April 2002 Bulletin

FTC to allow joint negotiations

The U.S. Federal Trade Commission (FTC) announced it will not challenge a proposal by a physicians group to organize competing physicians into a clinically integrated provider network in order to negotiate contracts with health plans to offer network physician services on a fee-for-service basis.

The Denver Col. physicians group, MedSouth Inc., asked the FTC to review the proposal for possible antitrust violations. Under the proposal, network physicians would be required to participate in the program, but would be free to negotiate and contract with customers who do not want to purchase the network services. In addition, the physicians in the network would share clinical information about patients and adopt and adhere to clinical guidelines and performance goals.

According to the FTC opinion letter issued on February 21, the proposed arrangement is not likely to have a significant anticompetitive effect as long as physicians in the network are willing "to deal individually on competitive terms with health plans, or if final physician participation in the group is significantly smaller than the [physician network’s] current membership." However, the FTC warned that it will monitor the physician network closely and that if physicians in the group use their collective power to force rate hikes or force payers into contracts, the agency will likely recommend antitrust enforcement actions "absent evidence that substantial efficiency benefits outweigh likely anticompetitive effects."

This appears to be the first instance where the FTC has allowed joint negotiation by competing physicians on the basis of clinical integration alone, although it is specifically permitted in the joint FTC-Department of Justice 1996 Antitrust Guidelines. In the past, the FTC has allowed joint negotiations by physicians who were economically integrated, e.g., by joint profit-sharing or capitation arrangements, who were therefore unable to form anticompetitive conspiracies.

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