purpose;
however, the state policy is articulated in its standards for
certification of cooperative agreements among hospitals. Such
agreements will be certified if their likely benefits will outweigh
the disadvantages attributable to the resulting reduction in
competition.
SCOPE OF COVERAGE
----------------------------------------------------- Appendix III:6.3
The legislation provides for cooperative agreements for the sharing,
allocation, or referral of patients, personnel, instructional
programs, laboratory facilities or procedures, or other services
traditionally offered by hospitals. It does not apply to merger
agreements among hospitals.
APPROVAL AGENCY
----------------------------------------------------- Appendix III:6.4
Maine Department of Human Services
STANDARDS FOR EVALUATING
PROPOSED AGREEMENTS
----------------------------------------------------- Appendix III:6.5
Applicants must demonstrate by clear and convincing evidence that the
likely benefits resulting from the agreement outweigh any
disadvantages attributable to a resulting reduction in competition.
ADVANTAGES EVALUATED
--------------------------------------------------- Appendix III:6.5.1
The Department must weigh the extent to which the agreement would
enhance the quality of hospital and hospital-related care provided
to Maine citizens;
preserve hospital facilities in geographical proximity to the
communities traditionally served by those facilities;
result in gains in cost efficiency of services provided by
hospitals involved;
improve the utilization of hospital resources and equipment; and
avoid duplication of hospital resources.
DISADVANTAGES CONSIDERED
--------------------------------------------------- Appendix III:6.5.2
The Department may also weigh the extent to which the agreement might
adversely affect the ability of health maintenance organizations,
preferred provider organizations, managed health care service
agents, or other health care payers to negotiate optimal payment
and service arrangements with hospitals, physicians, allied
health professionals, or other health care providers;
reduce competition among physicians, allied health professionals,
other health care providers, or other persons furnishing goods
or services to, or competing with, hospitals;
adversely affect patients in the quality, availability, and price
of health care services; and
restrict competition more than other arrangements that achieve the
same or more favorable benefits than those achieved from
reducing competition.
ROLE AND AUTHORITY OF THE
ATTORNEY GENERAL
----------------------------------------------------- Appendix III:6.6
The Attorney General must be consulted during the review process and
may subpoena and require the attendance and testimony of witnesses
and the production of documents for the purpose of investigating
whether the proposed agreement satisfies the standards contained in
law. The Attorney General can also file an action to enjoin the
operation of a cooperative agreement no later than 40 days following
the Department's approval of an application. Upon filing of the
complaint, the Department's certification, if previously issued, must
be stayed, and the cooperative agreement is of no further force
unless the court orders otherwise or until the action is concluded.
MONITORING REQUIREMENTS
----------------------------------------------------- Appendix III:6.7
The legislation does not mention monitoring requirements; however, if
the Department determines that the likely benefits no longer outweigh
any disadvantages, it may initiate proceedings to terminate the
agreement. In addition, the Attorney General may continue to monitor
the agreement and, if necessary, file suit to cancel a certificate.
The legislation also contains a sunset provision. The Department may
not accept any application under this legislation after June 30,
1995. By January 1, 1995, the Attorney General and the Department
shall submit recommendations, along with any necessary legislation,
to the Maine legislature regarding whether this program should be
amended.
RULES AND REGULATIONS
----------------------------------------------------- Appendix III:6.8
The legislation does not mention rules and regulations.
MINNESOTA
------------------------------------------------------- Appendix III:7
TITLE AND EFFECTIVE DATE OF
LEGISLATION
----------------------------------------------------- Appendix III:7.1
The Minnesota Integrated Service Network Act, May 1993
(1993 Minnesota Laws c. 345, art. 6, sec. 14; Minnesota Stat.
Ann. sec. 62J.2911 (West 1994))
STATED PURPOSES OF
LEGISLATION
----------------------------------------------------- Appendix III:7.2
The purposes of the legislation are
to support development of integrated service networks to accomplish
the purpose of the federal Medicare antikickback statute, which
is to reduce overutilization and overcharging;
to create an opportunity for the state to review proposed
cooperative arrangements and to substitute regulation for
competition when an arrangement is likely to result in lower
costs, or greater access or quality, than would otherwise occur
in the marketplace; and
to ensure that approval of such arrangements is accompanied by
appropriate conditions, supervision, and regulation to protect
against private abuses of economic power, and that an
arrangement approved by the state and accompanied by such
appropriate conditions, supervision, and regulation shall not be
subject to state and federal antitrust liability.
SCOPE OF COVERAGE
----------------------------------------------------- Appendix III:7.3
The legislation applies to both providers (hospitals, physicians, and
other health care providers) and purchasers of care (for example,
HMOs and insurance companies) who enter into cooperative agreements
that may be construed as violations of federal antitrust law.
Cooperative agreements include both mergers and joint ventures.
APPROVAL AGENCY
----------------------------------------------------- Appendix III:7.4
Minnesota Commissioner of Health
STANDARDS FOR EVALUATING
PROPOSED AGREEMENTS
----------------------------------------------------- Appendix III:7.5
The Commissioner cannot approve an application unless it is more
likely to result in lower costs, increased access, or increased
quality of health care than would otherwise occur under market
conditions.
ADVANTAGES EVALUATED
--------------------------------------------------- Appendix III:7.5.1
In making a determination regarding cost, access, and quality, the
Commissioner may consider the following factors:
whether the proposal is compatible with the cost containment plan
or other plan of the Minnesota health care commission or the
applicable regional plans of the regional coordinating boards;
market structure, which includes actual and potential sellers and
buyers, or providers and purchasers; actual and potential
consumers; geographic market area; and entry conditions;
current market conditions;
the historical behavior of the market;
performance of other, similar arrangements;
whether the proposal unnecessarily restrains competition or
restrains competition in ways not reasonably related to the
purposes of the law; and
the financial condition of the applicant.
In making determinations about costs, the Commissioner may consider
the cost savings likely to result to the applicant;
the extent to which the cost savings are likely to be passed on to
the consumer and in what form;
the cost of regulation, both for the state and for the applicant;
and
any other factors showing whether the proposed arrangement is
likely to reduce cost.
