Health Information Technology and Antitrust: Those Who Forget the Past Are Destined to Repeat It
By Mark Botti and Anthony Swisher, Squire Sanders LLP
Commercial activity of the type often drawing antitrust scrutiny is rapidly increasing in the area of health information technology (HIT).
The term HIT captures a wide range of products and services, including patient data organization and storage, payment tools, outcomes databases, and many others. The “coming” HIT revolution is undoubtedly being driven by both private market and public engines. The growth of HIT, as a commercial market matter, seems inevitable given the inherent value and opportunity of harnessing the power of technology to attack the well-documented problems in the healthcare sector.
The full deployment of HIT, for example the use of electronic health records, appears to be accelerating. According to the National Center for Health Statistics (NCHS), the number of physicians using some form of electronic health record (EHR) system grew by 26% in the last year. Among office-based physicians, 40% used a “basic” electronic health record system. Once the interoperability issue for EHR is solved, the network effects of that particular HIT should take off.
Government is actively involved in promoting HIT adoption through statutes such as the Health Information Technology for Economic and Clinical Health (HITECH) Act and the Affordable Care Act, and resulting programs like the coming health insurance exchanges and federal “meaningful use” reimbursement incentives. The HITECH Act, in particular, has anticipated the antitrust concerns of this article by directing the “development of a nationwide health information technology infrastructure” to promote “a more effective marketplace, greater competition … [and] increased consumer choice.” HIT growth is happening, and with that growth will come risks as well as opportunities.
As with other technology revolutions that have preceded it, the expanding role of HIT, if not managed carefully, carries with it the potential for antitrust pitfalls that would recall the classic antitrust stumbles of technology companies in other areas of the economy. In the drive to develop and deploy the technology, consideration of how to interact with the marketplace and attendant antitrust concerns are reasonably a secondary consideration during this growth process. Firms are justifiably focused on achieving the heretofore elusive interconnectivity and interoperability of HIT systems that will drive true cost savings and outcomes improvements. But rapidly evolving technological prowess often creates a strong market presence early in the development of a market; and some reviewers might unfortunately equate these developments with monopoly or market power, as opposed to the natural cycle of technological innovation. In the drive for interoperability, particular networks or platforms will likely gain ascendency to become the industry standard, while others fade; and some will see this as the success of the marketplace, while others view it as foreclosure of competition. Finally, as long as there has been industry and technology, there have been guilds who sometimes push back against innovation in an effort to protect their entrenched interests. The modern technology sector is no stranger to this phenomenon, which can sometimes lead to antitrust trouble as firms band together to stave off “ruinous competition.” So while today antitrust is properly a secondary consideration, in the likely tomorrow of HIT, it could be, if not managed and anticipated, a more central concern.
Fortunately, antitrust is a navigable area of the law. Whether it is in the context of network or product design, evaluation of a merger or acquisition, or development of joint standards, HIT firms can learn from the recent past technological revolutions and their interaction with antitrust enforcement. For example, the lessons of Microsoft’s horrendous antitrust experience seem to have been well learned by Google in its current attempts to weather antitrust scrutiny. HIT providers should not assume that only consumer-products superstars like Microsoft and Google are of interest to antitrust enforcers. Large technology companies in seemingly back-office and uninteresting areas, like Oracle and PeopleSoft, have clashed sharply with federal regulators as well. Finally, not all antitrust concerns should create defensiveness on the part of HIT providers. Quite to the contrary, antitrust authorities have acted definitely and aggressively to attack what they perceive as organized attempts by entrenched interests to thwart the deployment and promise of technological developments. Prominent examples include DOJ’s recent challenges to the book publishing industry over its reaction to the rapid rise of e-books, as well as the agency’s campaign to protect the online real estate brokerage industry. The point of this article is to highlight that while potential antitrust pitfalls are numerous and varied, with careful planning and an appreciation of antitrust policy priorities, HIT companies, as well as their customers and suppliers, can find that very real antitrust risks are also very manageable.
We offer here a few preliminary guideposts for HIT companies to sensitize them to the world of antitrust.
