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ANTITRUST LAWS AND THEIR EFFECTS ON 

HEALTHCARE PROVIDERS, INSURERS AND PATIENTS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON COURTS AND 

COMPETITION POLICY 

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

DECEMBER 1, 2010 

Serial No. 111–157 

Printed for the use of the Committee on the Judiciary 

( 

Available via the World Wide Web: http://judiciary.house.gov 

(II) 

COMMITTEE ON THE JUDICIARY 

JOHN CONYERS, JR., Michigan, Chairman 

HOWARD L. BERMAN, California 

RICK BOUCHER, Virginia 

JERROLD NADLER, New York 

ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia 

MELVIN L. WATT, North Carolina 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

WILLIAM D. DELAHUNT, Massachusetts 

STEVE COHEN, Tennessee 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

PEDRO PIERLUISI, Puerto Rico 

MIKE QUIGLEY, Illinois 

JUDY CHU, California 

TED DEUTCH, Florida 

LUIS V. GUTIERREZ, Illinois 

TAMMY BALDWIN, Wisconsin 

CHARLES A. GONZALEZ, Texas 

ANTHONY D. WEINER, New York 

ADAM B. SCHIFF, California 

LINDA T. SA ́ NCHEZ, California 

DANIEL MAFFEI, New York 

JARED POLIS, Colorado 

LAMAR SMITH, Texas 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

HOWARD COBLE, North Carolina 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia 

DANIEL E. LUNGREN, California 

DARRELL E. ISSA, California 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

TRENT FRANKS, Arizona 

LOUIE GOHMERT, Texas 

JIM JORDAN, Ohio 

TED POE, Texas 

JASON CHAFFETZ, Utah 

TOM ROONEY, Florida 

GREGG HARPER, Mississippi 

PERRY APELBAUM, Majority Staff Director and Chief Counsel 

SEAN MCLAUGHLIN, Minority Chief of Staff and General Counsel 

SUBCOMMITTEE ON COURTS AND COMPETITION POLICY

HENRY C. ‘‘HANK’’ JOHNSON, JR., Georgia, Chairman 

JOHN CONYERS, JR., Michigan 

RICK BOUCHER, Virginia 

CHARLES A. GONZALEZ, Texas 

SHEILA JACKSON LEE, Texas 

MELVIN L. WATT, North Carolina 

MIKE QUIGLEY, Illinois 

DANIEL MAFFEI, New York 

JARED POLIS, Colorado 

HOWARD COBLE, North Carolina 

JASON CHAFFETZ, Utah 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

BOB GOODLATTE, Virginia 

DARRELL ISSA, California 

GREGG HARPER, Mississippi 

CHRISTAL SHEPPARD, Chief Counsel 

BLAINE MERRITT, Minority Counsel 

(III) 

C O N T E N T S 

DECEMBER 1, 2010 

Page 

OPENING STATEMENTS 

The Honorable Henry C. ‘‘Hank’’ Johnson, Jr., a Representative in Congress 

from the State of Georgia, and Chairman, Subcommittee on Courts and 

Competition Policy ............................................................................................... 1 

The Honorable Howard Coble, a Representative in Congress from the State 

of North Carolina, and Ranking Member, Subcommittee on Courts and 

Competition Policy ............................................................................................... 2 

The Honorable John Conyers, Jr., a Representative in Congress from the 

State of Michigan, Chairman, Committee on the Judiciary, and Member, 

Subcommittee on Courts and Competition Policy ............................................. 24 

WITNESSES 

Mr. Richard Feinstein, Director, Bureau of Competition, Federal Trade Commission, Washington, DC 

Oral Testimony ..................................................................................................... 25 

Prepared Statement ............................................................................................. 28 

Ms. Sharis A. Pozen, Chief of Staff and Counsel to the Assistant Attorney 

General, Antitrust Division, U.S. Department of Justice, Washington, DC 

Oral Testimony ..................................................................................................... 41 

Prepared Statement ............................................................................................. 43 

Ms. Melinda Hatton, Senior Vice President and General Counsel, American 

Hospital Association 

Oral Testimony ..................................................................................................... 72 

Prepared Statement ............................................................................................. 74 

Mr. Arthur Lerner, Partner, Crowell & Moring LLP, on behalf of America’s 

Health Insurance Plans 

Oral Testimony ..................................................................................................... 84 

Prepared Statement ............................................................................................. 87 

Dr. Peter J. Mandell, M.D., Chair of the Council on Advocacy, American 

Academy of Orthopaedic Surgeons 

Oral Testimony ..................................................................................................... 98 

Prepared Statement ............................................................................................. 100 

Dr. Michael P. Connair, M.D., American Federation of State, County, and 

Municipal Employees, AFL-CIO 

Oral Testimony ..................................................................................................... 106 

Prepared Statement ............................................................................................. 108 

Mr. David Balto, Senior Fellow, Center for American Progress 

Oral Testimony ..................................................................................................... 114 

Prepared Statement ............................................................................................. 116 

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

Material submitted by the Honorable Howard Coble, a Representative in 

Congress from the State of North Carolina, and Ranking Member, Subcommittee on Courts and Competition Policy: 

Prepared Statement of the Honorable Lamar Smith, a Representative 

in Congress from the State of Texas, and Ranking Member, Committee 

on the Judiciary ............................................................................................ 4 

Prepared Statement of the National Community Pharmacists Association 7 

Page

IV 

Material submitted by the Honorable Howard Coble, a Representative in 

Congress from the State of North Carolina, and Ranking Member, Subcommittee on Courts and Competition Policy—Continued 

Prepared Statement of the American Medical Association (AMA) ............... 9 

APPENDIX 

MATERIAL SUBMITTED FOR THE HEARING RECORD

Responses to questions posed during the hearing to Sharis A. Pozen, Chief 

of Staff and Counsel to the Assistant Attorney General, Antitrust Division, 

U.S. Department of Justice, Washington, DC ................................................... 134 

Responses to Post-Hearing Questions from Richard Feinstein, Director, Bureau of Competition, Federal Trade Commission, Washington, DC ................ 136 

(1) 

ANTITRUST LAWS AND THEIR EFFECTS ON 

HEALTHCARE PROVIDERS, INSURERS AND 

PATIENTS 

WEDNESDAY, DECEMBER 1, 2010 

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON COURTS AND

COMPETITION POLICY

COMMITTEE ON THE JUDICIARY, 

Washington, DC. 

The Subcommittee met, pursuant to notice, at 10:30 a.m., in 

room 2141, Rayburn House Office Building, the Honorable Henry 

C. ‘‘Hank’’ Johnson, Jr. (Chairman of the Subcommittee) presiding. 

Present: Representatives Johnson, Conyers, Gonzalez, Polis, 

Coble, and Goodlatte. 

Staff Present: (Majority) Christal Sheppard, Subcommittee Chief 

Counsel; Anant Raut, Counsel; and E. Stewart Jeffries, Minority 

Counsel. 

Mr. JOHNSON. This hearing of the Committee on the Judiciary, 

Subcommittee on Courts and Competition Policy will now come to 

order. Without objection, the Chair is authorized to declare a recess. 

Welcome to the final hearing of the Subcommittee on Courts and 

Competition Policy in the 111th Congress. I want to start by saying 

how much I have enjoyed working with my colleagues on both sides 

of the aisle these past 2 years. We have had our share of healthy 

differences, but we have also passed a number of important pieces 

of legislation on a bipartisan basis. 

In particular, I can’t say enough about the Ranking Member of 

the Subcommittee, the Honorable Howard Coble, and how integral 

his presence and friendship has been to the success that we have 

enjoyed together. Thank you, Howard. 

Now, on today’s hearing, doctors are under pressure from all 

sides to find ways to coordinate patient care. Coordinated care can 

help patients by reducing costs and improving outcomes. It may involve sharing patient medical data, tracking outcomes across a population, or jointly contracting to provide a seamless continuum of 

care. But the question for many doctors is: How do you coordinate 

patient care without violating the antitrust laws? 

One of my first acts as Subcommittee Chairman was to write a 

letter to Chairman Leibowitz of the Federal Trade Commission regarding the $19 billion in incentives for health industry—excuse 

me, health information technology investments under the American 

2 

Recovery and Reinvestment Act of 2009. I asked him to provide 

physicians with clear guidance on how to take advantage of these 

incentives and integrate their practices in a way that did not violate the antitrust laws. 

In addition, I asked whether the FTC’s enforcement practices 

against physician collective negotiation have resulted in any appreciable decrease in patient premiums or increase in competition. I 

was gratified by Chairman Leibowitz’s prompt response assuring 

me that the FTC only initiates actions against collective negotiations in situations where there has been demonstrable harm to consumers in the form of reduced competition and higher prices. But 

I am concerned that the FTC and DOJ may be spending their resources going after the small, easy cases instead of tackling the 

larger systemic issues which actually result in greater societal 

harm. 

According to an American Medical Association study, 96 percent 

of major metropolitan cities have a concentrated health insurance 

market. While concentration can lead to efficiencies, it can also create distortions in the market, resulting in fewer choices and higher 

premiums. I am happy to see that the DOJ recently announced an 

investigation into Blue Cross Blue Shield of Michigan’s alleged 

anticompetitive practices. While I applaud the DOJ’s efforts, I remain concerned about the many other areas in this country where 

a single dominant health insurer wields absolute power. 

My goal in many areas as a legislator is to strike a balance. I 

believe that that is the heart of competition policy, and should be 

here as well. I am not blind to the concern that providing physicians and hospitals with more bargaining power can lead to higher 

healthcare costs. At the same time, if we allow the status quo to 

continue, we risk creating a long-term doctor shortage as physicians are driven out of their specialties by the imbalance in bargaining power and new doctors are discouraged from entering. 

It is fine and good to say that we should respect the free market, 

but the free market only works if the antitrust laws are enforced 

evenly against both sides. In this past week alone, articles in the 

Wall Street Journal, New York Times, and the Washington Post 

highlighted the challenges and opportunities that hospitals and 

healthcare providers will face under the new healthcare laws. How 

the antitrust laws are enforced against all parties involved will, in 

part, determine how successful these initiatives turn out to be. 

I now recognize my colleague Howard Coble, the distinguished 

Ranking Member of the Subcommittee, for his opening remarks. 

Before I close, I must give kudos to my staff, who have made me 

look taller in this Chair than I actually am. I want to thank them 

publicly for their great work. 

Now, Mr. Coble. 

Mr. COBLE. Thank you, Mr. Chairman. We are all obliged to our 

staff, Mr. Chairman, so I share that. 

I thank you, Mr. Chairman, for your generous words earlier. I, 

too, have very much enjoyed serving as the Ranking Member of 

this Subcommittee and commend you for having been a very good 

Chairman with whom to work for the past 2 years. I thank you for 

that. Thank you as well for calling this important and timely hearing. 

