Collaborative Agreements in Health Care

A variety of nonmerger collaborative agreements among health care entities has proliferated in recent years. Compared to traditional mergers and acquisitions, collaborative agreements preserve a degree of operational and financial independence for the contracting parties. State and federal oversight of collaborative agreements in health care is complex and rapidly evolving. This issue brief describes collaborative agreements, examines their potential effects in California, and highlights some intricacies for their oversight.

Below is a summary of key takeaways from the brief:

Collaborative agreements exist on a continuum of integration. The key element in identifying and distinguishing the various types of nonmerger collaborative transactions is the degree of control retained by participants with respect to governance, legal status, branding, and financial and administrative operations. Collaborative agreements exist on a continuum ranging from minimal to substantial integration.

The effects of collaborative agreements are uncertain. As opposed to the effects of mergers and acquisitions in health care, the impact of collaborative agreements such as strategic alliances and joint operating agreements are not yet well understood. Proponents typically claim that they provide clinical benefits that further the public interest. At the same time, transacting entities could form exclusive relationships that have the same anticompetitive effects of a merger or acquisition.

To assess the aggregate impact of an agreement on prices, quality, access, or innovation in the relevant market, antitrust enforcers and courts must evaluate a balance of these effects using a so-called “rule of reason” standard case by case. However, the nebulous and complex nature of structures in the continuum of collaborative transactions may make it difficult to definitively determine their impact in the health care market.

Collaborative agreements and existing merger review and antitrust enforcement. In California, health care entity transactions are subject to the oversight of the attorney general (AG), but only with pretransaction notice. However, for a variety of reasons, some collaborative agreements do not generate pretransaction notice to the AG and are thus likely to be left unexamined. Regulators may also review transactions for anticompetitive conduct after the fact, but the analysis under antitrust theories is highly complex due to the unique features of collaborative agreements.

The regulatory landscape is rapidly evolving. In February 2023, the Department of Justice (DOJ) withdrew decades-old federal enforcement policy statements to remove some of the safe harbor protections previously established for health care entity activities, including collaborative agreements. The withdrawal adds to the uncertainties surrounding the oversight of these transactions, which the DOJ has indicated is to be determined case by case.

This new federal enforcement landscape potentially highlights the need for state policies and regulations. In California, the newly created Office of Health Care Affordability is implementing expanded reporting requirements for health care affiliations and transactions that could enhance the oversight of collaborative health care agreements.

Conclusion. Policymakers concerned with the potential benefits and known harms of consolidation in the health care industry may wish to extend the scrutiny given to these nontraditional partnership agreements in the immediate and longer term.