Responding to physicians' cries for more market leverage, Rep. Henry Hyde (R-Ill.) has drafted legislation that would give physicians and other providers antitrust relief to form networks to deal collectively with payers.
MODERN HEALTHCARE obtained a copy of the bill, which surfaced last week in Washington. It's expected to be formally introduced shortly in the House, with a hearing to be scheduled as soon as the end of February.
The legislation comes despite the fact that dozens of physician networks have formed under existing antitrust laws and enforcement policies.
The Federal Trade Commission, for example, last week released yet another favorable antitrust ruling on a proposed physician network. The ruling, which dealt with a group of New Orleans urologists, is at least the 22nd favorable physician network ruling released by the FTC or Justice Department since 1993 (Jan. 8, p. 40).
The Hyde bill, as drafted, would require the FTC and Justice Department to review the actual competitive effects of a physician network rather than considering certain networks automatically illegal as price-fixing conspiracies.
In antitrust parlance, it means networks would undergo a "rule of reason" analysis, and the activities of the networks would no longer be illegal per se.
Similar antitrust relief language was part of the compromise federal budget bill that Congress passed last November but was vetoed by President Clinton. A provision in the bill, backed by the American Medical Association, would have allowed certain physician networks, now considered illegal per se, to contract with Medicare-certified provider-sponsored networks. The AMA ultimately wanted the antitrust relief extended to contract negotiations with all payers, not just Medicare.
Although the measure never made it into law, it prompted the FTC to reconsider its approach to analyzing physician networks (Dec. 11, 1995, p. 24).
Under current law and enforcement pol-icies, physicians can form contracting net-works if they meet certain conditions. The conditions are designed to ensure that the physicians don't monopolize a market or act as a single economic unit rather than a group of conspiring competitors.
For example, participation in a nonexclusive physician network, or network that allows physicians to participate in other networks, is limited to 30% of a particular medical specialty in a given geographic market. Also, participating physicians must share substantial financial risk in the network. They can do this by accepting capitated payment rates or creating other financial incentives, such as "withholds" from physician payments.
Physician networks that don't meet these conditions or use a third party, or "messenger," to collectively negotiate with payers may be charged with price-fixing conspiracies, which are per se violations of the antitrust laws.
Under Hyde's legislation, however, those same networks "shall not be deemed illegal per se. Such conduct shall be judged on the basis of its reasonableness, taking into account all relevant factors affecting competition, including the effects on competition in properly defined markets."
The bill defines provider broadly and could include hospitals that form contracting networks. And it would apply to networks contracting with all payers, not just Medicare.
The bill would require the FTC and Justice Department to issue guidelines on how they would review physician and provider networks under the rule of reason approach.
An AMA spokeswoman said the association is working with Hyde's staff on the bill but hasn't decided whether to endorse it.
Kathleen Kenyon, director of legal affairs and systems integration for the American Group Practice Association, said the legislation is unnecessary because it pushes the FTC and Justice Department in the same direction that they're moving already.
"We're interested in getting to the same place, but the statutory route is not the route to go," she said. "We could end up with an unnecessary statute with unintended consequence."
Kenyon said legislation that prescribes what the agencies should do may result in less flexible antitrust enforcement policies.