In making a determination about access, the Commissioner may consider
the extent to which the proposed arrangement would
increase or decrease the utilization\24 of needed health care
services or products by the intended targeted population,
make available a new and needed service or product to a certain
geographic area, and
otherwise make health care services or products more available to
persons who need them.
In making determinations about quality, the Commissioner may consider
the extent to which the proposed arrangement would
decrease morbidity and mortality,
result in faster convalescence,
result in fewer hospital days,
permit providers to attain needed experience or frequency of
treatment likely to lead to better outcomes,
increase patient satisfaction, and
have any other features likely to improve or reduce the quality of
health care.
--------------------
\24 When a proposed arrangement is likely to increase access in one
geographic area by lowering prices or otherwise expanding supply, but
limit access in another geographic area by removing service
capabilities from that second area, the Commissioner must articulate
the criteria employed to balance these effects.
DISADVANTAGES CONSIDERED
--------------------------------------------------- Appendix III:7.5.2
The legislation does not list any specific disadvantages that must be
evaluated beyond the comparisons mentioned in the previous section.
ROLE AND AUTHORITY OF THE
ATTORNEY GENERAL
----------------------------------------------------- Appendix III:7.6
The Attorney General provides advice to the Commissioner of Health in
determining whether the proposed cooperative agreement presents any
potential for antitrust liability. The Attorney General can provide
written comments after an application is filed for approval or upon
request by the Commissioner. Anyone who wishes to submit comments,
including the Attorney General, has 20 days from the date a notice is
published in the State Register to do so.
The Attorney General's role will depend on the type of review process
followed by the Commissioner. The Commissioner can choose one of
three different procedures for the review process. First, the
Commissioner may issue a decision based only on the application and
the comments. Second, the Commissioner may require a limited hearing
to discuss a particular issue. Third, the Commissioner may hold a
case hearing to review all the relevant issues. If a case hearing is
held, the Attorney General may appear as a party to the hearing.
MONITORING REQUIREMENTS
----------------------------------------------------- Appendix III:7.7
The Commissioner shall review at least annually data submitted by the
parties to the arrangement but may request more frequent data
submissions. In addition, the Commissioner is required to publish
notice in the State Register 2 years after the date of an order
approving an application, and at 2-year intervals thereafter,
soliciting comments from the public concerning the effect that the
arrangement has had on cost, access, and quality. The Commissioner
is also required to study and make recommendations by January 15,
1995, on the appropriate length and scope of active supervision of
arrangements approved for exemption from the enforcement of antitrust
laws. Under specified conditions, the Commissioner may modify or
revoke approval of the agreement.
RULES AND REGULATIONS
----------------------------------------------------- Appendix III:7.8
The legislation does not mention specific rules and regulations.
MONTANA
------------------------------------------------------- Appendix III:8
TITLE AND EFFECTIVE DATE OF
LEGISLATION
----------------------------------------------------- Appendix III:8.1
An Act Providing for Universal Health Care Access, October 1993
(1993 Montana Laws ch. 606)
STATED PURPOSES OF
LEGISLATION
----------------------------------------------------- Appendix III:8.2
The purposes of the legislation are
to further the goals of controlling health care costs and improving
the quality of and access to health care, which will be enhanced
in some cases by cooperative agreements among health care
facilities;
to provide the state with direct supervision and control over the
implementation of cooperative agreements among health care
facilities for which certificates of public advantage are
granted; and
to substitute state regulation for competition over the supervision
and control of the implementation of these agreements, thereby
granting the parties to the agreements state action immunity for
actions that might otherwise be considered to be in violation of
state or federal antitrust laws, or both.
SCOPE OF COVERAGE
----------------------------------------------------- Appendix III:8.3
The legislation provides for cooperative agreements between health
care facilities for the sharing, allocation, or referral of patients;
personnel; instructional programs; emergency medical services;
support services and facilities; medical, diagnostic, or laboratory
facilities or procedures; or other services customarily offered by
health care facilities. It also authorizes the Montana Health Care
Authority to create a statewide plan that includes legislation that
will enable health care providers and payers, including health
insurers and consumers, to enter into a greater number of cooperative
agreements than would otherwise occur in the competitive marketplace.
APPROVAL AGENCY
----------------------------------------------------- Appendix III:8.4
Montana Health Care Authority, a five-member board appointed by the
Governor, is the approval agency. The Authority delegates
implementation of certain administrative aspects of the legislation
to the Montana Department of Health and Environmental Sciences.
STANDARDS FOR EVALUATING
PROPOSED AGREEMENTS
----------------------------------------------------- Appendix III:8.5
ADVANTAGES EVALUATED
--------------------------------------------------- Appendix III:8.5.1
The Authority must weigh the extent to which the proposal would
result in lower health care costs, greater access, or greater quality
of health care than would occur without the agreement.
DISADVANTAGES CONSIDERED
--------------------------------------------------- Appendix III:8.5.2
The legislation does not list any specific disadvantages that must be
evaluated.
ROLE AND AUTHORITY OF THE
ATTORNEY GENERAL
----------------------------------------------------- Appendix III:8.6
The Attorney General serves as an ex officio, nonvoting member of the
Authority for the purpose of the Authority's approval or denial of
proposals, supervision of agreements, and revocation of a certificate
of public advantage.
MONITORING REQUIREMENTS
----------------------------------------------------- Appendix III:8.7
The legislation does not mention frequency or terms of monitoring
requirements; however, the Authority is charged with adopting rules
to effect the active supervision of agreements by the Authority. The
rules may include reporting requirements.
RULES AND REGULATIONS
----------------------------------------------------- Appendix III:8.8
The Authority must adopt rules for implementation of the law.
NEBRASKA
------------------------------------------------------- Appendix III:9
TITLE AND EFFECTIVE DATE OF
LEGISLATION
----------------------------------------------------- Appendix III:9.1
The Health Care Facility-Provider Cooperation Act, April 1994
(1994 Nebraska Laws 1223)
STATED PURPOSES OF
LEGISLATION
----------------------------------------------------- Appendix III:9.2
The legislation does not contain a specific statement of purpose. It
enables certain health care facilities and certain health care
providers to form cooperative agreements and participate in community
health planning while maintaining immunity from antitrust
enforcement.
