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June 2007 |
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Christi J. Braun Appeared in HMOs & Health Plans
After years of provider-controlled contracting organizations trying (and failing) to circumvent the antitrust laws, payors have grown cynical about the benefits of contracting with physician joint ventures. Clinical integration, though, is not the next refuge for price-fixing physicians, and, in fact, could provide significant benefits — improved quality and reduced costs-for patients and payors. As originally outlined by the Federal Trade Commission (FTC) and the Department of Justice Antitrust Division DOJ), a clinically integrated joint venture is one in which physicians (or other healthcare providers) have a mutual awareness of all participants' practices, interact closely in the provision of medical care, and work collectively to achieve cost efficiencies and quality improvements. The joint setting of price for the clinically integrated product is not illegal where the joint venture can show that the price setting is reasonably necessary to the achievement of the cost and quality efficiencies of the arrangement. Through advisory opinion letters and investigation settlements, the FTC has reiterated that organizations contemplating clinical integration must be serious about improving quality and controlling healthcare costs and should avoid unnecessary restraints on competition. Though some provider-controlled contracting organizations claiming to be clinically integrated are not actually integrated, payers should not condemn all clinical integration joint ventures. It is fine for payors to approach these arrangements with caution, though, because those that are serious about clinical integration will not need to strong-arm payors to contract with them. The few that can substantiate their claims to integration will offer substantial quality-improvement benefits to payors' subscribers and will entice payors with programs to control rising costs. Section 1 of the Sherman Act prohibits agreements among private individuals or businesses that unreasonably restrain competition. 1 Independent healthcare providers2 often do not think of themselves as "competitors," but they are competitors if they provide comparable services in the same geographic area. When a provider-controlled contracting organization such as a physician-hospital organization (PHO) or an independent practice association (IPA) negotiates the prices for services its members will provide, its actions result from an "agreement" among its members. 3 The organization's collective negotiation of the prices for its members' individual services thus restrains the competition between the members of the organization. Absent sufficient integration among the organization's providers, this restraint will violate § 1 of the Sherman Act. 4 Government focus on integration dates back to 1982 with the U.S. Supreme Court decision in Arizona v. Maricopa County Medical Society. In that case, the Supreme Court found that agreements among competing physicians regarding the prices for their individual services are per se, or automatically, unlawful unless they achieve sufficient operational integration. 5 The defendants, foundations for medical care, argued that the healthcare industry sufficiently differed from other industries that their price setting should be analyzed using the rule of reason. 6 The Supreme Court rejected this argument and noted that without integration among the physicians, the foundations' maximum price setting was no different, or less harmful, than the price fixing condemned as per se illegal in previous cases. 7 Since Maricopa, however, the Supreme Court has "urged caution in the application of the per se label . . . where `the economic impact . . . is not immediately obvious.'" 8 Thus, when the FTC analyzed the purported messenger arrangement and "clinical integration" of North Texas Specialty Physicians (NTSP), 9 it affirmatively decided not to apply the per se rule as the Supreme Court did in Maricopa.10 Instead, the FTC applied the "inherently suspect" truncated rule-of-reason analysis that it articulated in its PollyGram Holdings, Inc. decision. 11 Although the FTC readily found NTSP's agreements on price (and other coercive conduct) to be "inherently suspect," or conduct of a type previously condemned by courts, the FTC's truncated rule-of-reason analysis allowed NTSP an opportunity to provide legally supportable, procompetitive justifications for its conduct. Despite the more lenient legal standard, NTSP was unable to convince the FTC that its conduct was reasonably necessary to achieve any efficiencies. 