The Federal Trade Commission's noncompete ban, which was set to take effect Sept. 4, has been partially blocked while a federal court considers if the agency has authority to issue the ban. The FTC also has proposed changes to premerger notifications, withdrew two antitrust policy statements related to enforcement in healthcare markets and made changes to healthcare breach reporting.
Here are four recent FTC moves and how they could affect hospitals and health systems:
The FTC on April 23 voted 3-2 to ban noncompete agreements in a move it estimates will save up to $194 billion in healthcare costs over the next decade.
Though the FTC recognized that it does not have jurisdiction over nonprofit entities, it reserved the right to evaluate an entity's nonprofit status, which would include a significant number of the 6,120 hospitals in the U.S. A "portion" of the estimated 3,000 nonprofit hospitals and 900 state and local government hospitals in the U.S would fall under the IRS tax-exempt category, according to the FTC. Then there are profit-making hospitals and enterprises, some of which are also categorized as tax-exempt entities.
Questions also surround noncompetes for senior executives, which the FTC defines as "workers earning more than $151,164 a year and who are in policymaking positions." The ban would allow existing noncompetes for senior executives (less than 0.75% of workers) to remain in effect but would prohibit employers from entering into or attempt to enforce any new competes — even if they involve senior executives.
However, U.S. District Judge Ada Brown sided with tax preparation company Ryan LLC and the U.S. Chamber of Commerce, both of which argued that the FTC lacks authority to implement rules defining unfair methods of competition. In a July 3 ruling, Ms. Brown the plaintiffs are "likely to succeed on the merits the FTC lacks statutory authority to promulgate the noncompete rule," which she described as "arbitrary and capricious."
The court will rule on the ultimate merits of the challenge by Aug. 30, but a review so far indicated the ban will be struck down, according to court documents obtained by Becker's.
2. Health Breach Notification Rule
The FTC on April 26 made changes to the Health Breach Notification Rule as it aims to better address the evolving landscape of health technology.
The changes clarify the rule's scope regarding health apps and similar technologies while expanding the information covered entities must provide to consumers in the event of a breach of their health data.
Under the new rule, vendors of personal health records and related entities not governed by HIPAA are mandated to notify individuals, the FTC and, when applicable, the media, in case of a breach of unsecured personally identifiable health data.
Additionally, third-party service providers to vendors of protected health records must inform such vendors and entities upon the discovery of a breach.
Click here for more details on the changes.
The FTC withdrew two antitrust policy statements related to enforcement in healthcare markets.
Policy statements are non-binding and do not set legal obligations. Instead, they are issued to explain how the agency applies competition and consumer protection laws in various areas. The agency believes that the two statements are outdated and no longer reflect market realities and withdrawing them will help promote fair competition in healthcare markets.
Given the significant changes in healthcare markets over the last 30 years, the statements no longer serve their intended purpose of providing accurate guidance to market participants, according to the FTC. The commission said it will continue its enforcement by evaluating mergers and conduct on a case-by-case basis in healthcare markets that affect consumers.
"AHA is deeply disappointed that the FTC made the same mistake as the DOJ in withdrawing antitrust guidelines for hospitals and other health care providers," Melinda Hatton, general counsel and secretary, said. "Over the years, AHA has urged both federal antitrust agencies to modernize the guidelines to accommodate the need for more flexibility in enforcement actions to support hospitals' ability to navigate a changing healthcare landscape. And, AHA was instrumental in securing appropriate [accountable care organization] guidance that allowed hospitals to fully participate in that important program. Withdrawing all the guidance without consultation with the field is both unnecessary and reckless."
Click here for more details on the antitrust policy statements.
The FTC proposed changes to the premerger notification form in addition to premerger notification rules implementing the Hart-Scott-Rodino Act, which requires organizations to report large transactions to the FTC and Justice Department for antitrust review.
The agency argues that the proposed changes would help it to more effectively screen transactions for potential competition issues within the waiting period, which is generally 30 days. The FTC said this competition review is important to identify deals that require in-depth investigations to determine whether they would violate antitrust laws and, if so, to seek to block the proposed transaction.
The proposed changes for mergers and acquisitions would impose a significant burden on filing parties, "yet are largely unnecessary to screen transactions for closer review," the American Hospital Association wrote in a Sept. 5 letter to FTC Chair Lina Khan. "The amended rules would require filing parties to submit more information than the agencies could feasibly review in 30 days."
Click here for more details on the proposed changes.