SCOPE OF COVERAGE
----------------------------------------------------- Appendix III:9.3
The legislation provides for community health planning and
cooperative agreements for the sharing, allocation, or referral of
patients; personnel; instructional programs; equipment; support
services and facilities; or medical, diagnostic, or laboratory
facilities or procedures; or other services traditionally offered or
purchased by health care facilities or other providers.
APPROVAL AGENCY
----------------------------------------------------- Appendix III:9.4
Nebraska Department of Health
STANDARDS FOR EVALUATING
PROPOSED AGREEMENTS
----------------------------------------------------- Appendix III:9.5
Applicants must demonstrate by clear and convincing evidence that the
likely benefits resulting from the agreement outweigh any
disadvantages attributable to a reduction in competition that may
result.
ADVANTAGES EVALUATED
--------------------------------------------------- Appendix III:9.5.1
The Department must weigh the extent to which the agreement would
enhance the quality of health facility and provider care of
Nebraska citizens;
preserve health care facilities, including those in other states,
in geographical proximity to the communities traditionally
served by such facilities;
improve the cost efficiency of services provided by health care
facilities or providers involved in the state;
avoid duplication and improve the utilization of health care
facility resources and equipment;
enhance, maintain, or preserve competition for the services or
goods involved; and
mitigate adverse or enhance positive environmental effects.
DISADVANTAGES CONSIDERED
--------------------------------------------------- Appendix III:9.5.2
The Department may also include in its consideration the extent to
which the agreement might
adversely affect the ability of health maintenance organizations,
preferred provider organizations, managed health care service
agents, or other health care payers to negotiate advantageous
payment and service arrangements with health care facilities or
providers;
result in a reduction in competition among health care facilities
or providers or other persons furnishing goods or services to or
in competition with health care facilities that is likely to
result directly or indirectly from the cooperative agreement;
adversely affect patients in the quality, availability, and price
of health care services; and
be more restrictive to competition than other arrangements that
achieve the same or more favorable benefits than those achieved
from reducing competition.
ROLE AND AUTHORITY OF THE
ATTORNEY GENERAL
----------------------------------------------------- Appendix III:9.6
The Attorney General has an advisory role, consulting with the
Department during its review regarding any potential reduction in
competition resulting from the cooperative agreement.
MONITORING REQUIREMENTS
----------------------------------------------------- Appendix III:9.7
The Department must require the parties to the agreement to report
annually on their activities. If the Department determines that the
likely benefits no longer outweigh the disadvantages, it can initiate
proceedings to terminate approval. Any person may petition the
Department to make this determination.
RULES AND REGULATIONS
----------------------------------------------------- Appendix III:9.8
The Department may adopt rules and regulations to govern public
hearings under the law.
NEW YORK
------------------------------------------------------ Appendix III:10
TITLE AND EFFECTIVE DATE OF
LEGISLATION
---------------------------------------------------- Appendix III:10.1
Sections 2950 to 2958 of Senate Bill 6226 and Assembly Bill 8936,
December 1993
(1993 New York Laws ch. 731)
STATED PURPOSES OF
LEGISLATION
---------------------------------------------------- Appendix III:10.2
The purposes of the legislation are
to encourage the development of rural health network agreements
among health care providers serving rural areas and provide
funding,
to grant regulatory waivers to providers to successfully implement
networks,
to actively provide technical assistance in order to support the
creation and operation of rural health networks,
to encourage cooperative arrangements between rural health networks
and providers under the active supervision of the Commissioner
of the Department of Public Health,
to supplant competition with such arrangements, and
to provide state action immunity under the federal antitrust laws.
SCOPE OF COVERAGE
---------------------------------------------------- Appendix III:10.3
The legislation provides for contracts or joint or cooperative
agreements between health care providers serving rural areas.
Providers covered by the legislation include hospitals, physicians,
and other health care providers.
APPROVAL AGENCY
---------------------------------------------------- Appendix III:10.4
The Commissioner of the Department of Public Health
STANDARDS FOR EVALUATING
PROPOSED AGREEMENTS
---------------------------------------------------- Appendix III:10.5
Mergers, integration, and coordination must substantially meet the
following objectives:
promote sharing of resources and service delivery among providers;
promote cost effectiveness to consumers and providers;
improve accessibility to the full continuum of health care
services;
capitalize on the strengths of existing providers;
promote linkages, diversifications, or reconfigurations of rural
providers; and
identify methods to address regulatory impediments.
ADVANTAGES EVALUATED
-------------------------------------------------- Appendix III:10.5.1
In addition to the comments of the designated health system agency,
the Commissioner will consider whether
specific objectives of the proposed network would be met, including
demonstrated awareness of the level of health care currently
being provided within the service area;
the network would enhance cost efficiency and access of health care
to all residents of the area;
economies of scale in both the supply and demand of services would
be addressed;
information sharing, communication, and cooperation among health
care providers, human service entities, and consumers would be
fostered;
the network would contribute to the identification and development
of innovative delivery systems;
the network would enhance the accessibility and quality of services
with respect to health care needs, including illness prevention;
management and continuity of care would be fostered and improved;
service delivery would be reorganized and the effect such
reorganization would have on the health delivery systems in
underserved areas;
providers within the area served by the network would be made aware
of and have an effective opportunity to participate in or become
members of the network;
objectives and scope of the network would be reasonably implemented
using existing and projected resources;
participating providers would be equitably represented on governing
bodies of the network; and
consumers within the area served by the network would be made aware
of and have an opportunity to provide input in the establishment
and operation of the network and network operational plan, as
applicable.
DISADVANTAGES CONSIDERED
-------------------------------------------------- Appendix III:10.5.2
The legislation does not list any specific disadvantages that must be
evaluated.
ROLE AND AUTHORITY OF THE
ATTORNEY GENERAL
---------------------------------------------------- Appendix III:10.6
The legislation does not mention the role and authority of the
Attorney General.
MONITORING REQUIREMENTS
---------------------------------------------------- Appendix III:10.7
The legislation allows the Commissioner to withdraw approval of the
project and require repayment of all or part of a grant if the
Commissioner determines that a grant is being used for purposes that
do not comply with the legislation. The Commissioner is also
required to establish the type and frequency of reports that grantees
must file.