3 

Physicians have long been concerned with what they view as increasing concentration among health insurers. This concentration 

has led to lower reimbursement rates for physicians. That, coupled 

with the high and continuing rising cost of malpractice insurance, 

has caused many physicians not only in my district but I think nationally to consider abandoning the practice of medicine. 

To combat these forces, many physicians and hospitals have tried 

various forms of clinical integration to try and help contain costs 

and negotiate better reimbursement rates from insurers. Unfortunately, many of these clinical integration schemes have come under 

antitrust scrutiny by the FTC and DOJ as potential price-fixing arrangements. 

The FTC and DOJ have provided some guidance on what types 

of arrangements physicians can lawfully employ. However, these 

healthcare guidelines were released in August 1996, and that was 

almost a decade and a half ago. I know that there have been a host 

of changes in medical malpractice since that time. I have heard 

complaints from medical professionals that these guidelines no 

longer reflect market realities. I would like to ask Mr. Feinstein 

and Mrs. Pozen why these guidelines have not been revised, and 

are there plans to do so? 

In addition, it is my understanding that physicians can try to obtain a business review letter from the agencies; however, it is also 

my understanding that these letters can take a very long, extended 

time to come to fruition and can cost thousands, I am told, in legal 

fees. And this is not necessarily practical for many physicians. 

The discussion is particularly relevant, Mr. Chairman, it seems 

to me, given the Department of Health and Human Services is currently devising rules regarding accountable care organizations, or 

ACOs. These ACOs have the potential to reduce costs for consumers and to be beneficial for physicians as well. However, some 

have raised concern that the ACOs could also be used to facilitate 

price fixing. Physicians clearly want and need clear guidance in 

this arena, and I am hoping that HHS, along with DOJ and FTC, 

will be able to provide that to them. 

Physicians are not the only parties at issue here. The guiding 

principle of antitrust law is that it is supposed to promote consumer welfare through competition. This, of course, means generally lower prices, better services, and greater innovation in products and services. However, I feel that patients often get lost in 

these discussions about healthcare. 

What I would most like to hear from our witnesses, Mr. Chairman, is whether they feel that current antitrust enforcement truly 

serves the needs of patients, and, if it does not, what can be done 

to improve that. I look forward to hearing the answers to these and 

other questions, and yield back the balance of my time, Mr. Chairman. But before doing so, if I may, I would like unanimous consent 

to have introduced into the record statements from the Ranking 

Member of the full Committee Lamar Smith, the statement from 

the National Community Pharmacists Association, and the American Medical Association. 

Mr. JOHNSON. Without objection. 

[The prepared statement of Mr. Smith follows:] 

4 

PREPARED STATEMENT OF THE HONORABLE LAMAR SMITH, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF TEXAS, AND RANKING MEMBER, COMMITTEE ON THE

JUDICIARY


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[The prepared statement of the National Community Pharmacists Association follows:] 

PREPARED STATEMENT OF THE NATIONAL COMMUNITY PHARMACISTS ASSOCIATION


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[The prepared statement of the American Medical Association 

follows:] 

PREPARED STATEMENT OF THE AMERICAN MEDICAL ASSOCIATION (AMA) 


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Mr. COBLE. I thank the Chairman. 

Mr. JOHNSON. I thank the gentleman for his statement. 


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I now recognize John Conyers, a distinguished Member of this 

Subcommittee and also the distinguished Chairman of the Committee on the Judiciary. 

Mr. Chairman. 

Mr. CONYERS. Thank you, Chairman Johnson, and Members of 

the Committee. 

I can’t tell you how important this hearing is not to just the 

Committee, but to the whole question of healthcare in terms of the 

Health Care Reform Act just signed into law and the struggle in 

America to insure some 50 million people that don’t have a dime’s 

worth of insurance, and all that figures into the rising costs of providing healthcare for all Americans. 

Bringing in the Department of Justice and the Federal Trade 

Commission is extremely important because we are in the process 

of understanding just why there is a disparity between the way 

doctors are threatened, or hassled, or prosecuted or threatened to 

be prosecuted and the way, as Mr. Coble said, the health insurance—this is the most powerful group of private corporations in the 

country, and they don’t have any problem coming together to plan 

for what the rates will be and what the rules will be. Nobody says 

much about that, to my knowledge. So what this Committee is 

going to be doing even into the next Congress is getting to understand how come this is so and what can be done to make it come 

out differently. 

Now, maybe somewhere during this hearing today somebody will 

take issue with my saying that there is a disparity in prosecutorial 

treatment, and I hope somebody can prove me wrong. But it is 

pretty obvious doctors, every time they get together, they are always worried about the laws, and what can happen to them, and 

have they crossed the line or not. 

But the insurance companies, how do they operate in real time? 

Well, not that anybody here doesn’t know, but when they set the 

rates in a region, that is it. You are either in, or you are out. And 

everybody knows it, especially the doctors and the hospitals. So 

why didn’t they violate antitrust? Well, Chairman, that is just the 

way it goes. I mean, that is the way it has always been. 

As Chairman Johnson has pointed out, these laws, when this 

first started 30 or 40 years ago, the healthcare insurers were not 

as large, powerful, or numerous as they are now. We are tracking 

down some of the merger activities, I think it was in Arizona, 

where they have exceeding control over the way medicine and 

healthcare delivery is practiced, and it is that way almost everywhere else. 

So we appreciate your witnesses here. I think we have got a 

great set of panels. And I appreciate what everybody has done. 

And since everybody is saying goodbyes and giving out kudos, we 

are not going out of business, gang. We are just going into a new 

session, and there is new leadership. I would like to remind my colleague this has happened before and will no doubt happen again. 

Thank you, Mr. Chairman. 

Mr. JOHNSON. Thank you, Mr. Chairman. 

I can only hope that I can be around for as many years as the 

Chairman so that I can experience the ebb and flow and ebb again. 

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mentalism, I guess, is eking out. But I am happy for my colleagues 

on the other side of the aisle. 

And I would ask, are there any other Members who wish to 

make opening statements? 

That being the case, other Members’ opening statements will be 

included in the record. 

I am now pleased to introduce the witnesses for today’s hearing. 

Today’s hearing will feature two panels. On our first panel we have 

Richard Feinstein, Director of the Bureau of Competition for the 

Federal Trade Commission. 

Welcome back, Mr. Feinstein. 

Mr. FEINSTEIN. Thank you, Mr. Chairman. 

Mr. JOHNSON. Our second witness is Sharis Pozen. She is Chief 

of Staff for the Antitrust Division of the Justice Department. 

Welcome, Ms. Pozen. 

Ms. POZEN. Thank you, Mr. Chairman. 

Mr. JOHNSON. Thank you both for your willingness to participate 

in today’s hearing. Without objection, your written statement will 

be placed into the record, and we ask that you limit your oral remarks to 5 minutes. You will note that we have a lighting system 

that starts with a green light. At 4 minutes, it turns yellow, then 

red at 5 minutes. After each witness has presented his or her testimony, Subcommittee Members will be permitted to ask questions 

subject to the 5-minute rule. 

Mr. Feinstein, would you begin, please? 

TESTIMONY OF RICHARD FEINSTEIN, DIRECTOR, BUREAU OF 

COMPETITION, FEDERAL TRADE COMMISSION, WASHINGTON, DC 

Mr. FEINSTEIN. Thank you very much, Mr. Chairman and Ranking Member Coble, Members of the Subcommittee. I am Richard 

Feinstein, Director of the Bureau of Competition at the FTC. I very 

much appreciate the opportunity to testify today on behalf of the 

FTC about the relationship between competition and antitrust enforcement on the one hand and lower healthcare costs and higher 

healthcare quality on the other hand. 

I should note for the record that the prepared written statement 

submitted for this hearing represents the view of the FTC. My oral 

statement and answers to any questions today represent my own 

views and not necessarily those of the Commission or any individual Commissioner. 

We are at an important point in the history of providing 

healthcare in this country. 

Mr. JOHNSON. Mr. Feinstein, if I might ask you to pull that 

microphone a little closer. 

Mr. FEINSTEIN. A comprehensive healthcare reform bill has become law. No one can foresee exactly how all the provisions of the 

new law will mesh with the current system, but we believe a continued effective antitrust enforcement is a necessary component of 

any plan. 

In the Bureau of Competition, protecting and promoting competition in the healthcare sector is a number one priority. We believe 

that antitrust enforcement improves healthcare in two ways. First, 

it prevents or stops anticompetitive agreements to raise prices, 

26 

thus saving money for consumers. Second, competition spurs innovation that improves care and expands access. 

For these reasons, the FTC has a long history of promoting competition in the healthcare sector, broadly defined, of course, to include not only hospitals and physicians, but also pharmaceutical 

and medical device markets, among others. Just this morning, for 

example, the Commission announced a case challenging a clinical 

lab consolidation in southern California which threatens to increase the cost of laboratory services paid for by physician groups. 

While the Commission’s written prepared statement addresses 

our merger activity in more detail, this morning I will briefly describe our activities with respect to joint price negotiations by 

healthcare providers that harm consumers and our efforts to provide guidance on accountable care organizations and clinical integration. 

Some have suggested that the antitrust laws act as barriers to 

healthcare provider collaborations that can lower costs and improve 

quality. In my view, that is simply wrong. The FTC plainly recognizes that joint conduct among healthcare providers, such as clinical integration, can foster proconsumer innovations in delivery of 

healthcare services. 

Stated simply, what the FTC seeks to prevent are anticompetitive agreements to fix the prices that healthcare providers charge 

without benefits to patients. Such arrangements typically involve 

competing providers agreeing to charge the same high prices and 

collectively refusing to serve the health plan’s patients unless their 

fee demands are met. These agreements are likely to raise prices 

for the provider’s services without improving care, and have routinely been deemed to violate the antitrust laws. 

However, we do not want enforcement of the antitrust laws to 

impede new and potentially more efficient ways of delivering and 

financing healthcare services. Antitrust standards properly distinguish between price fixing by healthcare providers, which is likely 

to increase healthcare costs, and effective clinical integration 

among healthcare providers that has the potential to achieve cost 

savings and improve health outcomes. 

When analyzing these types of collaborations, we ask two basic 

questions. First, does the proposed collaboration offer the potential 

for proconsumer cost savings or quality improvements in the provision of healthcare services; and, two, are any price agreements or 

other agreements among participants regarding the terms on which 

they will deal with healthcare insurers reasonably necessary to 

achieve those benefits? If the answer to both of those questions is 

yes, then the collaboration is analyzed under the rule of reason 

rather than the per se rule that otherwise applies to pricing agreements among competitors. And as long as the collaboration cannot 

exercise market power, it is unlikely to raise significant antitrust 

concerns, because the collaboration has the potential to benefit consumers rather than harm them. 

To aid providers considering these types of collaborations, the 

FTC and the Department of Justice issued statements of antitrust 

enforcement policy in healthcare that provide guidance about the 

antitrust analysis that would be applied to various types of 

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sory opinions as well as routinely issuing informal guidance on specific proposals when requested. 

