Danbury, Conn., is the site of a second federal antitrust investigation of a physician-hospital organization, MODERN HEALTHCARE has learned.
The PHO targeted in the U.S. Justice Department probe is operated by 458-bed Danbury Hospital and 380 physicians on the hospital's medical staff.
The Federal Trade Commission also is conducting a separate antitrust investigation of a PHO in Billings, Mont.
The Billings and Danbury probes are believed to be the first-ever federal antitrust investigations of PHOs (See related story, p. 24).
The identities of the targets of the first PHO investigations have been a much-discussed topic in healthcare antitrust circles since March, when a law firm publicly disclosed that it had two PHO clients under investigation.
Hospitals and physicians form PHOs to jointly pursue payer contracts. The number of PHOs has mushroomed over recent years as hospitals and their key physicians attempt to align their financial incentives and protect or expand their patient-referral base.
The formation of a PHO poses two antitrust questions: Is the PHO illegally lessening competition by locking up too many doctors in its market?
Or are competing physicians using the PHO as a vehicle to fix prices?
In Billings, the focus of the FTC's probe is how the Billings Physician Hospital Alliance sets prices that it negotiates with payers (May 15, p. 8).
In Danbury, the focus of the Justice Department's investigation is market share, said Matthew Miller, M.D., vice president of medical affairs at Danbury Hospital and president of the PHO.
"What makes us unique is our relative geographic isolation," he said. "The potential for monopoly is of striking interest to the Justice Department."
The hospital is the only acute-care facility in Danbury, a city of about 66,000 people located on Connecticut's western border with New York. It's about 40 miles northeast of New York City and about 40 miles southwest of Hartford.
Miller said the PHO physicians represent 97% of the physicians on staff at the hospital, and the PHO is not open to physicians who aren't active mem bers of the hospital's staff.
The hospital and physicians formed the PHO, called Healthcare Partners, last June and received a civil investigative demand last fall for documents pertaining to the PHO's operations. A civil investigative demand is like a subpoena, but it's used in civil, not criminal, investigations.
Miller said the hospital, physicians and PHO have cooperated fully with the investigation, sending in the requested documentation and meeting with Justice Department officials several months ago in Washington.
Miller said the Connecticut attorney general's office also is working with the Justice Department in the case.
Miller said provider representatives and their attorneys are scheduled to meet with law enforcement officials this week to discuss "the language of a possible consent decree." He said the Justice Department has "very specific thoughts" on how to ensure that the PHO is a pro-competitive force in the market despite its high market share.
"We hope to have this whole thing wrapped up by next month," he said.
The Danbury providers are no strangers to antitrust inquiries from Justice Department investigators.
In a 1987 business review letter, the department said a proposed merger of two group practices, which represented the entire general surgery department at Danbury Hospital, would violate federal antitrust law.
The department said the merger would give the 10 surgeons involved the power to arbitrarily raise prices and control the availability of surgical services in the market served by the hospital.
The group practices subsequently scrapped their plans.
And in late 1992, Danbury Hospital received a civil investigative demand from the Justice Department as part of the agency's probe of whether Connecticut hospitals conspired to fix the wages paid to nurses and other workers (Feb. 1, 1993, p. 3).
The investigation technically is open, although there have been no publicly disclosed developments in the case for more than two years.