1. Understand the Goals of Antitrust and Shape Your Conduct Accordingly.
Let’s start with some background illustrations from the HIT revolution to highlight its interface with the antitrust world and the path forward to avoid antitrust failures.
On the aligned and benign front, greater deployment of HIT can line up very well with antitrust policy’s support for lower costs, more efficient coordination of care, and better patient outcomes. For example, the launch of Optum Labs by UnitedHealth Group and the Mayo Clinic promises to use sophisticated data mining techniques to refine approaches to care by finding optimal treatments for conditions in a given setting, understanding variations in care and examining the effectiveness of patient care approaches. One cannot doubt that this is the type of activity that, at a minimum, the antitrust laws were not designed to impede and, ideally, thoughtful antitrust enforcement policy and judicial outcomes should encourage. That the sponsors of the program are also commercial participants in the market has not stood in the way of its deployment. Quite to the contrary, in considering how the antitrust laws should apply to the emerging commercial Accountable Care Organizations, the Justice Department articulated antitrust tolerance because of ACOs’ potential “to encourage providers continually to innovate and develop better ways of improving care, utilizing health IT, controlling costs, and increasing coordination overall.” Undoubtedly, antitrust reviewers will apply the same principles to the activities of commercial HIT providers.
This is not to suggest that antitrust enforcers will hesitate to bring a case where the facts warrant, merely because the parties are engaged in the technology sector. History teaches that where parties lose focus on improving and deploying their technology, and instead make decisions with an eye towards reining in competition, the government will step in. The DOJ recently blocked the proposed merger of H&R Block and TaxACT, a deal in which the very technological contribution of the merging parties increased their antitrust risk. There was no dispute that the sophisticated, digital-do-it-yourself products offered by the merging firms had revolutionized tax preparation for the better. Indeed, they had so fundamentally altered the competitive landscape that, as a matter of marketplace reality, traditional tax preparation firms were not realistic alternatives for most consumers of the merging parties’ technology. The merging parties themselves appeared to recognize this in their now-public deal deliberation documents in which they touted “[e]liminati[ng this] competitor” and “regain[ing] control of industry pricing and avoid[ing] further price erosion.” In short, DOJ (and the reviewing court) were not persuaded that the transaction advanced the deployment and quality of the tax preparation technology, but instead viewed the transaction as one involving good, old fashioned anticompetitive post-merger price increases.
2. Don’t Overreach — Technological revolution creates winners and losers, and the latter in turn create antitrust risk.
Despite the seemingly overwhelming need and justification for deployment of HIT, technological innovation may leave some companies behind, and firms that feel threatened often turn to antitrust as a defense.
A good illustration, and of some interest to antitrust advisors, are those network technologies where economies of scale in users (so called network effects) may tip a marketplace to one solution over another, creating winners and losers among those desiring to provide the network, as well as difficulties and advantages for those finding access to the network useful or necessary to offer their services. While a longstanding core principle of antitrust policy is the protection of “competition, not competitors,” those same competitors can be the source of information and complaint that prompt an antitrust agency investigation, or bring to a court a concern that the antitrust laws have been violated. We may see antitrust concerns present themselves, for example, as Health Information Exchanges take hold and issues of interoperability and data collection standards are resolved.
From the world of consumer computing, we see how early success in a network product can lead to antitrust troubles. We believe that there is little doubt that regulators and the courts recognized the inherent value delivered by Microsoft’s operating system and related products, but they also believed that not every act of Microsoft which contributed to the winners and losers accessing its operating system was necessary for Microsoft to manage its network. Microsoft clearly failed to convince government regulators that the net effect of all design decisions regarding its operating system aligned with antitrust concerns over efficiency. In contrast, Google appears, at least in the U.S. so far, to have generally succeeded in holding at bay the attacks of disgruntled technology-driven service providers who wish to benefit from Google’s algorithmic searches. The reviewing agency, the Federal Trade Commission, shut down its investigation because it found that Google’s search algorithms were designed to improve Google’s search product – i.e., to compete more effectively and provide a better product – and thus were not an appropriate subject of antitrust enforcement.