12 Although the FTC's decision raises questions as to whether physician price-fixing agreements are still subject to per se condemnation, it remains clear that provider-controlled contracting organizations must generate substantial efficiencies-generally through partial integration of their practices — to avoid antitrust liability. Since Maricopa, provider-controlled contracting organizations have struggled with the question of how they can legally enter into contracts with payors, and payors have struggled with the question of whether organizational contracts are sufficiently beneficial. Historically, the answers to both of these questions often depended on the goals of the payors — managing care and costs for health maintenance organization (HMO) products or creating a sufficiently broad, but cost-effective panel for preferred provider organization (PPO) products. The concept of "financial integration," 13 which predates Maricopa, took on new importance in the 1980s and 1990s as HMO plans were viewed as a means of containing the rising costs of healthcare. HMOs, looping to put together cost-effective networks of providers, often sought arrangements with IPAs and PHOs that involved financial risk sharing through capitation payments, global fees, percentage of premium arrangements, or fee withholds. To successfully share substantial financial risk, the physicians needed to sufficiently integrate their practices through IPAs and PHOs to achieve cost efficiencies. The joint pricing of the physicians' individual services, when analyzed by the antitrust agencies, was considered reasonably necessary for the IPAs and PHOs to achieve those anticipated cost efficiencies. 14 Although some provider-controlled contracting organizations were never able to achieve the desired efficiencies and lost a great deal of money, others were very successful in their risk-sharing contracts. Likewise, some payers enjoyed great success in these contracting arrangements, while others viewed the arrangements as administratively burdensome and unprofitable. With the late 1990s backlash against the stringent controls imposed by HMOs, many payors started leaving the risk-contracting business. IPAs and PHOs that either no longer wanted to accept risk, or could not accept risk because payers removed the option, still wanted to be able to contract with payers but could not rely upon financial integration to insulate them from antitrust liability. While many IPAs and PHOs were entering HMO contracts in the 1990s, they also were entering contracts with payors for PPO products. As the popularity of PPOs caught on, many payers scrambled to put together networks of providers willing to accept discounted rates in exchange for patient volume. Although some IPAs and PHOs used valid messenger arrangements to avoid antitrust problems, most simply negotiated PPO product contracts. 15 Many payors were unconcerned about whether or not, under the antitrust laws, the IPAs and PHOs could legally negotiate contracts on their members' collective behalf. It is possible that the transactional cost efficiencies of single-signature contracts with the provider-controlled contracting organizations were sufficient to outweigh the competitive restraints of the joint price setting. 16 It is also possible that significant efficiencies from the IPAs' and PHOs' financial risk-sharing arrangements "spilled over" to the fee-for-service PPO contracts, resulting in significant efficiencies for the PPO arrangements. 17 As these contracts came up for renewal or renegotiation, though, payors became more concerned about physicians' collective setting of price in these PPO contracts. Thus, in the late 1990s, as IPAs and PHOs attempted to collectively negotiate non-risk HMO and PPO contracts, payers' focus on the legality of these arrangements increased. In general, the reason for this concern was that physicians sought higher rates and, when the payors rejected the rates or expressed an interest in contracting directly with the physicians rather than through the IPA or PHO, the provider-controlled contracting organizations used market power and coercive tactics (refusals to deal except upon collectively determined terms) to extract payors' agreements to the higher prices. As the FTC and the DOJ began investigating IPAs and PHOs for their collective price setting and other anticompetitive conduct, antitrust awareness among payors and providers increased. 18 Some provider controlled contracting organizations, unwilling to sufficiently integrate19 or stop their anticompetitive conduct, simply attached labels such as "messenger model" to their price fixing, leading payers to distrust provider-controlled groups. Other IPAs and PHOs, though, realized that they had been able to provide more cost-effective healthcare when they were financially integrated and looked to clinical integration as a means to return the focus of their organization to quality improvement and cost containment. The FTC and the DOJ first introduced the concept of clinical integration in their August 1996 Statements of Antitrust Enforcement Policy in Healthcare.20 The rationale behind the inclusion was that financial risk sharing was not the only means by which physicians could integrate their practices to produce significant cost and quality efficiencies. Although the agencies wanted physicians to be free to innovate and determine what a clinical integration program for their market might look like, the antitrust agencies did provide some thoughts, noting, "Such integration can be evidenced by the network implementing an active and ongoing program to evaluate and modify practice patterns by the network's physician participants and create a high degree of interdependence and cooperation among the physicians to control costs and ensure quality." 