The FTC is actively working on policy questions concerning accountable care organizations, or ACOs, which are encouraged by 

the new healthcare law to integrate providers in order to increase 

quality care and decrease costs. Many ACOs that will be set up to 

serve Medicare patients pursuant to the Affordable Care Act may 

wish to contract with payers in private healthcare markets as well, 

which may raise competition issues. 

To explore these issues, the FTC, CMS, and the HHS Inspector 

General’s Office hosted a workshop on October 5 to obtain information from industry stakeholders who have an interest in the development and operation of clinically integrated healthcare groups. 

We will continue to work with other government agencies, including, of course, our colleagues at the Department of Justice, to develop 

workable rules and regulations for ACOs. 

I have just about 5 more seconds, with your permission. 

We want to design rules for ACOs that are flexible enough to 

allow collaboration in healthcare that will improve quality and decrease costs without creating undue market concentration and price 

fixing. 

Thank you very much for the opportunity to share the FTC’s 

views on these vitally important issues. I, of course, look forward 

to answering your questions. 

Mr. JOHNSON. Thank you, sir. 

[The prepared statement of Mr. Feinstein follows:] 

28 

PREPARED STATEMENT OF RICHARD FEINSTEIN


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Mr. JOHNSON. Ms. Pozen. 

TESTIMONY OF SHARIS A. POZEN, CHIEF OF STAFF AND COUNSEL TO THE ASSISTANT ATTORNEY GENERAL, ANTITRUST 

DIVISION, U.S. DEPARTMENT OF JUSTICE, WASHINGTON, DC 

Ms. POZEN. Mr. Chairman, Members of the Subcommittee, I am 

pleased to be here today to talk about competition policy and antitrust enforcement in healthcare. I will focus on two areas: first, the 

Antitrust Division’s role in ensuring that coordination and integration among healthcare providers encourages innovation and efficiency without harming competition; second, the importance of 

measured and responsible antitrust enforcement in the health insurance market. Healthcare reform brings both areas to the forefront of competition policy. 

The Affordable Care Act allows for the creation of accountable 

care organizations which, will provide integrated, more efficient, 

higher-quality delivery and payment for Medicare and Medicaid 

services and their beneficiaries. The act also establishes competitive marketplaces and exchanges where individuals and small employers can purchase health insurance. The success of exchanges in 

ACOs will depend in part on effective competition both among 

health insurers and providers. 

Moreover, clear and accessible antitrust guidance will contribute 

to the success of these organizations. The Department is committed 

to providing efficient, quick review of any new business model that 

plans to deliver integrated care. 

ACOs are a good example of how providers might work together 

to deliver more efficient, high-quality care without inhibiting competition. ACOs are made up of providers that coordinate care for 

Medicaid beneficiaries with a common set of care protocols utilizing 

health ITs, investing in infrastructure, and meeting quality targets. 

If the ACO meets quality of care and cost targets, the ACO then 

shares those savings with the public through reduced governmental 

expenditures. 

The Department is actively working with the Health and Human 

Services and the Federal Trade Commission as the ACO regulatory 

process evolves, and the Department intends to offer whatever 

guidance and clarity may be needed to ensure that ACOs do not 

run afoul of the antitrust laws. The Department will provide expedited antitrust review to any ACO requesting our assistance. 

The Antitrust Division continues to undertake responsible and 

measured enforcement to prevent 

anticompetitive behavior in the healthcare industry. This enforcement is driven by the Division’s analysis of evolving market 

forces, structures, and dynamics in the healthcare industry. For example, the Department recently reviewed and analyzed evidence 

that demonstrated that entry and expansion in the healthcare industry faces strong barriers. This conclusion is significant, given 

that the Affordable Care Act provides the opportunity to reduce 

these barriers through newly formed health insurance exchanges, 

which again offer individuals and small businesses more affordable 

health insurance options. 

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changes are formed. Therefore, the Department of Justice will carefully review and challenge mergers that are likely to substantially 

lessen competition in the health insurance industry. The Justice 

Department will carefully scrutinize and continue to challenge exclusionary practices by dominant firms, whether for-profit or nonprofit, that substantially increase the cost of entry or expansion. 

For example, the Division recently filed a civil antitrust lawsuit 

against Blue Cross Blue Shield of Michigan, joined by the State of 

Michigan, alleging that Blue Cross used its dominance to impose 

anticompetitive most favored nations provisions in its agreements 

with approximately half of Michigan’s general acute-care hospitals; 

approximately 70 hospitals. The Blue Cross MFNs require a hospital either to charge Blue Cross no more than it charges Blue 

Cross’ competitors or to charge the competitors up to 40 percent 

more than it charges Blue Cross. These MFNs raise hospital prices, 

prevent other insurers from entering the marketplace, and discourage discounts, which inflate the cost of healthcare services and insurance. 

This action is significant for Michigan, but it has broader implications. Any time a dominant provider uses 

anticompetitive agreements, the market suffers. This cannot be 

allowed in Michigan or anywhere else in the United States. American consumers deserve affordable healthcare and competitive 

prices, and the Antitrust Division will vigorously pursue agreements and transactions that stand in the way of achieving this 

goal. 

Enforcement actions such as the Division’s lawsuit against Blue 

Cross work hand in hand with our efforts to prevent illegal consolidation in the health insurance market. In March, the Division informed the Blue Cross and Physician Health Plan of Mid-Michigan, 

the two largest providers of commercial health insurance in Lansing and their most significant rivals, that it would challenge their 

plans to merge. The companies abandoned the transaction. That 

transaction would have resulted in substantial lessening of competition in the Lansing market for commercial group health insurance and in the market for the purchase of physician services. 

In closing, the Justice Department believes that antitrust has 

and will continue to play an essential role in healthcare. To achieve 

the goals of healthcare reform, we must ensure that are our 

healthcare markets are as competitive as possible. This requires 

more than business as usual. We must provide predictability 

through clear and accessible guidance to healthcare consumers, 

providers, and payers. And the Antitrust Division is up to this 

task. 

Thank you. 

Mr. JOHNSON. Thank you, Ms. Pozen. 

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Mr. JOHNSON. We will now begin questioning, and I will start 

with the first round. 

What a dominant health insurance company in a market has the 

clout to make a take-it-or-leave-it offer of below-cost reimbursement rates, what is a sole practitioner or a small physician group 


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supposed to do? And this is a question first to Mr. Feinstein and 

next to Ms. Pozen. 

Mr. FEINSTEIN. Well, I will, of course, defer to Ms. Pozen on the 

premise regarding market power on the insurer side. 

With respect to what physicians can do, there is no question that 

it is difficult for a solo practitioner physician to resist that situation alone. I don’t think there is any dispute about that. And if 

they choose to collaborate in order to address that, there are ways 

that they can do that fully consistent with the antitrust laws. And 

we have laid out in great detail over the years ways that they can 

do that. 

Mr. JOHNSON. Would you share with us some of those methods? 

Mr. FEINSTEIN. Well, for example, going back to the guidelines 

that were issued in 1996, there have been—there is a fairly extensive description in general terms of methods of financial integration, of methods of clinical integration, both of which have been 

elaborated upon subsequently in advisory opinions. There are also 

opportunities for physicians to form entirely merged groups, which 

has happened in many segments of the country where individual 

physicians have formed unified practice groups. All of that is genuinely welcomed under the antitrust laws and certainly doesn’t pose 

condition concerns. What does pose concerns—— 

Mr. JOHNSON. If I might interrupt, how do those measures apply 

to a physician’s ability to contest a reimbursement rate imposed by 

a dominant health insurance company in that market? 

Mr. FEINSTEIN. Well, if it could be demonstrated that the rate 

that was being imposed by the insurance company was in some 

sense below cost, if it was going to have the effect, and it could be 

demonstrated that it was going to have the effect, of reducing the 

supply of physician services in a properly defined market, that may 

well be actionable under the antitrust laws against the insurance 

company. 

Mr. JOHNSON. That would require basically a private lawsuit; 

would it not? 

Mr. FEINSTEIN. It could be a private lawsuit, or it could take the 

form of enforcement by the Department of Justice or by a State attorney general. Historically the FTC has deferred to the Antitrust 

Division with respect to enforcement actions involving the insurance industry. 

Mr. JOHNSON. Can you cite to us any case where that has occurred? 

Mr. FEINSTEIN. Where what has occurred? 

Mr. JOHNSON. A small physician group or solo practitioner who 

is told that you will be reimbursed at this rate, and that rate is 

not profitable, it is below cost, and there has been a complaint to 

DOJ or FTC, and action has been taken to address the issue. 

Mr. FEINSTEIN. I would have to defer to Ms. Pozen about the extent to which that issue has arisen in the form of complaints. 

Mr. JOHNSON. Do you know of any? 

Mr. FEINSTEIN. On those specific facts I think those allegations 

have been raised from time to time, and I suspect that they have 

been the subject of investigation from time to time. I am not aware 

of a case on those particular facts. 

Mr. JOHNSON. Okay. Well, let us hear from Ms. Pozen. 

62 

Ms. POZEN. Sure. Thank you, Mr. Chairman. 

It is exactly the issue that we came upon when we were looking 

at the Michigan Blue Cross Blue Shield acquisition of PHP in Lansing. Not only did we have a concern about the commercial group 

insurance markets because that merger would have resulted in a 

90 percent market share, by our estimation, but we were also concerned about, as you put it, the purchase of physician services 

there. We thought that kind of dominance could affect the physicians and the kinds of rates that they could negotiate. So that was 

precisely the issue in that case, sir. 

Mr. JOHNSON. Is that the first time that any action has been 

taken with respect to a reimbursement schedule that was published and imposed upon a solo or physician group? 

Ms. POZEN. That potential harm, again, in the context of an acquisition, was looked at previously, and again, an acquisition of 

health insurance companies. When Aetna was acquiring Prudential, that was part of the allegations in that complaint, which 

ended in a consent agreement, and I believe in other mergers. 

Again, just as Mr. Feinstein pointed to, the reason that we find 

this issue and have concerns and try to resolve those concerns, just 

as we did in the Michigan Blue Cross Blue Shield acquisition, is 

because we don’t want to create dominant health insurance who 

can then affect physician services. 

Mr. JOHNSON. Thank you. My time has expired. I will now yield 

to the Ranking Member. 

Mr. COBLE. Thank you, Mr. Chairman. 

Good to have you both with us this morning. 

Mr. Feinstein, some physicians complain that the process for obtaining business review letters for cost-sharing arrangements is too 

costly and burdensome to be practicable for most physician groups. 

Do you have any practical suggestions as to how physicians could 

obtain a more prompt guidance from the FTC? 

Mr. FEINSTEIN. Yes, I do. Thank you, Mr. Coble. 

