Four Maine hospitals have agreed to integrate their respective physician-hospital organizations into a single contracting network under an antitrust settlement with the state of Maine.
Absent such integration, collective contract negotiations between the PHOs and payers could be considered illegal price fixing among competitors, according to a draft antitrust complaint filed along with the settlement.
The Maine attorney general's office filed the draft complaint and settlement on Jan. 11 in Kennebec County Superior Court.
The settlement is one of the first involving a PHO that sought legal protection under a state healthcare antitrust exemption law.
In 1992, Maine became the first state to pass a law that grants antitrust exemptions to hospitals that can prove their proposed collaborative ventures provide certain community benefits, such as lowering costs or improving quality or access, that outweigh their potential anti-competitive effects. Since then, nearly two dozen other states have passed similar laws.
Two North Carolina hospitals recently became the first to merge under such a state antitrust exemption law (See related story, p. 30).
The Maine hospitals that want to form one PHO by combining their own PHOs are 146-bed Central Maine Medical Center in Lewiston, 46-bed Stephens Memorial Hospital in Norway, 40-bed Northern Cumberland Memorial Hospital in Bridgton and 50-bed Rumford (Maine) Community Hospital.
Central Maine competes in a two-hospital town, but the other three are the only acute-care facilities in their towns. Also, the "super PHO" envisioned by the hospitals would include 100% of the 63 physicians practicing at the three smaller hospitals. The super PHO would include 130 of the 150 physicians on staff at Central Maine.
To avoid an antitrust suit by the state, the hospitals and physicians agreed to financially integrate their PHOs into a single economic unit. Under federal and state antitrust laws, a single economic unit is incapable of conspiring with itself to fix prices.
Under the settlement, the four PHOs agreed to accept capitated payment contracts and other at-risk payment schemes from payers and create common financial incentives, such as "withholds" from payments to physicians, as evidence of their integration.
The hospitals and physicians also agreed that the super PHO, to be called the Central and Western Maine Regional PHO, would be nonexclusive, meaning its hospitals and physicians would be free to participate in other networks and managed-care plans.
And the super PHO would be barred from entering into a service contract of longer than two years unless requested specifically by the payer.
"We knew that in order for this thing to work, we had to have 100% of the doctors at the three other hospitals to make it attractive to payers," said William Young Jr., president and chief executive officer at Central Maine. "But the state was concerned about the potential for restraint of trade."
Young said the providers opted to economically integrate their PHOs rather than use a "messenger," or third party, to negotiate contracts between payers and individual hospitals and physicians. A messenger model was an option available to the providers under the antitrust settlement with the state.
Young said the hospitals and physicians hope to have the super PHO up and running by the end of the month, with the first service contract signed shortly after that.