HEALTH CARE BASICS FOR BANKRUPTCY LAWYERS

Vertical integration also creates an opportunity for the merger partners to engage in discriminatory pricing practices, as where the supplier sells its products or services to its merger partner at a lower price than it sells to competing hospitals. This could constitute a violation of the Robinson-Patman amendments to the Clayton Act.

"Downstream" diversification presents a host of problems as well, only some of which involve the antitrust laws. Downstream diversification would occur, for example, when a hospital affiliates with a durable medical equipment (DME) firm that supplies DME to patients following their discharge from the hospital. A joint venture between the two might be challenged under section 1 of the Sherman Act, which prohibits unreasonable restraints of trade through a "contract, combination, or conspiracy" between two or more firms. The joint venture might also violate section 2 of the Sherman Act, which prohibits monopolization and attempts to monopolize. If the hospital and the DME firm merge into, or one acquires the other resulting in, a single, economical integrated entity, section 1 cannot be violated (because a firm cannot "contract, combine, or conspire" with itself), but a challenge under section 2 would still be possible.

The chances of a successful antitrust attack upon downstream diversification probably increase significantly if the hospital's relationship with the downstream supplier leads it to certain behaviors that might also be deemed to be "anticompetitive." The DOJ has issued guidelines on non- horizontal mergers.

D. Medicare and Medicaid Reimbursement on Sale

A debtor may be entitled to recover additional amounts from Medicare or Medicaid if, upon sale of an asset or discontinuation of operations, the value of the asset is less than the Medicare depreciated book value of the asset. Conversely, if a facility is sold at a price which exceeds the current Medicare depreciated book value of the assets, Medicare will be entitled to recover some of the depreciation that had previously been allowed. As with most Medicare reimbursement rules, the calculation of whether the debtor will be entitled to additional Medicare funds and the amount of those funds is sufficiently complicated that a reimbursement specialist should be consulted to structure the asset dispositions in a manner that will maximize value to the estate.

However, the Bankruptcy Court is not powerless when a state agency revokes or refuses to amend a license. If the reason for the revocation or refusal to amend the license is the debtor's failure to pay a dischargeable debt to the state agency, section 525 will protect a health care debtor from this discriminatory treatment.