Following through on his remarks made at the ABA Antitrust Section Virtual Spring Meeting, Assistant Attorney General Makan Delrahim and his team filed their most significant and pandemic-relevant criminal case of the year yet. On April 30, Florida Cancer Specialists & Research Institute LLC (FCS) entered into a deferred prosecution agreement (DPA) that included a felony charge for conspiring with a competing provider to allocate chemotherapy and radiation oncology treatments for cancer patients in Southwest Florida, the Department of Justice (DOJ) announced. As part of the investigation and charge, FCS agreed to pay the statutory maximum penalty of $100 million and to cooperate fully with the antitrust division’s ongoing investigation. This charge is the first in the department’s ongoing investigation into market allocation in the oncology industry.[1] FCS’ agreement with its co-conspirator is considered a per se illegal restraint on trade in violation of Section 1 of the Sherman Antitrust Act.[2]

According to the information, from 1999 until 2016, FCS entered into an illegal agreement that allocated chemotherapy treatments to FCS and radiation treatments to a competing oncology group. This conspiracy allowed FCS to operate with minimal competition in Southwest Florida, which caused those undergoing cancer treatments to have fewer options within the market when creating their treatment plans.[3] Specifically, FCS agreed not to provide radiation oncology treatments in Southwest Florida; in exchange, its co-conspirator agreed not to provide medical oncology services in the same region. As part of their conspiracy, FCS and its competitor further agreed not to hire oncologists specializing in treatment options allocated to the other, cooperated to prevent competition from third-party oncology practices and engaged in ongoing information exchanges regarding the division of treatment services.[4] Like DOJ’s recent corporate prosecutions in the generics industry, DOJ again opted to utilize a DPA to resolve the matter as a recognition of the collateral consequences FCS faces and its cooperation in the investigation. Without the DPA, a conviction of FCS would likely result in its mandatory exclusion from the U.S. Department of Health and Human Services’ federal health care programs for five years.[5] If this were to happen, there would be “substantial consequences” to vulnerable patients who are covered by these programs.[6] Because of this the DPA was seen as the best vehicle to protect patients while punishing FCS.

As part of the DPA, FCS not only has an ongoing obligation to cooperate in this investigation, as previously stated, but it also must report any violations of U.S. law to the department and maintain an updated compliance program designed to prevent and detect criminal antitrust violations. The term of the DPA is three years, with expiration in December 2023.[7] Should FCS violate its obligations under the DPA in any way during the period in which the DPA is in place, the company may be prosecuted for any felony about which the DOJ has knowledge.[8]

DPA and Waiver of Noncompete Agreements

DOJ believes that FCS and its co-conspirators, in order to carry out their conspiracy, “(1) agreed that FCS would not employ radiation oncologists and a co-conspirator oncology company would not employ medical oncologists in Southwest Florida, and (2) maintained the allocation agreement by working together to prevent competition from third-party oncology treatment providers unaffiliated with either FCS or the co-conspirator company in Southwest Florida.”[9] The DPA – Q&A makes clear that these contractual provisions helped facilitate the market allocation agreement, and that the waiver is expected to expedite renewed competition in the market. This is a unique feature of the DPA, as most agreements do not extend to noncompete agreements. However, the DOJ included this feature as a means to remedy the problem of market competition. The noncompete waiver eliminates a restriction on the ability of current and former FCS employees, including physicians and other health care professionals, to open or join a competing oncology practice in Southwest Florida.[10] This focus on noncompetes ties into the DOJ’s renewed focus on “no-poach agreements,” which we previously touched upon.

