FTC Staff Comment to The Honorable John J. Bonacic Concerning New York S.B. 3186-A, To Allow Health Care Providers to Negotiate Collectively With Health Plans

Office of Policy Planning
Bureau of Economics
Bureau of Competition
October 20, 2011
Senator John J. Bonacic
New York State Senate
201 Dolson Avenue, Suite F
Middletown, NY 10940
Dear Senator Bonacic:
The staffs of the Federal Trade Commission’s Office of Policy Planning, Bureau
of Competition, and Bureau of Economics1 are pleased to respond to your request for
comment on New York Senate Bill S.3186-A (“S.B. 3186” or “the Bill”), known as the
“Health Care Consumer and Provider Protection Act,” which would authorize
independent health care providers to negotiate collectively a variety of contract
provisions with certain health plans, including fees and other non-fee-related matters.
We are concerned that the Bill, if enacted, will likely lead to increased costs, reduced
innovation, and decreased access to health care for New York consumers, without
countervailing benefits. We therefore recommend that the Bill be rejected by the New
York State Assembly.
The Federal Trade Commission has consistently opposed legislative proposals to
grant antitrust exemptions for collective negotiations among health care providers.
Antitrust law already permits collaborations that benefit consumers, so the Bill is not
needed to allow truly procompetitive cooperative activities by health care providers. To
the extent that S.B. 3186 is designed to authorize conduct not already permitted under the
antitrust laws, the Bill threatens to deprive health care consumers of the benefits of
competition. The types of collective negotiations permitted by S.B. 3186 will likely raise
prices and reduce access for health care services, without ensuring improved quality of
care or other consumer benefits. In addition, the regulatory regime contemplated by the
Bill may not meet the rigorous standards required to confer state action immunity from
the federal antitrust laws to the providers.
Interest and Experience of the Federal Trade Commission
Congress has charged the Federal Trade Commission (“FTC” or “Commission”)
with enforcing the Federal Trade Commission Act, which prohibits unfair methods of
competition and unfair or deceptive acts or practices in commerce.2 Pursuant to its
statutory mandate, the FTC seeks to identify business practices and governmental
regulations that may impede competition without also offering countervailing benefits to
consumers.
UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION
WASHINGTON, D.C. 20580

2
Health care competition is critically important to the economy and consumer
welfare. For this reason, anticompetitive conduct in health care markets has long been a
key focus of FTC activity. The agency has brought numerous antitrust enforcement
actions involving the health care industry.3 In addition, the Commission and its staff
have given testimony,4 issued reports,5 and engaged in advocacy to state legislatures
regarding various aspects of competition in the health care industry. Of particular
relevance, the Commission and its staff have long advocated against federal and state
legislative proposals that would create antitrust exemptions for collective negotiations by
health care providers when such exemptions are likely to harm consumers.6
The New York Bill
As we understand it, S.B. 3186 would authorize health care providers to
collectively negotiate fee-related contract provisions with any health plan deemed to hold
“substantial market share in a business line.”7 In addition, the Bill would allow health
care providers to collectively negotiate numerous non-fee-related contract provisions
with a health plan operating within the same service area as the health care providers,
regardless of whether the plan holds substantial market share.8 Competing health care
providers would be allowed to communicate directly with each other regarding the
contractual terms and conditions to be negotiated with a health care plan, including prices
and other competitively sensitive information.9 Actual negotiations with health plans
must be accomplished through an authorized representative of the health care providers.10
Once competing health care providers establish terms to be negotiated, the health
care providers’ representative would be required to submit a report to the New York
Attorney General identifying the proposed subject matter of anticipated collective
negotiations with health plans, as well as any efficiencies or benefits expected to be
achieved through the negotiations for health care providers and consumers.11 With the
advice of the Superintendent of Insurance and the Department of the Health
Commissioner, the Attorney General must approve or disapprove any proposals for
health care providers to engage in collective negotiations within 20 days. If a proposal is
rejected, the Attorney General must provide an explanation of the proposal’s deficiencies,
along with suggestions to remedy these deficiencies.12 If the Attorney General does not
act, however, the report shall be deemed approved and the health care representative can
begin negotiations with health plans. In the event that a health plan declines to negotiate,
cancels negotiations, or fails to respond to a request for negotiation, the health providers’
