HEALTH CARE BUSINESS REVIEW
LETTERS ISSUED
(Since 1993 Issuance of DOJ/FTC Health Care
Antitrust Statements of Enforcement Policy: Current as of
4/19/2000)
- National Cardiovascular Network, Inc.
September 28, 1993
A proposal to establish a national network (PPO) of cardiologists,
cardiovascular surgeons, and acute care hospitals in 41 metropolitan
areas around the country to provide cardiac care to beneficiaries of
large third-party payers, such as insurers, unions, and multi-site
employers.
APPROVED: The network will assume significant financial
risk by providing specialized cardiac care services at all-inclusive,
global prices covering all hospitalization and physician expenses of
plan beneficiaries. In addition, in areas where it contracts with
competitors, the network will not sign up more than 20% of the
cardiologists, or more than 20% of the cardiovascular surgeons with
active admitting privileges at hospitals in any relevant geographic
market, thereby qualifying for an antitrust safety zone under the health
care industry policy statements.
- Pharmaceutical Manufacturers Association
October 1, 1993
The Association proposed that each participating member company would
agree to limit the annual increase in the average change in the prices
of its prescription drug products to a level not greater than the annual
increase in the consumer price index. The proposal was not to have
applied to any individual product and specifically excluded new
products.
REJECTED: "Agreements among competitors, including
agreements setting maximum prices, that interfere with the ability of
each firm in a market to determine its own prices have long been
illegal. Maximum price agreements often become agreements on actual
price increases. Courts have recognized this danger and have held such
agreements to be clearly unlawful."
- The Health and Personal Care Distribution Conference,
Inc.
October 13, 1993
National manufacturers' trade association proposed to undertake a
voluntary data exchange program among its members regarding the
transportation and distribution costs of its members' goods sold to
wholesale and retail customers, which are drugs, toiletries, and other
products commonly sold in drug stores.
APPROVED: The shared information would not result in
monopsony power, as HPCDC does not intend to negotiate transportation
rates collectively on behalf of its members; HPCDC's members, further,
account for only 3% of nationwide revenue of motor carriers. The
information will not result in price coordination because the cost of
transportation of members' goods as a percentage of total cost is very
low; also, an independent third party will collect, organize, compile,
and ultimately publish the data, which will not reveal individual
identities of any survey participants.
- Saint Anthony Medical Center
November 8, 1993
General acute care hospital in Rockford, Illinois proposed to offer
multi-provider preferred provider contracts to employers and other
third-party payers. Providers were free to contract independently of the
multi-provider contract. The hospital also proposed to contract with a
second hospital to cover services that St. Anthony does not, or cannot,
provide (overflow services) and to allow for patients' choice of
hospitals (patient-choice). Both patient-choice and overflow referrals
to the second hospital would be limited to 20 percent of admissions at
that hospital.
APPROVED: The proposal provides employers and payers with
an additional managed care plan. This should increase competition for
managed care plans and should help drive down costs for the consumers.
Additionally, since the second hospital would be limited to only 20
percent of admissions for patient-choice and overflow referrals, it
would be motivated to compete with St. Anthony for a larger share of the
managed care business.
- California Chiropractic Association
December 8, 1993
The association proposed to form a statewide chiropractic
managed care organization (MCO) that would contract with third-party
payers at a capitated rate and allow the third-party payers to enter
into a single statewide contract for chiropractic services through the
MCO.
APPROVED: The MCO will be a bona fide joint venture in
which the participating chiropractors will share significant financial
risk via capitation; efficiency will be enhanced via utilization
standards; the MCO will be non-exclusive; and the MCO will take steps to
include no more than 50% of the chiropractors in any local market. In
addition, if the MCO attempted to raise prices above competitive levels,
managed care plans and other payers believe that they have reasonable
alternatives to the MCO that would allow them to defeat such a price
increase.
- Bay Area Business Group on Health February 18, 1994
BBGH, a San Francisco non-profit organization, proposed that it ask
several HMOs to bid on two standard benefit plans and negotiate prices.
Sixteen California companies expressed interest in joining BBGH.
Participating companies were free to negotiate independently of the
group with HMOs not dealing with or approved by the group.
APPROVED: A substantial majority of all potential HMO
customers will not be represented by BBGH; although some current BBGH
members are direct competitors, the members' costs of purchasing HMO
health benefits account for only a small percentage of the selling price
of the products and services they provide; the BBGH has the potential to
create efficiencies in the delivery of HMO services that could result in
lower health care costs.
- New Jersey Hospital Association
February 18, 1994 The
association proposed that it produce a survey and report of employee
wages and salaries paid by hospitals in New Jersey.
APPROVED: The survey and report would be compiled and
published by an independent third party, set forth information solely on
an aggregated basis and in a manner so that the responses of individual
hospitals or hospital chains were not detectable, and contain
information that was at least three months old.
- Houston Health Care Coalition
March 23, 1994
The Coalition proposed that it form a Group Purchasing Association to
contract with health care providers to deliver health care services to
Coalition members' employees and their dependents in a 13-county area
surrounding Houston at predetermined rates. Not all Coalition members
will choose to become members of the Association; those Coalition
members who are also providers will be in an "associate member" category
and will not be permitted to vote on any matters involving the
Association's activities, be represented on the Board of Trustees, or
take part in decisions involving reimbursement rates. An independent
consultant will compile data from providers regarding the costs
associated with various Diagnostic Related Groups ("DRGs"), and will
survey average historical costs for various procedures at approximately
65 health care facilities in the area to assemble a data base of
prevailing charges for those DRGs available for program coverage. No
provider will have access to the data submitted by any other provider,
and only Association members will have access to the data or the study.
The schedule of reimbursement rates thus compiled by the Association
will be distributed to providers so they may decide whether to contract
with the Association.
APPROVED: No more than 20% of any health care
specialist-physician providers in any relevant market in which the
Association operates will be associate members. This limitation on
specialty provider participation will significantly reduce any risk of
provider collusion. No provider that is also an associate member may
take part in negotiating reimbursement rates or setting those rates on
the Association's behalf. Also, providers will not have access to any
specific cost data obtained by the Association from any other providers.
The Association has the potential to create efficiencies in delivering
health care services that could result in lower health care costs.
