MODERN HEALTHCARE's article, "Docs get their way," subtitled, "Under AMA attack, feds back off antitrust enforcement," (Jan. 8, p. 40) made the case that political pressure has been the dominant cause of the "leniency" shown by the Federal Trade Commission and the Justice Department in their enforcement actions.
The article overstates the agencies' responsiveness to political pressure and, more importantly, significantly understates the merits of the agencies' recent initiative to re-evaluate their enforcement policies.
None of the provider, consumer, employer, managed-care or insurance organizations that has opposed statutory changes in the antitrust laws, including the American Group Practice Association, has criticized the agencies' willingness to clarify their enforcement posture or the large number of positive business review letters and advisory opinions issued.
The agencies have been responsive to the need for enforcement policy clarification during a time of rapid market development, while important enforcement activity has continued at a fairly stiff pace.
Now is an especially appropriate time for the FTC, coordinating with the Justice Department, to initiate the information gathering process announced last Dec. 5 in a speech by Mark Whitener, deputy director of the FTC.
We at the AGPA had urged the FTC to address some of the physician arrangements identified in the speech. We were the first group to meet with the FTC after the speech. We commend the FTC for this initiative.
Since the statements of the enforcement policy were issued by the FTC and the Justice Department in 1994, healthcare markets have changed on both the demand (employer) and supply (provider) sides in ways that make this new initiative timely.
First, on the demand side, large, self-funded employers are increasingly contracting with provider networks.
These networks are currently caught between the threat of being regulated as insurance companies, if they contract on a risk-sharing basis, and violating antitrust law, if they negotiate non-risk-based prices.
The insurance side of this bind gained significance when the National Association of Insurance Commissioners issued a bulletin on Aug. 10, 1995, warning state insurance commissioners that providers that accept risk-sharing payments may be in the business of insurance.
Under such a scenario, providers would have to be licensed by the state and provide certain financial safeguards, such as establishing statutory capital reserves and other claims-related consumer protections.
For provider networks, the position of the insurance commissioners runs head on into the FTC and Justice Department statements of enforcement policy, which identify a "safety zone" for provider networks that accept risk in the form of capitation or significant risk withholds. Provider networks, even if they want to accept risk-sharing payments from employers that would bring them into the antitrust safety zone, may not be able to because of state insurance laws.
Under these circumstances, now is the right time for the agencies to talk with employers, and the provider networks they contract with, about the need for additional enforcement guidance.
On the supply side, physician networks have matured. For many years, the antitrust agencies challenged physician networks that were formed by unintegrated groups of physicians to resist managed care and keep prices high.
Such conduct is not unusual in low managed-care markets. Today, however, physician networks, including networks of group practices, are forming to embrace managed care. These networks are usually formed with the expectation of contracting on a risk-sharing basis, if that is what payers request. They often make significant investments in the capacity to control utilization and monitor and improve quality within the network. They generally have a strong primary-care base, although some specialty networks formed to subcontract with primary-care groups or managed care also are appearing in mature managed-care markets.
The agencies know these physician networks exist, and view them as pro-competitive. What the agencies need to do now is issue further guidance on how they will analyze these networks, identifying circumstances under which these networks will receive "rule-of-reason" treatment when they contract on a fee-for-service basis, which they are frequently asked to do by employers and managed-care companies.
Under a rule-of-reason antitrust analysis, law enforcement officers examine the actual competitive effects of a transaction rather than deeming it automatically illegal.
In the article, MODERN HEALTHCARE*described a critical analysis of agencies' current enforcement policy on provider networks by a prominent healthcare antitrust scholar, Clark Havighurst from Duke University School of Law.
Havighurst opposes statutory changes. On the merits, the professor, like the AGPA, supports current efforts of the FTC and the Justice Department to take a new look at markets and to adopt a more flexible and lenient enforcement policy.
The suggestion in the article that the antitrust agencies are considering change because of political pressure misses the mark. On the contrary, the time is right for further clarification of antitrust enforcement policy.