RULES AND REGULATIONS
---------------------------------------------------- Appendix III:10.8
The legislation requires the Commissioner to issue guidelines, in
consultation with the New York State Rural Health Council and the
Legislative Commission on the Development of Rural Resources. These
guidelines shall include at least the duration of network grants and
appropriate funding levels. The Commissioner is also authorized to
waive, modify, or suspend rules promulgated respective to the
legislation.
NORTH CAROLINA
------------------------------------------------------ Appendix III:11
TITLE AND EFFECTIVE DATE OF
LEGISLATION
---------------------------------------------------- Appendix III:11.1
Hospital Cooperation Act of 1993, July 1993
(1993 North Carolina Sess. Laws c. 529)
STATED PURPOSES OF
LEGISLATION
---------------------------------------------------- Appendix III:11.2
The purposes of the legislation are to permit cooperative
arrangements that are beneficial to North Carolina citizens and to
supplant competition currently mandated by federal and state
antitrust laws by a regulatory program. In addition, the legislation
is to provide regulatory as well as judicial oversight of cooperative
agreements to ensure that the benefits of cooperative agreements
permitted and encouraged in North Carolina outweigh any disadvantages
attributable to any reduction in competition likely to result from
the agreements.
SCOPE OF COVERAGE
---------------------------------------------------- Appendix III:11.3
The legislation provides for cooperative agreements for the sharing,
allocation, or referral of patients; personnel; instructional
programs; support services and facilities; medical, diagnostic, or
laboratory facilities, equipment, or procedures; or other services
traditionally offered by hospitals. It does not apply to mergers.
APPROVAL AGENCY
---------------------------------------------------- Appendix III:11.4
North Carolina Department of Human Resources
STANDARDS FOR EVALUATING
PROPOSED AGREEMENTS
---------------------------------------------------- Appendix III:11.5
The agreement must demonstrate by clear and convincing evidence that
the likely benefits resulting from the agreement outweigh any
disadvantages attributable to the reduction in competition.
ADVANTAGES EVALUATED
-------------------------------------------------- Appendix III:11.5.1
The Department must weigh the extent to which the agreement would
enhance the quality of hospital and hospital-related care provided
to North Carolina citizens;
preserve hospital facilities in geographical proximity to the
communities traditionally served by those facilities;
lower costs of, or improve the efficiency of, delivering hospital
services; and
avoid duplication and improve the utilization of hospital resources
and equipment.
The Department must also consider whether medically underserved
populations are expected to utilize the services that will be
provided under the proposal.
DISADVANTAGES CONSIDERED
-------------------------------------------------- Appendix III:11.5.2
The Department must also consider the extent to which the agreement
might
increase the costs or prices of health care at a hospital that is a
party to the cooperative agreement;
adversely affect patients in the quality, availability, and price
of health care services;
reduce competition among parties to the agreement and the likely
effects of this;
adversely affect the ability of health maintenance organizations,
preferred provider organizations, managed health care service
agents, or other health care payers to negotiate optimal payment
and service arrangements with hospitals, physicians, allied
health care professionals, or other health care providers;
reduce competition among physicians, allied health professionals,
other health care providers, or other persons furnishing goods
or services to, or competing with, hospitals; and
be more restrictive to competition than other arrangements that
achieve the same or more favorable benefits than those achieved
from reducing competition.
ROLE AND AUTHORITY OF THE
ATTORNEY GENERAL
---------------------------------------------------- Appendix III:11.6
The Attorney General is part of the review process and has veto power
over the agreement. If the Attorney General believes that the
applicant has not demonstrated through clear and convincing evidence
that the benefits from the agreement outweigh the likely
disadvantages, the Attorney General can object to the approval of the
cooperative agreement. The agreement cannot be approved until the
Attorney General's objection is addressed and withdrawn. The
Attorney General also has the power to revoke a certificate for
noncompliance with the terms of the agreement.
MONITORING REQUIREMENTS
---------------------------------------------------- Appendix III:11.7
During the time state approval is in effect, the parties to a
cooperative agreement must submit a report of activities to the
Department every 2 years and must provide a copy to the Attorney
General. This report must include
a description of the activities conducted pursuant to the
agreement;
price and cost information;
the nature, scope, and likely effect for the next 2 years of the
activities pursuant to the agreement;
a signed certificate by each party to the agreement that the
benefits or likely benefits of the cooperative agreement as
conditioned continue to outweigh the disadvantages of any
reduction in competition from the agreement as conditioned; and
any additional information requested by the Department of Human
Resources or the Attorney General.
In addition, the Department has the power to revoke a certificate for
noncompliance with the terms of the agreement.
RULES AND REGULATIONS
---------------------------------------------------- Appendix III:11.8
The legislation authorizes the Department and the Attorney General to
adopt rules to conduct a review of applications.
NORTH DAKOTA
------------------------------------------------------ Appendix III:12
TITLE AND EFFECTIVE DATE OF
LEGISLATION
---------------------------------------------------- Appendix III:12.1
Health Care Provider Cooperative Agreements, August 1993
(1993 North Dakota Laws ch. 263)
STATED PURPOSES OF
LEGISLATION
---------------------------------------------------- Appendix III:12.2
The legislation does not contain a specific statement of purpose;
however, the state policy is articulated in its standard for
approval. Applicants must demonstrate by clear and convincing
evidence that the likely benefits resulting from the agreement
outweigh any disadvantages attributable to the reduction in
competition. It establishes and funds a regulatory program for the
approval of cooperative agreements among two or more health care
providers or third-party payers.
SCOPE OF COVERAGE
---------------------------------------------------- Appendix III:12.3
The legislation provides for cooperative agreements for the sharing,
allocation, or referral of patients; personnel; instructional
programs; support services and facilities; medical, diagnostic, or
laboratory facilities or procedures; or other services traditionally
offered by health care providers. It does not cover mergers.
APPROVAL AGENCY
---------------------------------------------------- Appendix III:12.4
North Dakota Department of Health and Consolidated Laboratories
STANDARDS FOR EVALUATING
PROPOSED AGREEMENTS
---------------------------------------------------- Appendix III:12.5
The agreement must demonstrate by clear and convincing evidence that
the likely benefits to health care consumers resulting from the
agreement outweigh any disadvantages attributable to any reduction in
competition.
