The Federal Trade Commission has determined that a proposed statewide physician PPO in Montana doesn't put participating physicians at enough financial risk to prevent them from engaging in illegal price fixing.
A day after the FTC released its ruling, the U.S. Justice Department on July 6 cleared a hospital- and physician-sponsored PPO in Iowa of similar antitrust concerns because the physicians faced substantial financial risk.
The fact that the agencies released rulings on proposed integrated delivery systems within 24 hours of each other suggest they may be competing to show the Clinton administration who can provide the most antitrust guidance to the healthcare industry.
Industry leaders and healthcare attorneys have long criticized the agencies for not providing enough antitrust guidance to hospitals and other providers. A passing reference on the need for provider antitrust relief by first lady Hillary Rodham Clinton at last year's American Hospital Association convention in Orlando, Fla., seems to have supplied the cure (Aug. 16, 1993, p. 2).
Since that time, the agencies, and particularly the Justice Department, have been noticeably active in announcing healthcare antitrust actions to the field. For example, the Justice Department recently conducted a press conference to announce its antitrust settlement with two Florida hospital systems (June 27, p. 136).
The opinions released by the agencies last week outline several criteria that they believe determine whether a proposed integrated delivery system could engage in anti-competitive behavior. The opinions don't carry the weight of law, but they reveal the agencies' thinking on a particular issue.
The FTC's advisory opinion examines a proposed statewide physician PPO in Montana. The Montana Medical Association would operate the PPO, which would be managed by ACMG, a Miamisburg, Ohio-based healthcare management company.
Any of the state medical society's 800 members could join the PPO. Participating physicians would accept fees set at a maximum of 88% of their regular fees. However, the PPO would withhold 15% of a physician's fees and place the withholding in a risk pool to cover potential PPO losses. Any pool surpluses would be returned to physicians in proportion to their contributions.
The FTC determined that the plan raised two significant antitrust concerns. First, the PPO had the potential of enrolling more than half the physicians in the entire state of Montana, according to the PPO's own estimates. Controlling such a large group of physicians could lead to anti-competitive actions against payers and consumers.
Second, the physicians didn't share enough financial risk in the venture to make them legitimate business partners rather than competitors fixing prices through a third party, the FTC said. Under federal law, competitors who become single economic units through shared financial risk can't conspire with one another.
"A 15% withhold from charges may not be enough to affect each physician's normal incentive to maximize his or her income by increasing the number of services provided to enrolled patients," the FTC said. "In that case, the withhold would not be a sufficient form of risk-sharing to render a price agreement among PPO members permissible under the antitrust laws."
By comparison, a 20% withholding was enough to insulate some Iowa physicians from the same antitrust concerns, according to the Justice Department's business review letter.
The letter addresses a plan by Des Moines (Iowa) General Hospital to market a managed-care plan to area employers and payers along with 177 affiliated physicians. The plan, dubbed a "collaborative provider organization" by the sponsors, would accept capitated payments or discounted fees from payers. Physicians who receive discounted fees would have 20% of their payments withheld unless they meet specific cost-containment and utilization goals.
In addition to sharing significant financial risk in the venture, the Justice Department determined the plan wouldn't control enough physicians to raise antitrust concerns.
The Justice Department said the deal fell within one of the six healthcare antitrust "safety zones" created by the department and the FTC last September (Sept. 20, 1993, p. 3). One safety zone protects physician network joint ventures composed of no more than 20% of the physicians in any specialty in a geographic market who have hospital staff privileges and who share substantial financial risk.