21 In addition, the agencies made some suggestions about what a physician joint venture seeking to clinically integrate might do, including: (1) setting up a process to selectively choose high quality, or more efficient, physicians; (2) establishing a utilization management process to ensure quality and cost control; and (3) investing time and money in setting up the infrastructure necessary to achieve the expected efficiencies. 22 Despite the agencies' efforts in the Statements to encourage physicians to explore other means of integration, physicians did not seriously consider clinical integration for another five years. This lag in time might be explained by the success of financial risk sharing in the mid-1990s, or physicians may simply have been looking for more guidance. 23 In February 2002, the FTC issued its first advisory opinion letter to a physician joint venture, MedSouth, Inc., that sought to implement a clinical integration program. 24 MedSouth is a prune example of an IPA that, following the demise of its risk contracting business, looked for new means of facilitating quality improvement and cost containment. At the time of its advisory opinion request, MedSouth had 432 physician members practicing, in 39 medical specialties in the southern part of Denver, Colorado. It proposed: (1) the use of a web-based electronic clinical data record system to access and share clinical information relating to their patients and to facilitate coordination of care; (2) the development and implementation of clinical practice protocols covering 80-90% of the prevalent diagnoses, which would be monitored for compliance; (3) the development of performance goals or benchmarks relating to protocol compliance, quality improvement, and appropriate provision of services, against which physicians' performance would be measured as a means of improvement; and (4) the development of a program to improve performance of physicians willing to do so and expel those who could or would not. The FTC staff concluded that "the proposed program appears to have the potential to improve the quality and effectiveness of healthcare services that are delivered to patients, and thus to provide important benefits to consumers." It noted, with favor, that "the collective development and implementation of the protocols and benchmarks has the potential to create significant integration and interdependence among the physicians in their rendering of medical services." With regard to the clinical data record system, the FTC made clear that, while adoption of a clinical information system by itself would not suffice to establish integration, its use could facilitate greater collaboration and coordination of treatment. As the FTC explained, Efficiency-enhancing integration typically involves joint performance of one or more business functions of the participants in a way that potentially benefits consumers by expanding output, reducing price, or enhancing quality, service, or innovation, and that could not reasonably be achieved by the participants individually. The integration must likely generate procompetitive benefits that enhance the participants' ability or incentives to compete, and thus offset any anticompetitive tendencies of the arrangement. The FTC staff was careful, though, to also look at the possible anticompetitive effects of MedSouth's proposed program and whether those effects would be offset by the procompetitive efficiencies of the program. Looking closely at the medical staffs at the three hospitals in South Denver, the FTC noted that, in certain medical specialties, a high percentage of the physicians were MedSouth participants. Because it is difficult to calculate market shares for physician organizations, participation percentages are used as a proxy. Thus, MedSouth's high participation percentages in certain specialties raised a concern for the FTC that the MedSouth physicians could exercise market power — raise price above competitive levels and profitably sustain that increase. To reduce concerns over market power, MedSouth had an explicit policy of "non-exclusivity," meaning that its members would be free to contract independently with payors, and it planned to take steps to ensure that its members would contract individually. Because of the prospective nature of the advisory opinion, the FTC was unable to assess either the likely efficiencies or the anticompetitive effects. On balance, however, the staff concluded that the program was likely to generate efficiencies and they would not recommend a challenge if the program was implemented as proposed. In MedSouth, the FTC noted that it would "monitor MedSouth's operations and the behavior of its physician members for indications that the proposed conduct is resulting in significant anticompetitive effects." Markus Meier, Assistant Director of the Healthcare Services & Products Division of the FTC, recently announced that the FTC's staff has conducted a review of MedSouth's operations to determine whether its operations resulted in any anticompetitive effects, and the FTC will be publishing a letter regarding MedSouth's success at achieving its intended efficiencies. 25 The FTC's 2006 letter to Suburban Health Organization (SHO) provides sharp contrast to the MedSouth letter and MedSouth's success. 