'No-Poach' Prosecutions in Health Care Maybe (Definitely Are) Coming

Barry A. Nigro Jr., deputy assistant attorney general in the Department of Justice’s antitrust division, said at a recent American Bar Association antitrust in health care conference in Arlington, Va., that no-poach prosecutions are coming.

No-poach agreements are where firms get together and agree not to “poach,” or solicit or hire, each others’ staff members. The agreements restrict employee movement and are per se illegal, he said. If they are widespread enough, they can have the effect of fixing wages for groups of employees in certain employment markets.

“Combating rising health-care prices has been, and under the new administration will continue to be, a priority for the division, Nigro said. “We are investigating other potential criminal antitrust violations in [the health-care] industry, including market allocation agreements among health-care providers and no-poach agreements restricting competition for employees,” he added.

Regulators attending conferences and saying they could bring a case is expected behavior. Regulators gonna regulate. So Nigro’s statement about DOJ antitrust’s priorities is kind of like what that Christmas song says about Santa Claus’ watchful eye: He sees you when you’re sleeping, and, if Santa has any antitrust chops, he knows when you’ve been fixing wages.

But there is one trail of smoke coming from the chimney that suggests the no-poach chatter is more than just routine regulator-speak. Ryan Kantor thinks so. He is the former assistant chief of the health-care and consumer products section of DOJ’s antitrust division, and Nigro’s former colleague, who in May joined Morgan Lewis as a partner in its antitrust group in Washington. Kantor’s first client alert issued at Morgan Lewis? “DOJ Confirms Active No-Poaching Investigations in Health Care and Other Industries.”

I recently spoke to Kantor and his colleague, Mark L. Krotoski, a partner at Morgan Lewis in Palo Alto, about no-poach prosecutions.

Really, I was trying to get them to tell me what criminal cases were in the pipeline. Being responsible attorneys, and both former antitrust enforcers, Kantor and Krotoski were mum on specifics.

We did, however, have a perfectly nice conversation about some interesting things to watch for when those big announcements come.

Kantor said DOJ has discovered no-poach agreements in the course of merger investigations. They can also be brought to light through citizen complaints or complaints from market participants, Kantor said.

“It will be interesting to see how private defendants [in no poach prosecutions] respond,” Kantor said, because the DOJ’s antitrust guidance for human resources professionals, which cautions that no-poach agreements trigger criminal prosecutions, “hasn’t been tried in the courts yet.”

According to Krotoski, when prosecutions are announced, it will be important to review the terms of any resolution in plea agreements with prosecutors. It is also an open question in criminal antitrust cases whether courts will accept the resolutions proposed by prosecutors and companies.

It will also be interesting to watch whether executives will prosecuted as well in the no-poach area, Krotoski said. “DOJ has had a policy within the antitrust division for several years to prosecute the highest-ranking, most culpable individuals in an organization.”

“DOJ has said on a number of occasions that there are criminal cases in the pipeline, and the agency has used the word ‘pervasive’ a couple of times” to describe the no-poach problem, Krotoski said. “When you have that many senior statements by high level officials, it’s just a matter of time until of when prosecutions will start coming.”

So, at the moment, we’re waiting for the announcement of no-poach prosecutions in health care. The lesson is, if you’re a hospital system or provider with no-poach agreements, express or implied, as the regulators’ favorite Christmas song goes: you’d better watch out.

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