Normally an agreement like the one proposed by the Norman (Okla.) Physician Hospital Organization would raise alarms about collusion and other antitrust matters because the 280 doctors involved—a majority of the physicians in Norman—don't work for a single entity and would be considered competitors in their 38 medical specialties.
They work for various private practices or the publicly owned 388-bed Norman Regional Health System, and they will remain independent competitors in the future, even as they collectively work toward common prices.
In 2004, then-FTC Competition Bureau Director Susan Creighton said in a speech, “It is a core antitrust law principle that it is illegal for such competitors to agree on the prices they will charge, except where they come together and integrate in a legitimate joint venture that results in efficiencies or other pro-competitive benefits that outweigh the restriction of competition.”
The February 2013 FTC staff advisory opinion on the Norman PHO said the proposed physician hospital organization's new network appeared legal. The finding was notable particularly because the organization may use its size to negotiate higher prices and its founders couldn't put a number to the potential savings from the improvements in care, the opinion says.
“The Norman PHO came in and said, 'We can't quantify what the efficiencies will be.' And that is significant,” said R. Dale Grimes, an attorney with Bass, Berry & Sims in Nashville. “A lot of times, (providers) will try to say, 'We expect this to be the result.' Here they didn't do that, and the FTC approved them anyway.”
The decision comes as doctors and health systems across the country are banding together into clinically integrated organizations, responding to a national drive to slow the expansion of healthcare costs and improve the quality of patient care at the same time.
The physician-hospital organization is an older model that came into popularity during the 1990s, along with the rise of risk-sharing with HMOs. In some areas, independent physician associations, or IPAs, still remain a common vehicle to achieve clinical integration without a hospital being involved.
Recently, providers interested in clinical integration have been forming accountable care organizations, some of which include Medicare as a payer and have contracts under the reform law's Medicare shared-savings program.
ACOs certified by Medicare get a legal head start over other forms of integration, because they are presumed to be legitimate and therefore can proceed directly to the last stage of legal analysis—the one that the Norman PHO just passed—which is a “rule of reason” investigation that attempts to determine whether “pro-competitive benefits” outweigh the risks of anti-competitive effects.
Michael Murphy, president and CEO of the Iowa Health System's accountable care organization, based in Des Moines, said the concepts of coordinated, accountable care embodied in the healthcare reform law are giving healthcare providers from independent organizations more ability to create the strong, centralized governance models that are needed in such an organization, regardless of whether it's a PHO, IPA, ACO or any other abbreviation.
“Yes, there are hurdles, and there are things that you need to do. But we have gone a long way to taking down the barriers, as you see with the FTC ruling” on the Norman PHO, Murphy said. “I don't believe we need to own the continuum of care in order to do this work. What we need to do is bring together sites of care under a common governance model.”
Murphy predicted that with the right governance model in place, organizations like the Norman PHO will start using their combined patient data to pinpoint the complex and costly 5% of patients in the community who are the drivers for much of healthcare cost growth—the same as an ACO would do.
With Norman, the FTC decided that the pro-competitive benefits of improved patient care and lower cost would flow from the proposed new network's guarantees to share patient treatment and quality data among the unaffiliated doctors.
The arrangement would help prevent duplicative tests and hospitalizations and use transparency to encourage doctors to comply with common standards, all on a uniform health IT system.
The network also is developing its own clinical practice guidelines on 50 common diseases and will audit providers on their care, counsel outliers, and potentially even boot noncompliant doctors from the network. The results of the audits will be available to the network and to insurers.
Perhaps most crucially, attorneys said, is that any doctor can choose to pull out of the network if he or she doesn't like the contract rates and attempt to negotiate their own prices with insurers. The PHO will not use its purchasing power to prohibit insurers from working with doctors outside the network.
Gary Clinton, executive director of the Norman PHO, said he thinks insurance companies will be interested because it gives them the chance to negotiate a uniform contract for as many as 280 disparate doctors in a single network. “If it works for us, they've got a ready-made network right there,” he said. “If it doesn't, they can go back to each individual physician and get what they want, one at a time.
“The reason we did this is because we think we can hold down costs and provide better care, and we think we can prove it. And if there are some profits in there, all the better, but that's not the reason we're doing it.”
A spokeswoman for the state's largest insurer, Blue Cross and Blue Shield of Oklahoma, did not comment on the FTC's approval of the new network.
Andy Bachrodt, managing partner of the healthcare group at consulting firm Kurt Salmon, said clinically integrated PHOs like Norman's may appeal to insurers that have been skeptical in the past about a governance model that some have seen as way to drive up physicians' rates.
And he saw the FTC's decision to let the Norman PHO move forward and implement its proposal as a sign that it wants to encourage the development of such organizations.
“I think the FTC has clearly declared that the community benefit of improving quality and lowering cost can supersede what might otherwise be construed as an anti-competitive series of activities, like being able to contract together,” Bachrodt said.