Finally, members are free to deal with or approach any providers
individually, including providers who contract with the Association.
- Hotel Employees and Restaurant Employees International Union Welfare
Fund
May 20, 1994
Union proposed to provide a one-time historical claims report to the
PPO with which it contracts to provide health care services to its
members. The report would compare the amounts the union actually paid
for each procedure to each PPO physician between 9/1/91 and 8/31/92 with
the amount the physician would have received under the Resource-Based
Relative Value Scale fee schedule it has developed in order to help each
physician make an informed decision as to whether or not to accept the
RBRVS fee schedule for future services.
APPROVED: The limited information exchange has the
potential to enable individual physicians to make more informed
decisions about selling their services to the Welfare Fund and make
health care available to more employees at a reasonable cost. The PPO
agreed with the union not to disclose to any physician another
physician's payments.
- The Birmingham Cooperative Clinical Benchmarking Demonstration
Project
June 20, 1994
24 businesses and 10 hospitals in the Birmingham area proposed to
collect and analyze data about the clinical effectiveness and cost of
three types of services: obstetrical delivery, pneumonia, and acute
myocardial infarction, and to compare outcomes with Birmingham averages,
national averages and national "benchmark" averages.
APPROVED: The information will be collected by an
independent corporation and will for each report be based on data more
than three months old. This project was initiated by purchasers of
hospital services and is the result of collaboration between these
purchasers and providers of hospital services. Such collaboration has
the potential of allowing businesses that provide health care benefits
to make better informed purchasing decisions and should also promote
hospital effectiveness and efficiency.
- Seeskin, Paas, Blackburn and Company ("SPB")
June 29, 1994
Accounting firm representing 5-10% of dentists in the Cincinnati,
Ohio area proposed to collect price information from its dental clients
on approximately 400 procedures and publish a report showing the high,
low and average price for a given procedure, citing a need for the firm
and the dentists to have reliable statistical data on prices for various
services provided to patients.
APPROVED: The data collected would be historical, identity
of dentists in the program would not be disclosed, and no prices would
be included for any specialty containing fewer than five dentists, and
price information would be collected from only 5 - 10% of the dentists
in the market. In addition, no discounts from list price would be
reported.
- Collaborative Provider Organization, Inc. ("CPO")
July 6,
1994
Des Moines General Hospital and 177 physicians in south-central Iowa
proposed to form a PHO to offer a health care plan to business owners
seeking new ways to cover their workers' medical needs in a 25 county
area. The providers would contract with payers at capitated (per
subscriber) rates or discounted fee for service rates with a 20%
withhold.
APPROVED: The members of CPO will share risk via both
capitation and a withhold of discounted fee for service rates. CPO
members will not be directly involved in setting fees, but will retain a
third party administrator who will survey CPO members and compile
aggregate fee data to be used in negotiating contracts for health care
services. In the most populous county, less than 20% of all licensed
physicians will join CPO, including less than 20% of all primary care
physicians. In 18 of 30 identified specialties, membership will also be
less than 20%, but in 12 specialty areas membership would exceed 20%. No
CPO member will have access to another member's fees, pricing data or
other financial information. The proposal will provide an additional
alternative health care delivery system and could increase competition
and lower health care costs for consumers.
- Preferred Podiatric Network Inc.
September 14, 1994
A subsidiary of the New York State Podiatric Medical Association
proposed to act as an intermediary to facilitate communication between
managed care plans and non-integrated groups of podiatrists (members of
the Association) who desire to enroll as providers in such plans. The
Network would not negotiate fees on behalf of its members, and only at
the specific written request of payers may the Network negotiate certain
non-price matters.
APPROVED: Fee information would not be shared with or
among members; the Network would be a bona fide intermediary,
would not negotiate fees for competing podiatrists, and each podiatrist
would independently accept or reject any contract offer; the Network is
non-exclusive and should not impede the participation of its members as
podiatric providers in other managed care networks.
- International Chiropractor's Ass'n of California ("ICAC")
October
27, 1994
Nonprofit chiropractor's association proposed to form a for-profit
network of its members statewide that would contract with third-party
payers, limiting membership to no more than 50% of the chiropractors in
any relevant geographic market. The network will negotiate maximum fee
for service rates with each of its network-user clients. Members will
not charge more than the negotiated rate, and must charge their usual
rates if those are lower than the network rate. The network will monitor
utilization patterns and will drop providers whom it deems to be
over-utilizers.
APPROVED: The group will be a bona fide joint venture in
which the participating chiropractors will assume significant financial
risk by participating in fee withhold arrangements and a risk pool.
Absent the overall network's efficient operation, all or part of the
risk pool will not be available to the participating chiropractors for
distribution. Further, ICAC will be genuinely non-exclusive and will be
but one of several competing chiropractic networks. Since potential
users of ICAC need only a small number of chiropractors, if ICAC
attempted to demand noncompetitive terms, alternative chiropractors with
the ability and incentive to supplant ICAC on competitive terms would be
available to users.
- 15. Physician Care Inc. ("PCI")
October 28, 1994
Over 100 of the 276 physicians in south-central Kentucky proposed to
form a provider network to offer services to self-insured employers and
other third-party payers in the area. Care will be provided using either
capitated or discounted fee for service rates with a 20% withhold. PCI
will establish utilization standards and other measures to help contain
health care costs.
APPROVED: This non-exclusive venture will provide
alternative health care services to consumers, and its members will
share significant financial risk. The proposed network will have as much
as 37% of primary care physicians in some local markets, and a higher
percentage of some specialties; but, in the largely rural areas where
this network will operate, those percentages appear to be necessary to
provide adequate coverage for enrollees. No PCI member will have access
to another member's fees, pricing data or other financial information.
- Merger of Pulmonary Associates Ltd. and Albuquerque Pulmonary
Consultants P.A.
October 31, 1994
Two pulmonary specialist physician groups in Albuquerque, New Mexico,
each employing five doctors, four full time and one part time, proposed
to merge. The combined firm, with 8 full time and 2 part time doctors,
would be competing against at least 100 other physicians offering
similar services in the area.