26 SHO proposed a program to clinically integrate the 192 primary care physicians (PCPs) employed by SHO's eight member hospitals located in and around Indianapolis, Indiana. Its program would include the following components: (1) adoption and dissemination of practice guidelines and medical management protocols for asthma, coronary artery disease, congestive heart failure, and diabetes; (2) measurement of guideline compliance, assessment of quality outcomes, and identification of areas for improvement; (3) practice support in the form of educational resources, guidelines, and outcome data; (4) credentialing; (5) patient educational materials for smoking cessation, diet control and weight loss, and immunizations; (6) a technology platform to be rolled out in 18-24 months; and (7) a physician incentive plan amounting to 5% of the previous year's compensation, awarded half for group performance and half for individual performance. Although the FTC determined that the program involved some integration that had the potential to generate efficiencies, it concluded that the efficiency benefits were limited and that the competitive restraints-namely the joint pricing of the physicians' services-were unnecessary to achieve the potential efficiencies. SHO's problems, as identified by the FTC, stemmed mainly from the FTC's understanding that the participants were all employed PCPs and the program addressed a limited set of medical conditions. The employment status of the participants was perhaps the greatest problem for the following reasons: (1) the integration was being planned and funded by the hospitals, rather than the physicians; (2) the individual hospitals could have developed the same type of program without needing to jointly price the physicians' services; (3) SHO relied on the individual hospitals to motivate their employees, had no direct control or authority over the physicians' actions or performance, and had no means of dealing with i hospital whose physicians failed to comply with program requirements; and (4) the hospitals set the physicians' charges, so joint price setting had little power to motivate the physicians. The fact that the physicians were all PCPs also was detrimental to the program because there would be no opportunities for collaboration in the care of referred patients or in the provision of primary care services, and the FTC believed "little interaction will occur between or among primary care physicians at different SHO hospitals." The FTC also could see no need for SHO to negotiate a full fee schedule when its program only focused on a limited set of medical conditions — those affected by the treatment protocols and patient education. Although SHO did not get the positive review it was seeking, the advisory opinion letter provides a great deal of guidance for both provider-controlled contracting organizations and for payors. Physicians should further understand the importance of creating a program that involves a high degree of collaboration, interaction, and interdependence among the participants. Payers can see from SHO that it is not sufficient for an IPA or PHO to adopt a limited set of protocols and expect to be able to set the prices for all of their members' services; thus, payors can expect legitimate integration programs will generate efficiencies that truly justify the joint setting of price. Physicians and payers looking for further information on clinical integration, or desiring to compare a proposed program to one examined by the FTC can also look to programs run by two provider-controlled contracting organizations currently under FTC consent orders. California Pacific Medical Croup, Inc., which does business as Brown & Toland, presented its clinical integration program to the FTC pursuant to a prior notice requirement in its consent order, which settled allegations of price fixing. 27 Advocate Health Partners (AHP) adopted its clinical integration program before its settlement with the FTC on allegations that, prior to its clinical integration program, it engaged in price fixing and concerted refusals to deal except on collectively agreed upon terms. 28 Although the FTC has reviewed both Brown & Toland's and AHP's programs, the FTC's documents discussing, or responding to, the programs are not in-depth analyses like the FTC's MedSouth advisory opinion. The FTC merely informed the two groups that it had no present intention to pursue legal action against their respective organizations for the conduct involved in the operation of, and payor contracting for, their clinical integration programs. Just as with MedSouth's program, however, the FTC reserves the right to investigate and prosecute either group should it become aware of anticompetitive harm perpetrated by them. Payors approached by IPAs or PHOs claiming to be clinically integrated should not immediately assume that the organizations' programs are a sham or a cover for price fixing. Payers should take time to examine the clinical integration programs to see whether they, as consumers, believe that the programs will generate quality and cost efficiencies. If IPAs or PHOs have no market power, and thus cannot force payors to pay higher than competitive prices or accept lower quality, then there is likely no down side to