ADVANTAGES EVALUATED
-------------------------------------------------- Appendix III:12.5.1
The Department may weigh the extent to which the agreement would
enhance the quality of health care services provided to the
residents of North Dakota,
preserve health care facilities in geographical proximity to the
communities traditionally served by those facilities,
improve the cost efficiency of services provided by the parties
involved, and
avoid duplication and improve the utilization of health care
resources and equipment.
DISADVANTAGES CONSIDERED
-------------------------------------------------- Appendix III:12.5.2
The Department may also weigh the extent to which the agreement might
adversely affect the bargaining power of health maintenance
organizations, preferred provider organizations, managed health
care service agents, or other health care payers in negotiating
payment and service arrangements with hospitals, physicians,
allied health professionals, or other health care providers;
reduce competition among physicians, allied health professionals,
other health care providers, or persons furnishing goods or
services to, or competing with, providers and third-party
payers;
adversely affect patients in the quality, availability, and price
of health care services; and
be more restrictive to competition than other arrangements that
achieve the same or more favorable benefits than those achieved
from reducing competition.
ROLE AND AUTHORITY OF THE
ATTORNEY GENERAL
---------------------------------------------------- Appendix III:12.6
The Attorney General must be consulted regarding the Department's
evaluation of the competitive effects of an agreement. The Attorney
General may subpoena and require the attendance and testimony of
witnesses and the production of documents for the purpose of
investigating whether the cooperative agreement satisfies the
standards in the legislation. The Attorney General may file an
action to enjoin the operation of a cooperative agreement up to 40
days following the Department's approval of the application. If a
complaint is filed, the Department's certification, if previously
issued, must be stayed and the cooperative agreement is of no further
force unless the court orders otherwise or until the action is
concluded. The Attorney General is also vested with the authority to
terminate a cooperative agreement.
MONITORING REQUIREMENTS
---------------------------------------------------- Appendix III:12.7
The legislation is silent on monitoring requirements, except that the
Department may cancel an agreement if the likely benefits no longer
outweigh the disadvantages or the parties do not conform to the
provisions of any conditions attached to the agreement by the
Department at the time the application was granted. In addition, the
Attorney General may continue to monitor the agreement and, if
necessary, file suit to cancel a certificate.
RULES AND REGULATIONS
---------------------------------------------------- Appendix III:12.8
The legislation does not mention rules and regulations.
OHIO
------------------------------------------------------ Appendix III:13
TITLE AND EFFECTIVE DATE OF
LEGISLATION
---------------------------------------------------- Appendix III:13.1
Sections 3727.21 to 3727.24 of House Bill 714, October 1992
(1992 H. 714; Ohio Revised Code Ann. sec. 3727.21 (Baldwin))
STATED PURPOSES OF
LEGISLATION
---------------------------------------------------- Appendix III:13.2
The purposes of the legislation are to authorize discussions or
negotiations concerning the allocation of health care equipment or
services and provide hospitals immunity from civil enforcement and
criminal prosecution for the purpose of reducing consumer health care
costs, improving access to health care services, or improving the
quality of patient care.
SCOPE OF COVERAGE
---------------------------------------------------- Appendix III:13.3
The legislation provides for discussions or negotiations concerning
voluntary cooperative actions among hospitals for the allocation of
health care equipment or health care services, provided the actions
do not involve price fixing or predatory pricing.
APPROVAL AGENCY
---------------------------------------------------- Appendix III:13.4
The Director of the Ohio Department of Health
STANDARDS FOR EVALUATING
PROPOSED AGREEMENTS
---------------------------------------------------- Appendix III:13.5
The legislation does not state specific advantages that must be
evaluated, except that the cooperative actions must be designed to
reduce health costs, improve access, or improve the quality of care.
Also, the Director must determine that the benefits resulting from
the cooperative agreement are likely to outweigh the disadvantages
attributable to a reduction in competition.
ROLE AND AUTHORITY OF THE
ATTORNEY GENERAL
---------------------------------------------------- Appendix III:13.6
The request for an approval of an agreement must be submitted to the
Attorney General for an advisory review. The legislation includes a
negative option for approval at the Attorney General level. The
reasons the Attorney General may advise the Director to deny a
request include a determination that the agreement will result in
price fixing or predatory pricing.
MONITORING REQUIREMENTS
---------------------------------------------------- Appendix III:13.7
The Director may request periodic written progress updates of
approved cooperative agreements. The Director also has authority to
rescind an order approving an agreement.
RULES AND REGULATIONS
---------------------------------------------------- Appendix III:13.8
The Director may adopt rules for the implementation of this
legislation including rules establishing procedures and criteria for
the review and evaluation of proposed cooperative agreements.
OREGON
------------------------------------------------------ Appendix III:14
TITLE AND EFFECTIVE DATE OF
LEGISLATION
---------------------------------------------------- Appendix III:14.1
Senate Bill 683, 1993 Oregon Legislative Assembly, August 1993
(1993 Oregon Laws c. 769)
STATED PURPOSES OF
LEGISLATION
---------------------------------------------------- Appendix III:14.2
The purposes of the legislation are to declare the state's policy and
intent to displace competition among health care providers of heart
and kidney services by allowing them to enter into cooperative
programs and receive the full benefit of state action immunity in
order to achieve the following goals:
reduce or protect against rising prices and costs for heart and
kidney transplant services;
improve or maintain the quality of heart and kidney transplant
services provided in the state;
reduce or protect against duplication of resources, including
expensive medical specialists, medical equipment, and sites of
service;
improve or maintain efficiency in the delivery of heart and kidney
transplant services;
improve or maintain public access to heart and kidney transplant
services;
increase donations of organs for transplantation; and
improve the continuity of patient care.
SCOPE OF COVERAGE
---------------------------------------------------- Appendix III:14.3
The legislation allows cooperative programs for the sharing,
allocation, and referral of physicians; patients; personnel;
instructional programs; support services and facilities; medical,
diagnostic, laboratory, or therapeutic services, equipment, devices,
or supplies; and other services traditionally offered by health care
providers. The Oregon Health Sciences University and one or more
entities, each of which operates at least three hospitals in a single
urban area in the state, may apply to the Director of the Oregon
Department of Human Resources for approval of a cooperative program.