APPROVED: Because board-certified pulmonologists are not
the exclusive providers of the services they provide, but face
competition in these services from general surgeons, cardiac surgeons,
thoracic surgeons and internists as well as family physicians; because
HMOs and other third-party payers in the area currently employ, contract
with or reimburse many non-pulmonologists for the same type of services
provided by pulmonologists; and because staff privileges at area
hospitals are extended to many non-pulmonologists to perform these
services, it appears that the new firm would not be able to exercise
market power.
- Chicagoland Radiological Network ("CRN")
December 8, 1994
Group of radiologists proposed to offer prepaid radiological services
on capitated and discounted fee for service (with a substantial
withhold) bases to third party payers and self-insured employers in an
eight-county area in and around Chicago. Membership would include about
25% of the more than 780 radiologists in the Chicago area, and is not
expected to exceed that level in any relevant local market within that
area.
APPROVED: The group is assuming significant financial risk
through capitation and withholds on fee for service payments. It has
developed safeguards to address concerns regarding the sharing of price
information when using fee for service contracts. Each CRN physician
will be expressly prohibited from disclosing any information regarding
usual and customary charges or the charges he/she has agreed to accept
under any managed care arrangement to any other CRN physician, and CRN
will not develop a fee schedule. Rather, each physician will receive the
lesser of his usual and customary charges or the payer's fee schedule,
less at least 20% to be distributed only if cost control goals are met.
In addition, other radiological groups, and at least one other
radiological network, are competing in the area. The network will
provide cost savings to payers by educating referring physicians on more
effective utilization of radiologist services.
- Northwest National Life Insurance Co. ("NWNL")
March 9, 1995
Minneapolis health and life insurance company proposed to offer its
internal medical claims fraud and abuse detection services to outside
parties for a fee. The current in-house fraud detection unit would
become a separate division of the company, offering its services to
third party payers, employers, and insurance companies. NWNL would
continue to process its own medical claims and deal with its own claims
disputes, using the fraud detection unit as any other customer.
APPROVED: NWNL would establish sufficient protections to
assure that claims information submitted by outside clients to its fraud
detection unit would not be shared with NWNL, and vice versa, or among
the outside clients. A nationwide databank of medical practitioners'
fraud and abuse histories would be available for use by all clients of
the fraud and abuse detection unit, but only after cases were closed.
- Wisconsin Subacute Preferred Provider Network
March 29, 1995
Hillhaven, an operator of nursing homes, proposed a joint venture
with three other nursing home operators to offer managed care customers
a statewide network of subacute-care medical and rehabilitation beds in
nursing home facilities. None of the four participating firms offers
nursing home services, or will offer sub-acute-care services, in the
same local markets. Hillhaven will establish a "network price" for
subacute-care services and provide a central referral process for the
network, but each of the joint venturers will remain free to offer its
services independently of the others, at an independently-determined
price.
APPROVED: The joint venture will enable managed care
customers to contract prospectively with a single statewide network of
subacute-care providers, which will compete with hospitals that offer
subacute-care beds. Competition will not be affected since the four
providers are not located and do not compete in the same local markets.
- Mid-South Physician Alliance, Inc. and Mid-South Health Plan
March 30, 1995
Physician-owned corporations proposed to create a nonexclusive
physician network and affiliated HMO to provide primary care and
specialist physician services within 100 miles of Memphis, Tennessee.
The physician network would negotiate contracts with the HMO and other
third-party payers, either on a capitated basis or under a
fee-for-service schedule utilizing a "risk pool" withhold of at least
20% of the fees due each physician. Fees would be established by an
independent consultant after gathering a variety of information from the
participating physicians. No participating physician will have access to
any of the information collected. The physician members will comprise no
more than 30 percent of any type of primary care physician in Memphis or
in any of the five surrounding counties. For all but two of the
physician specialties in its panel, the Alliance will have fewer than 30
percent of area specialists.
APPROVED: The Alliance appears to be a bona fide joint
venture whose members will share substantial risk with an incentive to
achieve quality and efficiency objectives. Without attempting to define
precisely the boundaries of the relevant geographic market for primary
care physicians or for each physician specialty, for any reasonable
market, the concentrations of specialists and primary care physicians
expected in the network are not likely to have anticompetitive effects.
Area payers view the formation of the Alliance as procompetitive since
it will serve as an alternative to existing networks of providers formed
by large hospitals in the area.
- AdviNet, Inc.
May 12, 1995
A subsidiary of the nation's largest operator of nursing homes
proposed to provide a nationwide database of services offered by nursing
homes and other long-term care facilities. AdviNet, Inc. would contract
with employers, insurers, associations and individuals to make such
information available through a toll-free number. Members of the network
would be encouraged but not required to provide discounts to subscribers
of the service and their listings would be more detailed than those of
non-members. AdviNet would also assist in scheduling site visits by
customers.
APPROVED: AdviNet would operate independently of its
parent corporation and with a separate computer system. Specific pricing
information received from providers would not be made available to any
other provider. This network appears to meet a consumer need and should
promote competition by facilitating informed consumer choices.
- Pennsylvania Orthotics and Prosthetics Enterprise ("POPE")
July
17, 1995
Group of orthotists and prosthetists proposed to form an IPA (POPE)
to contract with third-party payers. POPE would be non-exclusive and
limit its membership to 20% of each type of practitioner in any relevant
geographic market. A management company will negotiate on behalf of the
members, and sensitive information will not be shared among the members.
POPE will establish a "risk pool" by withholding no less than 20% of
each member's billings to create incentives to achieve efficiency and
quality goals. The risk pool will be distributed to POPE members only if
as a group they meet those goals.
APPROVED: Because of its low percentages of each type of
specialist in any relevant geographic market, its intention to withhold
20% of all fees as a means of creating shared financial risk among
members, its non-exclusivity, and lack of any concerns among third-party
payers, POPE is not likely to cause anticompetitive effects in the
market for the provision of prosthetic and orthotic devices.
- Hanger Orthopedic Group Inc. ("Hanger")
September 15, 1995
Manufacturer and distributor of orthotic and prosthetic devices, and
owner and operator of over 80 orthotics and prosthetic clinics
nationwide proposed to form a national network of prosthetists and
orthotists to contract with third-party payers. The network will not
include any competitors in any relevant geographic market. Further, it
will be exclusive in relevant geographic markets where Hanger contracts
with an orthotic and prosthetic clinic only if the total revenues the
contracted clinic earns from providing orthotic or prosthetic services
does not exceed 20% of the total revenues for orthotic or prosthetic
services in the relevant geographic market.
