August 2002 Bulletin

Keep antitrust enforcers at bay

More fully integrate your practice

By Mark Rust, Esq.

In recent months, we have seen antitrust enforcers act against loose physician affiliations who believed that under the banner of a "specialty network" or "union" they could exercise fully all the clout that comes with such an alignment.

Generally, they often find they are wrong, leading to the question: "How can we be aggressive, develop strategic leverage and keep the antitrust enforcers at bay?"

The answer: more fully integrate. Integrate only to the degree that you are comfortable—but enough to meet the tests for being a single entity under Section One of the Sherman Antitrust Act.

Section One of the Sherman Act provides, in part, "Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several states, or with foreign nations, is hereby declared to be illegal."

This is an area of health law that is not well-developed, but this much can be said: As a practical matter, antitrust enforcers—the U.S. Department of Justice (DOJ) and the U.S. Federal Trade Commission (FTC)—have better things to do than pursue cases where the facts and the law are unclear, and where there is a real possibility that they might lose if the matter is put to a court test.

Options are available

It would mean that you could engage in a variety of ancillary ventures—from imaging to physical therapy to surgical centers—and increase the quality of care you deliver to your patients while earning ancillary income, all consistent with the law. And it would certainly mean you could negotiate as a single unit, increasing your bargaining strength by foreclosing all your physicians from a deal the entire group does not like.

You can’t affiliate to a minimal extent, like through a loose network and maintain that you and your colleagues are one entity, one actor, for antitrust purposes. While it is true that some joint negotiation can occur in a specialty network, what many orthopedists fail to realize is that the hammer they think is available to them in that negotiation—the ability to walk away from a deal the group does not like and ensure that the other party will not strike a deal with any individual member of the group—is simply not available in that type of organization, consistent with the antitrust laws.

Consolidation or combination

The opposite is true, however, in a consolidation, combination or merger, which is likely less painful than you think. Indeed, it may even strike you, after the fact, as a far more sensible way to practice. And it does not necessarily require the sacrifices you may currently believe are necessary for two or more groups to become one—and be more aggressive—in reality and in the eyes of the law. But it will—if done properly—help insulate you from any real antitrust fears.

As a general matter, a consolidation or combination is a transaction meant to be permanent—or as permanent as things can be in today’s business world—in which assets and future liabilities of two or more groups are shared by a single group. It means that the newly consolidated group shares a single billing number. And it means that the new group has a single governing structure that looks after the big picture issues for the benefit of all the physicians. But that is probably pretty nearly all it means.

It does not mean that a group need change necessarily the productivity method by which it currently shares revenues. Divisionalized accounting methodologies may be constructed to mirror, with precision, the manner in which you compensate yourself now, based on the revenues and expenses associated with your own practice.

It does not mean you need let someone else dictate employee hiring and firing at your location, unless of course what you are doing is illegal, in which case your partners would likely want to have something to say about it (as you would if it were one of your partners who proposed to do something that might get you in trouble).

It does not mean you must submit to the whims of a board upon which you have no say. You wouldn’t create an organization with your colleagues where you did not have significant power, and you would want to limit its powers to those issues that were truly important for the welfare of all your orthopaedic partners. But it will allow you to share in the rights that come along with the responsibility of acting as one entity—the right to negotiate with greater size and not fear the heavy hand of government.

Mark Rust is the managing partner of the Chicago office of Barnes & Thornburg. He can be reached at (312) 759-5646 or at

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