The legislation allows an approved cooperative program to engage in
the following behaviors, which would normally be considered
anticompetitive:
set prices for heart and kidney transplants and all services
directly relating to heart and kidney transplants;
refuse to deal with competitors in the heart and kidney transplant
market;
allocate product, service, geographic, and patient markets directly
relating to heart and kidney transplants;
acquire and maintain a monopoly in heart and kidney transplant
services; and
engage in other activities that might give rise to liability under
state or federal antitrust laws.
It also allows participating physicians to agree among themselves on
referrals of nontransplant cardiac surgery patients.
APPROVAL AGENCY
---------------------------------------------------- Appendix III:14.4
The Director of the Oregon Department of Human Resources
STANDARDS FOR EVALUATING
PROPOSED AGREEMENTS
---------------------------------------------------- Appendix III:14.5
The cooperative program must achieve at least six of the goals of the
legislation, including the first four mentioned.
ADVANTAGES EVALUATED
-------------------------------------------------- Appendix III:14.5.1
The Director is to consider whether
the cooperative program will contribute to or detract from
achieving the stated goals and
any alternative arrangements would be less restrictive to
competition.
The Director may weigh goals relating to existing circumstances and
to circumstances that are likely to occur without the cooperative
program.
DISADVANTAGES CONSIDERED
-------------------------------------------------- Appendix III:14.5.2
The legislation does not list any specific disadvantages that must be
evaluated.
ROLE AND AUTHORITY OF THE
ATTORNEY GENERAL
---------------------------------------------------- Appendix III:14.6
The legislation includes no specific role or authority for the
Attorney General.
MONITORING REQUIREMENTS
---------------------------------------------------- Appendix III:14.7
The Director is to actively supervise the cooperative program. For
each approved cooperative program, the Director is to establish a
Board of Governors, consisting of the president or the chief
executive officer of each hospital that is a party to the cooperative
program agreement and the Director or his/her designee. The Board is
not a governmental agency. The Board must develop policies and
approve budgets for the implementation of the cooperative program and
must deliver an annual report to the Director on the operation of the
cooperative program. As part of his/her review, the Director has
authority to modify or revoke approval of the cooperative program.
RULES AND REGULATIONS
---------------------------------------------------- Appendix III:14.8
The Director is to adopt rules necessary to carry out the
legislation.
TENNESSEE
------------------------------------------------------ Appendix III:15
TITLE AND EFFECTIVE DATE OF
LEGISLATION
---------------------------------------------------- Appendix III:15.1
Hospital Cooperation Act of 1993, May 1993
(1993 Tennessee Public Acts ch. 331)
STATED PURPOSES OF
LEGISLATION
---------------------------------------------------- Appendix III:15.2
The legislation does not specifically contain a statement of purpose.
It acknowledges that (1) existing laws may constrain hospitals'
ability to develop new and improved equipment and services and (2)
cooperative agreements may foster further improvements in the quality
of health care for Tennessee citizens, moderate increases in cost,
improve access, and enhance the likelihood that smaller hospitals
will remain open in service to their communities. Because
competition is important and some cooperative agreements may have
anticompetitive effects, the legislation says oversight is necessary
to ensure that the benefits of the agreements outweigh any
disadvantages attributable to the reduction in competition.
SCOPE OF COVERAGE
---------------------------------------------------- Appendix III:15.3
The legislation provides for cooperative agreements for the sharing,
allocation, or referral of patients, personnel, instructional
programs, support services and facilities, or procedures and other
services traditionally offered by hospitals.
APPROVAL AGENCY
---------------------------------------------------- Appendix III:15.4
Tennessee Department of Health
STANDARDS FOR EVALUATING
PROPOSED AGREEMENTS
---------------------------------------------------- Appendix III:15.5
The agreement must demonstrate by clear and convincing evidence that
the likely benefits from it outweigh the disadvantages attributable
to any reduction in competition.
ADVANTAGES EVALUATED
-------------------------------------------------- Appendix III:15.5.1
The Department must weigh the extent to which the agreement would
enhance the quality of hospital and hospital-related care provided
to Tennessee citizens,
preserve hospital facilities in geographical proximity to the
communities traditionally served by those facilities,
achieve gains in the cost efficiency of services provided by
hospitals involved, and
avoid duplication and improve the utilization of hospital resources
and equipment.
DISADVANTAGES CONSIDERED
-------------------------------------------------- Appendix III:15.5.2
The Department must also weigh the extent to which the agreement
might
adversely affect the ability of health maintenance organizations,
preferred provider organizations, managed health care
organizations, or other health care payers to negotiate optimal
payment and service arrangements with hospitals, physicians,
allied health professionals, or other health care providers;
reduce competition among physicians, allied health professionals,
other health care providers, or other persons furnishing goods
or services to, or competing with, hospitals, and the extent of
such reduction;
adversely affect patients in the quality, availability, and price
of health care services; and
be more restrictive to competition than other arrangements that
achieve the same or more favorable benefits than those achieved
from reducing competition.
ROLE AND AUTHORITY OF THE
ATTORNEY GENERAL
---------------------------------------------------- Appendix III:15.6
The Attorney General must be consulted by and agree with the
Department for approval of an agreement. The Attorney General may
subpoena and require the attendance and testimony of witnesses and
the production of documents for the purpose of investigating whether
the cooperative agreement satisfies the standards set out by the
legislation. The Attorney General may file an action to enjoin the
operation of the cooperative agreement up to 30 days following the
Department's approval of the application. If a complaint is filed,
the Department's certification, if previously issued, must be stayed
and the cooperative agreement is of no further force unless the court
orders otherwise or until the action is concluded.
MONITORING REQUIREMENTS
---------------------------------------------------- Appendix III:15.7
The legislation does not mention specific monitoring requirements;
however, it states that the Attorney General and the Department are
entrusted with active and continuing oversight.
RULES AND REGULATIONS
---------------------------------------------------- Appendix III:15.8
The legislation authorizes the Department to promulgate the rules and
regulations necessary to implement the law.