The lesson for HIT providers, whether acting singly or collectively, is to keep their focus on improved patient outcomes, product improvement, and increased efficiency, and to document and justify decisions with these goals in mind. Although decisions regarding product attributes and network configuration inevitably will create winners and losers in the marketplace, a consistent focus on product improvement and consumer welfare will significantly minimize the attendant antitrust risks, and avoid these decisions creating antitrust winners and losers.
3. ‘Back office’ doesn’t mean ‘back burner.’
Some HIT leaders might wonder whether they need to worry about antitrust because antitrust is cited so often as a “consumer welfare law,” and much of the HIT revolution might take place outside of the consciousness of the average healthcare consumer.
No doubt consumers will benefit from the HIT revolution, but much of it is not focused on consumer Apps, but on improvement of clinical and financial delivery systems. But what may seem an arcane world to the average consumer is of acute interest to the antitrust enforcer. A good example of this gave rise to one of the significant antitrust cases of recent years. DOJ challenged the proposed merger of two large providers of enterprise management software, Oracle and PeopleSoft, alleging that the merger would adversely affect competition in the financial management and human resource management software sectors. Despite the rapidly evolving marketplace, and the resulting challenge that the Justice Department faced in precisely labeling the market in which the companies competed, the Department sued the parties in federal district court, attempting to block the merger. Oracle and PeopleSoft were able to defeat the DOJ’s challenge, in part, by demonstrating to the court that DOJ’s proposed product market did not comport with marketplace realities, and that other firms provided real alternatives to firms looking for financial management and human resource management solutions.
The lesson from the DOJ’s failed challenge should not be, we hasten to add, that HIT providers in a similar marketplace should not worry about a challenge because of the presence of other competitors. Finding yourself in litigation with the federal government, while at times a necessary and viable path, as Oracle’s pursuit of PeopleSoft demonstrates, is not an optimal solution. The lesson for HIT firms operating in more technical areas of the marketplace, we believe, is to recognize the reality of potential antitrust scrutiny, even if their products are not necessarily “consumer facing.” Even in deals involving “back office” products, the antitrust agencies will scrutinize transactions from a variety of different angles to determine if they could substantially reduce competition, often reaching out to a variety of marketplace participants – competitors and customers alike – in the process. While the Justice Department lost its challenge to the Oracle/PeopleSoft merger, antitrust agencies have successfully challenged a number of technology mergers in such arcane areas as electronic benefits transfer and auto claims processing.
The greatest success for HIT providers grappling with antitrust issues lies not in surviving an antitrust challenge, but rather in anticipating and avoiding one in the first place. Whether considering a merger or some other commercial activity, HIT providers should understand that antitrust agencies, as well as reviewing courts, will sharply focus on the realities of the parties’ capabilities, how closely they compete, and the role of other marketplace participants. Consider for example, the great success that holders of standard-essential patents have had in obtaining antitrust blessing for the inherently antitrust risky enterprise of developing industry standards. Despite the palpable potential for the creation of a bottleneck, exclusion of rivals, and the exercise of monopoly power, the potential for economic and consumer welfare has clearly won over the antitrust agencies. In recent testimony before the Senate Judiciary Committee, the Antitrust Division recognized the critical role of standards in the modern economy: “Standards also drive our economy. Standards have a range of benefits, from helping to protect public health and safety to promoting efficient resource allocation and production by allowing for interoperability among complementary products… . Today, standards underpin efforts to drive and deploy electronic vehicles, share and protect health information, and enable the use of smart grids for the delivery of electricity.”
4. Remember the Borg: Resistance is futile.
Technological advancements of the type embodied in HIT not only can improve efficiency but also can significantly reduce costs of products and services.
Technology’s downward pressure on prices can lead firms using older technologies to resist, rather than embrace, new technological developments, sometimes violating the antitrust laws in the process. Very recently, the DOJ sued several members of the book publishing industry, as well as Apple, alleging a conspiracy to change the way e-books are sold that would result in higher prices to e-book purchasers. According to the DOJ, the hard-copy book publishers and Apple felt threatened by Amazon.com’s low prices for e-books, and set about to change the industry model to drive up e-book prices, narrowing the gap between electronic and hard-copy versions of titles. (Most of the defendants eventually settled the government cases.) The issues faced by the book publishing industry are by no means unique. Traditional real estate brokers have long felt the increasing competitive pressures brought to bear by online real estate firms. The traditional brokerages have used tactics such as restricting access to the Multiple Listing Service to try to slow the advance of their online counterparts, leading to several antitrust lawsuits brought by U.S. enforcers.