First of all, I think that there is a substantial amount of guidance in the form of letters that have already been issued and in 

the form of informal advice through speeches, through inquiries 

that are made to our healthcare shop. At the conference that was 

held last October, which was focused to some degree on accountable 

care organizations, what I alluded to in my opening statement, a 

number of the representatives of physician groups indicated their 

belief that the guidance that is out there right now is well understood. And I believe that there are many, many groups of physicians who are able to rely on that guidance and go forward without 

being challenged, but also without seeking a formal advisory opinion or business review. In some instances, they elect to do that. 

When they do, we have the obligation to make sure we understand 

the facts carefully and issue a reasoned letter. 

But I believe it is frequently the case that organizations are relying on the guidance that is out there in going forward without 

seeking formal advisory opinions. And I base that in part on my 

own experience in private practice. 

Mr. COBLE. Thank you, sir. 

Mr. Feinstein, does the FTC plan to revise its 1996 healthcare 

guidelines? 

63 

Mr. FEINSTEIN. Do we have plans to revise them; is that the 

question? At the moment we do not have plans to revise them beyond the extent to which they have already, in my judgment, been 

enhanced through the letters that have been issued over the years 

and the speeches that have been given, et cetera. We obviously are 

open to revising them as that is deemed to be appropriate, but 

when they were written, they were written rather broadly, and 

there is a substantial body of advice that has been issued over the 

last 14 years which I think takes the form, in effect, of updating 

the guidelines. 

Mr. COBLE. I thank you. 

Ms. Pozen, let me put a three-part question to you, if I may. How 

many antitrust actions has DOJ brought against physicians in the 

last 10 years; how many actions against hospitals; and how many 

actions against health insurers in that same timeframe? 

Ms. POZEN. I don’t know that I can give you precise numbers, but 

I can provide your staff those figures if you would like them. The 

Antitrust Division looks at all aspects of the healthcare industry. 

Since I have been at the Division, we have brought one case involving physicians and two cases involving health insurance companies. 

We have reviewed many and have many ongoing investigations. 

Mr. COBLE. If you can give us the detailed numbers, I would appreciate that. 

One more question, if I may, Mr. Chairman. 

We have heard complaints from physicians that the messenger 

model is cumbersome and outdated. If you would, Ms. Pozen, define 

the messenger models. And can you give us an example of how a 

lawful messenger model would work, and what benefits would a 

helpful messenger model bring to physicians who use it? 

Ms. POZEN. Sure. I think, as Mr. Feinstein pointed out, there are 

a number of ways that physicians can collaborate and work together jointly. One of those ways is through the messenger model, 

as you pointed out. The idea is that physicians, like any other entities, are otherwise competitors. And so one concern is that when 

physicians join together in ways that abut and run afoul of the 

antitrust laws, it can be considered price fixing. 

The messenger model is one way to avoid such allegations and 

not run afoul of the antitrust laws. The idea is using sometimes a 

third party or another means whereby you can negotiate with the 

insurance companies, but make sure that there isn’t price fixing 

among the physicians. So that is the messenger model, and that is 

how it can operate. 

Mr. COBLE. Thank you, Ms. Pozen. 

Thank you both. 

Thank you, Mr. Chairman. I yield back. 

Mr. JOHNSON. Thank you, Mr. Coble. 

Next, we will have questions from Mr. Conyers. 

Mr. CONYERS. Thank you. 

Nobody has talked about the concentration of the health insurance markets. Would you say something about that? 

Ms. POZEN. The question is to me, sir? I hope I was addressing 

such issues, sir, by ensuring that we vigorously enforce the antitrust laws, that we prevent further undue concentration in—— 

64 

Mr. CONYERS. That doesn’t say anything about a concentration. 

It tells me how good you think you work over at DOJ. Let us talk 

about the concentration. 

Ms. POZEN. Okay. Well, I think in our Michigan Blue Cross Blue 

Shield MFN case, there we did find undue concentration, and we 

found that there were contracting methods and techniques that 

Blue Cross Blue Shield of Michigan was using. 

Mr. CONYERS. Besides that case. 

Ms. POZEN. Well, as I made clear, and I think as we made clear 

when we announced that case, that if we find health insurance 

companies with dominance use 

anticompetitive methods, anticompetitive contracting methods, 

that we will stop them, and we will prosecute. And we will try to 

prevent further concentration through our merger enforcement. 

Mr. CONYERS. Well, what about is there concentration? 

Ms. POZEN. We have found that there is concentration. 

Mr. CONYERS. How much concentration? 

Ms. POZEN. Well, in the particular enforcement actions that I 

mentioned, we found that the—— 

Mr. CONYERS. Well, that is three. 

Ms. POZEN. There are a variety of studies out in the public documenting concentration in the health insurance area. 

Mr. CONYERS. What if you came across a statement that said 

there have been over 400 healthcare mergers in the last 10 years? 

Would you accept that as correct? 

Ms. POZEN. I would trust you, sir. 

Mr. CONYERS. Well, what about you, though? I don’t work over 

there with you every day. Matter of fact, this is the first time we 

have ever met. Have you ever heard of that statement before? 

Ms. POZEN. Yes, sir, I have. 

Mr. CONYERS. Well, then, why haven’t you told the Committee 

when I have asked you about four times about the nature of the 

concentration of healthcare insurers in the market, and you named 

three cases? 

Ms. POZEN. Well, since I have been at the Antitrust Division, 

those have been three significant cases that we have brought in 

that area in the time that we have been there. The other acquisitions that go on, some of them can raise serious competitive issues, 

and some of them do not. And some of them provide for efficiencies, 

and some do not. We will take each case as it comes and evaluate 

it on its facts, and we will vigorously enforce the antitrust laws. 

Mr. CONYERS. But you look into the past, don’t you? I am not 

holding you responsible for the past history. You have been in this 

job a year. Do you believe that there have been over 400 healthcare 

mergers in the last 10 years? You don’t know for sure? 

Ms. POZEN. I would take that as a fact. I don’t know the precise 

number, no, sir. 

Mr. CONYERS. Well, would you examine that for me? 

Ms. POZEN. Yes, sir. 

Mr. CONYERS. And we are going to be writing—there will be communication after the hearing—about whether or not there have 

been that many mergers. Does that seem like a large amount to 

you, if it is accurate? 

Ms. POZEN. I wouldn’t be able to comment on that. 

65 

Mr. CONYERS. You are not sure. But you are going to find out for 

the Committee? 

Ms. POZEN. Yes, sir. 

Mr. CONYERS. Okay. Now I will go on to the next sentence. The 

American Medical Association reports that 95 percent of insurance 

markets in the United States are now highly concentrated, and the 

number of insurers have fallen by just under 20 percent since 2000. 

Have you ever heard that statement before? 

Ms. POZEN. Yes, I have, sir. 

Mr. CONYERS. Do you believe it? 

Ms. POZEN. I don’t doubt its veracity in the context in which you 

are raising it, sir. 

Mr. CONYERS. Well, now wait a minute. Do you believe it or not? 

Ms. POZEN. I don’t have the statistics. 

Mr. CONYERS. You don’t know. 

Ms. POZEN. Exactly. 

Mr. CONYERS. You will have to study this. 

Ms. POZEN. Yes, sir. 

Mr. CONYERS. And you will include that in our communications. 

Ms. POZEN. Absolutely. 

Mr. CONYERS. All right. Do you know that the President of the 

United States has said that he would step up and reinvigorate 

antitrust enforcement in the area of healthcare? 

Ms. POZEN. Yes, sir. 

Mr. CONYERS. You heard that? 

Ms. POZEN. Yes, sir. 

Mr. CONYERS. You know that. 

Ms. POZEN. Yes, sir. 

Mr. CONYERS. And you are doing that. 

Ms. POZEN. Yes, sir. 

Mr. CONYERS. Because you have cited me three cases repeatedly 

this morning. 

Ms. POZEN. Yes, sir. 

Mr. CONYERS. Do you know how many other cases that could be 

prosecuted? 

Ms. POZEN. I don’t have those figures. I can tell you the cases 

that come to us, or that we look for, or that we find, and that we 

vigorously prosecute those who violate the antitrust laws. 

Mr. CONYERS. Well, if you believe that there have been 400 

healthcare mergers in 10 years, and you know that the President 

wants to step up antitrust enforcement, it seems like some of those 

might be subject to review. I mean, what I sense is that you are 

really on the case from this point forward, but you sort of act, Ms. 

Pozen, as if there is no history of antitrust law in healthcare, that 

this is a new subject. And you keep citing me three lousy cases as 

a proof that you are on the job, and you brag about the Department 

of Justice’s effectiveness in this area. 

Now, what about the mergers—well, let me just close. My time 

has expired. Do you know that there is a concentration of merger 

activity in our economy that has been going on for at least a dozen 

years or more? 

Ms. POZEN. I do, sir, and I have only been at the Antitrust Division for a short time in the Obama administration, and as I said, 

we are vigorously enforcing the antitrust laws. We are mindful of 

66 

the past, the present, and the future, and doing what we can to ensure that either dominant firms don’t abuse that dominance or that 

further dominance doesn’t occur. 

Mr. CONYERS. Well, just allow me just this one question. Thank 

you very much for this. But if you are vigorously enforcing antitrust laws, and you know that we are in the wave of an—that 

mergers are going on, and have been, at an unprecedented pace, 

how can you prosecute if you are not reviewing the past cases? 

Ms. POZEN. In terms of the cases that we have looked at in the 

mergers that come forward, we are carefully analyzing them. We 

are looking at the facts and applying the law. Not every merger is 

anticompetitive. I will assure you of that. But I will assure you 

that those that are anticompetitive, we will prosecute. 

Mr. CONYERS. All right. I thank you very much. 

I will have to send you, Mr. Feinstein, the questions that we 

would have engaged in. 

Thank you, Mr. Chairman. 

Mr. JOHNSON. Thank you, Mr. Chairman. 

Next, Mr. Goodlatte. 

Mr. GOODLATTE. Thank you, Mr. Chairman. Thank you for holding this hearing, and I want to thank both of our witnesses for 

being here today. 

Mr. Feinstein, I want to follow up on the questions of the Ranking Member Mr. Coble, who asked about some of the concerns that 

doctors have about obtaining business review letters for cost-sharing arrangements. How long does it normally take the FTC to 

produce a business review letter? 

Mr. FEINSTEIN. It really depends entirely on the scope of the request. We react to specific requests. 

I want to emphasize, by the way, before I address formal letters, 

there is a lot of informal guidance that goes on where folks call up 

our staff and get informal guidance. It may not take the form of 

writing, but they can take some comfort from that. 

Mr. GOODLATTE. If they are going to make a major business decision about whether they can proceed with an arrangement, they 

probably want something more formal. 

Mr. FEINSTEIN. Yes. And when that happens, they have an obligation to describe pretty completely the facts surrounding their 

proposal, and we have an obligation to make sure we understand 

those facts. It is an iterative process. Often they come to us with 

a proposal. We may have questions about how it is going to be implemented. 

Mr. GOODLATTE. Is there an average amount of time? 

Mr. FEINSTEIN. If there is an average amount of time, I haven’t 

calculated it. 

