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The Affordable Care Act at Odds with Antitrust? A Look into Hospital Mergers and Electronic Medical Record Implementations

There is a rising trend in hospital network and physician group consolidations, which has come hand in hand with the passing of the Patient Protection and Affordable Care Act (ACA). 1

 

One of the primary goals of the ACA is to facilitate the industry’s move from paper to electronic health records (EHR) and to obtain meaningful use out of EHRs. 2  Meaningful Use will be implemented in three stages. 3  The general objectives of Meaningful Use include capturing standardized information, coordinating care within and outside a hospital network, improving reporting, and using this information to engage patients. 4  Starting in 2016, the federal government will deduct Medicare and Medicaid payments for hospitals and physician groups who do not meet Meaningful Use criteria. 5  This effectively requires the medical industry to comply with these standards to obtain full Medicare and Medicaid payment.

 

However, EHR implementations are extremely costly and can be in the hundreds of millions of dollars. 6   In fact, Partners Healthcare spent $1.2 billion on its EHR implementation. 7

 

There is no surprise that the year the ACA passed, hospital mergers increased by forty-five percent. 8  Roger Stroger, a Foley & Lardner partner, noted, “[the] ACA plays a large role in driving these mergers.” 9  Given the high cost to install an EHR, smaller hospital networks and physician groups merge with larger organizations to meet Meaningful Use guidelines. 10  Moreover, hospitals encourage these mergers because they must attain sufficient economies of scale to balance the cost of installing EHRs. 11

 

However, this trend also raises serious antitrust concerns.  Most notably, a federal district court in Idaho granted the Federal Trade Commission’s (FTC) injunction to prevent a merger between St. Luke’s and Saltzer Medical Group because it substantially lessened competition. 12  The FTC is concerned that these large hospital networks will pressure insurance companies into paying higher prices. 13  Yet at the same time, the district court praised the healthcare network for achieving greater efficiencies, including its EHR implementation. 14

 

The Department of Justice (DOJ) and FTC have increasingly scrutinized the consolidation of hospital networks, which puts hospital organizations in a difficult position. 15  The medical field is working against the looming 2016 deadline to meet Meaningful Use standards, but do not necessarily have the resources to purchase the requisite software.

 

In all, the federal government poses a difficult balance for hospital networks.  They need to be large enough to achieve economies of scale after a costly EHR implementation but also make sure that they do not become too large to trigger antitrust concerns with the DOJ and FTC.


  1. Roy Strom, Hospital Mergers Get Caught Between Reform, Competition, Chicago Law. (Dec. 1, 2012), http://chicagolawyermagazine.com/Archives/2012/12/Hospital-Mergers.aspx. 

  2. How to Attain Meaningful Use, HealthIT, https://www.healthit.gov/providers-professionals/how-attain-meaningful-use (last visited April 17, 2016).  This provision of the ACA is also referred to as Meaningful Use. 

  3. Id. 

  4. Id. 

  5. Id. 

  6. Akanksha Jayanthi, 8 Epic EHR implementations with the Biggest Price Tags in 2015, Becker’s Healthcare (July 1, 2015), http://www.beckershospitalreview.com/healthcare-information-technology/8-epic-ehr-implementations-with-the-biggest-price-tags-in-2015.html (listing the most expensive Epic implementations in 2015). 

  7. Id. 

  8. Strom, supra note 1. 

  9. Id

  10. Id. 

  11. Id. 

  12. Saint Alphonsus Med. Ctr. – Nampa v. St. Luke’s Health Sys., No. 1:12-CV-00560-BLW, 2014 WL 407446 (D. Idaho Jan. 24, 2014). 

  13. See Press Release, Statement of FTC Chairwoman Edith Ramirez on the U.S. District Court in the District of Idaho Ruling in the Matter of the Federal Trade Commission and the State of Idaho v. St. Luke’s Health System Ltd. and Saltzer Medical Group, P.A., Federal Trade Commission (Jan. 24, 2014), https://www.ftc.gov/news-events/press-releases/2014/01/statement-ftc-chairwoman-edith-ramirez-us-district-court-district. 

  14. How Providers Can Avoid Antitrust Pitfalls During a Physician Practice Acquisition, Advisory Board Company (Mar. 27, 2015, 10:13AM), https://www.advisory.com/daily-briefing/2015/03/27/how-providers-can-avoid-antitrust-pitfalls-during-a-physician-practice-acquisition. 

  15. See Ayla Ellison, 5 Healthcare Antitrust Cases to Watch in 2015, Becker’s Healthcare (Jan. 30, 2015), http://www.beckershospitalreview.com/legal-regulatory-issues/5-healthcare-antitrust-cases-to-watch-in-2015.html.