APPROVED: Since none of the members of the Hanger network
will be competitors in any relevant geographic market, and since Hanger
will enter into exclusive contracts with orthotics and prosthetics
clinics only where the clinic earns no more than 20% of total local
market revenue, Hanger's network is not likely to cause anticompetitive
effects.
- South Carolina Dermatologists
November 1, 1995
South Carolina dermatologist proposed to form a network of all South
Carolina board-certified dermatologists to contract with managed care
entities and third party payers, but only for those services not
uniquely provided by dermatologists. The group of approximately 85
doctors (if all join) would be non-exclusive and would share substantial
financial risk either by accepting capitated rates or by withholding a
minimum of 20 percent of fees as a risk pool to be distributed only if
certain efficiency goals are met. Inpatient hospital care and any
procedure that dermatologists perform in more than 30 percent of all
cases would not be covered in any contracts handled by the network.
APPROVED: The service market would include many different
types of doctors, including internists, general practitioners, family
practitioners and plastic surgeons. The letter is premised on the
assumption that in any relevant local market, the network's members will
not exceed 30 percent of all physicians available to provide services of
the type offered by the network in that market. Thus, it is not likely
the network would attain market power. In addition, the group will share
significant risk, provide incentives to achieve cost-containment goals,
and be non-exclusive in nature.
- Southwest Oncology Group ("SWOG")
November 2, 1995
An association of cancer research institutions (hospitals and
universities) proposed to collect data from its members regarding the
cost effectiveness and resource utilization of clinical trials. Results
would be made public and used in part to convince insurance companies
that treatment in clinical trials is a cost-effective alternative to
standard care and that therefore patients participating in such trials
should not be denied insurance coverage. The association will track
numbers of physician visits, laboratory tests, x-rays, nurses visits,
drugs, and hospitalizations, and will assign costs to all treatments
based on standardized data bases. Data would be collected from at least
five providers and would be more than three months old at the time of
analysis. Results would be stated so as to allow providers to draw their
own conclusions about the cost effectiveness of any given treatment.
APPROVED: SWOG's proposed activities involving the
exchange of cost information would fall under the Statement 6 safety
zone. There also is no agreement among SWOG members to approach or
negotiate with insurance companies collectively or to attempt to coerce
concessions from them by taking a unified position in separate
negotiations. The study promises to benefit consumers by providing
information that can be used to control health care costs and ensure the
most cost-effective use of health care resources.
- Georgia Preferred Podiatric Medical Network
November 3, 1995
Network representing 92 of Georgia's 212 podiatrists (but open to all
members of the state podiatry association, of which there are 187)
proposed to employ or contract with an agent to act as an intermediary
for soliciting and managing managed care contracts between the network's
members and third party payers. The non-exclusive group would operate
under a messenger model, transmitting terms and conditions from
individual doctors to payers, and transmitting contract offers from
payers to physicians, who would then decide unilaterally whether or not
to accept each payer's contract offer. If payers so request, the Network
may discuss with payers such potentially competitively significant
non-price issues as utilization review, credentialing, and quality
assurance standards, but may not negotiate such standards or terms on
behalf of the members.
APPROVED: The Network will function as a bona fide
messenger to facilitate contract agreements and may facilitate the
adoption of efficiency-enhancing utilization review and quality
assurance procedures through non-binding discussions undertaken at the
request of payers. Such discussions will not be used to facilitate
collusive behavior among the network's members. Non-exclusivity further
assures that competing networks can be formed and joined by members of
the Network.
- Dermnet, Inc.
December 5, 1995
Group of 100 dermatologists, 19 plastic surgeons, and 11
dermatopathologists proposed to offer tailor-made panels of specialists
to provide skin treatment services to managed care groups and other
third-party payers in Dade, Broward and Palm Beach counties, Florida,
through a single agent. The group will share risk through capitation,
but would begin operations by contracting for capitated rates with a
certain percentage of standard Medicare reimbursement levels guaranteed.
After approximately six months, contracts with payers would be fully
capitated. The group will establish quality assurance, utilization
review and credentialing rules and standards and will be non-exclusive
in nature, allowing its members to join or continue their present
participation in other networks.
APPROVED: Dermnet's members will share significant risk
through capitation. While the group will represent 43.5% of
board-certified dermatologists in the tri-county area, its ability to
acquire market power in any relevant geographic market will be limited
by its non-exclusivity and the presence of other similar networks.
Payers did not believe that their ability to contract with
dermatologists would be adversely affected by the creation of Dermnet.
The group would raise no competitive concern with respect to plastic
surgeons since it represents only 12.5% of the board-certified plastic
surgeons in the area, and its membership would not exceed 30% of all
plastic surgeons in any reasonably drawn market. While eleven of the
fifteen dermatopathologists in the tri-county area will be Dermnet
members, payers can and do use dermatopathologists significantly beyond
the tri-county area and are not concerned by Dermnet's large panel.
- Preferred Laboratory Access Network ("PLAN")
December 7,
1995
Group of 17 small and mid-sized independent clinical laboratories in
California proposed to form a network to compete with several large
national laboratories for regional managed care laboratory services
contracts, particularly those to be let by the California state Medicaid
system, MediCal. PLAN membership will be open to all clinical
laboratories, but it will be limited so that it will account for no more
then 30 percent of the laboratory sales volume for any relevant market.
PLAN intends to share risk by operating primarily using capitated rates;
on those rare occasions when a fee-for-service contract is sought, rates
will be set using a messenger model to avoid any agreement as to price
by member labs. When not bidding for large regional contracts, members
of PLAN will continue to compete with one another for traditional
laboratory business, which is expected to constitute the majority of
PLAN members' revenue for the foreseeable future.
