June 10, 2021
Jesse W. Markham
Prior to stepping down as California’s attorney general to assume his new role as Joe Biden’s secretary of health and human services, Xavier Becerra consolidated all aspects of healthcare enforcement under a new Healthcare Rights and Access Section. Antitrust enforcement in healthcare will now be under the auspices of this new section.
It was well known that Becerra placed healthcare rights near the top of his overall agenda as attorney general. In an effort to focus more sharply on healthcare-related issues, this new section brings together resources from around the agency to address antitrust enforcement, along with reproductive rights, access for LGBT community members, elder abuse, affordability for disadvantaged populations under the Affordable Care Act and all other enforcement responsibilities of the agency.
Outlook for antitrust enforcement
The restructuring has received little attention outside the agency, but raises interesting questions about the future of healthcare antitrust enforcement in California. At first glance, the consolidation of these disparate policy initiatives into a single division might suggest that antitrust enforcement could be diluted as the new section allocates its resources across a broad swath of enforcement work – much of which has nothing to do with competition in the industry. A clue may be found in the choice of the section’s leadership. Heading the new section is a highly regarded lawyer who is currently president of the California Lawyers Association (successor to the California State Bar). Although his practice and expertise are not focused narrowly on antitrust, he is nevertheless an expert in the arcane aspects of antitrust law as applied to the healthcare industry. Indeed, he is an editor of the association’s forthcoming “California Antitrust Law” chapter on healthcare, a lengthy and scholarly exposition of the Cartwright Act’s application to all aspects of healthcare from hospital mergers to generic pharmaceutical competition.
Time will tell a fuller story, but there seems to be no reason to expect that healthcare will receive less, rather than greater, attention from California’s antitrust enforcers. Recently, the agency has scored important wins in this area. In an action against Sutter Health, the attorney general challenged the hospital system’s alleged ‘all or nothing’ policy requiring insurers to include all of its medical facilities in order to have access to any Sutter hospital. The case was closely watched by hospitals and insurers and represented a novel challenge to the operations of large hospital systems. That case settled for $575 million in December 2020, along with certain conduct commitments by the hospital system, although Sutter denied wrongdoing. The settlement recently received preliminary approval from the Superior Court of San Francisco.
In 2019 the attorney general blocked a proposed merger of five Adventist Health hospitals, four of which were owned by St Joseph Hospital System. The state argued that the combined network would have unacceptable control over healthcare delivery in a largely rural area in northern California. The decision to block the transaction appears to have represented something of a change in approach, given that in 2018 the agency allowed a much larger merger between CHI and Dignity Health. A more skeptical policy seems evident from the attorney general’s recent cases.
Going forward, the antitrust staff attorneys assigned to this section will inevitably bring healthcare into even sharper focus, perhaps all the more so as the section brings together a broad range of pertinent expertise.
This content was originally published on June 10, 2021, via the International Law Office (ILO) newsletter. It can be found here: Restructured California Attorney General’s Office: will healthcare antitrust enforcement change?
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