FTC Settlement Order Bars Texas Doctors’ Group from Joint Price Negotiations

August 11, 2011

The Federal Trade Commission (FTC) has entered yet another consent decree with yet another physician group that allegedly was bargaining collectively with payors. An association representing 900 physicians in the Amarillo, Texas, area agreed to a FTC order barring it from jointly negotiating the prices it charges insurance providers. The FTC alleged in a complaint filed with the order that the association, Southwest Health Alliances, Inc., d/b/a BSA Provider Network, had violated federal law since 2000 by fixing the prices its member doctors would charge insurers. This led to higher prices for consumers and businesses.

The FTC order settling the charges prohibits Southwest Health from similar conduct in the future. The association also is settling similar charges brought by the Office of the Texas Attorney General.

Southwest Health is an independent practice association (IPA) consisting of multiple, independent medical practices with approximately 900 physician members – 300 of whom provide primary care services – in the Amarillo area. According to the FTC’s complaint, since at least 2000, the network has restrained competition by entering into and implementing agreements to fix the prices and terms at which it would contract with health plans, and has collectively negotiated the terms and conditions under which it would deal with health plans.

The FTC contends that the agreements eliminated competition and harmed consumers by increasing prices for physician services. Collective price negotiation and agreements between IPAs and health care providers may be justified under some circumstances. For example, if an IPA clinically or financially integrates its members’ practices, this may create efficiencies that justify joint price negotiations. However, because Southwest Health’s doctors undertook no such integration, the agreements produced no beneficial efficiencies for consumers.

The proposed order settling the FTC’s complaint is designed to stop Southwest Health’s allegedly anticompetitive conduct, while allowing it to continue to engage in legitimate joint conduct. To do this, the FTC order bars Southwest Health from entering into or facilitating agreements among physicians: 1) to negotiate on behalf of any physician with any insurer; 2) to negotiate with any physician as an insurer; 3) to deal, refuse to deal, or threaten to refuse to deal with any insurer; and 4) not to deal individually with any insurer, or not to deal with any insurer, except through Southwest Health.

In addition, the proposed order prohibits Southwest Health from facilitating the exchange of information between physicians concerning the terms on which they will contract with insurers. These terms are similar to those found in other FTC cases of this type.

The proposed order does not preclude Southwest Health from engaging in conduct that is reasonably necessary to form or participate in legitimate “qualified risk-sharing” or “qualified clinically integrated” arrangements, as defined in the order. It also does not prohibit agreements that only involve doctors who are part of the same medical practice.

Finally, the proposed order contains notification provisions that will allow the FTC to monitor Southwest Health’s compliance with its terms, and will allow insurers to terminate any contracts, without penalty, entered into with the network since its alleged restraint of trade began in 2000. The proposed order will expire in 20 years.

The Commission vote approving the complaint and proposed settlement order was 5-0.

For more information:

http://www.ftc.gov/os/caselist/0910013/index.shtm

NOTE: The Commission issues a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The issuance of a complaint is not a finding or ruling that the respondent has violated the law. A consent order is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $16,000.

p.s. When will doctors ever learn about the troubling aspects of messenger model IPAs?

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