Preferred provider organizations and antitrust policy: some recent issues

Preferred Provider Organizations (PPOs) have rapidly increased in number in response to soaring health care costs. Government antitrust enforcement agencies have encouraged the growth of PPOs because they help bring needed competition to the health care field. Antitrust problems in this area can generally be avoided by careful planning and counseling, but there are antitrust questions that are sometimes raised. Such issues include whether large PPOs can selectively deal with certain hospitals and refuse to deal with others; when exclusion of competing providers by provider-sponsored plans might be unlawful, and whether PPOs can be contract preclude participating providers from participating in competing plans. In analyzing such questions, one should look at whether there is an agreement among competing providers, whether the PPO has sufficient market power to cause anticompetitive effects, whether the restrictions in issue are motivated by an anti-competitive effects, whether the restrictions in issue are motivated by an anti-competitive purpose, and whether there are procompetitive (including efficiency enhancing) reasons for the arrangement. Another question that is frequently raised is when can provider members of a PPO jointly negotiate or set their reimbursement rates. The law is not clear on this subject. However, if the provider members of a PPO make significant financial contributions to the plan or otherwise share in the risk of adverse financial consequences resulting from the plan's operation, antitrust risks are lessened.