APPROVED: In the markets for "stat" tests (blood counts,
throat and urine cultures and other tests that require very quick
turnaround) and "routine" tests (those that are generally uncomplicated
and widely used but not particularly time sensitive), PLAN members
compete with other independent clinical labs and hospital labs. To the
extent that PLAN members provide esoteric or exotic tests (those
requiring more sophisticated lab procedures or equipment and usually not
time sensitive), they compete with reference labs throughout the
country. While the market share information provided was limited and
necessarily inexact, the combined market shares were sufficiently low to
indicate that PLAN's members, as a group, would not possess potentially
anti-competitive levels of market power. Furthermore, PLAN will operate
in a nonexclusive manner, and payers and California state government
officials all agree that competition in lab markets is fierce. The
presence of three large national labs in the primary target area for
MediCal HMO contracting offsets any market power that these 17 smaller
labs might command. In addition, there are many other independent labs
available to create similar networks, and hospital labs also provide
competition in local markets.
- Oklahoma Physicians Network-IPA, Inc.and PROklahoma Care,
Inc
January 17, 1996
Oklahoma physicians proposed to establish a statewide, non-exclusive
physician network and an HMO to provide primary care and specialist
services in Oklahoma. The physician network would negotiate contracts
with the HMO and other third-party payers, either on a capitated basis
or under a fee-for-service schedule utilizing a "risk pool" withhold of
20 percent of the fees due each physician.
APPROVED: The proposal appears to be a bona fide joint
venture whose members will share substantial risk with an incentive to
achieve cost containment and utilization goals. Participating primary
physicians generally comprise no more than 30 percent of the primary
physicians in putative local markets in both urban and rural parts of
the state. The network has fewer than 30 percent of the specialist
physicians in most specialties in urban parts of the state, but does
have more than 30 percent of specialists in some putative local markets
in rural parts of the state. However, the network will retain an
incentive to ensure that its physician services are priced competitively
because roughly 90 percent of the physician-members are in specialties
in local market in which the network does not have a substantial
percentage of the physicians.
- Children's Healthcare, P.A. ("CHPA")
March 1, 1996
65 to 70 pediatricians practicing in seven counties in southern New
Jersey proposed to form a provider network to contract with managed care
plans for the provision of basic health care to children of plan
enrollees. The group proposed to share risk either through capitation or
via an unspecified percentage fee withhold subject to its meeting
certain cost containment goals. CHPA would have a right of first refusal
to negotiate with any payer seeking to initiate or renew a contract with
an individual member of the group, after which members would be free to
contract individually or join other similar networks. CHPA alleged a
service market reaching to any other primary care or specialty
physicians who treat children, and a geographic market encompassing the
greater Delaware Valley, consisting of southern New Jersey, southeastern
Pennsylvania and northern Delaware, and asserted that within those
parameters it would possess no market power and thus pose no competitive
threat.
REJECTED: Rule of reason analysis led the Department to
conclude that CHPA, if implemented as proposed, would likely violate the
antitrust laws. In the area to be serviced by CHPA, family practitioners
are not acceptable substitutes for pediatricians in the development of
managed care physician networks, and markets for basic pediatric
services are significantly more localized than CHPA asserted. As a
result, in several south New Jersey communities, CHPA would achieve high
levels of concentration (50% - 77%) in the relevant service market and
would be able to exercise market power to the detriment of consumers.
Further, information developed in our investigation suggested a
significant danger that CHPA might operate in a de facto
exclusive manner, thus depriving plans of competitive alternatives in an
area where there are, according to plan managers, significant barriers
to new entry. On balance, the projected efficiencies claimed by CHPA,
such as risk-sharing, development of practice procedures, sharing of
administrative expenses and joint purchasing, do not outweigh the
significant threat of anticompetitive effects posed by the venture.
- Southeastern Healthcare Alliance, Inc. ("SHC")
March 5, 1996
SHC proposed to form a physician hospital organization ("PHO") among
its owned and/or operated hospitals and nursing homes in northern
Georgia and those facilities' affiliated physicians, to be called the
Southeastern Healthcare Alliance, Inc. While the PHO would include high
percentages of the primary care doctors in this rural area, joint price
setting among horizontal competitors would be avoided by use of a
messenger model to establish contracts with managed care plans and other
payers. An agent of the PHO would receive contract offers from payers
and convey these individually to members of the PHO. At the specific
written request of payers, the agent would discuss and transmit
information regarding potentially competitively significant terms or
conditions (e.g., utilization review or credentialing) and would
negotiate for the group regarding administrative issues such as billing
practices and contract interpretation. The PHO would be non-exclusive,
allowing doctors and/or hospitals to join other networks or to contract
individually with payers.
APPROVED: By avoiding any horizontal fee-setting or joint
agreement on other competitively significant contract terms among
competing doctors, the PHO is not likely to cause harm to existing
competition in the market for physician services. The market for
hospital services will not be affected since the four SHC hospitals are
already under common ownership and control. Because providers are free
to join other networks or contract individually with plans, the PHO
would not impede the development of competing networks as managed care
develops in the area.
- Orange Los Angeles Medical Group ("ORLA")
March 8, 1996
Five large, financially integrated anesthesia medical groups that
currently serve as the exclusive or principal anesthesia suppliers for
six major Orange County hospitals proposed to form a contracting
organization ("ORLA") to negotiate with the hospitals, managed care
health plans and primary provider organizations (such as IPAs and large
medical groups) they serve. The proposed joint venture would be
exclusive -- its member-groups, and their member-anesthesiologists,
would not be free to contract directly with managed care customers in
competition with ORLA.
REJECTED: Each of the hospitals served by the five ORLA
groups would consider, as a viable competitive alternative to its
existing group, only a similarly large, financially integrated
anesthesia group with comparable hospital anesthesia management
experience. Further, each hospital would substitute a lower-priced
alternative group only if the alternative group's anesthesiologists
lived and worked in close proximity to that hospital. For each hospital
served by one of the five ORLA groups, there currently are at most six
such competitive alternatives (i.e. the five groups that propose to form
ORLA, and the one comparable Orange County group that is not
participating in ORLA); if ORLA is implemented as proposed, it would
reduce the number of competitive alternatives to no more than one. (For
some of those hospitals, ORLA may eliminate all existing competitive
alternatives.) Under current market conditions, entry by credible
competitive alternatives is unlikely to occur in the near future on a
sufficient scale to offset ORLA's substantial reduction in competition.
Thus, hospitals, primary provider groups and managed care health plans
believed that the joint venture would enable ORLA to exercise market
power. Finally, any efficiencies ORLA may achieve could otherwise be
achieved in ways that would not reduce competition.
