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FTC questions state antitrust rules on Medicaid redesign

The Federal Trade Commission has questioned whether state

The Federal Trade Commission has questioned whether state regulations that provide antitrust immunity to hospitals and other health care providers involved in New York's Medicaid redesign are needed or legal. Photo Credit: iStock

The Federal Trade Commission has questioned whether state regulations that provide antitrust immunity to hospitals and other health care providers involved in New York's Medicaid redesign are needed or legal.

The state's Delivery System Reform Incentive Program -- known as DSRIP -- was created a year ago as an attempt to improve care and reduce costs for low-income Medicaid patients. The program will allocate $6.42 billion in federal money to hospitals, doctors and other community health care groups statewide over the next five years, provided they cut avoidable hospital use among Medicaid recipients by 25 percent by the end of 2019.

The program requires formation of "performing provider systems" that call for close collaboration among hospitals, doctors' practices and other health care providers that might normally be competitors to combat chronic disease among low-income patients.

So in December 2014, the state enacted regulations that allow these systems to apply for a Certificate of Public Advantage -- or COPA -- to protect them from state and federal antitrust laws in their DSRIP collaborations.

But in an April 22 letter to the New York State Department of Health, FTC staff said the certificate was both unnecessary and "is likely to foster anticompetitive conduct."

"The antitrust laws are not a barrier to the formation of efficient health care collaborations," the FTC wrote in the 11-page letter. " . . . Because procompetitive health care collaborations already are permissible under the antitrust laws, the main effect of the COPA regulations is to immunize conduct that would not [sic] generate efficiencies and therefore would not [sic] pass muster under the antitrust laws."

The FTC urged the health department "to carefully consider each PPS' potential impact on competition" and said it "will continue to investigate and challenge transactions that are anticompetitive."

The letter comes as the health department is set to announce award letters Thursday to the state's 42 performing provider systems, or PPS, for projects to reduce hospital admissions. Two of those systems are on Long Island -- one centered at Stony Brook University Hospital and the other at Nassau University Medical Center in East Meadow.

In a statement, the health department said it "is reviewing the letter from the FTC and in the meantime, DOH is moving forward" with the DSRIP program "and does not anticipate that the issues the FTC raises will have any impact" on the provider systems.

The FTC's comments came after the New York Health Plan Association, the trade group for the state's health insurers, The Business Council of New York State and other groups sent a letter in October to the FTC and the U.S. Department of Justice voicing their concern that the certificate would allow hospitals and doctors to use their collaboration to get higher reimbursement rates and thus "will inevitably lead to monopolistic or oligopolistic market practices."

The FTC's letter focused on three performing provider systems that had applied for the COPA immunity: Adirondack Health Institute, Advocate Community Partners and Staten Island Performing Provider System. Advocate is a consortium of about 3,000 doctors in New York City and Long Island that have partnered with the North Shore-Long Island Jewish Health System. The Staten Island PPS includes North Shore-LIJ's Staten Island University Hospital.

North Shore-LIJ spokesman Terry Lynam said it was unclear why the FTC was concerned.

"COPA will protect only those activities related to DSRIP," he said. "It would not protect any improper provider collaboration related to other managed care contracts or any other activities."

But the FTC said in its letter that "the potential anticompetitive effects of information sharing and joint payment negotiations under a COPA may extend to commercial and Medicare patients as well."


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