representative may request intervention by the Attorney General to require the health plan
to participate in negotiations.13 The Attorney General must then oversee a resolution
process between the health care providers and the health plan, which may include
appointing a mediator and, if necessary, a fact-finding board that would submit its
recommendations to the Attorney General for a final decision.14
In the event that an agreement is reached between the health care providers and a
health plan, the Attorney General would have 60 days to conduct a substantive
investigation of the competitive impact of the proposed agreement before approving or

3
disapproving it.15 In evaluating the competitive impact of the proposed agreement, the
Attorney General would be authorized to collect information from health plans and health
care providers operating in the same geographic area as the health care cooperative.16
Once an agreement has been approved, the Attorney General would be required to
monitor the agreement to ensure compliance with the conditions of approval.17
The Likely Effects of S.B. 3186
The Bill is designed to allow coordinated activity among competitors beyond
what the antitrust laws permit, and therefore poses a substantial risk of consumer harm by
increasing costs, impeding innovation, and decreasing access to health care. Indeed, at
least ten organizations in New York have submitted memoranda in opposition to this
legislation, primarily citing concerns about collective negotiations among health care
providers potentially leading to increases in private insurance premiums that, in turn,
could lead to an increase in the number of uninsured New York residents.18 Furthermore,
we believe it would be difficult to undo the consumer harm that is likely to occur once
competitors have shared sensitive fee- and non-fee-related information in anticipation of
collective negotiations, regardless of whether negotiations or agreements are approved
under the regulatory scheme described in the Bill.
a) The Bill Is Unnecessary to Promote Arrangements That Will Benefit
Consumers
As a preliminary matter, federal antitrust law already permits many joint activities
by health care providers when such activities are procompetitive and likely to benefit
consumers. Therefore, additional legislation is not necessary to promote the interests of
New York health care consumers. We understand that some health care providers are
concerned that they have limited leverage when negotiating with large health plans, and
therefore would like to collaborate in their dealings with them. Consequently, we can
understand why the New York legislature would want to provide a greater level of
certainty to health care providers regarding potential antitrust risks. However, we believe
that legislation allowing collective negotiations among health care providers, beyond
what is permitted by the federal antitrust laws, would result in substantial harm to
consumers rather than procompetitive benefits.
First, collective negotiations by providers may be lawful when they are
reasonably necessary to create efficiencies, such as reducing the cost or improving the
quality of health care services, or fostering innovation in health care delivery. Antitrust
enforcement agencies recognize, for example, that effective clinical integration among
health care providers may have the potential to achieve cost savings, improve health
outcomes, and encourage innovation. The FTC, its staff, and the U.S. Department of
Justice have provided substantial guidance to clarify that the antitrust laws do not prevent
health care providers from engaging in these types of beneficial collaborations.19 When
in doubt about the potential antitrust risks associated with a proposed collaboration,
health care providers may request an advisory opinion from FTC staff.20

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Second, no antitrust exemption is needed to permit health care providers to
discuss their concerns regarding health plan practices, whether among themselves or with
health plans. Health care professionals may, under existing antitrust law, engage in
collective advocacy to promote the interests of their patients, and also to express their
opinions about other issues such as payment delays and dispute resolution procedures.21
b) The Bill Poses a Substantial Risk of Consumer Harm
In addition to being unnecessary, the Bill, if enacted, is likely to harm consumers.
Regardless of its stated intent to address an imbalance in negotiating leverage between
health care providers and health plans, the practical effect of the Bill will be to exempt
some anticompetitive conduct from antitrust scrutiny. The underlying assumption of the
legislation – that consumers would benefit from collective negotiations among
providers – is fundamentally flawed. There is no credible economic theory supporting
that notion, and no evidence demonstrating that collective negotiations among providers
will do anything other than raise prices for consumers.22 Indeed, the primary objective of
permitting collective negotiations among health care providers is to raise reimbursement
rates paid by health plans. These rate increases are inevitably passed on to consumers in
the form of higher health insurance premiums or higher out-of-pocket expenses.
