New leadership, by nature, ignites ambiguity.
Last month, Governor Haslam’s former chief counsel, Herbert Slatery, took the oath of office as Tennessee Attorney General. His appointment comes at a defining stage in healthcare law and its future in Tennessee, leaving doctors, healthcare groups and other providers anticipating a coming precedent regarding one of the most pressing legal issues any provider will face – a merger or an acquisition.
It’s no surprise that the rate of physician practice mergers and acquisitions is on the rise. According to the New England Journal of Medicine, since 2000, there has been a near 75 percent increase in the number of active doctors employed by hospitals. With the implementation of the Affordable Care Act, which raises the need for capital to fulfill technology, data and analysis requirements, the demand for mergers and acquisitions is only continuing. Yet, with an increase in consolidations among healthcare providers comes rising antitrust concerns and complications.
The line is already a blurry one. In order to provide the best possible care, many doctors merge with a hospital or healthcare group to gain access to essential resources, technologies and collaborative support. Yet, at some undefined point, that collaboration can appear to be too powerful, which would potentially result in loss of market share by smaller competitors, loss of negotiating power by insurers, and rising healthcare costs to patients.
Despite a great many healthcare mergers and acquisitions in our state, even in the last year – including the $4.3 billion purchase of Vanguard Health System by Dallas-based Tenet Healthcare Corporation and Community Health Systems’ acquisition of Florida-based Health Management Associates – the Tennessee Attorney General’s office has largely remained quiet on antitrust issues … so much so that many healthcare professionals are unaware the state has its own antitrust codes.
But the tide had turned. It was just months ago that Tennessee took a clear stance under the leadership of former Attorney General Bob Cooper.
Cooper joined in an opinion brief to the 9th circuit court of the United States Court of Appeals on an Idaho antitrust suit, Federal Trade Commission and State of Idaho vs. St. Luke’s Health System, Ltd. and Saltzer Medical Group P.A. The lawsuit began as St. Luke’s Health System, the largest healthcare system in Idaho, merged with the largest independent physician practice in the state. The opinion expressed agreement with the District Court’s decision to order a divesture of the merger as a means of preserving competition, avoiding losses of bargaining power with insurers and ultimately retaining a level of affordable healthcare for patients.
Though the suit impacts Idaho alone, Cooper’s participation in the opinion served as a signal to warn Tennessee doctors they might not be able to trade ownership for salaries, and that all healthcare transactions would be carefully scrutinized to ensure there was no anti-competitive elements. The on-the-record action let healthcare attorneys, executives and practitioners understand, at least to some degree, that the business-as-usual stance of the AG’s office concerning consolidations will not continue if hints of antitrust issues emerge.
But just as attorneys and healthcare professionals received a new direction on an exigent issue, the tide turned once more with a new attorney general.
So the questions moving forward become — will Attorney General Slatery feel as strongly as his predecessor did about the monopolization of medicine? Will each and every future merger and collaborative effort be met with sharp scrutiny? Can we expect new legislation to emerge through the General Assembly, and will our struggling rural hospitals and smaller practitioners find that they need to source new ways of collaboration outside of an outright sale?
Though that priority is unclear now under the new leadership, it is likely an issue that won’t be ignored for long. For one, the Federal Trade Commission has expressed its intent to focus on antitrust issues surrounding healthcare consolidations. And two, the number of transactions are not declining. Eventually, the shrinking number of networks, especially in our smaller and rural communities, will force the issue to the attorney general’s front burner.
Ultimately, time will tell if Attorney General Slatery chimes in with the same opinion as former Attorney General Cooper, but it’s something all providers should pay attention to … because if he does, the landscape of healthcare deals in Tennessee will indeed be met with a dynamic shift, and providers will have to find new ways to integrate and meet the requirements of the Affordable Care Act while maintaining the highest level of competition.
Keith Dennen is member attorney with the Nashville office of Dickinson Wright, PLLC, a full-service law firm with 12 offices throughout the United States and Canada. He focuses his practice on healthcare law and corporate law. Reach him at kdennen@dickinsonwright.com.RELATED LINKS:
