In last month’s Antitrust Update, we reported on the conflict between Georgia’s Certificate of Need laws and the Federal Trade Commission’s (FTC’s) desire to seek divestitures as a remedy in the Phoebe Putney case. A further conflict of state healthcare policy and the federal antitrust regulators emerged in April in relation to applications under New York’s Certificate of Public Advantage (COPA) rules, with the FTC submitting a public comment arguing against the grant of COPAs to three performing provider systems (PPS) newly formed under the New York Delivery System Reform Incentive Payment (DSRIP) program.

The FTC’s comment expresses concern that the grant of COPAs to the three entities would shield potentially anticompetitive conduct, and implies that competition protections in the New York system would be ineffective. The comment also provides some insights into the FTC’s position on the conduct of DSRIP provider systems that do not have COPAs that may violate antitrust laws.

New York’s DSRIP and COPA System

New York’s DSRIP program encourages collaborations among New York healthcare providers aimed at achieving system reform, quality improvements and cost reductions. The purpose of DSRIP is to restructure the New York healthcare delivery system by reinvesting in the Medicaid program, with the primary goal of reducing avoidable hospital use by 25% over five years. The New York state government has allocated up to $6.42 billion to the DSRIP program, with payouts based on provider systems achieving predefined results in system transformation, clinical management and population health.

A COPA is issued by the New York Department of Health signifying the approval of a Cooperative Agreement or planning process—which can include DSRIP project plan applications—subject to certain conditions being satisfied. The COPA regulation was designed to establish a mechanism for active state supervision of collaborative arrangements between healthcare competitors, with the purpose of securing “state action immunity.” The state action immunity doctrine provides immunity from federal government or private antitrust challenges for certain transactions that may otherwise have a potential anticompetitive effect.

Under the New York COPA regulation, parties that have received a COPA may collectively negotiate, enter into, and conduct business covered by the COPA without the threat of enforcement action by the federal antitrust authorities or private lawsuits. COPA regulations do not, however, shield blatantly anticompetitive collaborations. In granting a COPA, the Department of Health must work in consultation with the New York Attorney General’s (NYAG’s) office and conduct a detailed competitive analysis of the market, as well as of the potential benefits and anticompetitive effects of the proposed collaborative arrangement. Further, even after a COPA has been granted, there are annual reporting requirements and continual oversight. The NYAG may seek relief under state antitrust laws if it believes that the parties have engaged in conduct outside the scope of the COPA, or if the anticompetitive effects outweigh the benefits of the collaboration.

Although around 28 DSRIP performing provider systems have been established, only three—Adirondack Health Institute Performing Provider System, Advocate Community Partners Performing Provider System and Staten Island Performing Provider System—have applied for a COPA. It is these applications that the FTC opposes.

The FTC’s Concerns

In its comment, the FTC asserts strongly that the federal antitrust laws do not prohibit procompetitive collaboration among competitors. Therefore, the FTC believes, the need for a COPA must imply that the conduct proposed to be undertaken by the three DSRIP provider systems will be anticompetitive.

In general, the federal antitrust laws prohibit competitors from engaging in conduct that would restrict competition. As outlined in the FTC’s comment, the laws are founded on the premise that competition among sellers in an open marketplace gives consumers the benefits of lower prices, higher-quality goods and services, greater access to goods and services, and innovation. At one end of the spectrum, the laws summarily prohibit obviously anticompetitive activities, such as price-fixing or market-allocation agreements between competitors. More complex, however, is the treatment of restrictions in the context of activities that otherwise increase efficiency and benefit consumers, such as collaborations of healthcare providers.

The FTC cites the history of federal antitrust enforcement in the healthcare arena, which has resulted in very few challenges among thousands of arrangements reviewed. The FTC’s focus in challenging consolidations or collaborations in the healthcare area has principally been on conduct that may result in collective negotiation of reimbursement rates with commercial providers. The FTC firmly believes that such collective negotiation—particularly where the collaborating providers represent a substantial portion of competing providers of a particular service or specialty—is likely to result in increased provider bargaining leverage, increased reimbursement rates, and eventually higher premium and out-of-pocket costs to consumers.