Ultimately, there is no credible basis to conclude that the regulatory scheme
contemplated by the Bill will be better for consumers than the outcomes achieved
through competition among health care providers; indeed, evidence shows that such a
deviation from the competitive process may only harm consumers.
The Bill is intended to extend antitrust immunity to health care providers that
collectively negotiate agreements with health plans, thereby denying consumers the
benefits of competition in health care markets. The Commission and its staff have long
opposed blanket antitrust exemptions for health care providers. Indeed, for more than
thirty years, the Federal Trade Commission has consistently challenged such collective
negotiations by independent, competing health care providers because of their harmful
effects on competition and consumers.23 For example, in testimony before Congress
regarding a proposed federal antitrust exemption for physician collective bargaining, the
Commission detailed the predictable harm to consumers, including higher prices for
health insurance coverage, a reduction in benefits as health insurance costs increase,
higher out-of-pocket expenses for consumers not covered by insurance, and an increase
in the portion of the population that is uninsured.24
The Bill further increases the risk of consumer harm because it effectively would
require health plans to negotiate with health care providers.25 This approach would
decrease the incentives of health care providers to compete on price and quality, and
would make it more difficult for health plans to resist provider pressure for higher fees.
It also would threaten the ability of health plans to use selective contracting, a key
mechanism for promoting quality and cost-containment goals.26 As a result, consumers
are likely to face significantly increased health care costs.

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Furthermore, by immunizing agreements among competing physicians on the fees
and other terms they will accept from health plans, the Bill is likely to facilitate other
anticompetitive coordinated conduct, such as collusive refusals to deal. For example,
while S.B. 3186 would not explicitly authorize providers to strike or boycott health
benefit plans,27 the Commission previously has observed that collective negotiations can
convey an implicit threat: if the health plan does not agree to terms acceptable to the
physician group as a whole, the plan may be prevented from successfully negotiating
agreements with individual members of the group.28 In the face of antitrust immunity for
collective negotiations, this sort of collusive refusal to deal likely would be difficult to
detect and prosecute.
c) Market Share Provisions Not Likely To Alleviate Risk of Consumer Harm
S.B. 3186 contains market share provisions purporting to reduce the potential for
anticompetitive harm from collective negotiations among competing physicians. It is
unlikely, however, that these provisions will be effective in protecting health care
consumers.
First, the Bill authorizes health care providers to engage in collective negotiations
on fee-related matters only in situations in which a health plan has “substantial market
share in a business line.”29 The definition of “substantial market share in a business line”
is unclear, however, and therefore will be difficult to implement in practice. Second,
although the Bill limits the market share of health care provider negotiating groups, this
limit only applies where health plans themselves have a very small share of the market.30
With respect to both of these market share provisions, the Bill fails to establish
proper antitrust markets from either a legal or economic perspective. A high market
share may indicate market power when based upon a properly defined antitrust market,
including relevant product and geographic dimensions. Determining proper antitrust
markets is among the most difficult issues in antitrust law, and it does not appear to be
adequately addressed in the Bill. In addition, although the market share thresholds
apparently are designed to offset health plans’ market power, the Bill sets market share
thresholds much lower than those commonly accepted by courts and others engaged in
antitrust analysis. Consequently, the Bill is likely to authorize anticompetitive behavior
by health care providers in situations where a health plan does not actually possess
market power that would create an imbalance in negotiating leverage.31
Furthermore, the Bill would not apply any market power screen to negotiations
involving non-fee-related matters. Non-fee matters can have a direct and substantial
effect on provider fee levels and the cost of services that the health plan covers.32
Agreements on non-fee terms also may limit the options available to health plans to meet
consumer demand for high-quality and affordable health insurance.