Mr. GOODLATTE. Could you calculate it and provide it to the 

Committee? 

Mr. FEINSTEIN. We can certainly do that, yes. 

Mr. GOODLATTE. This is pretty important because if you are making a decision that potentially is going to affect your ability to continue your business, redesign your business, expand your business, 

and you need to have guidance about whether or not you can do 

it, you want to proceed quickly. When you go in the private sector 

to get advice from attorneys, and accountants, and consultants and 

67 

so on about the decisions you make, you get pretty prompt replies. 

And it is important that the government understand that and the 

importance of giving prompt replies as well. So if you could provide 

that information to the Committee, I would appreciate it. 

Mr. FEINSTEIN. I certainly share that goal of giving prompt replies. 

Mr. GOODLATTE. Thank you. 

Does the FTC have a role in examining mergers among health 

insurers? 

Mr. FEINSTEIN. No. Historically we have deferred to the Department of Justice. I think largely that is because years ago most of 

the insurers, particularly the Blue Cross and Blue Shield organizations, were set up as nonprofits originally. Some of them have converted to for-profit status. But because, as you probably are aware, 

there are some limitations on our jurisdiction with respect to the 

activity of nonprofit entities, over the years a tradition unfolded 

whereby the Justice Department took the lead on health insurance 

mergers. And there have occasionally been matters that the FTC 

has looked at in the last 15 or 20 years, but it has been quite rare, 

and none that I can think of in the last decade or more. 

Mr. GOODLATTE. Are there any statutory impediments to bringing actions by the FTC with regard to health insurance mergers? 

Mr. FEINSTEIN. Other than the one I alluded to, no. We enforce 

section 7 of the Clayton Act. That can be applied to health insurance mergers. There is, of course, the 

McCarran-Ferguson exemption for the business of insurance, but 

I think it is pretty widely recognized that that does not shield 

health insurance mergers from antitrust scrutiny by either agency. 

Mr. GOODLATTE. Does the FTC plan to revise its 1996 healthcare 

guidelines? 

Mr. FEINSTEIN. As I said, we don’t have current plans to revise 

them. I am not saying that it won’t happen, I’m just saying we 

don’t have a current plan to do that. The principal reason for that 

is that we believe that it is, in effect, a living document with the 

updating taking the form of the advisory opinions that have been 

issued over the last 14 years. That is not to say that there may not 

be an occasion to do it. 

And I would also note that we are, as both, I think, Ms. Pozen 

and I addressed—we are, of course, looking at the question of providing guidance with respect to accountable care organizations in 

real time. That is something that the agencies are working together on right now. And I think it is reasonable to assume that 

to some degree that guidance will be relevant to clinical integration 

otherwise, although there are some distinctions that will have to be 

kept in mind. 

Mr. GOODLATTE. Let me interrupt you and ask one more question 

here. With regard to the new healthcare bill, what are some the 

antitrust safe harbors that the FTC might be considering with respect to the formation of the accountable care organizations that 

have been created by that legislation? 

Mr. FEINSTEIN. Well, that is very much a work in progress. I 

think just as there are safe harbors that are in the current guidelines relating to market share, for example, and certain types of 

conduct, those are the types of issues that we and the Justice DeVerDate Aug 31 2005 11:12 Mar 02, 2011 Jkt 000000 PO 00000 Frm 00071 Fmt 6633 Sfmt 6601 H:\WORK\COURTS\120110\62658.000 HJUD1 PsN: DOUGA
68 

partment are considering. It would be premature for me to make 

a definitive statement about what form that will take, because it 

is literally something that we are discussing between the two agencies and with CMS on a weekly basis. 

Mr. GOODLATTE. Under the law, when can accountable care organizations come into being? Is there a timetable for that? 

Mr. FEINSTEIN. My understanding—and I will defer to Ms. Pozen 

if she has a clearer understanding—my understanding is that CMS 

intends to issue regulations early next year. 

Is that correct? 

Mr. GOODLATTE. Could they be formed right now if the regulations existed? 

Mr. FEINSTEIN. I assume that the answer to that question is yes. 

Mr. GOODLATTE. I know there are various phase-ins of various 

aspects of the bill. Your understanding is they could occur right 

now. So, again, the sooner you have information available, the 

sooner these organizations might be formed. 

Mr. FEINSTEIN. Well, I think there is an expectation that some 

of the antitrust issues and the way they will be analyzed will be 

reflected in the regulations to be issued as well an additional statement to be made by the antitrust enforcement agencies. 

Mr. GOODLATTE. Ms. Pozen, do you want to add anything to that? 

Ms. POZEN. As I indicated in my statement, we are committed to 

providing guidance and providing expedited review of ACOs. We 

have a business review process that today if an ACO is forming, 

they can come in and seek our guidance on an informal or formal 

basis. 

I hope that answers your question. 

Mr. GOODLATTE. Are there regulations that DOJ is going to issue 

at some point that would give guidance as to whether or not it is 

desirable to form one of these in terms of what kind of safe harbors, antitrust safe harbors, might be available? 

Ms. POZEN. Well, the ACOs that are being formed to take Medicare and Medicaid funding are subject to CMS regulations, as Mr. 

Feinstein indicated. That is an ongoing process and an ongoing discussion that we have with CMS and the FTC regarding how to provide antitrust guidance in that context so that, just as you said, 

ACOs have guidance going forward in order to receive those funds 

through CMS. So that is an ongoing process now, but, as I said, 

in the interim we have a business review process. If ACOs need advice, we are happy to give it to them. 

Mr. GOODLATTE. Thank you. 

Thank you, Mr. Chairman. 

Mr. JOHNSON. Next we will hear from Mr. Gonzalez. 

Mr. GONZALEZ. Thank you very much, Mr. Chairman. I want to 

thank the witnesses for their testimony. The first question is—if 

you will just answer yes or no, it makes it a lot easier—do we have 

a competitive health insurance industry in the United States 

today? Mr. Feinstein. Just yes or no. And remember, I know these 

are your personal opinions and not the Department or Commission. 

Mr. FEINSTEIN. Well, it is hard for me to answer that yes or no 

because my agency doesn’t focus on that issue to the extent that 

the Department of Justice does. I think it really varies, candidly, 

market by market. There are some markets that are more competiVerDate Aug 31 2005 11:12 Mar 02, 2011 Jkt 000000 PO 00000 Frm 00072 Fmt 6633 Sfmt 6601 H:\WORK\COURTS\120110\62658.000 HJUD1 PsN: DOUGA
69 

tive than others, I would say. I don’t know that I would be comfortable answering the question on a national basis. 

Ms. POZEN. I would echo Mr. Feinstein’s answer. I know there 

are some areas where there is vigorous competition and there are 

some areas where I presume there isn’t. And if those areas are subject to a merger where there will be, you know, more concentration 

created as a result of the merger or a dominant firm is using that 

market power in an illegal way, we will prosecute. 

Mr. GONZALEZ. I am not sure—the answer for all of us has to be 

no. And that is the reality and that is where we find ourselves. And 

I am not sure that any of us had anything to do with the direction 

things took and where we find ourselves today. But it is a precautionary tale maybe going forward. And the reason I say that is, 

what I am looking at, insurance market concentration ranked as of 

2007. So this is old information. I only suggest it has probably gotten worse. But if we go State by State, combined market share percentage of the top two insurers in every State in this Nation, and 

I don’t get to—at 48 percent, where basically two insurers comprise 

48 percent, some may say, Wow, that may be acceptable. I am not 

sure that is really acceptable. But that is like number 40 in the 

ranking. Everyone else has anywhere from 53 to 98 percent of the 

market share by two insurers. 

Now how can anyone in good faith today not answer my question 

as ‘‘no’’? I mean, maybe it is just out of necessity and that is the 

way things grew and that is what you are going to have. And we 

have to abandon the goal of competition in order to achieve competition. That is the whole thing about—remember with TARP, we 

had to abandon free market principles in order to save the free 

market. Well, maybe we do that all the time, Mr. Chairman. I am 

not sure. 

So let’s talk about doctors quickly. Doctors are at a tremendous 

disadvantage. My own observation is that they are just not as organized as the insurance industry or as the hospitals. They are rather busy practicing medicine. That occupies all of their time. I also 

believe that, you know, they are not as unified because of the specialties today. But nevertheless we are asking them to do something to make health care reform a reality. So I am just going to 

ask you—and I know I am going to revisit some of this. But if I 

was a physician and I am looking to be part of these ACOs and I 

don’t want to expose myself out there and I don’t have all of the 

lawyers and the big firms, lobbyists, advocates, and so on that are 

the organizations but I want to be part of the answer in this solution, what assurances can you give these doctors that they are not 

going to run afoul? 

So you are telling me that there is coordination among the FTC, 

the Department of Justice, and the Inspector General over at HHS. 

That is correct, isn’t it? Y’all are coordinating your efforts. So you 

are going to provide guidelines. And I strongly suggest that guidelines can’t be given in some speech or some conference or some convention. That just doesn’t work in the real world. They have to be 

black letter. They have got to be able to see it. Because my fear 

is, you have a lot of discretion and wiggle room to pass judgment 

on these things after the fact. 

70 

To what extent do you provide beyond guidance but something 

more in the manner of preclearance? So I am not familiar how you 

do this or how the HHS and the Inspector General does it. But if 

I am a doctor or a group of doctors and I am trying to do this, what 

assurance can you give me that it is a safe thing to do and that 

I am not going to be penalized down the road? 

Mr. Feinstein. 

Mr. FEINSTEIN. I think there are—and I think you are going to 

see this as a result of the ongoing ACO effort that is underway. I 

certainly think there is certainly a recognition in the enforcement 

agencies that this is a circumstance where safe harbors with a 

clear expression of the boundaries of the safe harbors is appropriate, and also a clear expression that circumstances that are outside the precise boundaries of the safe harbor aren’t necessarily 

going to violate the law. From the standpoint of an individual physician, something that I think is important to remember is that, 

you know, if what they are hoping to accomplish is something that 

is likely to lead to more efficient delivery of care and higher quality, something that is going to serve the interests of consumers, we 

are not going to get in their way. We want that to happen. Where 

we step in are the circumstances where there is nothing going on 

other than increased prices. I am happy to report that in the last— 

you know, in recent years, we haven’t seen as much of that. We 

haven’t brought as many of the cases. Our resources overall in the 

health care sector are not disproportionately directed at the physician segment of the market. We spend a great deal more of our 

time these days on the pharmaceutical sector and on hospitals. But 

that doesn’t mean that there aren’t areas where, just as there may 

be markets where health insurers have market power, there may 

also be specific markets where hospitals have market power or 

where you know there are must-have groups of physicians. That is 

different of course from the individual physician. But I would go 

back to four sort of first principles. If the goal is to do something 

that is going to improve care and ideally even lower costs, we are 

not going to—we are going to bless that as quickly as we can. 

Mr. GONZALEZ. Ms. Pozen. 