State vs. Federal Oversight

The FTC’s comments assume that the COPA will shield anticompetitive conduct, and expressly do not address the question of whether state antitrust oversight will be sufficient to maintain competition in New York healthcare markets. But oversight by the NYAG’s office under the state antitrust laws—which closely track the federal antitrust laws—is at the root of the COPA regulation. This is consistent with a growing trend in state healthcare regulation. Several states, including New York, Massachusetts and Connecticut, have created new state regulatory bodies and established review systems designed to give the states more control over the competitive dynamics in the healthcare system, often to the exclusion of the federal antitrust agencies. The FTC has submitted comments objecting to these and other state initiatives on the basis that they are often based on improper characterization of the limitations of the federal antitrust laws.

In deliberately avoiding the question of whether state antitrust oversight will be sufficient to protect competition in the New York health system and New York consumers, while insisting on a continued role for itself, the FTC implies that such enforcement must somehow be inadequate. It is unclear why this should be.

The NYAG’s office, like many other state attorneys general, has a designated antitrust bureau staffed and led by sophisticated, experienced counsel with a track record of successfully bringing enforcement actions in a variety of industries. In the case of healthcare, the NYAG has particular expertise, having reviewed many provider consolidations and other developments, often working closely with the FTC and Department of Justice (DOJ) Antitrust Division.

Possibly the answer lies in the FTC’s concern that the New York Legislature believes that the antitrust laws are inconsistent with the goals of healthcare reform. The comment cites—and strongly disagrees with—the legislative findings in relation to the New York Senate Bill that underlies COPA to the effect that the antitrust laws prohibit collaboration among healthcare providers that otherwise could be beneficial to New York residents. In such a political climate, can the NYAG freely exercise its judgment as to whether conduct under its purview by virtue of a COPA violates the antitrust laws, and implement the enforcement action envisaged by the COPA regulations?

Collaboration Within DSRIP Provider Systems

The FTC comment also raises specific concerns about collaborations among healthcare providers who are members of DSRIP performing provider systems. Although the FTC’s concerns focus on conduct in a provider system with a COPA—which would be immune from federal antitrust enforcement—they offer a useful guide for all DSRIP provider systems about conduct that may be problematic under the antitrust laws.

The FTC’s comment notes that healthcare providers with a COPA may be encouraged to share competitively sensitive information and engage in joint negotiations with payers “in ways that will not yield efficiencies or benefit consumers.” In this regard, the FTC’s focus is primarily on collective negotiations with payers or agreements on the prices healthcare providers will accept from payers (which could be implied from detailed information exchanges about payer contracts and prices). The FTC is firmly of the view that such collaborations or agreements eliminate or reduce competition, leading to higher prices—which are passed on to consumers in the form of higher premiums and out-of-pocket payments—and lower-quality care.

The FTC further notes that antitrust concerns are implicated where such collaborations or agreements are between competing providers representing a substantial portion of any particular service or specialty, which will often be the case with DSRIP provider systems. Accordingly, DSRIP provider system members need to ensure that information exchanges are carefully tailored to the purposes of the collaboration and any exchanges relating to payer rates or existing agreements with payers are carefully controlled. In addition, collaborations on rate negotiations are likely to be a no-go area unless special circumstances exist.

The FTC also raised the concern that even though the DSRIP program is limited to Medicaid, the potential anticompetitive effects of information-sharing or joint negotiation may spill over into commercial and Medicare aspects of providers’ businesses. This could occur through the need to share information about all the participating providers’ patient populations—including commercial, Medicare, and Medicaid patients—to implement properly the value-based payment models contemplated under the DSRIP program. Arguably, such information exchanges and negotiations would also be covered by a COPA for a DSRIP PPS that applies for one. Other DSRIP provider systems, however, will need to establish clear parameters for information-sharing to avoid such spillover effects, which could be a potential violation of the antitrust laws.


Whether or not the New York Department of Health and NYAG take the FTC’s comments to heart in considering the COPA applications of the three DSRIP provider systems, the trend toward individual state management of competition in healthcare markets is likely to continue, as states grapple with the enormous changes in the operation of healthcare systems and the delivery of health services to their consumers. But the FTC will continue to advocate for broad and consistent application of the federal antitrust laws and seek aggressively to investigate and enforce those laws in healthcare markets.