AAOE Anti-Trust Policy

Transcription

1 2016 AAOE Anti-Trust Policy WHY DISCUSSIONS OF PRICE/COST ARE NOT PERMITTED ON THE LISTSERVES OR DURING AAOE SPONSORED ACTIVITIES AMERICAN ASSOCIATION OF ORTHOPAEDIC EXECUTIVES 6602 East 75th Street, Suite 112 Indianapolis, IN 46250

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3 Table of Contents Executive Summary... 1 Introduction... 2 The Listserv... 2 AAOE Listserv Policy... 2 The Issue... 2 Why Are These Discussions Prohibited?... 3 Example... 4 What About the Discussion of Wages?... 6 So Why Can AAOE Collect Price/Cost Data?... 6 What is AAOE Doing to Prevent These Discussions?... 7 Listserv Banners... 7 Conclusion... 8

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5 Executive Summary The American Alliance of Orthopaedic Executives provides a listserv for the benefit of members to network with one another. Following a series of code of conduct violations related to the discussion of wage and cost data on the listserves, AAOE is providing the reasoning behind the prohibition of this type of activity. This prohibition also extends to any AAOE sponsored event. AAOE derives this prohibition from the Sherman Antitrust Act of 1890 which prohibits collusory activity within an industry. The members of the AAOE and its listserv participants constitute the orthopaedic industry in the eyes of AAOE and thus these discussions have been prohibited by volunteer leadership in an effort to protect listserv participants and AAOE from charges of collusory behavior. This analysis of the law covers the different types of collusory behavior recognized under United States competition law and how a court could find information exchanged via the Listserv as illegal under anti-trust law. How the AAOE is combating the discussion of prohibited topics on the Listserv and the penalties for violations are also included. 1

6 Introduction The Listserv The American Alliance of Orthopaedic Executives provides listserv services to members of the Alliance and to members of several state orthopaedic executive societies which are separate entities and independent of AAOE. The listserv allows real-time communication among participants via and is one of the most used member services that AAOE provides. AAOE Listserv Policy Current (as of May 2016) AAOE policy on the listserv requires participants to abstain from discussions of price and cost data, including wage data on this service. The code of conduct states: The Issue Members can exchange most any kind of information that is beneficial to subscribers, but must avoid all information that involves a). the prices charged for healthcare services charged or third party reimbursement paid or b). the salary, wage, and/or benefits information for healthcare personnel. Note: Requests made on the listserv to have this kind of data sent directly to the requestors or offline does not circumvent this rule. Listserv participants have brought it to AAOE s attention that the guidance provided in the listserv code of conduct has not been robust enough to allow them to determine if a question or message thread is prohibited. To remedy this, the following report has been prepared to help members and listserv participants understand why discussions of price and cost data, including wage data, are prohibited on the AAOE listserv and at any other AAOE sponsored activity. 2

7 Why Are These Discussions Prohibited? The Sherman Antitrust Act of 1890 prohibits anti-competitive conduct among two (or more) businesses to unreasonably restrain market competition for goods and services. The law forbids activity such as price-fixing, bid rigging, and market allocation schemes. The Federal Trade Commission views discussions on a listserv about costs and prices as potentially anticompetitive under the Sherman Act. As such, the volunteer leadership of the AAOE has prohibited the discussion of price and cost data on the listserv. Price-fixing, also known as collusion, has been banned in the United States since enactment of the Sherman Antitrust Act. In the United States, neither the outcome nor the strategies that sustain the outcome are illegal; what is illegal is the process through which firms achieve a collusive agreement. 1 Thus, to be found guilty of explicit collusion, two or more firms must be found to have had a conscious commitment to a common scheme designed to achieve an unlawful objective, 2 and that the firms had a unity of purpose or a common design and understanding, or a meeting of minds. 3 AAOE does not believe that members of the Association and listserv participants would ever engage in explicit collusion as it is patently illegal under the Sherman Antitrust Act but, the law does not exist in a universe of diametric poles (good and evil, black and white, etc.). Instead, the law recognizes that there are shades of gray in human behavior thus, US antitrust law actually identifies three different types of collusion, as the reader may see in Table 1.1: Collusion Type Description Legality Explicit Collusion Supracompetitive prices are achieved via express communication about an agreement. Illegal Table 1.1 Conscious Parallelism Concerted Action Supracompetitive prices are achieved without express communication. Supracompetitive prices are achieved with some form of direct communication but firms do not expressly propose and reach an agreement. Legal Could Be Legal, Could Be Illegal 1 Harrington, Joseph, A Theory of Tacit Collusion, Working Paper, January 2012, (accessed 18 May 2016). 2 Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752 (1984); American Tobacco Co. v. United States, 328 U.S. 781 (1946);