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The Bill May Not Create State Action Immunity
The federal antitrust immunity that the Bill purports to confer on collective
negotiations by health care providers with health plans is effective only if the State of
New York has clearly articulated an intent to replace competition in this area with a
regulatory scheme, and then actively supervises this private conduct.33 The active
supervision test seeks to determine “whether the State has exercised sufficient
independent judgment and control so that the details [of the restraint] have been
established as a product of deliberate state intervention, not simply by agreement among
private parties.”34 As explained by the United States Supreme Court in Patrick v. Burget,
state officials must “have and exercise power to review particular anticompetitive acts of
private parties and disapprove those that fail to accord with state policy.”35 As the Court
has made clear, private parties claiming state action immunity face a high bar.
Here, the review scheme contemplated by the Bill may not be sufficient to meet
the active supervision prong of the state action doctrine. The health care providers’
representative must furnish a copy of all communications related to negotiations,
discussions, and offers made by the health care plan,36 as well as any proposed
agreements negotiated pursuant to the Bill.37 It is unclear, however, to what extent state
officials would be allowed to review particular contracts and fee arrangements between
groups of providers and health plans to assess whether they comport with state policy
goals. Likewise, while the New York Attorney General would be required to monitor
agreements approved under this Bill to ensure ongoing compliance and would be allowed
to revoke an approval if an agreement violates the goals of the legislation, it is unclear
whether the New York Attorney General can fulfill these legislative requirements.
The Bill would impose substantial and ongoing oversight requirements on the
New York Attorney General, yet these responsibilities may be difficult for the Attorney
General to carry out given the required time frames, fact-intensive nature of the issues,
and resources needed for a proper review. The Attorney General would have only 60
days to conduct a substantive competitive review of any agreement arising from
collective negotiations.38 Furthermore, the Bill does not clearly articulate a standard of
review or the factors that must be considered by the Attorney General during its review.
While the Bill would allow the Attorney General to set fees to cover the cost of
administering this legislation, these fees are designated for the New York State
Department of Health, not the Attorney General’s office.39 Thus, it is unclear whether
the Attorney General would have the resources necessary to oversee the regulatory
scheme described in the Bill.40

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Conclusion
Our analysis of S.B. 3186 suggests that its passage would pose a significant risk
of increased health care costs and decreased access to care for New York consumers.
The antitrust immunity provisions in this legislation are unnecessary and would allow
groups of independent health care providers to engage in unsupervised anticompetitive
conduct. In summary, FTC staff is concerned that this legislation is likely to foster
anticompetitive conduct that is inconsistent with federal antitrust law and policy, and that
such conduct could harm New York health care consumers.
We appreciate your consideration of these issues.
Respectfully submitted,
Susan S. DeSanti, Director
Office of Policy Planning
Joseph Farrell, Director
Bureau of Economics
Richard A. Feinstein, Director
Bureau of Competition

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1 This letter expresses the views of the Federal Trade Commission’s Office of Policy Planning, Bureau of
Competition, and Bureau of Economics. The letter does not necessarily represent the views of the Federal
Trade Commission (Commission) or of any individual Commissioner. The Commission has, however,
voted to authorize staff to submit these comments.
2 Federal Trade Commission Act, 15 U.S.C. ' 45.
3 See Federal Trade Commission, Overview of FTC Antitrust Actions in Health Care Services and
Products, March 2011 [hereinafter FTC Health Care Overview], available at
http://www.ftc.gov/bc/healthcare/antitrust/hcupdate.pdf.
4 See Prepared Statement of the Fed. Trade Comm’n Before the H. Comm. on the Judiciary, Subcomm. On
Courts and Competition Policy, Antitrust Enforcement in the Health Care Industry, Dec. 1, 2010; Prepared
Statement of the Fed. Trade Comm’n Before the Subcomm. On Consumer Protection, Product Safety, and
Insurance, Comm. on Commerce, Science & Transportation, The Importance of Competition and Antitrust
Enforcement to Lower-Cost, Higher-Quality Health Care, July 16, 2009 (all testimonies available at
http://www.ftc.gov/ocr/testimony/index.shtml).
