On April 30, 2020, the United States Department of Justice Antitrust Division (DOJ) announced that it had brought a one-count felony charge against Florida Cancer Specialists & Research Institute LLC (FCS), an oncology group headquartered in Fort Myers, Florida, for conspiring with another provider group to allocate cancer patients in Southwest Florida. The parties entered into a Deferred Prosecution Agreement (DPA) that includes, among other things, FCS’s agreement to pay a $100 million criminal penalty, the maximum allowable for violations of Section 1 of the Sherman Act. Under the terms of the DPA, FCS also agreed to waive and not enforce any non-compete or non-solicitation provisions contained in its physician contracts. In addition, FCS agreed to pay the State of Florida more than $20 million in disgorgement of profits and abide by other terms of relief to resolve the state’s investigation. According to DOJ, this charge is the first in its ongoing investigation into market allocation in the oncology industry. 

The field of oncology has three major areas of specialty: medical, radiation, and surgical.  Medical oncologists focus on delivering chemotherapy treatments, whereas radiation oncologists treat cancer through the administration of radiation. FCS is one of the largest oncology practices in the country, with more than 100 practice locations throughout Florida and 200 employed physicians. DOJ charged FCS with conspiring with another Fort Myers-based oncology practice – identified in the charge as “Oncology Company A” – to allocate the delivery of cancer therapies in Southwest Florida (i.e., Collier, Lee, and Charlotte counties). Specifically, the parties agreed through “conversations and communications” that FCS would provide medical oncology services but not radiation oncology services and that Oncology Company A would provide radiation oncology services but not medical oncology services. The parties also agreed that, in Southwest Florida, FCS would not employ radiation oncologists and Oncology Company A would not employ medical oncologists. The conspiracy dated back to 1999 and was in effect until at least September 2016. During the relevant time period, FCS generated more than $950 million in revenue. The DOJ alleged that the conspiracy was a per se violation of the Sherman Act, meaning that it had no offsetting procompetitive benefits. 

The DOJ cited two principal factors for entering into the DPA. First, if convicted, FCS would be subjected to a mandatory exclusion from all federal healthcare programs under 42 U.S.C. § 1320a-7 for a period of at least five years. This would result in substantial disruption to FCS’s patients – including those enrolled in clinical trials – and FCS’s employees. Second, FCS cooperated with DOJ’s investigation leading up to entry of the DPA and agreed to continue doing so going forward. The terms of the DPA run through December 31, 2023.

Healthcare providers should be mindful of the following takeaways from the FCS matter:

• DOJ remains very active in the healthcare enforcement space. The FCS case is the latest of DOJ’s enforcement actions aimed at curbing alleged anticompetitive conduct by healthcare providers. In recent years, the agency has pursued civil enforcement cases involving a wide range of provider conduct, including managed care contracting practices (see United States v. Charlotte-Mecklenburg Hosp. Auth); agreements among competitors to limit marketing within a particular geographic territory (see United States v. Hillsdale Cmty. Health Ctr. and United States v. W.A. Foote Mem'l Hosp.); and agreements by competitors not to poach each other’s employees (see Seaman v. Duke Univ where in an unprecedented move, DOJ successfully intervened in the private action for the limited purpose of joining the parties' settlement and obtained the right to enforce the settlement's injunctive relief). Every indication is that these enforcement initiatives – whether pursued civilly or criminally – will continue.
• Private lawsuits are likely to follow. Government enforcement actions commonly spawn a spate of private class action litigation. While FCS has already been subject to some private antitrust-related lawsuits, it is possible that others may follow. For example, to the extent that FCS agreed not to recruit and employ physicians in the radiation oncology space, a radiation oncologist practicing in Southwest Florida may contend that his or her wages were artificially suppressed as a result of an anticompetitive conspiracy. Accordingly, the DPA may not resolve all of FCS’s antitrust-related legal headaches. 
• Now, more than ever, providers should adopt and enforce antitrust compliance policies. FCS has sustained an enormous economic and reputational setback that would have been avoided through the adoption of, and adherence to, an antitrust compliance policy. All provider organizations would be well advised to educate their employees on the bounds of permissible conduct as it relates to interactions with competitors. The centerpiece of any educational initiatives should be a comprehensive, written antitrust compliance policy.
• All agreements among competitors are not unlawful. DOJ characterizes the conduct in the FCS matter as per se unlawful, meaning that these are “naked” market allocation agreements that provide no consumer benefit whatsoever. That is not to say, of course, that competitors can never enter into arrangements that pass muster under the antitrust laws. For example, a properly structured joint venture among competitors to expand or enhance a healthcare service typically would be evaluated under the rule-of-reason standard – a more pliable, defense-friendly legal standard than the per se standard.  By contrast, agreements that only reduce competition and offer no procompetitive benefits are more likely to be evaluated under the harsher per se standard pursued in the FCS matter.