The anti-trust law was established to regulate unfair business practices and competition, leading to unjustified business dominance in the industry. In a free market, the players strive to achieve a competitive advantage by offering quality services, lowering prices, and innovating new products. Anti-trust regulations have helped transform the healthcare system from a managed system to a consumer-driven one (O’Lawrence et al., 2018). Forms of unfair trade practices in the health industry include price fixing, the formation of cartels, and joint trade practices to create a monopoly. Surgical Care Affiliates (SCA) was recently found guilty of unfair trade practices aimed at oppressing the actions of competitors. Understanding anti-trust laws allow a healthcare organization to mitigate the risks of civil and criminal liabilities when entering different business alliances and mergers.
Surgical Care Affiliates Anti-Trust Charges
In 2021, SCA LLC was found guilty of two counts for engaging in unfair competitive practices in retaining highly skilled and executive employees in two separate cases; between May 2010 and October 2017 and February 2012 and July 2017 (U.S. Department of Justice, 2021). SCA agreed with competitors in the industry to prevent the poaching of executives and skilled employees within the stated periods. It was established that SCA willingly participated in meetings and conversations to instruct competitive firms and human resource managers to avoid soliciting skilled employees’ services.
The agreements were regularly monitored to ensure compliance. SCA violated the Shermans Act for unjustly denying employees access to competitive opportunities in other companies (U.S. Department of Justice, 2021). As a result, employees suffered limited mobility forcing them to stay in their current workplace. The ability of the company to suppress the mobility of executives and highly skilled employees allowed it to manipulate the compensation system to its advantage.
The agreements between SCA and competitors in the industry occurred before UnitedHealth Group acquired Surgical Care Affiliates in 2017. The acquisition was one of the largest in the health industry in the recent past, despite different controversies facing the acquisition. A conviction for SCA exposed the parent company to financial losses and other damages.
Lessons Learned from SCA Violations of Anti-Trust Law
SCA LLC’s anti-trust case illustrates that the application of the Sherman Act is not limited to the protection of customers only but can be extended to include employees and human resources practices. Agreements to manipulate the mobility of human resources in the industry constitute unfair employment practices. SCA colluded with key healthcare players in the industry to create artificial labour conditions that unreasonably denied highly qualified executives access to competitive job opportunities.
The anti-trust laws address the changing nature of business practices that might be difficult to identify in a real-world situation. Anti-trust laws in the health industry aim to promote fair trade practices and offer remedies to anti-competitive behaviours or practices (O’Lawrence et al., 2018). The SCA case was carefully planned and executed to avoid detection by employees and law enforcement agencies. The dynamic nature of the business environment presents enterprises with the opportunity to use unjust ways to achieve a competitive advantage. The anti-trust laws have been amended to address issues arising from emerging business practices in the health sector.
There is a need to carefully scrutinize a company’s business practices before entering into a strategic alliance with the business. Due diligence should be conducted before finalizing a merger and acquisition decision. Due diligence is useful in identifying possible legal risks and contractual obligations that each player currently faces. Scrutiny and due diligence of SCA prior to acquisition by UnitedHealth Group could have helped to identify malpractices in human resource practices.
Actions to Prevent Violation of Anti-trust Laws
Before finalizing a merger and acquisition process, it is important to conduct due diligence to ensure compliance with different healthcare regulations. The aims of the merger or acquisition should be carefully analyzed to ensure that it does not contravene existing legal provisions. Involving the services of professionals like lawyers will help streamline the process. Healthcare leaders should evaluate a merger and acquisition decision to establish if it will result in better service delivery to consumers and improve operation efficiency. Establishing predetermined strategic goals to achieve and carefully planning the process using scientific principles will help business leaders identify future uncertainties encountered in a merger and acquisition (Jacob, 2020). Healthcare leaders should utilize activities within the control of the organizations to achieve the desired results of a merger and acquisition process.
The goals and objectives should be stated, and the time horizon should be specified to ensure continuous monitoring of the initial aims and compliance with legal requirements. Objectives of different departments should be stated to avoid competition for resources, duplication of roles, and conflicts of cultures after the merger of the two organizations. Healthcare leaders should consider engaging relevant authorities in the process to help structure the strategic alliance in the common interest of customers (Cerezo- Espinosa de Los Monteros et al., 2021). Relevant authorities will also help advise healthcare leaders on the effect of market concentration in the case of a merger or acquisition. The main concern in the concentration effect is the rise in the cost of healthcare services due to the low levels of business competition in the industry.
Employees from different departments of the organization should be involved in the merger and acquisition process. The difference in human resource practices and workplace culture greatly influences the success of a merger or acquisition. Involving the employees in the change management process will help create a positive attitude, identify opportunities and create a team spirit that will facilitate the integration of cultures in the merger and acquisition process. Regular communication is necessary to reduce employee anxiety about future uncertainty about job security due to the strategic alliance. Employees should be encouraged to remain productive during the transition process. Continuous training and education will help employees cope with the change in production activities and workplace routines.
A review of the Federal Trade Commission and related Acts before finalizing the merger and acquisition will help eliminate the risk of future investigations. Information on different requirements should be compelled and carefully analyzed to determine if the merger and acquisition will violate anti-trust laws. Recent developments and amendments to existing laws should be considered in the review of FTC requirements. In addition, state jurisdictions should also be considered to ensure that the agreement does not bridge state legal provisions.
Conclusion
Fair competition and trade practices allow consumers access to affordable, quality healthcare products and services. In the recent past, healthcare providers have been engaging in different strategic alliances to improve service delivery and operation efficiency. Fair Trade Commission has investigated healthcare organizations engaging in strategic alliances that have recently contravened fair trading practices. Healthcare organizations seeking to form a strategic alliance should conduct due diligence on different legal provisions and requirements in the healthcare sector.
References
Cerezo-Espinosa de los Monteros, J., Castro-Torres, A., Gómez-Salgado, J., Fagundo-Rivera, J., Gómez-Salgado, C., & Coronado-Vázquez, V. (2021). Administration of strategic agreements in public hospitals: Considerations to enhance the quality and sustainability of mergers and acquisitions. International Journal of Environmental Research and Public Health, 18(8), 4051. https://doi.org/10.3390/ijerph18084051
Jacob, A. B. (2020). Mergers and acquisitions: A qualitative study in the medical device sector. International Journal of Management, Economics and Social Sciences, 9(3). https://doi.org/10.32327/ijmess/9.3.2020.9
O’Lawrence, H., Saunders, L., Li, M., & Kelly, M. (2018). Health policy analysis: Antitrust law and regulation on health care providers. European Journal of Environment and Public Health, 2(1). https://doi.org/10.20897/ejeph/82620
U.S. Department of Justice. (2021, August 2). U.S. v. Surgical care affiliates, LLC and SCAI Holdings, LLC. https://www.justice.gov/atr/case/us-v-surgical-care-affiliates-llc-and-scai-holdings-llc
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