5 See FED. TRADE COMM’N, EMERGING HEALTH CARE ISSUES: FOLLOW-ON BIOLOGIC DRUG COMPETITION
(Jun. 2009); FED. TRADE COMM’N, PHARMACY BENEFIT MANAGERS: OWNERSHIP OF MAIL-ORDER
PHARMACIES (Aug. 2005); FED. TRADE COMM’N AND U.S. DEP’T OF JUSTICE, IMPROVING HEALTH CARE: A
DOSE OF COMPETITION (Jul. 2004) [hereinafter FTC/DOJ, A DOSE OF COMPETITION] (all reports available
at http://www.ftc.gov/reports/index.shtm).
6 See FTC Staff Comment to Senators Eric D. Coleman and John A. Kissel and Representatives Gerald Fox
and John W. Hetherington of the Connecticut General Assembly Concerning House Bill No. 6343 to
Exempt Certified Health Care Cooperatives From the Antitrust Laws (Jun. 2011); FTC Staff Comment to
the Hon. Elliott Naishtat Concerning Texas S.B. 8 to Exempt Certified Health Care Collaboratives From
the Antitrust Laws (May 2011); FTC Staff Comment to Rep. Tom Emmer of the Minnesota House of
Representatives Concerning Minnesota H.F. No. 120 and Senate Bill S.F. No. 203 on Health Care
Cooperatives (Mar. 2009); FTC Staff Comment to Antonio Silva Delgado of the Puerto Rico House of
Representatives Concerning S.B. 2190 to Permit Collective Bargaining by Health Care Providers (Jan.
2008); FTC Staff Comment to the Hon. William J. Seitz Concerning Ohio Executive Order 2007-23S to
Establish Collective Bargaining for Home Health Care Workers (Feb. 2008); FTC Staff Comment to the
Hon. Lisa Murkowski of the Alaska House of Representatives Concerning Alaska Senate Bill 37 to Permit
Collective Bargaining by Health Care Providers (Jan. 2002); FTC Staff Comment to the Hon. Brad Benson
of the State of Washington House of Representatives Concerning House Bill 2360 to Permit Collective
Bargaining by Health Care Providers (Feb. 2002); FTC Staff Testimony Before the Alaska House of
Representatives Concerning Alaska Senate Bill 37 to Permit Collective Bargaining by Health Care
Providers (Mar. 2002); FTC Staff Comments to the Hon. Dennis Stapleton of the Ohio House of
Representatives Concerning House Bill 325 to Permit Collective Bargaining by Health Care Providers
(Oct. 2002); FTC Staff Comment to the Hon. Rene O. Oliveira of the Texas House of Representatives
Concerning Senate Bill 1468 to Permit Collective Negotiations by Physicians (May 1999); FTC Staff
Comment to Robert R. Rigsby of the District of Columbia Government Concerning Bill No. 13-333 to
Permit Collective Bargaining by Physicians (Oct. 1999) (all advocacies available at
http://www.ftc.gov/opp/advocacy_date.shtm). See also Prepared Statement of the Fed. Trade Comm’n
Before the H. Comm. on the Judiciary, Concerning H.R. 1304, the “Quality Health-Care Coalition Act of
1999,” June 22, 1999, available at http://www.ftc.gov/os/1999/06/healthcaretestimony.htm.
7 S.B. 3186 § 4922 (N.Y. 2011).
8 S.B. 3186 § 4921 (N.Y. 2011). S.B. 3186 would not authorize strikes of health benefit plans by health
care providers. S.B. 3186 § 4925 (N.Y. 2011). The statement of legislative intent clarifies that the Bill is
not intended to affect collective bargaining relationships involving health care providers who are
employees, or rights relating to collective bargaining arising under applicable federal/state collective
bargaining statutes.