- Allergy and Asthma Consultants, Inc. ("AAC")
March 19, 1996
Group of allergists serving Massachusetts and six neighboring states
proposed to form a non-exclusive physician network joint venture to
negotiate and contract with health benefit plans. The group, to be
called Allergy and Asthma Consultants, Inc. ("AAC"), would provide
services either under a capitated payment plan or using a discounted
fee-for-service schedule with a "risk pool" withhold of at least 20% of
the fees due each physician.
APPROVED: The proposed activities fall within the "safety
zone" of Statement 8 of the Statements of Enforcement Policy and
Analytical Principles Relating to Health Care and Antitrust issued by
the Department of Justice and Federal Trade Commission on September 27,
1994. AAC would represent approximately 10 percent of the practicing
allergists in the Commonwealth of Massachusetts. The network will
achieve significant integration through risk sharing, and provide
utilization review and quality assurance monitoring. Since AAC physician
providers will participate on a non-exclusive basis, competing networks
will not be adversely affected. The proposal also involves additional
competitive safeguards, including provisions relevant to a previously
entered consent decree between the United States and one of the initial
participants in AAC.
- Itasca Clinic and Grand Rapids Medical Association
March 19,
1996
Two small physician clinics (one with 13, one with 8 physicians) in
rural northern Minnesota proposed to merge for the stated purpose of
enhancing their ability to provide quality care in a cost-effective
manner and to facilitate the recruitment of specialist physicians into
the merged group in order to increase the range of health care services
available locally.
APPROVED: Relying substantially on the clinics'
presentation of the pertinent market facts, the Department evaluated the
proposed merger for its likely competitive effects in two relevant
product markets: (1) primary care services provided by primary practice
doctors and internists; and (2) general surgical services. In those
markets the merged clinic would employ about 40% of the primary care
doctors and about 32% of the general surgeons. Given the lack of any
competitive concerns among payers and some payers' belief that the
merger would increase access to medical care, the merger did not appear
likely to substantially lessen competition.
- Hospice Network of New Jersey, Inc.
April 24, 1996
Group of institutions that coordinate delivery of care to terminally
ill patients proposed to form a joint venture to negotiate and contract
with health benefit plans to provide enrollees with hospice services.
Each of the seven initial members operates in a different New Jersey
county.
APPROVED: Hospice services are provided in local markets.
The seven initial members of the venture are in distinct geographic
areas and thus not direct competitors. Therefore, joint marketing and
other cooperative arrangements among the members are unlikely to have an
anticompetitive effect in any local market. However, if future members
are direct competitors with other members, the group must either avoid
joint pricing and agreements on other significant terms of competition,
or they must assure that such joint decisions are necessarily related to
significant economic integration among them.
- Plastic Surgery Associates of Connecticut, LLC ("PSAC")
June 28,
1996
Eight plastic surgeons practicing in southwest Connecticut proposed
to form a nonexclusive network joint venture to contract with HMOs,
employers, primary care IPAs, PHOs and other payers to provide a variety
of plastic and reconstructive surgical services. Members would
contribute capital to the corporation and would share risk through
either fee withholds or capitated rates.
APPROVED: PSAC appears to be a bona fide joint
venture whose members will share substantial financial risk and will not
possess anticompetitive levels of market power in any reasonable
geographic market. There are adequate reasonable substitutes for the
services provided by PSAC's members, and PSAC's formation appears to
fall well within the 30% safety zone for non-exclusive physician
networks. In addition, it appears that PSAC will likely provide
efficiency-based benefits, including lower prices for plastic surgery
services, to health care payers and consumers and is likely to foster
increased competition.
- Allied Colon and Rectal Specialists ("ACRS")
July 1, 1996
Seven of the nine dedicated colon and rectal specialists in the
Phoenix metropolitan area (and seven of ten statewide) proposed to form
a non-exclusive independent practice association ("IPA") in Maricopa
County, Arizona. Members would assume significant financial risk by
participating in either capitated contracts or in a fee withhold
arrangement.
APPROVED: Although this network is the only one in Arizona
specializing in colon and rectal surgical services and includes of seven
of nine specialists in the county and seven of ten in the state, payers
confirmed that colon and rectal surgical services are readily available
from general surgeons and other types of surgeons. When these
substitutes for ACRS surgeons are included in the service market, a
reasonable approximation of ACRS's combined market share is 15% in
Maricopa County and 9% statewide. The ready availability of substitute
providers makes it unlikely that ACRS could successfully act
anticompetitively. The network also may have procompetitive effects.
- Primary and Specialist Medical Center ("PSMC")
July 2, 1996
Proposal by 48 physicians in eight medical specialties to form a
network that will provide medical services in a six-city area including
New Haven, Connecticut and will represent its members on an exclusive
basis in negotiations with managed care payers. The group will offer
both capitated and discounted fee-for-service contracts (with a 20%
withhold at risk).
The six-city area in which PSMC will operate can be easily traversed
by automobile within approximately 20 minutes, a travel time payers view
as generally acceptable for patient convenience.
APPROVED: PSMC's members will account for less than 20% of
the physicians in each medical specialty in the six-city area in which
PSMC will operate and will share substantial financial risk. Thus,
PSMC's proposal meets the 20% safety zone for exclusive physician
networks. It is unlikely that PSMC would create market power that would
lead to competitive harm.
- El Paso Surgical Group ("EPSG")
July 24, 1996
Eight general surgeons in El Paso proposed to form a nonexclusive
network to provide general surgical services in the El Paso area at
reduced costs to managed care plans and other third party payers. EPSG
would be non-exclusive and would share risk either through capitation or
by withholding at least 20% of fees due as a risk pool. EPSG may expand
to include no more than 4 additional general surgeons and it may also
add other types of doctors.
APPROVED: As proposed, EPSG constitutes approximately 23%
of the general surgeons in the area; if four more are added, it will
comprise 34%. Based on payer interviews, it is not likely that the
network would result in market power or cause anticompetitive effects.
If EPSG adds other types of physicians but includes no more than 30% of
the physicians in any specialty in the area, the network would fit
within the safety zone for nonexclusive physician networks. Higher
percentages would be judged under the rule of reason.
