Despite vocal opposition from New York Attorney General Schneiderman’s office, New York Governor Cuomo signed legislation this week authorizing Nassau Health Care Corporation (“NuHealth”) – a public healthcare provider that operates a hospital, skilled nursing facility, and several community health centers in Nassau County, New York – to “engage in arrangements, contracts, information sharing, and other collaborative activities with public or private entities and individuals including joint ventures and joint negotiations with physicians, hospitals and payors” that “may displace competition and might otherwise be considered violations of state or federal antitrust laws.”  In the reported words of Eric Stock, Chief of the Antitrust Bureau for the New York Attorney General, the bill gives NuHealth a “blank check to engage in a huge swath of antitrust activities with no oversight,” which is “virtually unprecedented.”

The bill passed both houses of New York’s legislature unanimously, and it expressly finds that NuHealth, as “a free-standing public health care provider,” is “at a competitive disadvantage in the current and emerging health care environment” such that “it cannot become part of a larger system of corporate entities while maintaining its public status.”  As a result, according to the bill, NuHealth’s “inability to compete on its own and by potential limits on its ability to collaborate with other public and private providers” put at “jeopard[y]” its “efforts to provide high quality health care services to medically underserved populations.”

According to reports, for more than a year NuHealth had been exploring a public-private partnership with North Shore-LIJ Health System – the largest healthcare system in New York operating 16 hospitals, three skilled nursing facilities along with nearly 400 ambulatory and physician practices and nearly 2,600 full-time physicians – to operate its extended care facility and community centers.  That may be why NuHealth lobbied for the legislation, which seeks to “clarify the state’s intention” that NuHealth’s collaborations “may be carried out regardless of whether they displace competition and may otherwise be considered violations of state or federal antitrust law.”

The legislation is not the first time that New York (like many other states) attempted to tailor state action immunity to protect local healthcare providers from antitrust scrutiny.  Two years ago, the New York legislature considered proposed legislation “designed to restore fairness in the contracting process between health care providers and large managed care plans by allowing such providers to join together to negotiate contract provisions” by cloaking providers in state-action immunity for collective negotiation with payors.  Unlike that legislation, which failed to pass, the just enacted NuHealth legislation is designed to benefit not a broad group of providers, but rather a class of one – NuHealth.

New York’s legislation benefiting NuHealth also comes in the wake of the recent Supreme Court decision in FTC v. Phoebe Putney Health System, Inc., where the Court held that in order for state action immunity to apply a state must clearly articulate and affirmatively express a policy to displace competition.  Time will tell whether what has played out in New York will become a template for legislative action elsewhere.

Drawing on the experience of members of our healthcare team in complementary areas of health law, including transactions, tax, labor and employment, and healthcare regulation, our team of antitrust lawyers have the depth and experience to handle the most significant antitrust healthcare matters, including transactions and investigations.  If you have any questions regarding this matter, or would like to learn more about our healthcare antitrust capabilities, please contact Jonathan L. Lewis, or 202.861.1557, or Lee H. Simowitz, or 202.861.1608.