9
9 S.B. 3186 § 4923.1(a) (N.Y. 2011).
10 S.B. 3186 § 4923.1(c) (N.Y. 2011).
11 S.B. 3186 § 4924.2 (N.Y. 2011).
12 S.B. 3186 § 4924.4 (N.Y. 2011).
13 S.B. 3186 § 4924.7 (N.Y. 2011).
14 S.B. 3186 § 4924.8 (N.Y. 2011).
15 S.B. 3186 § 4924.9 (N.Y. 2011).
16 S.B. 3186 § 4924.10 (N.Y. 2011).
17 S.B. 3186 § 4927 (N.Y. 2011).
18 See Memoranda in Opposition to S.3186-A (Hannon)/A. 2474-A (Canestrari) from the National
Federation of Independent Business (Jun. 22, 2011), Business Council of New York State (Jun. 22, 2011),
Iroquois Health Care Alliance (Jun. 22, 2011), Hinman Straub Attorneys at Law on behalf of Blue Cross
and Blue Shield Plans of New York (Feb. 7, Jun. 6, and Jun. 21, 2011), Rochester Business Alliance (Jun.
22, 2011), Unshackle Upstate (Jun. 21, 2011), New York Health Plan Association (Jun. 22, 2011),
Employer Alliance for Affordable Health Care (Jun. 2011), Coalition of New York Public Health Plans
(Jun. 2011), Center for Medical Consumers and New York Public Interest Research Group (Jun. 2011).
19 See, e.g., U.S. Dep’t of Justice & Fed. Trade Comm’n, Statements of Antitrust Enforcement Policy In
Health Care (1996) [hereinafter DOJ/FTC, 1996 Health Care Statements], available at
http://www.ftc.gov/bc/healthcare/industryguide/policy/index.htm; TriState Health Partners, Inc., Letter
from Markus Meier, FTC to Christi Braun, Ober, Kaler, Grimes & Shriver, April 13, 2009; Greater
Rochester Independent Practice Association, Inc., Letter from Markus Meier, FTC to Christi Braun & John
J. Miles, Ober, Kaler, Grimes & Shriver, Sept. 17, 2007, letters available at
http://www.ftc.gov/bc/healthcare/industryguide/advisory.htm. See also Fed. Trade Comm’n & U.S. Dep’t
of Justice, Antitrust Guidelines for Collaborations Among Competitors, April 2000, available at
http://www.ftc.gov/os/2000/04/ftcdojguidelines.pdf. Most recently, the FTC and DOJ Antitrust Division
jointly released a proposed statement explaining how the antitrust agencies will apply U.S. antitrust law to
the new Medicare Shared Savings Program Accountable Care Organizations created by the Affordable
Care Act of 2010. Fed. Trade Comm’n & U.S. Dep’t of Justice, Proposed Statement of Antitrust
Enforcement Policy Regarding Accountable Care Organizations Participating In the Medicare Shared
Savings Program, available at http://www.ftc.gov/opp/aco/index.shtml.
20 For information about the Federal Trade Commission’s advisory opinion process, see Guidance From
Staff of the Bureau of Competition’s Health Care Division on Requesting and Obtaining an Advisory
Opinion, available at http://www.ftc.gov/bc/healthcare/industryguide/advop-health.pdf.
21 The 1996 Statements of Antitrust Enforcement Policy In Health Care issued by the Commission and the
Department of Justice explain the ways in which antitrust law permits health care providers to collectively
provide both fee and non-fee related information to health plans. DOJ/FTC, 1996 Health Care Statements,
supra note 19. See also Letter to Gregory G. Binford (Feb. 6, 2003) (advisory opinion explaining that
physicians’ proposed formation of advocacy group to collect and disseminate information about health plan
policies and procedures, including fees paid to local physicians compared to fees paid in other areas, did
not appear likely to have anticompetitive effects); American Medical Assn., Model Managed Care Contract
(4th Ed. 2005), available at http://www.ama-assn.org/ama1/pub/upload/mm/368/mmcc_4th_ed.pdf.