Providers should be mindful that so-called no-poach agreements, in which providers agree not to hire or recruit one another’s employees, may be considered a type of illegal allocation agreement as well, as applied specifically to the labor market. DOJ has stated that it views such no-poach agreements, absent independent business justifications, as per se unlawful and that it now will pursue criminal liability under the antitrust laws.[11] In-home health care services in California are already facing antitrust scrutiny given their use of such no-poach agreements.[12] The investigation began last year and is being run by prosecutors in San Francisco with the DOJ’s antitrust division. The in-home health care market is very fragmented, with many different companies owning pieces of market share, which creates fertile ground for such noncompete agreements. While no indictments have been issued yet, as recently as January, Assistant Attorney General Delrahim told The Wall Street Journal he expected charges in a no-poach case to be filed in the first half of the year, although COVID-19 has slowed that timeline.[13] Health care providers should also take note that discussions involving clinical topics ‒ even though they may not be obviously competitively sensitive ‒ are susceptible to antitrust scrutiny as well.

The current investigation into FCS reflects the antitrust division’s new focus on the health care industry, which started a few years ago. In 2015, in US v. Hillsdale Community Health Center, DOJ and the Michigan attorney general jointly filed a lawsuit against four Michigan hospital systems, alleging that they orchestrated agreements not to compete with each other in violation of Section 1 of the Sherman Act and Section 2 of the Michigan Antitrust Reform Act.[14] According to the complaint, Hillsdale entered into agreements with these three competitors to unlawfully allocate territories for the marketing of competing health care services and to limit competition among them ‒ thereby eliminating a significant form of competition to attract patients.[15] In 2016, in US v. Charleston Area Medical Center, the United States filed a complaint alleging that Charleston Area Medical Center, Inc., and its co-conspirator unlawfully agreed to allocate territories for the marketing of competing health care services and unlawfully limited competition.[16] As a result of this more stringent focus, health care systems and provider groups employing noncompetes could see cases brought by the federal antitrust agencies, state and local governments, and private parties.

Given the rapidly changing times Americans now face and the importance of the health care systems nationwide, it is imperative to understand and be prepared for DOJ’s heightened scrutiny within the market.

[1] Leading Cancer Treatment Center Admits to Antitrust Crime and Agrees to Pay $100 Million Criminal Penalty, DOJ (DOJ Press Release) (April 30, 2020), available at: https://www.justice.gov/opa/pr/leading-cancer-treatment-center-admits-antitrust-crime-and-agrees-pay-100-million-criminal.
[2] Information, U.S. v. Fla. Cancer Specialists & Res. Inst., LLC, No. 2:20-cr-78 at *3-4 (M.D. Fla. April 30, 2020), available at: https://www.justice.gov/opa/press-release/file/1272551/download.
[3] Id. at *3-4.
[4] Id. at *4-5.
[5] Florida Cancer Specialists & Research Institute, LLC Deferred Prosecution Agreement – Q&A, available at: https://www.justice.gov/opa/press-release/file/1272556/download.
[6] Deferred Prosecution Agreement at *4, U.S. v. Fla. Cancer Specialists & Res. Inst., LLC, No. 2:20-cr-78 (M.D. Fla. April 30, 2020), available at: https://www.justice.gov/opa/press-release/file/1272561/download.
[7] Id. at *2.
[8] Id. at *12.
[9] Florida Cancer Specialists & Research Institute, LLC Deferred Prosecution Agreement – Q&A, available at: https://www.justice.gov/opa/press-release/file/1272556/download.
[10] Id.
[11] DOJ, “Division Update Spring 2019,” available at: https://www.justice.gov/atr/division-operations/division-update-spring-2019/no-poach-approach.
[12] Josh Sisco, “Home health care industry targeted in criminal antitrust probe,” MLEX Market Insight (April 20, 2020), available at: https://mlexmarketinsight.com/insights-center/editors-picks/area-of-expertise/antitrust/home-health-care-industry-targeted-in-criminal-antitrust-probe.
[13] Id.
[14] Complaint, U.S. v. Hillsdale Cmty. Health Ctr., No. 2:15-cv-12311 (E.D. Mich. June 25, 2015).
[15] Id.
[16] Complaint, United States of Am. v. Charleston Area Med. Ctr., Inc. & St. Mary’s Med. Ctr., Inc., Civil Action No. 2:16-cv-03664 (April 14, 2016).