Antitrust Agencies Watch for Labor Market Collusion in the Healthcare Industry

On April 13, 2020, the Department of Justice’s Antitrust Division (DOJ) and Federal Trade Commission (FTC) issued a joint statement declaring their commitment to protect healthcare workers on the front lines of the COVID-19 response from anticompetitive conduct in the labor market. The COVID-19 crisis has been acutely felt in healthcare labor markets, including shortages of frontline healthcare workers in certain practice and geographic areas and temporary surpluses of non-frontline medical professionals due to postponement or deferral of elective surgeries and other elective care. In the face of these changes, the agencies plan to increase oversight of “employers, staffing companies (including medical travel and locum agencies), and recruiters, among others, who engage in collusion or other anticompetitive conduct in labor markets, such as agreements to lower wages or to reduce salaries or hours worked.” Labor market collusion (including agreements not to hire and agreements to set compensation or benefits) has been an enforcement focus for the agencies since at least 2010, and the joint statement suggests that the agencies will remain vigilant against potential labor market collusion in the health care industry, including closely watching the industry for signs of anticompetitive employment practices.

For years, both the DOJ and FTC have challenged naked “no-poach” agreements and wage-fixing agreements, including in the healthcare industry. Most recently, in 2019, as discussed in our initial client alert on this joint statement, the DOJ filed a Statement of Interest in Seamen v. Duke University, et al., Civil No. 1:15-cv-462, urging the court to apply the per se rule to naked poaching agreements. In that case, the Duke University School of Medicine and University of North Carolina at Chapel Hill School of Medicine had allegedly agreed not to compete for each other’s faculty and physicians. Similarly, in 2018, the FTC brought an enforcement action against a therapist staffing service, “Your Therapy Service,” for colluding to limit pay for therapists and asking competitors to do the same to prevent therapists from switching staffing companies due to pay. The resulting consent order prohibits the staffing services from colluding in this manner and inviting others to enter such agreements and exchange information.

As the COVID-19 crisis tightens its grip on the country, the demand for medical professionals has increased in many places, and medical professionals are now moving across the country to provide their services in cities and states that need them the most. As hospitals race to staff their emergency departments and intensive care units to provide care to COVID-19 patients, the DOJ and FTC will be on the lookout for evidence of agreements with other healthcare companies or among staffing agencies regarding salary, terms of compensation, hiring and refusal to hire employees, employee benefits, and refusal to solicit employees. The agencies have made clear that such agreements can be and will be criminally prosecuted.

Certain practices that could be indicative of anticompetitive conduct, such as information sharing regarding compensation and employment terms, will also be under increased scrutiny. Any exchanges of specific information between healthcare companies may be red flags for anticompetitive behavior, especially if the information consists of employee compensation data and terms of employment, quarantine benefits, COVID-19 bonuses, and temporary staffing. The DOJ has previously prosecuted analogous exchanges of information. For example, it filed a lawsuit against the Utah Society for Healthcare Human Resources Administration in 1994 because the organization was engaged in a conspiracy to exchange non-public information regarding budget and entry-level wages for registered nurses. Similarly, in 2007, the DOJ sued the Arizona Hospital and Healthcare Association and its subsidiaries for agreeing on sharing competitively sensitive contract terms to set uniform bill rates paid to nurse staffing agencies. The resulting settlement prohibited this conduct and prevented the Association from boycotting or discriminating against agencies or hospitals that were not part of their staffing service.

Healthcare facilities and staffing agencies must be careful to comply with DOJ and FTC guidelines to reduce the risk of civil or criminal liability, including the Antitrust Guidance for Human Resource Professionals, Section 6 of the agencies’ Statements of Antitrust Enforcement Policy in Health Care, and the agencies’ most recent Joint Statement Regarding COVID-19 (see our prior client alert):

• The Antitrust Guidance for Human Resource Professionals contains guidance on best practices and potential antitrust risks for hiring and compensation decisions. As the healthcare employment landscape changes rapidly in response to COVID-19, healthcare facilities and staffing agencies will need to educate any individuals involved in hiring, retention, and placement of healthcare workers on “no-poach” and wage-fixing agreements as well as unlawful sharing of competitively sensitive information.
• Section 6 of the Statements of Antitrust Enforcement Policy in Health Care sets forth an antitrust safety zone for written surveys of prices for healthcare services or wages, salaries, or benefits of healthcare personnel. Specifically, written surveys are generally not problematic if: (1) the survey is managed by a third party; (2) the information provided by survey participants is based on data more than three months old; and (3) any information disseminated is sufficiently aggregated. Healthcare facilities, staffing agencies, and managed care organizations that plan to engage in such surveys should make sure that their conduct falls within the safety zone and contact antitrust counsel if their plan to exchange information falls outside the safety zone.
• In the Joint Statement Regarding COVID-19, the agencies recognize that “there are many ways firms, including competitors, can engage in procompetitive collaboration.” For example, healthcare facilities and staffing agencies may share information regarding “technical know-how” instead of specific information regarding wages and terms of employment if they follow the safeguards outlined by the agencies. There may also be less concern if information is shared in a way that preserves the identity of the underlying sources, for example, through a third party aggregating the data. Joint purchasing agreements among healthcare providers “such as those designed to increase the efficiency of procurement and reduce transaction costs, do not raise antitrust concerns.” However, the agencies also make clear that it “will not hesitate to seek to hold accountable those” who use COVID-19 “as an opportunity to subvert competition or prey on vulnerable Americans.” If you have concerns about actions you may be considering in response to COVID-19, the agencies provide expedited guidance on your planned actions, aiming to respond within seven business days, under the DOJ’s Business Review Process and the FTC’s Advisory Opinion Process. To limit exposure and avoid raising red flags, healthcare facilities and staffing agencies should consider taking advantage of the expedited review process.

The latest statement makes clear that while some activities raise very little to no antitrust concern, the antitrust agencies are on alert for potential labor market collusion in the healthcare industry and will not cut back enforcement in the face of the COVID-19 crisis. O’Melveny has robust antitrust, healthcare, and employment practices, and employers in the healthcare industry with any questions about the potential antitrust implications of their hiring, employment, or compensation practices should contact the undersigned attorneys.

This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Ben Bradshaw, an O’Melveny partner licensed to practice law in California and the District of Columbia, Riccardo Celli, an O’Melveny partner licensed to practice law in the Capital Region of Brussels, the Law Society England & Wales, and Roma, Courtney Dyer, an O’Melveny partner licensed to practice law in the District of Columbia and New York, Andrew Frackman, an O’Melveny partner licensed to practice law in New Jersey and New York, Philip Monaghan, an O’Melveny partner licensed to practice law in the Capital Region of Brussels, Hong Kong, the Law Society England & Wales, and the Law Society Ireland, Bo Pearl, an O’Melveny partner licensed to practice law in California, Anna Pletcher, an O’Melveny partner licensed to practice law in California, Katrina Robson, an O’Melveny partner licensed to practice law in California and the District of Columbia, Ian Simmons, an O’Melveny partner licensed to practice law in the District of Columbia and Pennsylvania, Michael Tubach, an O’Melveny partner licensed to practice law in California and the District of Columbia, Courtney C. Byrd, an O’Melveny counsel licensed to practice law in the District of Columbia and Maryland, Zhao Liu, an O’Melveny counsel licensed to practice law in California and the District of Columbia, Stephen McIntyre, an O'Melveny counsel licensed to practice law in California, Sergei Zaslavsky, an O’Melveny counsel licensed to practice law in the District of Columbia and Maryland, and Trisha Parikh, an O’Melveny associate licensed to practice law in California, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.

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