TEXAS
------------------------------------------------------ Appendix III:16
TITLE AND EFFECTIVE DATE OF
LEGISLATION
---------------------------------------------------- Appendix III:16.1
An Act Relating to Cooperative Agreements Among Hospitals, September
1993
(1993 Texas Sess. Law Serv. ch. 638 (Vernon))
STATED PURPOSES OF
LEGISLATION
---------------------------------------------------- Appendix III:16.2
The legislation does not contain a specific statement of purpose;
however, the state policy is articulated in its standards for
approval. It allows the approval of cooperative agreements among
hospitals if the likely benefits resulting from the agreement
outweigh any disadvantages.
SCOPE OF COVERAGE
---------------------------------------------------- Appendix III:16.3
The legislation provides for discussions and negotiations concerning
cooperative agreements provided that the actions do not involve price
fixing or predatory pricing for the allocation or sharing of health
care equipment, facilities, personnel, or services among hospitals.
It does not apply to mergers.
APPROVAL AGENCY
---------------------------------------------------- Appendix III:16.4
Texas Department of Health
STANDARDS FOR EVALUATING
PROPOSED AGREEMENTS
---------------------------------------------------- Appendix III:16.5
The applicants must demonstrate that the benefits resulting from an
agreement outweigh any disadvantages attributable to a reduction in
competition that may result.
ADVANTAGES EVALUATED
-------------------------------------------------- Appendix III:16.5.1
The Department must weigh the extent to which the agreement would
enhance the quality of hospital and hospital-related care provided
to Texas citizens,
preserve hospital facilities in geographical proximity to the
communities traditionally served by those facilities,
achieve gains in the cost efficiency of services provided by the
hospitals involved, and
avoid duplication and improve the utilization of hospital resources
and equipment.
DISADVANTAGES CONSIDERED
-------------------------------------------------- Appendix III:16.5.2
The Department may also weigh the extent to which the agreement might
adversely affect the ability of health maintenance organizations,
preferred provider organizations, or other health care payers to
negotiate optimal payment and service arrangements with
hospitals, physicians, allied health care professionals, or
other health care providers;
reduce competition among physicians, allied health professionals,
other health care providers, or other persons furnishing goods
or services to, or competing with, hospitals;
adversely affect patients in the quality, availability, and price
of health care services; and
be more restrictive to competition than other arrangements that
achieve similar benefits.
ROLE AND AUTHORITY OF THE
ATTORNEY GENERAL
---------------------------------------------------- Appendix III:16.6
The Attorney General has an advisory role, consulting with the
Department of Health regarding any potential reduction in competition
that may result from a cooperative agreement. The Attorney General,
at any time after an application is filed, may demand the attendance
and testimony of witnesses and the production of documents for the
purpose of investigating whether the cooperative agreement satisfies
the standards required by law. The Attorney General may seek a court
order compelling compliance with a demand for testimony or documents
or may seek an order to enjoin the operation of the cooperative
agreement. The Attorney General may file an action up to 20 days
after receipt of a final copy of the Department's decision. The
Attorney General may ask for a court order to stay the cooperative
agreement pending final disposition of the case or file suit seeking
to cancel the certificate of public advantage.
MONITORING REQUIREMENTS
---------------------------------------------------- Appendix III:16.7
The Department may initiate proceedings to terminate the certificate
of public advantage. The legislation does not mention frequency of
monitoring.
RULES AND REGULATIONS
---------------------------------------------------- Appendix III:16.8
The Department must adopt rules to implement the law.
WASHINGTON (GENERAL
APPLICABILITY)
------------------------------------------------------ Appendix III:17
TITLE AND EFFECTIVE DATE OF
LEGISLATION
---------------------------------------------------- Appendix III:17.1
Sections 447 and 448 of the Washington Health Services Act of 1993,
April 1993
(1993 Washington Laws ch. 492)
STATED PURPOSES OF
LEGISLATION
---------------------------------------------------- Appendix III:17.2
The purposes of the legislation are
to exempt approved cooperative activities from state antitrust laws
and to provide immunity from federal antitrust laws for such
activities and
to displace competition in the health care market to achieve a
variety of goals to contain costs; promote the development of
comprehensive integrated and cost-effective health care delivery
systems through cooperative activities; promote comparability of
health care coverage; improve cost effectiveness; ensure
universal access; and create reasonable equity in the
distribution of funds, treatments, and medical risks.
SCOPE OF COVERAGE
---------------------------------------------------- Appendix III:17.3
The legislation provides for cooperative agreements among certified
health plans, health care facilities including hospitals, health care
providers including physicians, or other persons involved in the
development, delivery, or marketing of health care services.
APPROVAL AGENCY
---------------------------------------------------- Appendix III:17.4
The five-member Washington Health Services Commission is the approval
agency. When reviewing proposed agreements, it must obtain the
written opinion of the Attorney General and act consistent with such
opinion.
STANDARDS FOR EVALUATING
PROPOSED AGREEMENTS
---------------------------------------------------- Appendix III:17.5
ADVANTAGES EVALUATED
-------------------------------------------------- Appendix III:17.5.1
The Commission must weigh the extent to which the agreement would
enhance the quality of health services to consumers,
achieve gains in cost efficiency of health services,
avoid duplication and improve utilization of health services and
equipment,
facilitate the exchange of information relating to performance
expectations,
simplify the negotiation of delivery arrangements and
relationships, and
reduce the transaction costs on the part of certified health plans
and providers in negotiating more cost- effective delivery
systems.
DISADVANTAGES CONSIDERED
-------------------------------------------------- Appendix III:17.5.2
The Commission must also consider in its review
whether the agreement would reduce competition among certified
health plans, health care providers, or health care facilities;
whether the agreement would adversely affect quality, availability,
or price of health care services to consumers; and
the availability of arrangements less restrictive to competition
that would achieve the same benefits.
ROLE AND AUTHORITY OF THE
ATTORNEY GENERAL
---------------------------------------------------- Appendix III:17.6
The Commission is required to obtain an informal opinion from the
Attorney General about whether a proposed cooperative activity would
be authorized under the law. If an entity chooses to seek an
exemption from antitrust under the legislation, the Attorney General
must provide advice to the Commission, if requested.
