A landmark antitrust settlement reached late last month with a Colorado physician group will require the independent practice association to change how it reviews contracts with insurers.
The agreement settled Federal Trade Commission charges that the group had fixed prices and excluded third-party payers from entering the market. Both sides claimed victory: The IPA applauded the settlement because it didn't include the government's original plan to disband the group. The FTC said the more important impact of the agreement was that it sent a strong message about boundaries to all IPAs.
"There's no doubt that some degree of collective integration of multiple providers can be helpful," says Willard Tom, deputy director of the FTC's bureau of competition. "The problem was when this IPA negotiated on an exclusive or de facto basis for all of the providers in a market, that became the exercise of market power, and that's bad for consumers."
The FTC issued a complaint against the Mesa County Physicians IPA, which is located in Grand Junction, Colo., in May. The group is comprised of about 190 physicians, or approximately 85% of all private practice physicians in the area.
It was spawned from a group that first formed in the early 1970s to provide physician services to Rocky Mountain HMO, which is now the largest insurer in western Colorado. The group's relationship with the HMO grew extensively during the 1990s, and it is at the heart of the FTC complaint. Rocky Mountain enrollees account for about half of the IPA's patient volume.
The complaint charged that the relationship "created a substantial obstacle to the ability of other payers to contract with a physician panel in Mesa County."
It also stated that the IPA employed a fee schedule and encouraged members not to deal individually with other, third-party payers. The result, the FTC claimed, was higher prices for physician services and the exclusion of third-party payers that could have offered alternative health insurance programs.
The FTC originally sought to reduce the size of Mesa, but dropped those plans after it found the physicians were sharing financial risk and were sufficiently clinically integrated. In addition, the FTC says, the market has become more competitive since the complaint was filed.
"What other IPAs should take away from this case," says the IPA's President William Kelley, M.D., "is if you are clinically integrated you have a lot more leeway than if you are not clinically integrated. If you are an IPA just for financial reasons, then you're not under the umbrella of safety that you would be if you were more clinically integrated."
Once the government backed off plans to disband Mesa, the group decided to settle, Kelley says. However, he denied that the IPA ever used a fee schedule and says agreeing to settle is not an acknowledgment of any wrongdoing.
The proposed consent order prohibits Mesa from engaging in collective negotiations on behalf of members, collectively refusing to contract with payers, acting as an exclusive bargaining agent for members and restricting members from dealing with third party payers through another entity. The order also disbands Mesa's contract review committee, from which members could receive advice on individual contracts.
The good news for IPAs is the fact that Mesa was allowed to remain intact, says Keith Mueller, past president of the National Rural Health Association, who is helping rural providers form IPAs.
"What helps is knowing that having almost all of the physicians (in a rural area) as members of the IPA is not a violation. If you behave properly in terms of not looking at each other's fee schedule and you don't force physicians to accept only the contracts the IPA negotiates, you should not have to worry about an investigation," he says.
What all IPAs will need to be careful about in the future, Mueller and other antitrust experts agree, is staying within the boundaries of the "messenger model," with IPAs simply carrying contractual proposals back and forth between providers and purchasers.