The American Medical Association recently complained to a House committee that the government casts an overly suspicious eye on physician collaboration through network arrangements. The Federal Trade Commission late last month signaled yet again that its suspicious indeed. Since 2001 the FTC has brought more than 30 complaints against associations of independent physicians and practices engaged in contracting activity that the government viewed as illegal price-fixing. Just one such case was litigated in federal court, and the 5th U.S. Circuit Court of Appeals, New Orleans, sided with the FTC in May 2008. The targeted organization, North Texas Specialty Physicians, has asked the U.S. Supreme Court to review the case.
FTCs not done yet
Calif., Colo. doc partnerships latest to be scrutinized
On Christmas Eve, the commission announced two more administrative complaints filed in tandem with consent orders compelling physician organizations in California and Colorado to cease and desist participating in contract negotiations in ways the government viewed as illegal price-fixing.
They fit within that mold, said healthcare antitrust lawyer Christi Braun, an associate in Ober, Kaler, Grimes & Shriver, Washington. The FTC looked at that conduct and said this is potentially per se illegal. The organizations, Boulder Valley Individual Practice Association, or BVIPA, Boulder, Colo., and AllCare Independent Physician Association, Modesto, Calif., do not concede in the agreements struck with the FTC that they broke the law or that the alleged facts are true.
The governments healthcare antitrust guidelines provide that price coordination isnt a problem if the practices are sharing financial risk or if the joint contracting is a necessary part of broader clinical integration that credibly promises to improve quality and efficiency. Two physician organizations have won favorable advisory opinions from the commission on clinical integration arrangements that involve joint contracting. But more often, the commission has dismissed claims of clinical integration as thinly veiled price-fixing schemes, yielding the parade of complaints and consent orders, and thats what happened in the case of BVIPA.
M. Catherine Higgins, BVIPAs executive director, said that throughout a three-year investigation the FTC ignored the organizations efforts to frame its contracting practices in the context of the clinical integration it provides. Their staff attorneys just have blinders on, Higgins said. That integration includes an information system that manages laboratory orders and results, referrals and other clinical functions, and also includes a polling mechanism used in contract negotiations. The FTC concluded that the organization and its members failed to offer integration sufficient to justify the contracting practices described in the complaint: negotiating and facilitating agreements to fix prices, threatening to terminate contracts with payers that dont go along, and refusing to negotiate individually.
BVIPA, which includes more than 350 primary-care and specialty physicians, in 2004 issued a letter to insurers clarifying that it was each companys choice to enter a single contract with the network, employ BVIPA as a messenger to streamline individual contract negotiations, or invite BVIPA to facilitate direct negotiations with members. Its still our belief that when the insurance company has a choice, theres no per se violation of antitrust law, Higgins said. She added that several members and insurers have struck individual contracts and that others have certified they werent forced into their contracts and will keep them in place.
In May 2008, the FTC held a daylong workshop exploring the nexus of competition and clinical integration, but the program was geared toward the government learning about what was happening in the marketplace rather than giving providers what theyve been looking for: clear guidance on how to do it without drawing heat from antitrust enforcers.
In testimony to the House Small Business Committee on Sept. 25, 2008, AMA Trustee William Hazel said that the clues offered in the commissions advisory opinions indicate that without vast resources physicians are effectively barred from forming networks that allow them to work collaboratively on costly and involved healthcare quality initiatives or participate in balanced negotiations with health insurers. Meanwhile, Hazel added, managed-care consolidation has allowed payers to dictate contract terms and has resulted in rising prices with no benefits to patients. The American Academy of Family Physicians holds the same position.
Clinical integration was not argued in the California case. AllCare IPA has traditionally negotiated capitated contracts for the services of more than 500 physician members, and members also entered their own contracts with payers. More recently AllCare participated in talks with insurers on behalf of members seeking fee-for-service contracts, and the FTC alleged its members sent one company a form letter indicating theyd only do business through the association. In antitrust parlance, thats refusal to deal.
AllCares antitrust attorney, Richard Feinstein, a partner in Boies, Schiller & Flexner, Washington, said the group decided early in the multiyear investigation to revert to what its focus had been all along, capitation contracts that steer well clear of antitrust exposure because the participating members share in the financial risk. This was a tiny, tiny portion of what AllCare exists for, Feinstein said.
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