Antitrust in Healthcare - Essay Example

United States of America and State of Michigan V. Blue Cross Blue Shield of Michigan

On October 18, 2010, the Attorney General of the US and the state of Michigan brought civil anti-trust charges against Blue Cross Blue Shield of Michigan (Blue Cross). Blue Cross is one of the biggest independent licensees of the Blue Shield Association (Robinson, 2003, p.102). Blue Cross is a non-profit organization that administers and provides health care reimbursements to over 4 million members in Michigan. It was alleged in the charges that Blue Cross used the most favored nation (MFN) clause in contracts with its member hospitals to enforce monopolistic advantages. The Attorney General defended that such MFN status will hurt competition by
• Reducing the capability of other health insurers’ to compete with Blue Cross
• The clause will also help Blue Cross to raise prices beyond fair value
• It will create an entry barrier for new entrants
• MFN status of Blue Cross will raise the health insurance prices in Michigan
Hence, from the above summary of charges of anti-trust against Blue Cross by FTC, it can be said that Blue Cross’ MFN status with the hospitals of Michigan is likely to influence anti-competitive effects in the market (Tonn, 2011, pp.1-4).
Anti-Trust in Health Care
The purpose of anti-trust acts is to encourage a free marketplace that has a competitive environment. These laws are aimed to protect the public interest and restrict monopoly practices that adversely affect the public in society. The main purpose of such anti-trust law is to encourage the best possible allocation of scarce resources and services to the public at the lowest prices (Ladenburg, 2007, pp.33-35).
The federal anti-trust law is based on the following three acts that prohibit all restrictive trade practices and conspiracies in contacts or agreements:
The Sherman Act – Under Section 1 of the act, the rule applies to all agreements which may include restrictive trade practices, monopoly practices and boycott of other firms, conspiracy to fix prices, separate market territories, harm competition, and use of coercive tactics.
The Federal Trade Commission Act – Under Section 5 of the act, the law applies to all types of actions that use unfair advantages and methods of competition.
The Clayton Act – Under Section 7 of the act, it prohibits any such merger and acquisition that has the potential to create a monopoly in the market or substantially reduce in the market.
Recommendations to Management
From the above discussion regarding the anti-trust act against Blue Cross and lessons learned, it can be said that Blue Cross had the market power to its advantage via the MFN clause in a contract which will further influence the sale of health insurance products and services in Michigan. Making such a contract is discouraged by FTC under the anti-trust act in healthcare organizations. This is because, from the charges and rebuttals charged by the Attorney General on Blue Cross, it is clear that contracts including ‘MFN’ (Most Favoured Nation) status will fall under the purview of the act because of its very nature of creating an anti-competitive environment. In addition, it is also important to note that the senior management must ensure a contract or agreement regarding the prospective M&A of the company with other healthcare organizations should not include any such clause that influences monopoly, restrictive trade practices, conspiracy to fix price, a boycott of other firm’s products and services, and coercive tactics to harm competition since any clause which encourages such action in future will bring the company under the purview of the anti-trust act.
Conclusion
In the year 2010, a Michigan-based non-profit healthcare organization named Blue Cross Blue Shield of Michigan, United States was charged with anti-trust action. The company’s senior management has decided to merge with other healthcare organizations in the future and so this case, in particular, will help the management to draft proper contracts with the target HROs in compliance with the guidelines provided in the Act. Based on arguments regarding the lessons learned from the case of Blue Cross vs. Unites States of America and the State of Michigan, the management is advised not to include any such clause in a contract that reflects monopolistic practices or anti-competitive actions. This is because any such act will bring the company under the purview of the Federal Trust Commission investigation and further damage the goodwill of the company. Read More