BY Kianna Sitarski and Beth Anne Jackson, Brown & Fortunato
Healthcare providers are now facing increased scrutiny from the United States Department of Justice (DOJ) and the Federal Trade Commission (FTC) when it comes to antitrust enforcement in the context of mergers, acquisitions and other collaborations. On February 3, 2023, the DOJ issued a policy statement that withdrew previous DOJ-FTC joint guidance issued in 1993, 1996, and 2011 (Guidance) that provided “antitrust safety zones” (Safety Zones) for healthcare providers. In addition, in late April, the FTC sued Louisiana Children’s Medical Center and HCA Healthcare, Inc., the buyer and seller, respectively, of three Louisiana hospitals, nearly four months after Louisiana’s Attorney General and Department of Justice had approved the transaction under its Certificate of Public Advantage 
program.
The Safety Zones grew out of the DOJ and FTC concerns that challenging potentially anticompetitive conduct by healthcare providers would increase the cost of quality health care services to consumers, because “many health care providers have delayed cooperative cost-cutting arrangements because of uncertainty about antitrust restrictions.” The 1993 policy laid out six transactions that the DOJ and FTC would not challenge: (1) 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 inflation; (5) joint purchasing agreements among health care providers; and (6) physician network joint ventures. The 1996 policy clarified and expanded upon the 1993 policy.
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In response to the 2010 Affordable Care Act and the Medicare Shared Savings Program, the DOJ and FTC issued the 2011 policy to create an additional Safety Zone for certain accountable care organizations that were “highly unlikely to raise significant competitive concerns” and, therefore, would not be challenged by the DOJ and FTC under the antitrust laws absent extraordinary circumstances. This 2011 policy was limited in scope and applied only to “collaborations among otherwise independent providers and provider groups that are eligible and intend, or have been approved, to participate in the Shared Savings Program” and did not apply to mergers.
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Just one day before the Safety Zones were formally withdrawn by the DOJ, Deputy AAG Mekki identified two major changes to the healthcare industry that have emerged in recent years that undercut the intended purpose of the Safety Zones: technological improvements and consolidation of industry providers. Now more than ever, healthcare providers are utilizing “machine learning, artificial intelligence, and other advanced tools to develop or deliver products and services,” inevitably affecting “how buyers and sellers transact business” and the ability for healthcare providers to compete in the industry. Additionally, large healthcare providers have expanded both horizontally and vertically to encompass “industry participants who once served distinct or adjacent functions.”
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In recognition of the significant changes to the healthcare space in recent years, the DOJ determined that the policies reflected in the Guidance were “overly permissive on certain subjects, such as information sharing, and no longer serve their intended purposes of providing encompassing guidance to the public on relevant healthcare competitive issues in today’s environment.” Therefore, the DOJ and FTC will approach antitrust enforcement actions against healthcare providers on a case-by-case basis going forward, in accordance with “modern market realities.”
The withdrawal of the federal Safety Zones may have implications for Texas healthcare providers beyond the increased risk of federal antitrust scrutiny: it may jeopardize important protections under state law. Chapter 314A of the Texas Health and Safety Code grants “federal and state” antitrust immunity to mergers among hospitals so long as the merger meets state statutory and regulatory requirements. Oversight of the merged hospital is an important part of the statutory framework. Hospitals may apply for a Certificate of Public Advantage with the Texas Health and Human Services Commission (HHSC), which is authorized to issue a letter of approval in appropriate circumstances. A copy of the application must also be submitted to the Texas Attorney General.
Although immunity from antitrust enforcement is conditioned upon the issuance of a Texas Certificate of Public Advantage after a thorough vetting of the transaction, the federal withdrawal of the Safety Zones and the FTC’s recent actions in Louisiana call into question whether Texas hospitals granted a Certificate of Public Advantage by HHSC can reasonably rely on state-granted immunity from federal and state antitrust laws. In the FTC’s lawsuit against Louisiana Children’s Medical Center and HCA Healthcare, the State of Louisiana filed a motion to intervene in late April, calling the FTC’s actions a “blatant attack” on Louisiana’s state sovereignty given the state’s lengthy and comprehensive review of the transaction.
The DOJ withdrawal of the Safety Zones for healthcare providers signals a shift in antitrust enforcement nationwide. Healthcare providers can no longer rely on the now-outdated Guidance – and, possibly, a state-issued Certificate of Public Advantage – for deals that would have been safe from federal and state antitrust enforcement in the past.