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22 There are some studies demonstrating that consolidation among health plans may result in lower prices to
consumers for healthcare services. See, e.g., Glenn A. Melnick, Yu-Chu Shen & Vivian Yaling Wu, The
Increased Concentration of Health Plan Markets Can Benefit Consumers Through Lower Hospital Prices,
30 HEALTH AFFAIRS 1728 (2011), available at http://content.healthaffairs.org/content/30/9/1728.full.html.
There is, however, no reasonable basis for the assertion that consolidation among health care providers
(either physicians or hospitals) would benefit consumers in the form of lower prices. See, e.g., Paul B.
Ginsburg, Wide Variation in Hospital and Physician Payment Rates Evidence of Provider Market Power,
Center for Studying Health System Change, Research Brief No. 16 (Nov. 2010), available at
http://www.hschange.com/CONTENT/1162/; Robert A. Berenson, Paul B. Ginsburg & Nicole Kemper,
Unchecked Provider Clout in California Foreshadows Challenges to Health Reform, 29 HEALTH AFFAIRS
699 (2010), available at http://content.healthaffairs.org/content/29/4/699.full; William B. Vogt & Robert
Town, How has hospital consolidation affected the price and quality of hospital care?, Robert Wood
Johnson Found. Synthesis Project, Research Synthesis Rep. No. 9 (Feb. 2006), available at
http://www.rwjf.org/files/research/no9researchreport.pdf; Cory Capps & David Dranove, Hospital
Consolidation & Negotiated PPO Prices, 23 HEALTH AFFAIRS 175 (2004), available at
http://content.healthaffairs.org/content/23/2/175.full.
23 See FTC Health Care Overview, supra note 3, at 21-52.
24 Prepared Statement of the Fed. Trade Comm’n Before the H. Comm. on the Judiciary, Concerning H.R.
1304, the “Quality Health-Care Coalition Act of 1999,” June 22, 1999, available at
http://www.ftc.gov/os/1999/06/healthcaretestimony.htm. It is well-recognized that antitrust exemptions
routinely threaten broad consumer harm for the benefit of a few. The bipartisan Antitrust Modernization
Committee observed “[t]ypically, antitrust exemptions create economic benefits that flow to small,
concentrated interest groups, while the costs of the exemption are widely dispersed, usually passed on to a
large population of consumers through higher prices, reduced output, lower quality and reduced
innovation.” ANTITRUST MODERNIZATION COMMISSION, REPORT AND RECOMMENDATIONS (April 2007) at
335, available at http://govinfo.library.unt.edu/amc/report_recommendation/amc_final_report.pdf.
25 Antitrust jurisprudence recognizes a party’s long-established right to exercise discretion over with whom
it deals. See United States v. Colgate & Co., 250 U.S. 300, 307 (1919).
26 See FTC/DOJ, A DOSE OF COMPETITION, supra note 5, at 11-12:
[Managed Care Organizations, hereinafter MCOs] historically relied on three strategies to
control costs and enhance quality of care. One is selective contracting with providers that
must meet certain criteria to be included in the MCO’s provider network. Selective
contracting can intensify price competition and allow MCOs to negotiate volume
discounts and choose providers based on a range of discounts. When MCOs and other
insurers have a credible threat to exclude providers from their networks and send patients
elsewhere, providers have a powerful incentive to bid aggressively to be included in the
network. Without such credible threats, providers have less incentive to bid aggressively,
and even MCOs with large market shares may have less ability to obtain lower prices.
27 S.B. 3186§ 4925(1) (N.Y. 2011).
28 The FTC has taken numerous enforcement actions to address situations in which health care providers
collectively negotiated prices and other competitively significant terms with health plans and refused to
negotiate individually with health plans. In using these tactics, health care providers often were able to
extract higher fees and other favorable terms from health plans, thereby raising the costs of and restricting
access to health care services for consumers. See, e.g., Southwest Health Alliances, Inc., Dkt. No. C-4327
(F.T.C. Jul. 15, 2011); Minnesota Rural Health Cooperative, Dkt. No. C-4311 (F.T.C. Dec. 28, 2010);
Roaring Fork Valley Physicians IPA, Inc., Dkt. No. C-4288 (F.T.C. April 5, 2010); Michigan State Medical
Society, 101 F.T.C. 191, 296 n. 32 (1983) (“the bargaining process itself carries the implication of adverse

11
consequences if a satisfactory agreement cannot be obtained”); Preferred Physicians Inc., 110 F.T.C. 157,
160 (1988) (consent order) (threat of adverse consequences inherent in collective negotiations). For
descriptions of all FTC enforcement actions taken prior to March 2011 that relate to agreements on price or
price-related terms in the health care industry, as well as docket links, see FTC Health Care Overview,
supra note 3, at 21-52.
