Q&A with Jeff Baird: What’s the impact of health care monopolies?

AMARILLO, Texas – The Department of Justice’s new task force on health care monopolies and collusion is “absolutely warranted,” says attorney Jeff Baird, chairman of the Health Care Group at Brown & Fortunato. 

The DOJ announced in May that it had formed a Task Force on Health Care Monopolies and Collusion (HCMC) within its Antitrust Division to guide its enforcement strategy and policy approach, including by facilitating advocacy, investigations and, where warranted, civil and criminal enforcement in health care markets.  

Here’s what Baird had to say about how this type of activity is impacting the HME industry today and how, if left unchecked, could have a much bigger impact in the future. 

HME News: How big of a deal is it that the DOJ has created this task force?  

Jeff Baird: The DOJ creates task forces when it determines that potential problems are on the horizon that the government needs to get its arms around before the problems become unmanageable. Many in health care have been concerned about the proliferation of vertical integration. The government has taken notice, and it appears to be considering responsive steps before the adverse effects of vertical integration become more pronounced.   

HME: Why is this focus warranted?  

Baird: This focus is absolutely warranted. In the pharmacy space, the “Big 5” pharmacy benefit managers (PBMs) control much of the industry. All or most of the Big 5s own mail-order pharmacies (“MOPs”) that compete with independent MOPs. The PBMs limit the number of independent MOPs on the PBMs’ mail-order panels and steer patients to their own MOPs. DME suppliers do not have to deal with PBMs, but they have to deal with Medicare Advantage Plans and Medicaid Managed Care Plans. Also, if insurance companies (that own the plans) decide to move into the DME space (i.e., own DME operations), then independent DME suppliers will find themselves in the same predicament as independent pharmacies. Up to now, I have been talking about a small segment of the overall health care industry. Look at the bigger picture: If hospital systems own physician practices, infusion centers, SNFs, etc., then the systems control A to Z health care for their patients.   

HME: The task force seems pretty action-oriented. Part of its goal is civil and criminal enforcement. Will the task force have teeth? 

Baird: Criminal cases will be brought only in extreme circumstances. I do see a proliferation of civil cases. The task force will have “teeth” to the extent that it will provide a road map to the DOJ and FTC to scrutinize mergers/acquisitions and, if the facts so warrant, bring enforcement actions against the transactions.  

HME: What does this potentially mean for HME providers?  

Baird: On the one hand, it is hard for me to see monopolization issues arising out of acquisitions in the DME space. Sure, national DME suppliers will purchase independents; however, I do not think that any national supplier will have the market share to adversely affect service and reimbursement. And in any event, reimbursement is controlled by Medicare, Medicaid and insurers. In the same vein, although there is a lot of private equity activity in the DME space, I don’t see such activity approaching monopolization levels. Where vertical integration will affect DME suppliers is when the large insurers purchase DME suppliers or form their own DME businesses. If this happens, independent DME suppliers will find themselves in the same predicament as independent pharmacies that have to deal with PBMs.