In the latest in a series of antitrust advisory opinions on provider networks, the Federal Trade Commission gave a big thumbs down to a proposed network of orthopedic surgeons practicing in the Washoe County, Nev., market.
The FTC, in a nine-page opinion dated July 11, said the proposed network would have represented an illegal price-fixing scheme because the participating physicians didn't share enough financial risk in the venture (See related story, p. 36).
Under federal antitrust laws, competitors who share sufficient eco-Legal
nomic risk are considered a single economic unit incapable of conspiring with itself.
Michael Peregrine, a healthcare attorney with Gardner, Carton & Doug-las in Chicago, said the ruling offers important legal guidance to providers that attempt to use a "messenger model" contracting system to insulate providers from price-fixing charges.
Under the proposal reviewed by the FTC, eight orthopedic surgeons from two competing group practices would have formed a third organization, called the Northwestern Nevada Orthopaedic Surgery Alliance. The surgeons would have jointly pursued service contracts through the alliance while maintaining their affiliation with their own group practices.
During an initial phase of operation, the surgeons would have pursued service contracts through a messenger model approach in which the surgeons would employ an "independent agent." The agent would have used historical fee data from the surgeons in consultation with payers to create a fee schedule for the physicians' services. The plan called for the surgeons later to move to a package-pricing system and accept capitated contracts.
In neither scenario did the contracting system resolve potential anti-competitive behavior, the FTC said.
In the first situation, the agent/messenger would be an integral part of the fee-setting and negotiating process rather than simply acting as a vehicle through which the two parties can pass information, the FTC said.
"The use by competitors of a common agent to formulate pricing proposals would raise serious antitrust concerns," the FTC said.
And in the second situation, although the surgeons as a group would share financial risk with an employer or insurer, they would not share sufficient economic risk among themselves to be considered a single economic unit, the agency said.
Jacqueline Cox, head of a consulting company working with the physicians, said the surgeons already have submitted a revised messenger model scheme to the FTC and are awaiting clearance.