In the healthcare industry, in particular, the antitrust enforcement agencies have long been concerned about efforts to thwart innovation. The FTC successfully challenged an agreement among Indiana dentists to refuse to provide payers with copies of dental x-rays to assist in the evaluation of the necessity of provided care. The Supreme Court upheld the FTC’s challenge, finding that the dentists’ conduct had a material impact on competition, and undermined a practice designed to reduce the cost of dental care. More recently, both the FTC and DOJ have brought cases against groups of physicians who, threatened by changes to their practice brought on by advances in managed care, agree on the prices they will charge in an attempt to gain bargaining leverage and increased reimbursement rates. Thus, with respect to antitrust enforcement, HIT can actually be a two-edged sword. The very qualities that generally align the growth of HIT with the priorities of antitrust policy can lead to greater antitrust enforcement in response to efforts within the industry to resist its deployment.
5. Special Note: Don’t Forget the HEALTH in HIT.
While much of our focus has been on the lessons from prior “technology” failures and successes in the antitrust arena, it is important here to take a step back and specially emphasize the healthcare context of this coming revolution.
Antitrust enforcement decisions are not made without due consideration of broader policy concerns. Thus, while HIT shares a common strain with other sectors of the economy that have experienced rapid technological advancement and deployment, healthcare has long been viewed as different. Its clinical quality component is something that antitrust agencies are much more loathe to intrude upon than, for example, the quality of the results generated by a web site’s search algorithm. Perhaps it is less than equation, but nonetheless a warranted observation, to say that if likely improved quality in the search experience of a leisure traveler staves off antitrust review, likely improvement in the cost and quality of care delivered to a patient should also ward off antitrust review.
The impact of healthcare costs on national economic performance is a major driver of current healthcare policy and its attendant technological revolution. In advocating for the Affordable Care Act, the Obama Administration has focused extensively on “bending the cost curve,” and reducing healthcare costs. Certainly, part of these savings could be realized through innovations in administrative processes, such as billing, payment and record keeping systems. Potentially more significant, however, are savings resulting from improved care, such as reducing medical errors, improving preventative care, and mining outcomes data for best practices to reduce the need for hospital readmissions and costly acute care. Particularly with respect to these patient-focused innovations, although antitrust policy will not turn a blind eye to obviously anticompetitive conduct or transactions involving HIT, the antitrust enforcement agencies can be expected to be acutely aware of the national conversation on reducing the cost of healthcare, and to ensure that their enforcement decisions do not hinder unnecessarily the advancement of cost-saving technologies that could improve patient care.
If history is any guide, the rapid growth and innovation in health information technology will inevitably lead to antitrust hurdles as firms sort themselves out in the marketplace and certain technologies rise while others fall. Past antitrust enforcement in technology markets, however, reveals that antitrust concerns should not stand in the way of innovation. A consistent focus on product improvement, a clear-eyed view of the practical realities of the marketplace, and an appreciation of the public policy priorities that inform antitrust enforcement decisions can help firms safely navigate the antitrust waters.
Mark Botti is a partner in the Antitrust & Competition Practice Group of Squire Sanders (US) LLP in Washington, D.C. He advises clients on the full spectrum of antitrust matters, including government investigations, mergers and acquisitions, joint ventures, government and private litigation, and competition policy matters. He served for 13 years in the U.S. Department of Justice in various litigation and leadership positions within the Antitrust Division.
Anthony Swisher is a partner in the Antitrust & Competition Practice Group of Squire Sanders (US) LLP in Washington, D.C. He has extensive experience representing clients before the Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice in connection with government antitrust investigations of mergers, acquisitions, and joint ventures. He has represented clients in a wide range of industries—from insurance to healthcare to energy.
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