29 S.B. 3186 § 4922 (N.Y. 2011). The Bill states that “substantial market share in a business line” exists if
a health care plan’s market share of a business line within a service area exceeds either ten percent of the
total number of covered lives in that service area or 25,000 lives, or the New York Attorney General
determines that the health plan’s market share significantly exceeds the countervailing market share of
individual health care providers. S.B. 3186 § 4920.5 (N.Y. 2011).
30 S.B. 3186 § 4923(2) (N.Y. 2011). The Bill limits the size of health care provider negotiating groups to
30 percent in situations where health plans have less than 5 percent of the market.
31 Proper market definition allows market participants to be identified, which facilitates the calculation of
market shares and market concentration levels. These calculations may be informative of the likely
competitive effects of a merger, collaboration, or other type of conduct by market participants, especially in
situations where market power is thought to exist. See, e.g., U.S. Dep’t of Justice & Fed. Trade Comm’n,
Horizontal Merger Guidelines § 4 (2010), available at http://www.ftc.gov/os/2010/08/100819hmg.pdf.
By setting the thresholds at a 10 percent and 5 percent market share, respectively, the Bill would
authorize anticompetitive behavior by health care providers in many situations in which the health plan
would not actually possess market power. Although the federal courts have not identified a precise market
share figure that constitutes market power, the guidance they have provided strongly suggests that 10
percent is not sufficient. See, e.g., Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2 (1984) (rejecting
the possibility that a hospital had market power in spite of the fact that it serviced roughly 30 percent of the
relevant market); United States v. Eastman Kodak Co., 63 F.3d 95 (2nd Cir. 1995) (finding that 30 percent
share of the relevant market was too small to give rise to inference of market power); New York v.
Anheuser-Busch, Inc., 811 F. Supp. 848 (E.D.N.Y. 1993) (finding that 40 percent market share was
insufficient to show market power in light of low barriers to entry); Manufacturer’s Supply Co. v.
Minnesota Mining & Manufacturing Co., 688 F. Supp. 303 (W.D. Mich. 1988) (finding that 25.8 percent
market share was insufficient to show market power).
32 For example, health care providers would be allowed to collectively negotiate a number of non-fee terms,
including coverage provisions, health care benefits, benefit maximums/limitations, exclusions of coverage,
as well as the formulation and application of health care provider reimbursement procedures. S.B. 3186
§ 4921(1) (N.Y. 2011).
33 Parker v. Brown, 317 U.S. 341, 351 (1943); see also Cal. Retail Liquor Dealers Ass’n v. Midcal
Aluminum, Inc., 445 U.S. 97, 105 (1980).
34 Federal Trade Commission v. Ticor Title Insurance Co., 504 U.S. 621, 634 (1992).
35 486 U.S. 94, 101 (1988).
36 S.B. 3186 § 4924.5 (N.Y. 2011).
37 S.B 3186 § 4924.9 (N.Y. 2011).
38 Based on the experience of FTC staff, investigating physician conduct matters is time- and resource-
intensive.
39 S.B. 3186 § 4926 (N.Y. 2011).

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40 In addition, according to the Bill, the Attorney General must monitor any agreements between health care
providers and health plans that are approved under the Bill, and “may revoke an approval upon a finding
that the agreement is not in substantial compliance with the terms of the application or the conditions of
approval.” S.B. 3186 § 4927 (N.Y. 2011). The Bill is silent, however, on what actions the Attorney
General might take to remedy anticompetitive effects that have already resulted from such an agreement.