- Sierra CommCare, Inc. ("Sierra")
August 15, 1996
An 80-bed community hospital and 23 physicians engaged in group or
solo practice proposed to form a nonexclusive network to provide primary
care and specialist physician services in the Ridgecrest, California
area. Sierra will retain the services of an independent third party to
administer the operations of the venture and act as a "messenger"
between payers and individual members. The messenger will convey
contract offers between payers and individual members without expressing
his or her views or otherwise attempting to influence contract
decisions, and each member will independently accept or reject such
offers. Sierra will also establish policies and procedures to restrict
the flow of competitively sensitive information among network members
and from the venture to the members. Members may compete with Sierra and
will not be discouraged from joining other networks or contracting
directly with health plans.
APPROVED: Sierra appears to have properly structured its
messenger model arrangements to avoid agreements on prices and other
competitively sensitive matters. If the arrangements are carefully
implemented, the network's operations should not result in price
collusion or cause anticompetitive harm, even though Sierra's network
will include virtually all of the physicians in the Ridgecrest area and
the markets for physician services there are highly concentrated.
- Home Care Alliance, Inc.
October 4, 1996
Three home health care providers in Mississippi proposed to form a
statewide network to contract with managed care plans. Home health
agency territories in Mississippi are designated by the state, and these
three agencies compete in only one county, although additional competing
agencies may be added to the network in the future. The network would be
non-exclusive and would avoid joint price setting by using a "messenger
model" contracting process. An independent third party ("messenger")
will obtain fee schedules from each member and convey them to payers;
payer contract proposals will be forwarded to each member for its
unilateral decision whether to accept the contract terms offered. At a
payer's request, the messenger may discuss but not negotiate or agree to
non-price issues such as utilization review, credentialing, and quality
assurance standards.
APPROVED: Since the proposed initial members are
competitors in only a single county and cannot become competitors in the
future without a change in Mississippi law, there is little possibility
of horizontal collusion among them. While additional competing members
may be added in the future, this should not cause competitive harm since
the network will operate using messenger model arrangements that appear
to be properly structured to avoid agreements on price and other
competitively sensitive matters.
- Cincinnati Regional Orthopaedic and Sports Medicine Associates
("CROSMA")
October 4, 1996
56 of the approximately 158 board eligible or board-certified
orthopaedic surgeons practicing in the greater Cincinnati metropolitan
area proposed to form an independent practice association to offer
prepaid medical and surgical services on a capitated basis to third
party payers and self-insured employers. Currently in ten separate
practice groups, the 56-orthopaedist group will be non-exclusive in
nature and will contract with third party payers either on a capitated
basis or possibly using a discounted fee-for-service schedule with a
risk pool withhold of at least 20% of the fees due to members. The risk
pool would be distributed only if the group as a whole meets
pre-established efficiency and quality parameters. No CROSMA member will
have access to any other member's fee information, and CROSMA will use a
third party administrator (who is restricted from disclosing fee
information to members) to negotiate with payers.
APPROVED: CROSMA appears to be a bona fide joint
venture in which members will assume significant financial risk. Here,
it appears appropriate to treat services provided by orthopaedic
surgeons as the relevant service market. Although there is insufficient
information to determine if CROSMA's proposed 28-county region is the
appropriate geographic market, good evidence indicates that CROSMA's
market share (about 35 percent) would not be appreciably greater with a
smaller geographic market definition. CROSMA should not create
anticompetitive market power since payers have significant alternatives
who will constrain CROSMA's pricing and CROSMA members will be able to
contract with payers individually if they choose. Several payers
expressed support for the formation of CROSMA and it appears that the
network's formation may create operational efficiencies that could lower
costs to consumers in the greater Cincinnati area.
- Anne Arundel Medical Center Anesthesiologists
October 17,
1996
The sixteen independent practitioner anesthesiologists that currently
provide anesthesia services at Anne Arundel Medical Center in Annapolis,
Maryland proposed to merge into a single, integrated group to contract
with the Medical Center and third party payers. The Medical Center and
payers indicated a preference for a single anesthesia group for a
variety of reasons including ease of negotiating contracts, scheduling
doctors' time, identifying and budgeting for costs, and establishing and
monitoring consistent quality control standards. The proposal would
enable the Medical Center to contract with the integrated group about
pricing terms in order to offer payers global fee arrangements.
APPROVED: Under any plausible geographic market definition
and assumption about the number of market participants, the merger does
not raise substantial competitive concern. This conclusion is bolstered
by the lack of concern about possible anticompetitive effects by the
Medical Center or any third-party payers who utilize the Medical Center.
The merged group should face effective competitive constraints on its
ability to exercise market power. In addition, the merger may produce
substantial efficiencies to the benefit of consumers.
- RWHC Network, Inc.
November 12, 1996
A group of 21 small, rural hospitals in Wisconsin proposed to form a
network to contract with managed care plans and other third-party
payers. Initially, network contracts would provide for services on a
discounted fee-for-service basis, but the network's goal would be to
provide services on a capitated basis. The network would employ the
services of a third-party administrator, probably the Rural Wisconsin
Health Cooperative, of which they are all members, to collect and
analyze data from each member hospital, create data bases, prepare
statistical analyses and furnish recommendations to enable the network
to contract with payers. No member would have access to any
disaggregated information held by the administrator. Each member would
be free to join other networks and to contract individually with payers.
The network contended that each of its proposed members serves a
different geographic area and that members do not compete with each
other for patients.
APPROVED: Based on the parties' representations regarding
the absence of competition among the network's member hospitals, the
network's proposed operations are not likely to cause anticompetitive
effects. The network appears to be a bona fide joint venture
designed to facilitate health care contracting between small, rural
hospitals that are not actual or potential competitors and managed care
organizations and other large third-party payers. No managed care plan
or other third-party payer expressed concern that the network is likely
to result in competitive harm.
- Marin General Hospital and Ross Hospital
February 11, 1997
Two Marin County, California hospitals proposed to consolidate their
inpatient mental health services. While the two hospitals compete in
providing inpatient and other psychiatric care to adults, Marin General
does not provide the chemical dependency programs and the inpatient
psychiatric services for children and adolescents that Ross provides.
The hospitals will continue to compete in the sale of the consolidated
services and will not jointly determine prices for the consolidated
services, other than for Medicaid and indigent patients covered under
the county's program. Joint pricing for Medicaid and county program
patients will not eliminate competition, however, since the hospitals do
not compete for that business.