entering a contract with a group that proposes to provide cost and quality efficiencies. In fact, contracting with clinically integrated joint ventures should provide significant quality benefits to patients and cost efficiencies for payors. When approached by an IPA or PHO claiming to be clinically integrated, a payor should keep an open mind and ask the organization's representatives to fully explain the program. As the discussion of MedSouth and SHO above shows, the FTC has set a fairly high bar for clinical integration. Achieving the type of integration contemplated by the FTC will not be easy or simple and will generally require significant investments of time and money by the joint venture's participants. The group should be able to describe its infrastructure (both staffing and computer systems), explain the mechanisms by which its members intend to improve quality and reduce costs (protocols or guidelines, methods for monitoring compliance with protocols, and an organized process for working with members to improve quality), and show the commitment of their members to the goals of the organization (participation agreements, committee lists, and evidence of participation). If an EPA's or PHO's program has been in existence more than 12 months, the organization's representatives should also be able to point to evidence of improved quality (either through increased provision of protocol-directed care or through better test results for patients), or to contained or reduced healthcare expenditures for a defined patient population. In this era of demand for cost and quality transparency, payors should encourage physicians who not only track their quality and costs but who also are willing to improve results and share their data. 29 If, after reviewing a provider-controlled contracting organization's proposed clinical integration program, a payor believes that the program could (or does) integrate its providers in a fashion that might result in cost and quality efficiencies, then the payor should look at whether the organization has market power. In doing so, the most important variables are the organization's provider participation percentage and whether it is an exclusive or non-exclusive organization. 30 Obviously, payors are not going to conduct extensive analyses of the relevant geographic and product markets. They can, however, look at the organization's participation roster and get a sense of whether the group includes "must have" providers or a substantial percentage of local providers within particular medical specialties (30% or greater). High participation percentages make it more likely that an IPA or PHO will have market power (the ability to raise prices above competitive levels and profitably sustain that price increase), or that its operations will have an anticompetitive effect. However, high participation percentages only become a concern if the IPA or PHO also operates as an "exclusive" network (i.e., its physicians contract only through it and not directly with payors who choose individual contracts over a clinical integration group contract). Even if the organization includes 100% of area physicians, it will have no market power if it is non-exclusive in the sense that its physicians are actually willing to contract with payors individually or through other contracting venues. The non-exclusive physician-contracting organization provides ore more option from which payors can choose. If an IPA has some degree of market power, however, the collaboration still might generate substantial efficiencies that outweigh any harm resulting from its market pourer. Thus, for a payer deciding whether to contract with a provider organization that has some market pourer, the real question is whether the payer; and its subscribers, will be better, or worse, off if it contracts with the organization. Absent market power-, the IPA or PHO cannot force the payor to agree to higher than competitive prices or to reduced quality or selection. As a result, there should be little downside, and potentially significant upside, to the payer entering a contract -with the clinically integrated joint venture. IPAs arid PHOs that are developing clinical integration programs today are doing so because they believe that their investment will result in significant benefits for their patients. To facilitate collaboration in the delivery of patient care, most are creating health information exchanges (HIE) — web-based systems in which patients' treatment information is collected into records that can be accessed and used by providers. Having the most-complete patient record available at the time of treatment provides significant benefits to physicians when making treatment decisions and should result in reduced costs and better care for the patient. 