Ms. POZEN. As I said, we are committed to guidance. We are 

working with CMS, HHS, and the Federal Trade Commission on 

what that guidance will precisely be to address the issues that you 

have pointed out. We want these organizations to go forward, to 

feel comfortable integrating, to feel comfortable innovating and not 

stand in the way and not inhibit that. It is an iterative process at 

this point, as CMS develops its regulations, but we do want there 

to be guidance, potentially safe harbors, and an expedited review 

as part of that. 

Mr. GONZALEZ. Thank you very much. Thank you, Mr. Chairman, 

for your indulgence. 

Mr. JOHNSON. Thank you, sir. And with another question, I will 

recognize Chairman Conyers. 

Mr. CONYERS. Just a closing question. Had either of you heard 

about the concentration of health insurers in this country by State 

that Judge Gonzalez referred to when he was talking with you? 

Ms. POZEN. Yes. 

Mr. CONYERS. You had heard about that? 

71 

Ms. POZEN. Yes. And it is one of the reasons, as I mentioned in 

my statement, we wanted to figure out how that happened. Just 

getting to exactly your question. How could that happen? And what 

we found was, when we focused on entry and we found that there 

are barriers, as I indicated in my statement, there are barriers to 

new entry. New insurers can’t come in and take on some of these 

dominant players. So that learning that we did right off the bat 

when we got into office is infusing all of our thoughts and all of 

our investigations on this issue. 

Mr. CONYERS. So why couldn’t you answer ‘‘no’’ to his question? 

Come on. You can tell us. What is the real reason? 

Ms. POZEN. Well, I think that when you look at health insurance 

markets, you can look at them on a statewide basis, you can look 

at them on an MSA basis, and on a local basis. 

Mr. CONYERS. But you end up with the same answer every time. 

They are all concentrated. 

Ms. POZEN. And we are—— 

Mr. CONYERS. Aren’t they, Ms. Pozen? Now, look, this is your job. 

Ms. POZEN. I know, and we are trying to figure out why, I can 

assure you of that. And we are trying to do what we can not to 

allow more of it, and we are trying to assure that those insurers 

that are dominant aren’t using that dominance in an anti-competitive way. 

Mr. CONYERS. But why didn’t you answer ‘‘no’’? 

Ms. POZEN. Why didn’t I answer ‘‘no’’ to the question of whether 

or not—— 

Mr. CONYERS. You know what the question was. 

Ms. POZEN. Yeah. Because I hate to say it. We are lawyers, and 

we always want to say it depends. I don’t mean to be flip, sir. I 

really am not. I do understand the gravity of the issue and respect 

the—— 

Mr. CONYERS. Mr. Feinstein, why couldn’t you answer ‘‘no’’ to his 

question? 

Mr. FEINSTEIN. Let me be clear about my personal view on this. 

Mr. CONYERS. That is what I want. 

Mr. FEINSTEIN. I accept the proposition that there are some markets—— 

Mr. CONYERS. Do you know of any market not concentrated in 

health insurance? 

Mr. FEINSTEIN. The level of concentration varies from market to 

market. 

Mr. CONYERS. Do you know of any market? Just answer the 

question. 

Mr. FEINSTEIN. Do I know of any market that is not concentrated? With all due respect, it depends on what you mean by 

concentrated. There are certainly markets that have high concentration—— 

Mr. CONYERS. Oh, I see. I get it. I get it. I get it. 

Mr. FEINSTEIN. But there is variation. The question was nationally. 

Mr. CONYERS. Let me just close with this. Do you know how 

many people in America do not have insurance? You nod your 

head. What is the answer? 

Ms. POZEN. Millions do not have insurance. 

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Mr. CONYERS. Millions? How many millions? 

Ms. POZEN. I don’t have the exact figure. 

Mr. CONYERS. What about you, Mr. Feinstein? 

Mr. FEINSTEIN. I don’t know a precise number. I will just say too 

many. 

Mr. CONYERS. Okay. Thank you, Mr. Chairman. 

Mr. JOHNSON. Well, it is true it is about 40 million, isn’t it? 

Mr. CONYERS. 50 million. 

Mr. JOHNSON. 50 million? 50 million people. 

I would like to thank the FTC and DOJ for appearing before our 

Subcommittee today. You are excused. Thank you very much. 

Mr. FEINSTEIN. Thank you, Mr. Chairman. 

Mr. JOHNSON. And I will invite the second panel to take its place. 

Ladies and gentlemen on our second panel, we have Melinda 

Hatton, Senior Vice President and General Counsel to the American Hospital Association. Welcome, Ms. Hatton. 

Next witness is Arthur Lerner, a partner at the law firm of 

Crowell & Moring LLP, on behalf of America’s Health Insurance 

Plans. Welcome, Mr. Lerner. 

Next to Mr. Lerner is Dr. Peter Mandell on behalf of the American Association of Orthopaedic Surgeons. Welcome back, sir. 

Our next witness is Dr. Michael Connair on behalf of the American Federation of State, County, and Municipal Employees. Welcome, sir. 

Dr. CONNAIR. Thank you. 

Mr. JOHNSON. And finally we have David Balto, Senior Fellow 

with the Center for American Progress. Welcome back, Mr. Balto. 

Mr. BALTO. Thank you very much. 

Mr. JOHNSON. Ms. Hatton, please proceed with your testimony. 

TESTIMONY OF MELINDA HATTON, SENIOR VICE PRESIDENT 

AND GENERAL COUNSEL, AMERICAN HOSPITAL ASSOCIATION 

Ms. HATTON. Thank you, Mr. Chairman. I am Melinda Hatton, 

General Counsel and Senior Vice President for the American Hospital Association. On behalf of our more than 5,000 member hospitals, health systems, and other health care organizations and the 

nearly 200,000 employed physicians, the AHA thanks you very 

much for the opportunity to discuss the impact of the antitrust 

laws on our Nation’s hospitals and our hospitals’ efforts to improve 

quality and efficiency. 

Our antitrust concerns are twofold. First, we support timely, 

user-friendly guidance from the antitrust agencies on how the laws 

will be applied to clinical integration efforts among health care providers. Second, we urge the Department of Justice to be increasingly vigilant about anti-competitive behavior on the part of health 

insurers and we commend the Department for its recent steppedup enforcement. 

Our health care delivery system is fragmented. A typical Medicare patient sees two primary care physicians and five specialists, 

working in four different practice settings in a single year. The 

numbers escalate greatly for those with chronic conditions. Most 

health care providers work alone in small groups or in specialty 

practices. Most physicians still don’t work for hospitals. Care is 

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ics to post-acute settings to patients’ homes. Some of these settings 

may be affiliated with a hospital while many are not. It is an insufficient system that is hard for any patient, particularly a sick patient, to navigate. Lack of coordination also makes it more likely 

that tests will be duplicated and adverse drug interactions will not 

be caught in time. 

We know the patients get real benefits when caregivers work together to provide more coordinated, more efficient, higher quality 

care. The AHA has, since 2004, been seriously engaged in efforts 

to advance clinical integration among health care providers by, 

among other efforts, tackling legal and regulatory barriers. At its 

heart, clinical integration is really teamwork—hospitals, doctors, 

nurses, and other caregivers working together to make sure our patients get the right care at the right time in the right setting. To 

do so effectively, we do need user-friendly guidance from the antitrust agencies on how the laws and policies will be applied to clinical integration. 

A bipartisan group of lawmakers who sit on the Committees of 

jurisdiction have agreed that the best solution to tackle these antitrust laws as a barrier to clinical integration is to issue user-friendly, officially backed guidance that clearly explains to caregivers 

what issues they must resolve in order to embark on a clinical integration program. In three separate letters to the antitrust agencies 

over 7 months, lawmakers clearly called for such guidance. We continue to urge those agencies to act quickly to provide it. 

In addition to guidance, we have urged the Department of Justice’s Antitrust Division to be increasingly vigilant about anti-competitive conduct on the part of entrenched health insurers. In May 

of 2009, when the Administration first came into office, the AHA 

called upon DOJ to reexamine and bolster enforcement as it applies 

to health care plans. Hospitals are held accountable for the care 

they provide to their communities, with quality and patient satisfaction routinely measured and publicly reported on a government 

Web site. Hospitals also have been subject to intense antitrust 

scrutiny by the Federal antitrust agencies. 

Conversely, insurers have not faced nearly as much public antitrust scrutiny or oversight. Patients receive higher quality, more efficient care when caregivers work together. That is the path we are 

on and one that holds the greatest promise for fixing a fragmented 

delivery system. The antitrust laws can make a real contribution 

if the agencies enforcing them are willing to exercise the same kind 

of leadership and foresight that led to the issuance of the statements on antitrust enforcement and health care in the early 1990’s. 

User-friendly guidance for clinical integration and more vigilance 

in the health insurance sector are important steps not just for hospitals but for the future health and vitality of the Nation’s health 

care delivery system. 

Mr. Chairman and distinguished Members of the Committee, 

thank you for the opportunity to discuss these issues with you 

today. America’s hospitals look forward to working with you and all 

of those who are committed to improving the quality and efficiency 

of care for patients in every one of your communities. We believe 

that clinical integration is a proven strategy for achieving these 

aims and that the efforts of health care providers to improve delivVerDate Aug 31 2005 11:12 Mar 02, 2011 Jkt 000000 PO 00000 Frm 00077 Fmt 6633 Sfmt 6601 H:\WORK\COURTS\120110\62658.000 HJUD1 PsN: DOUGA
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ery should not be impeded by unnecessary barriers, like the antitrust laws. 

[The prepared statement of Ms. Hatton follows:] 

PREPARED STATEMENT OF MELINDA HATTON


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Mr. JOHNSON. Thank you, Ms. Hatton. 

Next, Mr. Lerner. 


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TESTIMONY OF ARTHUR LERNER, PARTNER, CROWELL & 

MORING LLP, ON BEHALF OF AMERICA’S HEALTH INSURANCE PLANS 

Mr. LERNER. Chairman Conyers, Chairman Johnson, Ranking 

Member Coble, and Members of the Committee, I am Arthur 

Lerner partner in the Washington, D.C. office of the Crowell & 

Moring law firm. I am testifying today on behalf of America’s 

Health Insurance Plans, a national association representing approximately 1,300 health insurance plans, providing coverage to 

over 200 million Americans. 

I was very pleased to be invited to testify today by Chairman 

Conyers. After completing my undergraduate education at the University of Michigan, as did both of my parents and both my brothers and my wife—I only have one of those—and then attending law 

school, I began my legal career in 1976 in the Health Care Division 

of the Bureau of Competition as an antitrust trial attorney. I then 

worked as an assistant to the Director of the Bureau of Competition as attorney adviser to FTC Chairman Pertschuk from 1978 

until 1981, as Deputy Assistant Director and then Assistant Director in charge of the FTC’s Health Care Antitrust Program from 

1981 to 1985 and have been in private practice since then. I am 

former Chair of the Antitrust Practice Group of the American 

Health Lawyers Association and of the Federal and Civil Enforcement Committee of the Antitrust Section of the ABA. 