MONITORING REQUIREMENTS
---------------------------------------------------- Appendix III:17.7
With the assistance of the Attorney General's office, the Commission
shall actively supervise any conduct authorized under the legislation
to determine whether such conduct or rules permitting certain conduct
should be continued and whether a more competitive alternative is
practical. The Commission must periodically review the operation of
cooperative agreements through, at least, annual progress reports
from the entities involved. If the Commission determines that the
likely benefits of the conduct no longer outweigh the disadvantages
attributable to potential reduction in competition, it can order a
modification or discontinuance of the conduct.
RULES AND REGULATIONS
---------------------------------------------------- Appendix III:17.8
The Commission is required to adopt rules (1) governing conduct among
providers, health care facilities, and certified health plans under
the act, including rules pertaining to contracts and cooperative
activities, and (2) permitting collective negotiations among health
care facilities and providers.
WASHINGTON (RURAL HOSPITAL
DISTRICTS)
------------------------------------------------------ Appendix III:18
TITLE AND EFFECTIVE DATE OF
LEGISLATION
---------------------------------------------------- Appendix III:18.1
Act relating to cooperative activities of local governments (1992
regular session), March 1992
(1992 Washington Laws ch. 161)
STATED PURPOSE OF
LEGISLATION
---------------------------------------------------- Appendix III:18.2
The purpose of the legislation is to foster the development of
cooperative and collaborative arrangements among rural public
hospital districts by specifically authorizing cooperative agreements
and contracts for these entities under the Interlocal Cooperation
Act. Rural public hospital districts are authorized public hospital
districts whose geographic boundaries do not include a city with a
population greater than 30,000.
SCOPE OF COVERAGE
---------------------------------------------------- Appendix III:18.3
The legislation provides for cooperative agreements among rural
public hospital districts. The agreements are authorized to include
allocation of health care services, combined purchases and
allocations of medical equipment and technologies, joint agreements
and contracts for health care service delivery and payment with
public and private entities, and other cooperative arrangements.
APPROVAL AGENCY
---------------------------------------------------- Appendix III:18.4
Most agreements do not need formal approval; however, before their
effective date, all agreements made under this legislation must be
filed with the county auditor and the Secretary of State. Agreements
that deal in whole or in part with the provision of services or
facilities for which a state agency has constitutional or statutory
powers of control are considered approved unless they are disapproved
by that state agency within 90 days of receipt.
STANDARDS FOR EVALUATING
PROPOSED AGREEMENTS
---------------------------------------------------- Appendix III:18.5
The legislation does not mention either advantages that must be
evaluated or competitive disadvantages that must be considered.
ROLE AND AUTHORITY OF THE
ATTORNEY GENERAL
---------------------------------------------------- Appendix III:18.6
The legislation does not mention any role or authority for the
Attorney General.
MONITORING REQUIREMENTS
---------------------------------------------------- Appendix III:18.7
The legislation contains no specific requirements for monitoring
agreements.
RULES AND REGULATIONS
---------------------------------------------------- Appendix III:18.8
The legislation does not mention rules and regulations.
WISCONSIN
------------------------------------------------------ Appendix III:19
TITLE AND EFFECTIVE DATE OF
LEGISLATION
---------------------------------------------------- Appendix III:19.1
1991 Wisconsin Act 250 Regarding Health Care Cooperative Agreements,
September 1992
(1991 Wisconsin Laws Act 250)
STATED PURPOSES OF
LEGISLATION
---------------------------------------------------- Appendix III:19.2
The legislation does not contain a specific statement of purpose;
however, the state policy is articulated in its standards for
approval.
SCOPE OF COVERAGE
---------------------------------------------------- Appendix III:19.3
The legislation provides for cooperative agreements among health care
providers, including hospitals and physicians. Services covered
include the sharing, allocation, or referral of patients or the
sharing or allocation of personnel; instructional programs; support
services and facilities; medical, diagnostic, or laboratory
facilities or procedures; or other services customarily offered by
health care providers.
APPROVAL AGENCY
---------------------------------------------------- Appendix III:19.4
Wisconsin Department of Health and Social Services
STANDARDS FOR EVALUATING
PROPOSED AGREEMENTS
---------------------------------------------------- Appendix III:19.5
The benefits likely to result from the agreement must substantially
outweigh any disadvantages attributable to a reduction in
competition, and any reduction in competition likely to result from
the agreement must be reasonably necessary to obtain the benefits.
ADVANTAGES EVALUATED
-------------------------------------------------- Appendix III:19.5.1
The Department must find that at least one of the following benefits
is likely to result:
the quality of health care provided to residents of the state will
be enhanced;
a hospital, if any, and health care facilities that customarily
serve the communities in the area likely affected by the
cooperative agreement will be preserved;
services provided by the parties to the cooperative agreement will
gain cost efficiency;
utilization of health care resources and equipment in the area
affected by the cooperative agreement will improve; and
duplication of health care resources in the area likely affected by
the cooperative agreement will be avoided.
DISADVANTAGES CONSIDERED
-------------------------------------------------- Appendix III:19.5.2
The Department must also weigh the extent to which the agreement
might
adversely affect the ability of health maintenance organizations,
preferred provider plans, persons performing utilization review,
or other health care payers to negotiate optimal payment and
service arrangements with hospitals and other health care
providers;
reduce competition among physicians, allied health professionals,
or other health care providers; and
be more restrictive to competition than other arrangements that
could likely achieve substantially the same benefits.
ROLE AND AUTHORITY OF THE
ATTORNEY GENERAL
---------------------------------------------------- Appendix III:19.6
The legislation does not mention any role or authority for the
Attorney General.
MONITORING REQUIREMENTS
---------------------------------------------------- Appendix III:19.7
The legislation states that the Department may revoke approval of a
cooperative agreement if the Department determines that the benefits
resulting from the cooperative agreement no longer outweigh any
disadvantages attributable to any actual or potential reduction in
competition resulting from the agreement. The legislation contains
no procedure or criteria for the Department to use to make this
determination.
RULES AND REGULATIONS
---------------------------------------------------- Appendix III:19.8
The legislation does not mention rules or regulations.
MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix IV
Thomas Dowdal, Assistant Director, (410) 965-8021
Robert Sayers, Evaluator-in-Charge
Jerry Baugher
Marquita Harris
Roger Hultgren