Federal and state courts are expected to rule on several nationally watched antitrust health care cases during the first half of 2015. 

As we enter into the first week of the New Year, Nexsen Pruet associate Rachel Anna examines how the cases involve issues such as state action, health care provider mergers and certificate of need regulations.

Massachusetts AG Approves Hospital Acquisitions – But Will the State Court?

Partners HealthCare System (“Partners”) sought to acquire South Shore Hospital (“South Shore”) and two-hospital Hallmark Health System (“Hallmark”) in 2012 and 2013.  The Massachusetts Health Policy Commission (“the Commission”), a state entity, reviewed the proposed transactions and determined that they would likely increase health care costs in northeastern Massachusetts.[1]  Following the Commission’s report, the Attorney General’s Office and the Department of Justice (“DOJ”) investigated Partners’ proposed deals.

In May, Massachusetts Attorney General Martha Coakley agreed to a conduct remedy to allow Partners to acquire South Shore and Hallmark.  A conduct remedy is intended to address anticompetitive issues and preserve competition when a structural remedy, such as divestiture, would preclude the merger’s potential efficiencies and procompetitive effects.  Under a conduct remedy, parties agree to abstain from or commit to certain conduct (e.g., firewalls, contracting restrictions, antiretaliation provisions, etc.).  Although structural remedies are favored over conduct remedies in merger cases, several states, such as New York, Maine, and Pennsylvania, have recently demonstrated a willingness to impose conduct remedies.[2]

In this case, Partners agreed to cap prices, restrict its joint contracting with commercial payors, and limit its expansion for ten years.  In September, the Commission released another report finding that the proposed transaction—even with the conduct remedies—would increase costs for employers and consumers.[3]  But the Commission also determined that the merger has the potential to improve quality and increase access to health care services and warrants additional review.

In light of the Commission’s reports, Superior Court Judge Janet L. Sanders has yet to approve the antitrust settlement between Partners and the Attorney General’s Office. During a November 10th hearing, Judge Sanders suggested that she might want to hear from the new incoming attorney general before ruling on the settlement agreement.  The parties expect a decision in early 2015.