8 In a perfect world, one that consisted solely of diametric poles, the law would only distinguish between explicit collusion and conscious parallelism (tacit collusion), and participants could chat openly on the listserv about the wages they pay employees and the prices they charge insurers for services rendered to patients. However, messages on the listserv that discuss price/cost data, including wage data, would most likely be considered a concerted action by the courts and could implicate all of those participating in the listserv, including AAOE, as engaging in anti-competitive activity. Indeed, it is a familiar scenario in antitrust law that a plaintiff will allege that patterns of identical pricing are concerted and therefore illegal under United States law while defendants argue that the pattern constitutes consciously parallel pricing and is therefore legal. It is not until a plus factor is produced, something that shows that the pricing action was not an independent decision by a firm, that a court and/or jury can rule in favor of the plaintiff s argument. 4 Conscious Parallelism Concerted Action Explicit Collusion As shown by the above graphic, a concerted action as it relates to competition law involves the overlap of explicit collusion, where firms agree to set prices above market equilibrium, and conscious parallelism, where firms are pricing above market equilibrium because the firm has chosen to with no communication to competitors. Example John Smith is an orthopaedic practice executive in Indianapolis, IN. He posts a question to the AAOE listserv asking what other practices bill an insurer for a total knee replacement. John s intentions are perfectly innocent; he just wants to make sure that 4 Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 588 (1986). 4

9 his practice is charging as much as they should. Other executives respond to John s request with information on what they bill insurers for a total knee replacement. One of those responses is from a practice on the other side of Indianapolis and they bill twice what John s practice is billing. John, worried that his practice is losing money decides to raise the price that he is billing insurers for the procedure. When asked why his practice has suddenly doubled the cost of the procedure, John explains to the insurer that he read on the AAOE listserv that Total Hip and Knee in Indianapolis bills that much so he was concerned that his practice was under-billing the procedure. The next week, John arrives at the practice to find his boss in his office holding a federal complaint. His boss explains to him that his practice, Total Hip and Knee, AAOE, and any other executive that replied to that thread is being sued by the Department of Justice for price fixing. At trial, the records of the AAOE listserv are presented as the plus factor showing that the communication existed to move this case from the realm of conscious parallelism to concerted action. The jury found John s practice and Total Hip and Knee guilty of collusion and fined the two groups $7 million. Both practices ended up bankrupt and John lost his job. This is an extreme example but one that would be worth remembering. AAOE s listserv records are discoverable in any criminal and civil litigation. The listserv policy and its enforcement protect both the Association and the listserv participants. 5

10 What About the Discussion of Wages? The discussion of current wages for highly skilled employees (physicians, physician assistants, nurses, etc.) is also prohibited on the AAOE listserv under the same anti-collusion reasoning. Several recent judicial proceedings have held that competitors discussing the salaries of employees is anti-competitive. Courts will typically consider two primary factors to determine if the discussion and its outcome is anti-competitive: 1. The market power of the companies involved (in this case the orthopaedic practices); and 2. The nature of the information being exchanged. In reviewing the market power of the companies involved, a court would look at whether the companies own the market for the positions under discussion. If the provider is unable to work in the same capacity for a competitor in the same city or region for a different wage, the court would likely rule that the communication led to anti-competitive behavior. To illustrate: a lawsuit against several hospitals in Detroit from the Service Employees International Union found that because hospital nurses possess unique skill sets and gain industry-specific and employer-specific experiences as they work, the hospitals became the only practical outlets for hospital [nurses] to sell their services at an amount reflecting their skills and knowledge. That lawsuit was settled in October 2015 (Detroit Medical Center had withheld agreement to the settlement for nine years) for $90 million. Secondly, the court would look at the nature of the information being shared, i.e. the timing (how current is the data being shared), the availability of the information to the general public, specificity of the data, and the purpose for the data collection. Most likely, responders are going to provide the most recent data because it s the easiest data to get ahold of. It is unlikely that wage data is available to the general public. So Why Can AAOE Collect Price/Cost Data? AAOE conducts a yearly benchmarking survey in which we collect data from practices all around the country to help practices and interested individuals with price and cost specific data. The Association may do this because it is a third party organization and not a firm operating within the orthopaedic industry/market. The Department of Justice and the Federal Trade Commission have released guidance under which, if the survey meets a three pronged test, the survey would not be deemed anti-competitive and would reside in an anti-trust safety zone. These surveys are considered in the safety zone if they: 1. Are managed by a third party; 2. The information provided by the survey is more than three months old; and 6

11 3. There are at least five employers reporting data for each statistic, with no employer reporting more than 25% of any statistic and no single employer may be identified with any specific information. What is AAOE Doing to Prevent These Discussions? AAOE, through the Communications Council, polices the listserv for violations of this policy on a daily basis. Violators will be warned once via the listserv that their comment/question violates the policy by a member of the Communications Council. Repeat violations will be responded to with progressive methods of discipline leading up to permanent removal from the listserv. Table 3.1 outlines a sample action plan for a repeat offender: First Violation Second Violation Third Violation Table 3.1 Warning via listserv Listserv access suspended for the following five business days Listserv access suspended indefinitely Listserv Banners Following infractions, AAOE may post a disclaimer at the top of all listserv messages reminding participants that discussion of price and cost data, including wage data, is not appropriate on the listserv. This disclaimer will remain until the close of the next business day. Additionally, a disclaimer may be added to the beginning of all listserv messages for one day once a quarter on a day to be determined by the Communications Council. 7

12 Conclusion So what s the bottom line? Think about what you intend to post before you post it. Remember that as a group of people, you represent a portion of the orthopaedic industry and discussion of price and cost data in a manner that could lead to collusive activity within an industry will not be tolerated by the federal government. If there are concerns about whether your intended post to the listserv violates the prohibition on price/cost data, contact AAOE at info@aaoe.net. These rules were put in place by the AAOE leadership for the protection of the participants of the listserv and for the protection of AAOE as a business entity. 8