More than four years after it began its investigation, the Federal Trade Commission last week issued a proposed consent agreement to settle antitrust charges against a physician-hospital organization operated by a Montana hospital and a group of physicians.
The PHO, known as the Billings Physician Hospital Alliance, is believed to have been the first PHO to come under federal antitrust scrutiny. Since then, at least three other PHOs have been investigated and have settled their disputes with the government.
The providers targeted in the Billings investigation signed off on an original consent agreement with the FTC in June 1995 and again on an updated consent agreement in May.
The five FTC commissioners didn't vote on the agreement until Oct. 21. They approved it by a 5-0 vote, and the agency made it public two days later.
"We put this thing behind us long ago. (The settlement) is a nonevent," said James Paquette, president and chief executive officer of Saint Vincent Hospital and Health Center in Billings, the "H" in the PHO.
Mark Whitener, deputy director of the FTC, declined to comment on why the agency took so long to close the book on the Billings PHO case, which he said was routine.
"In our view, the violations were pretty clear cut," Whitener said. "This case was similar to cases we've brought before against physicians."
The release of the settlement comes at a politically safe time for the FTC and in a much different era of federal healthcare antitrust enforcement.
In the early 1990s, when the Billings case began, antitrust officials were publicly beating their chests about going after doctors who dared to interfere with the competition-inducing growth of managed care. Four years later, the managed-care industry is the new bogeyman, and organized medicine led by the American Medical Association has been pressuring the FTC, the Justice Department and Congress to ease antitrust rules for physicians who want to collectively deal with payers.
Attempting to head off AMA-backed legislation that FTC Continued from p. 5
would reduce the authority of the FTC and the Justice Department to scrutinize physician networking activity for possible antitrust violations, the two agencies said late last year that they would issue new relaxed antitrust rules for physician networks. They did so in late August (Sept. 2, p. 4). A month later, Congress recessed without passing the physician antitrust relief bill the AMA wanted.
Had the Billings consent agreement been released before that time, it could have given the AMA more ammunition to push for its antitrust relief legislation.
The draft complaint accompanying the agreement accuses the PHO of first preventing insurers from getting managed-care plans established in the Billings market and then fixing the prices that it would allow such plans to pay physicians for their services.
The FTC said the illegal conspiracy started in 1987, when a group of 115 physicians, representing about 80% of the solo practitioners in the market, formed Montana Associated Physicians Inc., or MAPI, to act collectively against managed-care plans.
The FTC said the conspiracy broadened four years later when MAPI and Saint Vincent created a PHO, with a total of 126 physicians, for the same purpose.
Under federal antitrust law, competitors can't collectively set prices for their services unless they become a single economic unit by creating a legitimate joint venture in which they share significant financial risk.
Under the proposed settlement, the providers are barred from collective pricing unless they form a legitimate joint venture or restructure their operations to comply with FTC and Justice Department antitrust guidelines for healthcare providers.
The guidelines allow competing providers to use an independent third-party, or "messenger," to negotiate prices with payers. The guidelines, as expanded by the agencies in August, also allow physicians to integrate their practices in nonfinancial ways in order to ensure that they're acting as one organization rather than a group of conspiring competitors.
Paquette said the restrictions are moot because the PHO restructured itself to comply with the rules shortly after the investigation began.
"We went to a messenger model almost immediately," Paquette said. "It takes a little longer to get contracts negotiated, but it hasn't been a problem."
The proposed settlement is subject to a 60-day public comment period after which the FTC will decide whether to make it final.