I am testifying today on behalf of AHIP and not on behalf of any 

other client or organization. And I am well aware of the history of 

antitrust enforcement in the health care sector, since that has been 

my life for the last 35 years. I appreciate this opportunity to testify 

in enforcement of our Nation’s antitrust laws and the importance 

of preserving and expanding competition for the benefit of consumers. 

I am going to talk principally about two things. My written statement goes on at somewhat greater length. First, antitrust enforcement to ensure competition in the health care provider community; 

and second, antitrust enforcement in the health insurance marketplace. 

By way of introduction, I think the antitrust laws and antitrust 

enforcements do not and should not take sides, other than it being 

on the side of the consumer. Antitrust enforcement should not be 

and has not been for or against health insurance companies or for 

or against physicians or hospitals or any other industry. Whether 

an entity runs into antitrust trouble will and should depend on 

what it does. 

On the physician side, the discussion today has seemed to focus 

on two things. One, whether physicians should be able to band together to sort of level the playing field and get a better deal for 

themselves. And I go into this at somewhat greater length in my 

statement. But it has never been a solid defense in the antitrust 

world to say, Well, I can’t get paid the rate that I would like to 

be paid in the marketplace. Therefore, I should be allowed to fix 

prices to deal with that. That is a fundamental and blatant antitrust violation and has been viewed as such by Administration 

after Administration, by the courts through every Administration 

going back many, many years. On the other hand, if providers are 

85 

trying to get together and work to improve outcomes and to improve health care delivery, there is lots of room under the antitrust 

laws for them to do so today. And the FTC and DOJ have given 

out lots of guidance about how that can be done. 

It is a difficult task sometimes to be in private practice, to advise 

clients, and I have advised clients that include not only health 

plans but also health care providers. When providers come and say, 

How much more of this integration stuff do I have to do so I can 

fix prices, it puts the lawyer in an awkward spot because the question then is not, How can I integrate; and if I integrate, what am 

I allowed to do along with that to make it work? But if the question 

is, How do we raise prices, if that is all it is about, then antitrust 

has a lot to say and properly so. 

On the other hand, if what physicians and hospitals are trying 

to do is to actually expand and increase the quality of care to improve health care outcomes to be accountable for the costs, there 

is a lot of room for them to do so under the antitrust laws. Health 

plans are working across the country with many provider organizations in various kinds of projects both with organizations, you 

know, that are now being called accountable care organizations but 

for many, many years have taken other forms to try to improve 

health care and reduce costs. 

There is always reason for the antitrust agencies to be up to 

date, for the antitrust agencies to look at the evolving marketplace 

and try to decide if clarification of their guidance is appropriate. 

But it would not be appropriate to radically alter the guidance that 

has been out there, so as either to permit blatant price fixing or 

to allow integration, which is, in a sense, a good thing to become 

sort of a talisman that allows providers to break the antitrust laws. 

There is room to do the former without having to do the latter. 

On the hospital side, there are a lot of reasons for wariness and 

concern that we just make sure that hospital combinations and 

hospital consolidations do not raise inappropriate antitrust problems. The FTC and DOJ have been active in policing mergers in 

that area and need to be able to continue to do so. 

Finally, on the health insurance side—I realize I have rambled 

through my time pretty quickly here, but I know that you are interested in hearing about health insurance and whether the antitrust laws should be enforced there. So if you let me, I will go on 

for another minute or so about that or I can wait and take it in 

questions. 

Mr. JOHNSON. I think it might be good to let you go ahead. 

Mr. LERNER. I will just talk briefly about it. 

The Federal Trade Commission and the Department of Justice 

had a lengthy 27 days of hearings in 2004 and resulted in a conclusion that there is not a significant nationwide problem in terms of 

monopsony or power buying or health plans or paying providers 

less than what it costs to deliver health care. In fact, most health 

plans pay well more than the Medicare and Medicaid programs. 

There is data out there about concentration levels in health care. 

Some of that data is deeply flawed, the way it is counted, the way 

it is measured. But the most important thing to take note of is that 

the vigor of competition in some of these markets does not correspond with notions of, you know, what are the current shares. 

86 

Sometimes these markets are quite competitive, even if concentrated. 

And the other thing I would probably want to emphasize today 

is that if you look at the mergers that have occurred in health care 

insurance plans, they typically do not account for whatever structure we now see in the health insurance marketplace. Typically it 

seems that companies who do the work better, have been better at 

it, have historically been large and significant in a local market are 

still the ones who are large and significant in a local market and 

that mergers have not typically involved the creation of the kind 

of structure that we are talking about. And I can say that when 

we have done mergers—and I have represented a number of clients—we get investigated extremely thoroughly and extremely 

acutely by Ms. Pozen’s staff or the other people at the Department 

of Justice. 

Sometimes these raise difficult questions, where a merger might 

involve the number eight competitor in a market merging with the 

number six competitor, where neither of them is going anywhere 

in particular, and the number one and two firms are very, very 

strong, so the Justice Department has to make some discerning 

judgments. So in our view, you know, every company always wants 

to think it is going to fare well. But my experience has been that 

the Department of Justice is quite thorough in their inquiries into 

health insurance mergers. 

[The prepared statement of Mr. Lerner follows:] 

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PREPARED STATEMENT OF ARTHUR LERNER


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Mr. JOHNSON. All right. Thank you, Mr. Lerner. I am anxious to 

determine whether or not your extensive contacts with the State of 

Michigan will save you from the heat that I expect to be generated. 

Mr. LERNER. I am actually from Toledo, so we paid out-of-State 

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Mr. JOHNSON. All right. Thank you, sir. 

Dr. Mandell. 

TESTIMONY OF PETER J. MANDELL, M.D., CHAIR OF THE 

COUNCIL ON ADVOCACY, AMERICAN ACADEMY OF 

ORTHOPAEDIC SURGEONS 

Dr. MANDELL. Chairman Conyers, Chairman Johnson, distinguished Members of the Committee, thank you for having me here 

this morning. I am Pete Mandell, Chair of the Council on Advocacy 

of the American Association of Orthopaedic Surgeons. I am also a 

practicing orthopedist on the San Francisco Peninsula and have 

done that for about 35 years now. On behalf of our organization 

and my orthopedic surgeon colleagues across the country, thank 

you for inviting us to talk about antitrust laws as interpreted by 

the U.S. Department of Justice and the Federal Trade Commission 

and their effects on patients and physicians. 

As we talked about all morning, health insurance markets are 

highly concentrated; and for the most part insurers possess market 

shares that are associated with monopsony power, the ability to 

present physicians with take-it-or-leave-it contracts that harm the 

quality and supply of physician services in this country. Moreover, 

because health insurers are virtual monopolies, whatever savings 

are generated by those take-it-or-leave-it contracts are not provided 

to the beneficiaries of their insurance, also known as our patients. 

Because of these indisputable facts, AAOS believes that the antitrust laws should be changed to allow physicians to collectively negotiate with health plans and that the McCarran-Ferguson Act 

should be amended to change the anti-competitive practices of insurance companies and establish negotiating equity among health 

plans and physicians. The fact that health insurers possess monopsony power and the physicians are powerless in their negotiations 

with health plans should not be news to anyone. For a decade now, 

the AMA has provided studies that report that unequivocally, physicians across the country have virtually no bargaining power with 

dominant health insurers, and those health insurers are in a position to exert monopsony power. 

Antitrust enforcement by the DOJ and FTC has been ineffective 

in halting health insurer market concentration. However, it has 

been effective in preventing physicians from jointly negotiating 

with insurers. In this way, antitrust enforcement has actually augmented the negotiating power of insurers. Physicians, we think, 

should be allowed to share information and negotiate collectively 

with health insurance plans. 

Currently, the DOJ and FTC allow a restrictive form of bargaining that we talked about a little while ago called the thirdparty messenger model which has been used with only spotty success around the country. It is labor-intensive, cumbersome, and 

costly to implement safely. It has also proven an easy target for insurers because they know that the DOJ and FTC have a low 

threshold for alleged physician collusion and for initiating expensive antitrust investigations and litigations. 

Let me give you two examples. In Delaware, a dozen years ago, 

a health insurance plan unilaterally instituted massive cuts. Almost all the 47 orthopedic surgeons and many other physicians in 

99 

that State dropped out of the plan. The physicians negotiated, 

using a union and using the third-party messenger model. While 

the insurer reversed the cuts, the DOJ ultimately investigated and 

prosecuted the physicians and the union. Approximately 80 subpoenas were issued. Depositions were taken in four States. The 

union itself incurred about $1.5 million 1998 dollars in legal fees. 

It is more like $2 million now. In the end, the consent decree allowed the use of the third-party messenger model anywhere in the 

United States except for Delaware and by anyone in the United 

States except for that union for a period of 5 years. One orthopedic 

surgeon colleague lost his partnership in a medical practice. Another was threatened with imprisonment by the DOJ. 

The second example involves a case that was finalized earlier 

this year in Idaho where the Idaho Orthopedic Society and other 

orthopedists were charged by the DOJ with antitrust violations. Although resolved by consent decree, the defendants incurred more 

than $1 million in legal fees and expenses. Several Idaho colleagues report that the final decree bears no resemblance to the actual events that went on in Idaho, which they found quite frustrating. For example, at no point during the investigation were the 

accused physicians interviewed or deposed. 

Antitrust laws send a clear message of what fair competition 

means—or should send a clear message of what fair competition 

means. Instead, the message we hear, as physicians, loud and clear 

is the Hobson’s choice of ‘‘just lie down and take it.’’ If physicians 

object, they are exposed to charges of antitrust violation. 

This is why the AAOS supports legislation like the Quality 

Health Care Act of 2000, sponsored by Congressman Conyers and 

former Congressman Tom Campbell. Such an act would extend to 

all health care providers—not just doctors, but all health care providers—the right to collectively negotiate with health insurance 

companies. 

AAOS supports the Subcommittee’s efforts to address the issue 

of equal application of antitrust laws to both physicians and health 

insurance plans. 

AAOS is pleased to have had the opportunity to share with you 

our thoughts but, more importantly, the experiences of our colleagues on the effects of DOJ and FTC antitrust enforcement. 

Maintaining quality care while ensuring fair competition in today’s 

market should be our ultimate goal, and we thank you for giving 

us the opportunity to present this morning and look forward to 

working with you further on this in the future. 

[The prepared statement of Dr. Mandell follows:] 

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PREPARED STATEMENT OF PETER J. MANDELL


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Mr. JOHNSON. Thank you, Dr. Mandell. 

Next, Dr. Connair. 

TESTIMONY OF MICHAEL P. CONNAIR, M.D., AMERICAN FEDERATION OF STATE, COUNTY, AND MUNICIPAL EMPLOYEES, 

AFL-CIO 

Dr. CONNAIR. My name is Dr. Michael Connair. Thank you for 

this honor. And thank you, Peter, for your comments, with which 

I agree. 

