5 Benefits of Hospital Antitrust Settlements

An official from the Federal Trade Commission explained why the commission would rather settle than pursue litigation in certain matters, including antitrust cases involving hospitals.

"While our litigated challenges grab headlines, most agency antitrust enforcement occurs through challenges settled by a consent order," Deborah Feinstein, director of the Bureau of Competition, said in a speech this week. "In my view, FTC consent orders are every bit as important in preserving competition and protecting consumers as are our successful litigation efforts."

Parties can use an FTC consent order to settle a case if they agree to discontinue or correct the practice challenged by the FTC. A party may decide to raise the topic of a settlement at any time during a pending investigation. "A well-crafted consent order can achieve divestiture necessary to preserve existing levels of competition, stop anticompetitive conduct, cause firms to take additional steps to restore competition or clear away impediments to future competition," said Ms. Feinstein.

If an agreement is not reached via a consent order, the case moves into litigation before an FTC administrative law judge. The FTC or respondent can then appeal that decision to the commission, which will either dismiss the case or issue a cease and desist order.

Ms. Feinstein explained a few of the "enormous benefits" the FTC sees when resolving matters through consent orders.  

1. A consent order can lead to a quicker resolution. The time it takes to litigate a case can prolong the anticompetitive effects of the conduct in question, particularly if the merger is consummated, said Ms. Feinstein. But pending mergers aren't immune to the pressures of time. "Even where a merger is not consummated, obtaining relief quickly is important. Competition can be affected during the pendency of a merger. For example, customers and employees may go elsewhere because of the uncertainty related to the transaction," she said.

2. Litigation is resource-intensive. Ms. Feinstein said the FTC aims to be a good steward of public resources, and resolving matters through consent orders frees up resources for other investigations and challenges. "While decisions on fully litigated records may provide greater guidance on the state of the law, it is generally not good public policy to impose substantial costs on respondents and third parties to bring to trial matters that can be settled based on the sound application of law to the substantial record the commission has developed during an investigation," said Ms. Feinstein.

3. Litigation is uncertain. The FTC wants to achieve remedies before "the eggs are scrambled" and a remedy either becomes unavailable or less effective, according to Ms. Feinstein. This was the case when the FTC settled a case challenging Phoebe Putney Health System's 2011 acquisition of Palmyra Park Hospital in Albany, Ga. By the time it was settled, it became clear that divestiture would be an unavailable remedy due to Georgia's certificate of need law. This made divestiture "impossible" because a divested facility could not obtain a new CON license, according to Ms. Feinstein. The FTC instead accepted a proposed settlement that doesn't include divestiture but "represents the most effective and efficient resolution available," said Ms. Feinstein.

4. Litigation can be a "blunt instrument." Ms. Feinstein said the decision to litigate is sometimes the result of a rejected settlement proposal. In these cases, the parties accept the litigation outcome will be "all or nothing." A merger may either be blocked or allowed to proceed in its entirety. "In contrast, a consent order allows us to be surgical in our approach," said Ms. Feinstein, "to eliminate the anticompetitive aspects of a transaction or conduct with the detailed information needed to do so while not adversely affecting precompetitive aspects of an arrangement."   

5. The consent process involves back-and-forth discussions, which can be beneficial. Ms. Feinstein said the fair amount of negotiations involved in a settlement allow "all sides to fine-tune the specifics to maintain as much of the legitimate efficiencies as possible." For instance, if the parties can bring forward an upfront buyer and explain why a different divestiture package may be more effective than one proposed by the FTC, the commission is "always ready to listen," according to Ms. Feinstein.

Furthermore, Ms. Feinstein said the FTC tries to be transparent about what it considers an acceptable settlement. "Not surprisingly, parties often ask what it would take to resolve a competitive concern. When possible, staff will provide a response. Sometimes the parties supply a basic framework of what they have in mind for a settlement. At that point, staff may provide feedback — often quite detailed — in order to narrow the issues and provide the basis for an effective remedy," she said.

More Articles on Hospitals and the FTC:

Phoebe Putney Won't Have to Sell Palmyra Hospital in FTC Settlement
FTC Official Addresses Physician-Hospital Mergers, ACO Policies
Recent Data Privacy Suits Show FTC's Resolve to Enforce Data Security Laws

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