April 2002 Bulletin

Messenger model consent decree proposed

What will be prohibited, permitted

By Richard N. Peterson, Esq.

A number of individuals from all parts of the country have contacted the AAOS regarding the proposed consent decree between the Federation of Physicians and Dentists (Federation) and the U.S. Department of Justice (DOJ) regarding the messenger model of physician joint negotiating with payers. Following is a summary of the underlying complaint and an analysis of the proposed consent degree.

On November 20, 2001, the DOJ’s Antitrust Division published the proposed consent decree in the Federal Register. The final judgment, with an accompanying competitive impact statement, had been presented to the U.S. District Court for the District of Delaware on October 22, 2001 (United States of America v. Federation of Physicians and Dentists, Inc., D. Del., No. CA 98-475 JJF). As of the date of this writing (March 13, 2002), it has not yet be signed, but there are no indications that it will not ultimately be accepted.

In the underlying complaint, filed on August 12, 1998, the DOJ alleged that the Federation recruited almost all of the private practice orthopaedic surgeons in Delaware to be its members, and then that these members negotiated exclusively through the Federation to oppose a proposed fee reduction by Blue Cross and Blue Shield of Delaware in violation of section 1 of the Sherman Antitrust Act, 15 U.S.C. Sect. 1. Section 1 of the Sherman Act provides that "[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several states, or with foreign nations, is hereby declared to be illegal." In the complaint, the DOJ maintained that the Federation had misused the messenger model in Delaware to "facilitate illegal collusion by doctors to maintain high fee levels."

Prohibited activities

The proposed consent judgment, which applies to the Federation’s conduct both in Delaware and nationally, would bar the Federation from:

Permitted activities

The proposed consent decree does not prohibit the Federation from serving as a third party messenger in negotiations between independent physicians and health insurance plans, as long as the Federation abides by certain restrictions on this activity. These restrictions include:

The proposed consent decree reaffirms and clarifies many of the existing rules and restrictions generally applicable to the messenger model of physician negotiation. A number of legal commentators have suggested that the proposed consent decree either signals that the DOJ and the Federal Trade Commission (FTC) have adopted a stricter, more narrow interpretation of the messenger model or that it represents a relaxation of the antitrust rules applicable to the use of the messenger model, providing greater freedom for independent health care providers to negotiate jointly with payers. I subscribe to neither view. However, the proposed consent decree is useful in that it clearly delineates one narrow path by which independent physicians should be able to jointly communicate with payers regarding payment and other contractual terms without undue fear of antitrust scrutiny.

Whether a particular messenger model compiles with the antitrust laws requires a case specific analysis. Orthopaedic surgeons contemplating such a negotiation model are strongly encouraged to retain the services of knowledgeable health care antitrust counsel.

Richard N. Peterson, Esq., is the AAOS General Counsel.

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