Mr. JOHNSON. And if you would pull that microphone up. Is it 

on? 

Dr. CONNAIR. It is not on. 

Mr. JOHNSON. There is a button down there. 

Dr. CONNAIR. I am an orthopedic surgeon in solo practice in Connecticut, and I am the Vice President of the National Union of Hospital and Health Care Employees and the Federation of Physicians 

and Dentists, both are affiliates of AFSCME. I speak to you this 

morning as a physician and from a labor union perspective. 

Unions represent the largest block of organized consumers in the 

Nation and have a significant stake in the quality of health care. 

Too often, the quality has been compromised because insurers, 

rather than physicians, inappropriately dictate the care a patient 

receives. Contracts between insurers and physicians of course regulate reimbursement for physicians but, more importantly for consumers, greatly affect the quality and availability of care that we, 

physicians, provide for our patients every day. 

For the past 14 years, my unpaid union role has been to educate 

physician members in lawful ways to obtain fairer contractual 

terms from insurers. Physicians in three of the groups that I 

helped organize, alluded to by Dr. Mandell, were sued by the Department of Justice for alleged antitrust violations despite Herculean efforts to follow the third-party messenger model outlined by 

the DOJ FTC. The doctors in these three groups had simply refused to be coerced into contracts that would have resulted in a 20 

percent or more decrease in reimbursement. The contractual relationship of doctors to insurers is similar to the weak position that 

unorganized service workers face when they are up against an employer intent upon maximizing profit. 

There is much more at stake though in physician insurance contracts than physician finances. Bad contracts give insurers the 

legal right to limit care and impose substandard care on patients. 

As a practical matter, insurers possess monopsony power in virtually all U.S. markets, and doctors have no choice but to participate in these contracts or go out of business. 

The ability of a physician to obtain a fair contract from an insurer grows more difficult every year. A lack of antitrust enforcement against insurers and prosecution of about 35 cases against 

physicians have made insurers downright dictatorial in their treatment of physicians and patients. 

This is a stack of 33 of the 35 cases either description or consent 

decree. Typically, these cases are about physicians seeking to unfix 

insurance company price fixing. Insurance consolidation and the 

Federal antitrust enforcement pattern has had a chilling effect on 

physicians’ willingness to resist substandard provider agreements 

107 

either for their own financial survival or to protect the quality of 

patient care. The unprecedented antitrust enforcement has allowed 

insurers to intimidate physicians into accepting low fees or even 

giving up the practice of medicine altogether. 

There is a pressing need to grow the ranks of primary care providers, but insurance company practices are inhibiting this growth 

by undervaluing the work of these doctors, often paying them less 

for a visit than a plumber or a vet. 

When it comes to physicians and patients, insurers act with impunity because they perceive they have immunity. Insurance companies get a free pass on antitrust with respect to physicians and 

a free pass from patient lawsuits under ERISA. 

Health care benefits are provided in lieu of additional wages. Unopposed monopoly pricing of insurance products robs workers and 

employers of value. When a third of health care dollars are diverted away for patient care, workers are shortchanged. 

A false semblance of market stability results when intimidated 

doctors stop fighting and begin signing substandard contracts. The 

one-sided antitrust prosecutions and forced consent decrees are always, always against doctors and never—not once in the history of 

the U.S. that we can find, and they are often unfair and incomplete. 

Some blame goes to the courts. Federal judges are mandated by 

the 2004 amendments to the Tunney Act to review antitrust consent decrees for fairness and impact on the public. This is not routinely done, and it has been discouraged by the DOJ. During the 

debate on the 2004 amendments, then Chairman Sensenbrenner 

commented that the amendments were to ensure judicial review 

beyond ‘‘the mockery of justice standard.’’ 

True health care reform requires antitrust reforms; that is, a rebalancing of the contractual power between doctors and insurers so 

that patients are guaranteed access to the best medical care. Antitrust legislative reforms must include a reconsideration of the right 

of physicians to collectively negotiate with payers, as proposed by 

Campbell and Conyers. Antitrust regulatory reforms must include 

an update of the 1996 antitrust guidelines consistent with current 

market realities and the right for physicians to develop and participate in quality initiates without threat of prosecution. 

And finally, antitrust enforcement reforms must start and end 

with an even-handed application of the rules of competition by the 

DOJ and the FTC, consistent with the intent of the 1890 Sherman 

Act. That includes independent review of the last 35 consent decrees for fairness. The Sherman Act, you will remember, was written as a short and general outline of fairness principles with the 

expectation that regulators and the courts would tailor the details 

to the specific market situations. Current antitrust enforcement in 

health care fails to treat physicians and consumers fairly. 

I would like to thank Chairman Conyers, Chairman Johnson, 

Ranking Member Coble, and Members of this Subcommittee and 

their staff for holding this hearing. I will be pleased to answer any 

questions. 

[The prepared statement of Dr. Connair follows:] 

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PREPARED STATEMENT OF MICHAEL P. CONNAIR


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Mr. JOHNSON. Thank you, Dr. Connair. We have got a series of 

votes, six of them, which we will go to after we hear from Attorney 

Balto. Please proceed, sir. 


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TESTIMONY OF DAVID BALTO, SENIOR FELLOW, 

CENTER FOR AMERICAN PROGRESS 

Mr. BALTO. Thank you very much, Mr. Chairman. 

You know, I want to compliment the Committee and its staff for 

all the work you have done. Justice Brandeis said that sunlight is 

the best disinfectant. And if he was here today, he would really applaud you for all the work the Committee has done in bringing attention to important competitive issues. 

I am the former FTC Policy Director, and I usually represent 

consumer groups. And I asked myself the question, who represents 

the consumer? I think that is what this whole debate comes down 

to, who represents the consumer? Over the past decade, the FTC 

and the Department of Justice has said, in health care the insurance company represents the consumer; and they are wrong. 

What has been the result of that misplaced set of priorities? 31 

or 35 cases against doctors. Zero, zero cases against health insurers’ anti-competitive conduct. Zero cases against deceptive and 

fraudulent conduct by the agencies. Massive consolidation leading 

to highly concentrated markets. I am a little worried. I don’t know 

about you folks. You just went through a year-long, exhaustive debate on health care reform, and the representatives of the government couldn’t tell you that the markets were overly concentrated. 

That is something to worry about. 

What is the result of the misplaced priorities? 35 cases against 

doctors. I did look at all those cases. I examined them. Relatively 

few say that there was some harm. And the harm was insurance 

companies couldn’t get the rates they wanted. Nothing about consumers in those complaints. Of those 35 cases, in only one case was 

the insurance company upset enough to file a private antitrust 

suit. Give me the money back. Nope. They have the FTC to do that. 

And they don’t care about—there is no money to get because there 

is no harm. Did consumers file suits in those 35 cases? Zero. Not 

a one because consumers weren’t harmed. 

At the same time, what happens when doctors try to get together? Well, you have these 1996 guidelines which I helped author; and if you think those guidelines are up to date, if you think 

the health care world is the same as it was in 1996, you should 

bet on the Minnesota Gophers beating the Wolverines in football. 

The standards applied are so egregious it is impossible for doctors 

to get advice in a timely fashion. 

Member Goodlatte asked us how long these letters take. I am 

surprised they didn’t have the answer. The answer is on page 9 of 

my testimony. I went back and looked at the last six letters. I 

talked to the lawyers and doctors who had submitted letters to the 

FTC. The time period is between 245 to 645 days. The cost, over 

$100,000 in each case. The letters, exhaustive. When you go outside of health care and you want the advice from the government, 

it takes something like 2 to 3 months. Now the agency committed 

to a 90- to a 120-day period to get these letters done. This is clearly 

out of whack and needs to be reformed. 

What is the result of this? Skyrocketing insurance premiums, 

record numbers of uninsured, diminishing reimbursement for these 

doctors, these dedicated doctors who are dedicated to serving the 

public, who are often forced into assembly line care. 

115 

Who suffers? Ultimately the patients suffer. What is the solution? First, we need vastly stronger health insurance enforcement 

and on both sides, looking both at consumers and on physicians. 

There is a really important decision by the Third Circuit Court 

of Appeals on page 3 of my testimony that came out just this Tuesday. A large insurance company tried to exploit a hospital; and it 

said, We are not to blame in an antitrust sense. We are getting 

lower premiums. And the court said, You are wrong. Maybe you 

are giving them lower premiums, maybe you are not; but the way 

you are getting lower premiums is by giving consumers worse 

health care. You have to look at the total equation, look at the impact on patient quality, look at the impact on these doctors. 

Second, the FTC should only bring cases against doctors and 

other providers if there is clear evidence of competitive harm. 

These 31 cases that they brought under their per se rule of illegality just didn’t make a hill of difference and took the limited government resources away from more important things, like prosecuting health insurance companies. 

Third, there needs to be new guidelines, and they need to have 

clear safe harbors. I have suggested one for pharmacies. 

Finally, in terms of mergers, both Member Gonzalez and Member 

Conyers posed about how highly concentrated the market is. What 

can you do about that? Well, there is something you can do; and 

the FTC did it for hospitals in this last decade. Go back, do a study 

of consummated mergers, and attack those consummated mergers 

that have harmed consumers. You can challenge a merger even if 

it has been consummated. 

I applaud the Committee’s focus on these efforts, and I will look 

forward to trying to assist the Committee in trying to lead to sensible antitrust enforcement in the health care area. 

[The prepared statement of Mr. Balto follows:] 

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PREPARED STATEMENT OF DAVID BALTO


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Mr. JOHNSON. Thank you, Mr. Balto. One of the issues being proconsumer price savings versus doctors’ abilities to eke out an honest and profitable occupation or profession is very important. And 

you have struck upon a couple of interesting points that I would 

love to follow up on today. However, with the six votes, it is going 

to take us some time to be able to return here, and then there are 


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other things on our agenda for this afternoon. So we will have to 

reschedule this hearing, and we will adjourn it today. 

Thank you for coming. 

And by the way, before I adjourn, without objection, Members 

will have 5 legislative days to submit any additional written questions which we will forward to the witnesses. You have not had any 

questions yet. So we will have you back. Thank you. 

[Whereupon, at 12:11 p.m., the Subcommittee was adjourned.] 

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A P P E N D I X 

MATERIAL SUBMITTED FOR THE HEARING RECORD

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RESPONSES TO QUESTIONS POSED DURING THE HEARING TO SHARIS A. POZEN, CHIEF

OF STAFF AND COUNSEL TO THE ASSISTANT ATTORNEY GENERAL, ANTITRUST DIVISION, U.S. DEPARTMENT OF JUSTICE, WASHINGTON, DC 


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RESPONSES TO POST-HEARING QUESTIONS FROM RICHARD FEINSTEIN, DIRECTOR, 

BUREAU OF COMPETITION, FEDERAL TRADE COMMISSION, WASHINGTON, DC 


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Æ 


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