Diagnosing Physician-Hospital Organizations, Essay Example

Introduction

In this scenario, the physician-hospital organization (PHO) is legally described as a super PHO, in which the organization is a superstructure that “owns or controls (or acts as an agent for) a group of other PHOs and involves multiple hospitals and physician groups” (Creighton 1). It is important to consider that according to antitrust laws, it is not legal for competitors of this nature to participate in price regulatory transactions. However, if the organization is a legal joint venture that instates some precompetitive benefits then these practices are permissible.

Discussion

The implementation of a joint venture is necessary to ensure that there are no illegal restraints on competition. Statement 9 of the Health Care Statements describes that: “multiprovider networks will be evaluated under the rule of reason, and will not be viewed as per se illegal, if the providers’ integration through the network is likely to produce significant efficiencies that benefit consumers, and any price agreements (or other agreements that would otherwise be per se illegal) by the network providers are reasonably necessary to realize those efficiencies” (Creighton 1).

Therefore, it would be necessary for the PHO to restructure itself in a manner that promotes clear benefit to patients and creates a more effective health care system. Ultimately, this can be demonstrated by showing that the quality of patient care is increasing as a consequence of this partnership, not just profitability. According to the FTC, this form of partnership is considered to be legal if they produce significant efficiencies, which must be demonstrated using physical records during the compilation of yearly reports.

The main problem in this case is that the PHO currently serves as a vehicle through which competing hospitals and physicians could bargain collectively with health plans to obtain higher fees for themselves. While this is not technically an illegal practice if the organization enters a joint venture, it violates antitrust laws. It is therefore important for this collaboration to fill the correct paperwork to register as a joint venture in order to bypass these difficulties. An important concern is also that the owner PHOs, member hospitals, and member physicians cancelled contracts with payors and informed them that the PHO would be the sole entity through which they would enter into payor contracts. Therefore, it appears that this organization is monopolizing the income earned from health care transactions, which is not legal. It is important to restate this intention to clarify that the payors and third party members will be negotiating with the newly established joint venture organization. Furthermore, it is not reasonable for all hospitals in the area to participate; since 90% of all physicians in the region are included in this partnership, it is still considered to be a monopoly. Therefore, it is reasonable for this full group to break into smaller joint ventures in order to remain within the scope of legal practice.

The FTC and the U.S. Department of Justice (DOJ) Antitrust Division are responsible for enforcing federal antitrust laws (Federal Trade Commission 1). According to the official FTC website, “Premerger notification filings, correspondence from consumers or businesses, Congressional inquiries, or articles on consumer or economic subjects may trigger an FTC investigation” (Federal Trade Commission 1). When this organization suspects that a law has been breached, the agency will contact the company under suspicion to determine if they have permission to conduct a voluntary investigation. If the company agrees to consent, it is expected that they will cease engaging in the behavior that is believed to be illegal. Furthermore the FTC will recommend steps that will help them resolve the potential antitrust behavior. However, if the FTC and the company under suspect cannot reach a negotiation, a formal hearing will be conducted to determine whether the company is responsible for breaching the relevant antitrust laws (Sullivan et al. 25). If the company is found to have violated the law, they will be issued a cease and desist letter that will result in penalties if it is not obeyed.

Conclusion

Therefore, it is in the best interest of this health care consortium to reorganize its practices in a manner that does not violate antitrust laws. Furthermore, it is important to consider that the organizations are not acting ethically or in the best care of their patients. Rising costs of health care indicate increased profits, but it will also prevent many people from being able to access the health care that they need. Thus, it is important for these institutions to consider the legal components of their agreement and break into smaller health care groups if this partnership is still deemed to be necessary. As long as there is some kind of competition within this area, it is likely that the FTC will not become suspicious of their actions and they will be able to continue practice as a joint venture. While some profitability will be maintained in this manner, it will not cause any significant damage among consumers because competition will still be present to regulate prices.

Citations

Creighton S. (2004). Diagnosing Physician-Hospital Organizations. Retrieved from https://www.ftc.gov/sites/default/files/documents/reports/improving-health-care-dose-competition-report-federal-trade-commission-and-department-justice/040723healthcarerpt.pdf

Federal Trade Commission. (2015). The Enforcers. Retrieved from https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/enforcers

Sullivan ET, Hovenkamp H, Shlanski HA. (2009). Antitrust Law, Policy and Procedure: Cases, Materials, Problems.

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