Transactions
Commonwealth of Pennsylvania v. Urology of Central Pennsylvania, Inc., et al., (M.D. Pa Case No: 1:11-cv-01625-JEJ 2011)
The Pennsylvania attorney general entered into an antitrust consent order with urology group that had been formed in 2005 as the result of a merger of five separate practices. The decision is noteworthy in several respects. First, as more physician groups merge and as hospitals acquire more physician practices, such challenges are likely to become more common. Second, the investigation and consent order occurred years after the merger was consummated. Merging providers need to be aware that antitrust concerns do not end with the transaction; post-merger complaints by managed care plans concerning higher prices and greater provider demands can lead to an antitrust investigation. Finally, despite allegations of “monopoly”, the consent order involves limited restrictions on the merged group, and no effort to break up the group or obtain divestiture. This may reflect the difficulty that antitrust enforcers face in attacking physician specialty transactions, given the opportunities for entry through hospital recruitment, significant efficiencies, and geographically dispersed competition affecting many specialties.
Physician (and hospital) combinations are also likely to come under greater antitrust scrutiny with the recent issuance of the final Statement of Antitrust Enforcement Policy with respect to ACOs. http://ftc.gov/os/fedreg/2011/10/111020aco.pdf While advance compliance with the Antitrust Statement is not mandatory to qualify as an ACO, CMS and the antitrust agencies have developed a process that will likely involve detailed monitoring of ACOs’ antitrust compliance.
The Antitrust Statement identifies conduct that may raise issues, especially for ACOs with a high market share in, among other areas, physician specialties. In particular, the statement raises concerns regarding exclusive relationships with providers with a high share. The antitrust agencies define exclusivity very broadly. The standards talk about the contractual provisions that “prevent or discourage” providers from contracting with other ACOs. Other agency statements have provided that exclusivity can be “implicit or explicit,” “formal or informal,” or based on a “written or de facto agreement.”
At the same time, the Statement’s methods for determining market share are admitted to be only “screening devices”, and will often be subject to effective challenge. Counsel for providers planning ACOs or ACO-like organizations may wish at an early stage to evaluate their antitrust exposure and its implications for both the size of ACO provider networks and relationships between ACOs and their providers.
Reported By: David Ettinger, Detroit, Michigan
Lower Fees, Inc. v. Bankrate, Inc., No. 4D10-1695 (Fla. 4th DCA Oct. 19, 2011).
Pointing to a seventy-year-old Florida Supreme Court opinion, Oceanic Villas, Inc. v. Godson, 4 So. 2d 689 (Fla. 1941), the 4th DCA noted that “a fraudulent inducement claim cannot be defeated by a contractual agreement unless the contract specifically states a fraud claim is not sufficient to negate the contract.” Unless the contract addresses fraud expressly in the “no reliance” provision, a fraudulent inducement claim is viable for seeking rescission (at least in the 4th DCA). “[W]e conclude our supreme court has spoken clearly that no contract provision can preclude rescission on the basis of fraud in the inducement unless the contract provision explicitly states that fraud is not a ground for rescission.”
Reported By: Steven Grigas.