31 When these HIEs include service providers outside of the organization, such as hospitals, labs, imaging centers, and pharmacies, the potential for cost savings goes up significantly because fewer duplicate tests, x-rays, MRIs, CT scans, etc. will be ordered and duplicate, unnecessary, or potentially harmful (due to allergies or negative drug interactions) prescriptions will be avoided. Many IPAs and PHOs also are making electronic-prescribing software available to members. In addition to reducing medical errors from illegible or inappropriate (due to allergies or interactions) prescriptions, many of these electronic prescribing programs help physicians comply with formulary requirements and increase use of generics, both of which save payors money. Payers also may see cost savings and health improvements for their high-cost patients, because many clinical integration programs are focusing-through protocols and medical management-on the diseases and chronic conditions (diabetes, asthma, heart disease, chronic obstructive pulmonary disease, congestive heart failure, osteoporosis) that are most costly. Payors (and their patients) should benefit significantly from contracting with physician organizations that adopt these new technologies, focus on improving care through protocols, and collaborate in the treatment of their patients. Notes 115 U.S.C. § 1. 2The term "independent" in this context means that the healthcare providers are not part of the same business entity. For Sherman Act § 1 purposes, the constituent parts of a single, integrated business generally lack the capacity to "conspire" with each other or the business. See, e.g., Copperweld Corp. v. Independence Tube Co. , 467 U.S. 752 (1984). Thus, two hospital subsidiaries of a healthcare system could not, by themselves, violate § 1. 3The "agreement" that violates Sherman Act § 1 is generally not a written document, but is merely a meeting of the minds. As the Federal Trade Commission recently explained in the matter of North Texas Specialty Physicians (NTSP), a 500-physician IPA, "it is enough that participating physicians individually authorized NTSP to take certain actions on their behalf, knowing that others were doing the same thing." N. Tex. Specialty Physicians, Dkt. No. 9312 (FTC Nov. 29, 2005) at 17, available at www.ftc.gov/os/adjpro/d9312/051201opinion.pdf (hereinafter NTSP). The Fifth Circuit heard oral arguments on NTSP's appeal of the FTC's decision March 5, 2007. See No. 06-60023. 4Examining the sufficiency of the integration is important not because integration itself is a desired end but because sufficient integration should lead to efficiencies that, absent market power, should outweigh the competitive restraint. Market power is the ability to raise price above competitive levels and profitably sustain that increase. See Rebel Oil Co., Inc. v. Atlantic Richfield Co. , 51 F.3d 1421, 1434 (9th Cir. 1995), cert. denied 516 U.S. 987 (1995). 5Arizona v. Maricopa County Med. Soc'y, 457 U.S. 332 (1982). 6A rule of reason analysis involves a market power determination. Generally, this requires the court to identify the product market — the services delivered by the competitors — and the geographic market — the area within which those services were delivered. Then, the court must determine whether the anticompetitive effects of the price agreement substantially outweigh its procompetitive benefits. 7Maricopa, 457 U.S. at 357. 8NTSP at 11 (citing FTC v. Indiana Fed'n of Dentists, 476 U.S. 447, 459 (1986)). 9The FTC prosecutes agreements that restrain competition under Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45. The courts have held that Section 5 covers conduct that would violate Section 1 of the Sherman Act. See FTC v. Superior Court Trial Lawyers Assn, 493 U.S. 411, 422 (1990). 10NTSP at 10-11. 11PolyGram Holdings, Inc. , Dkt. No. 9298 (FTC Jul. 24, 2003), 5 Trade Reg. Rep. (CCH) § 15,453, aff'd, 416 F.3d 29 (D.C. Cir. 2005). 12Although NTSP presented arguments regarding its "clinical integration" program, it did not argue that it was sufficiently clinically integrated to jointly set the price of its members' services. See NTSP at 30. 13Although the terms "financial integration," "financially-integrated joint venture," "clinical integration," and "clinically-integrated join venture" are commonly used, provider-controlled contracting networks engaged in these integrative activities are only partially, not fully, integrated networks because the providers in the network remain competitors as to their individual provision off services to patients outside of the joint venture. A fully integrated joint venture is one in which the physicians merge their practices and stop competing for patients. 14See, e.g., Letter from Arthur N. Lerner, Esq., Assistant Director off the FTC, to Gilbert M. Frimet, Esq., Frimet, Bellamy, Gilchrist & Liter, P.C. (Mar. 22, 1984) (discussing an HMO plan to reimburse an IPA on a capitated basis), available at www.ftc.gov/bc/advisoryopinions/32.pdf; Letter from Anne K. Bingaman, Esq., Assistant Attorney General, to George Miron, Esq., Feith & Zell, P.C. (Dec. 8, 1993) (describing chiropractic network contracting with managed care organizations on a capitated basis), available at www.usdoj.gov/atr/public/busreview/0781.htm; Letter from Anne K. Bingaman, Esq., Assistant Attorney General, to Eugene E. Olson, Esq., Connolly, O'Malley, Lillis, Hansen & Olsen (July 6, 1994) (discussing a physician-hospital organization's proposal to provide services under a capitated rate or on a fee-for-service basis with a 20% withhold), available at www.usdoj.gov/atr/public/busreview/0788.htm; Letter from Robert F. Leibenluft, Esq., Assistant Director of the FTC, to David V. Meany, Esq., Michael Best & Friedrich (May 14, 1997) (analyzing a physician network proposing to use capitated contracts and risk withholds), available at www.ftc.gov/bc/adops/yelltone.htm; Letter from Robert F. Leibenluft, Esq., Assistant Director of the FTC, to Robert C. Morton, Esq., Rodi, Pollock, Pettker, Galbraith & Cahill (Aug. 13, 1998) (addressing a network of neurologists that proposed to contract on a capitated basis), available at www.ftc.gov/bc/adops/ainlet.fin.htm. See also U.S. DEP'T OF JUSTICE & FED. TRADE COMM'N, STATEMENTS OF HEALTHCARE ANTITRUST ENFORCEMENT POLICY, Statement 8, §§ A.4 and B (Aug. 1996) (hereinafter Statements) available at www.ftc.gov/bc/healthcare/industryguide/ 15In a valid messenger arrangement there can be no illegal restraint of competition because there is no agreement between, or among, competitors on price or price-related terms. Each physician (or group practice) in the organization makes an independent decision regarding the price terms for his or her services. The IPA or PHO uses a "messenger" to convey information regarding price and other competitive terms between the payor and the individual physicians, and no competitively sensitive information is shared among competing physicians. 16See, e.g., In re Arbitration between United Healthcare of Illinois, Inc., and Advocate Health Care Network, AAA, No. 51 195 Y 01990 03, at 9 (Nov. 18, 2005). But see, NTSP at 31. 17See, e.g., Statements at Statement 8, § C.2. 18Since 1990, the FTC and the DOJ have prosecuted and entered settlement agreements with well over 30 provider-controlled contracting organizations. See www.ftc.gov/bc/0608hcupdate.pdf (a summary of FTC cases) and www.usdoj.gov/atr/cases.html (listing all of the Antitrust Division's cases). 19Since Maricopa, provider-controlled contracting organizations have struggled with the concept of what constitutes "sufficient" integration to avoid per se illegality and generate efficiencies substantial enough to outweigh any competitive harm. While the integration they undertake may be clinical, financial, or a combination of both, the agencies and the courts have made clear that the joint setting of prices must be reasonably necessary to achieve the anticipated efficiencies of the integrated arrangement. See Letter from M. Elizabeth Gee, Assistant Director of the FTC, to Charles E. Rosolio, Rosolio and Silverman, P.A. (May 15, 1987), available at www.ftc.gov/bc/advisoryopinions/16.pdf; Statements at Statement 8, § B.1. 20See Statements at Statement 8, §§ B.1 and C.1. 20Id. at Statement 8, § B.1. 21Id. 23Lawrence F. Casalino, The Federal Trade Commission; Clinical Integration, and the Organization of Physician Practice, 31 J. HEALTH POL., P0L'Y & L. 569, 574 (2006). 24Letter from Jeffrey W. Brennan, Esq., Assistant Director of the FTC, to John J. Miles, Esq., Ober, Kaler, Grimes & Shriver (Feb. 19, 2002) (hereinafter MedSouth), available at www.ftc.gov/bc/adops/medsouth.htm. MedSouth was not, however, the first letter to discuss a program that involved clinical integration. See Letter from Robert F. Leibenluft, Esq., Assistant Director of the FTC, to John A. Cook, Esq., Cook, Goetz, Rogers & Lukey, P.C., Jan. 30, 1997 (discussing an ambulance network that involved both clinical integration and the sharing of substantial financial risk through withholds and capitation), available at www.ftc.gov/bc/adops/mobil.htm. 25Markus Meier, Clinical Integration: Where We Are and Where We're Going (Feb. 28, 2007) (unpublished statement recorded and on file with the American Bar Association Health Law Section, available to ABA members at www.abanet.org/antitrust/at-bb/audio/07/02-07.shtml). 26Letter from David R. Fender, Esq., Acting Assistant Director of the FTC, to Clifton E. Johnson, Esq., and William H. Thompson, Esq., Hall, Render, Killian, Heath & Lyman (Mar. 28, 2006), available at
www.ftc.gov/os/2006/03/SuburbanHealthOrganization 27Documents describing Brown & Poland's proposed program and the FTC's letter in response to Brown & Toland's notice that it intended to negotiate with payors regarding its clinical integration program are available at http://www.ftc.gov/os/adjpro/d9306/index.htm. Pertinent documents include the PPO Submission, Follow-up, Second follow-up, Transmittal Letter, and Response. 28The FTC's settlement with AHP is available at www.ftc.gov/os/caselist/0310021/0310021.htm. A description of AHP's program, including its calculation of cost and quality efficiencies, is available at www.advocatehealth.com/ 29See, e.g., Sara R. Collins & Karen Davis, Transparency in Healthcare: The Time Has Come, THE COMMONWEALTH FUND (Mar. 15, 2006); www.hhs.gov/transparency/; Martin Sipkoff, Transparency Called Key To Uniting Cost Control, Quality Improvement, MANAGED CARE MAGAZINE (Jan. 2004), available at www.managedcaremag.com/archives/ 30Because it is difficult to accurately calculate a market share for a physician organization or its members, participation percentages are used as a proxy for market share. 31Jan Walker, et al., The Value of Healthcare Information Exchange and Interoperability, HEALTH AFFAIRS (Jan. 19, 2005). |
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Ober, Kaler, Grimes & Shriver Maryland
Washington, D.C. Virginia |
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