The Application of Antitrust and Fraud-and-Abuse Law to Specialty Hospitals

Abstract

The recent growth of specialty hospitals in the health care industry represents a significant departure from the way in which most hospital care is currently provided. While medical practice is highly fragmented, hospital care has traditionally been an integrated service–typically a large facility handles most medical treatments and provides a wide array of services for patients. Single specialty hospitals present a different form of hospital care that channels certain medical specialties and treatments into distinct hospitals, each devoted to particular sets of patients. The laws regulating health care must adapt to such changes in the provision of health care. Under current standards, fraud-and-abuse laws fail to address adequately the new challenges that specialty hospitals present to self-referral enforcement. The traditional application of antitrust laws may overlook the procompetitive effects of new types of transactions and agreements involving specialty hospitals, and, simultaneously, these laws may fail to protect the public effectively against some of the anticompetitive advantages that each type of hospital has over another. The rapid proliferation of specialty hospitals in the health care market demands evaluation of these issues now. This Note argues that the existence of specialty hospitals raises issues that are not covered by current antitrust and antifraud legislation, yet must be addressed in the interests of the health care industry. Part II presents the current status of fraud-and-abuse laws regulating health care, with particular attention to self-referral regulations. Part III similarly seeks to outline the status quo of antitrust policy and enforcement in the health care industry. Part IV explains what single specialty hospitals are, and what advantages and disadvantages they present to the health care industry, focusing primarily on fraud and antitrust issues. Part V addresses particular instances and ways in which antitrust and fraud-and-abuse laws interact in the context of specialty hospitals. Part V first focuses on general conflicts between regulation and competition by providing three specific examples of such interaction: payment-for-performance theories, industry reactions to specialty hospital competition, and certificate of need (“CON”) laws as a direct regulation of hospital care. Part V then examines specialty hospitals in terms of general health policy goals and nonprice features of competition. Finally, Part VI proposes possible solutions to some of the problems presented in earlier parts, including specific changes to the self-referral amendments and strict enforcement of antitrust laws in the specialty hospital subsector of the health care industry.