An attempt by a group of Colorado doctors to control an "independent" third-party contracting service led to a revision of an agreement settling price-fixing charges against them.
The Federal Trade Commission approved the final settlement May 20, more than a year after issuing a proposed settlement in the case.
Richard Feinstein, who heads the FTC's healthcare antitrust division, said the agency was concerned that the physicians' group was potentially circumventing the consent agreement before it was even imposed.
He said the agency was unaware of the newly formed contracting service when the FTC entered the proposed antitrust settlement.
Consequently, the final agreement bars members of the group from owning the contracting company, and it bars company owners from engaging in contract negotiations on behalf of the group's physicians.
Mark Horoschak, who represents the Mesa County (Colo.) Physicians Independent Practice Association and once held Feinstein's position at the FTC, declined to comment on whether the physicians formed the contract review organization to avoid the price-fixing allegations. He said the physicians are grateful the process has ended.
"We were able to convince the FTC that the IPA would not be the exclusive bargaining agent for the doctors and that payers could negotiate directly with the physicians," said Horoschak, an antitrust lawyer with the Charlotte, N.C.-firm Womble, Carlyle, Sandridge & Rice. "That's why the FTC ultimately did not insist on divestiture."
That's what the FTC originally wanted in May 1997, when it sued the 192-physician group, alleging illegal price fixing. The agency said the physicians were independent competitors who used their IPA to collectively set prices.
Participants in the IPA represent 90% of all primary-care physicians in the group's 93,000-population market in western Colorado and 85% of all practicing physicians, the FTC said in its lawsuit.
Before the case was heard by a federal administrative law judge, both sides entered a proposed settlement in February 1998, which largely let the physicians off the hook. The settlement allowed the IPA to continue if it stopped collectively negotiating member fees and abolished its contract-review committee.
The deal allowed the physicians to use a "third-party messenger" model, through which doctors could individually deal with payers.
After the FTC sued but before the doctors entered the proposed settlement, several IPA physician leaders formed a new company called Innovative Reviewers to be the messenger for the physicians, the government said. According to the FTC, 12 of the company's 15 shareholders were members of the IPA, one was an IPA employee, and another was married to an IPA member.
Under the final agreement, those shareholders must either drop out of the IPA or limit their contract negotiations to non-IPA members.