APPROVED: The proposed consolidation will not result in
per se illegal conduct, and under a rule-of-reason
analysis the Department is not prepared to say that the consolidation is
likely to have a net anticompetitive effect. While these are the only
hospitals in Marin County providing inpatient psychiatric care, the
venture explicitly preserves the potential for price competition between
the hospitals and includes protections against the unnecessary sharing
of confidential business information. The venture may lower the cost of
adult mental health services by eliminating duplicative costs and
spreading fixed costs over a larger population. The consolidation may
thus permit the hospitals to offer competitive rates for the care of
Medicaid patients and indigent patients covered by a Marin County
program. On the other hand, the venture has significant potential for
eliminating competition in quality of care or other nonprice areas, and
joint pricing for Medicaid patients could facilitate collusion on the
pricing for other patients. On balance, and on the facts presented, the
Department does not have a present intention to challenge the venture,
but that view could change depending on how the venture actually
operates.
- Santa Fe Managed Care Organization ("SFMCO")
February 12,
1997
Sole general acute care hospital and 70-75 physicians in Santa Fe
proposed to form a non-profit managed care organization to negotiate
primarily risk-based contracts with payers. By subcontracting, the
organization's physician panel could include virtually all remaining
Santa Fe physicians. All physicians would provide services on a
non-exclusive basis. For contracts not involving substantial risk
sharing among SFMCO's members, SFMCO will act as a "messenger" to
facilitate contracting between third-party payers and SFMCO's individual
member and non-member participating physicians. While SFMCO members will
be liable for a share of SFMCO's deficits and eligible for a share of
SFMCO's surplus, non-member (subcontracting) physicians will not. SFMCO
will also implement other requirements designed to create divergence of
economic interest between member and non-member physicians, giving
members incentives to bargain down the compensation paid to non-member
physicians. With three exceptions, SFMCO's member physicians together
with any physician employees of the hospital will not exceed 30 percent
of the physicians with offices in the City of Santa Fe in any physician
specialty. The exceptions are for (1) physician specialities in which
all the SFMCO member physicians in the specialty are in a preexisting
integrated practice group that has not been formed or expanded to avoid
the 30 percent limitation, (2) family practitioners and internists who
are represented to be good substitutes for each other in the Santa Fe
area, and (3) pediatricians.
APPROVED: Although SFMCO's proposal creates the potential
for anticompetitive conduct that could cause harmful effects on
consumers, it also has the potential for creating significant
efficiencies by offering payers capitation and global fee arrangements
that are not now generally available in the Santa Fe area. Under all the
circumstances here, the Division is unable to conclude that SFMCO's plan
would likely cause anticompetitive harm if it is implemented carefully
as proposed.
- Orthopaedic Associates of Mobile, P.A., and the Bone Joint Center of
Mobile
April 16, 1997
Two groups of orthopedic specialists in the greater Mobile, Alabama,
area proposed to merge. The combined entity would be an integrated group
practice comprised of 16 of the 50 providers of orthopedic services
(32%) in the greater Mobile area.
APPROVED: Such a combination could raise competitive
concerns, but no managed care plan or other third-party payer expressed
any concern that the proposed merger would likely cause any substantial
anticompetitive effects. Rather, payers were confident that if the
merged group attempted to raise prices, they would have adequate
substitutes to defeat such a strategy. Therefore, it does not appear
likely that the proposed merger would lessen competition substantially
in the greater Mobile area.
- CVT Surgical Center ("CVT") and Vascular Surgery Associates ("VSA")
of Baton Rouge
April 16, 1997
Group of six cardiovascular-thoracic surgeons proposed to merge with
group of four peripheral vascular surgeons. The groups were more
complementary than competitive, with only 60 procedures performed in
common by the two groups -- about 15% of the procedures performed by CVT
were peripheral procedures also performed by VSA. The groups contended
that their geographic market was at least as large as an area within one
and one-half hours' drive from Baton Rouge, including the cities of
Hammond, New Orleans, Houma, Lafayette and Thibodaux. In that area the
merged entity would represent significantly less than 20% of the
surgeons available to perform the relevant procedures. The merging
groups accounted for approximately 50% of the vascular surgeons listed
in the Baton Rouge Yellow pages.
APPROVED: While the Department doubted that the geographic
market was as large as the parties proposed, the payers in the greater
Baton Rouge area (a more probable geographic market) needed very few
peripheral vascular surgeons to successfully market their plans to
consumers. Competing surgeons from the New Orleans area seemed capable
of quickly entering the Baton Rouge market, and had in fact begun to do
so. Payers in the area were generally confident that the merged group
was not likely to acquire market power. The Department concluded that
the proposed merger was not likely to have any significant adverse
competitive effects and might result in efficiencies benefitting
consumers and payers.
- Southwest Orthopedic Specialists ("SOS")
June 10, 1997
Ten of approximately 62 orthopedic specialists in the Albuquerque
metropolitan area proposed to form a non-exclusive risk-bearing joint
venture to jointly market their services to third party insurers
covering a statewide population. Risk would be shared either by
accepting capitated rates, or by offering services under a discounted
fee-for-service schedule with a 15% withhold that would be forfeited
unless SOS as a whole meets certain efficiency and quality parameters.
While the network intends to expand in the future to meet insurers'
coverage needs, at no time would it exceed 30% of the orthopedic
specialists in any relevant geographic market.
APPROVED: Absent extraordinary circumstances, the
Department will not challenge a non-exclusive physician network joint
venture whose participants share substantial financial risk and
constitute 30% or fewer of the physicians in a practice specialty in a
relevant market. SOS meets these criteria.
- Allentown, Pennsylvania Gastroenterologists
July 7, 1997
Three practice groups each comprised of four gastroenterologists
proposed to merge into a single 12-person firm in Allentown,
Pennsylvania. The group would then represent 12 of 14
gastroenterologists in Allentown (85.7%) and 12 of 19
gastroenterologists in Allentown and nearby Bethlehem (63%). The group
suggested that the geographic market area within which to measure the
potential market power of the merged firm would be the Greater Lehigh
Valley, including Lehigh and Northampton counties and parts of Bucks,
Berks, and Carbon counties, because some of the merging physicians
regularly traveled to these areas to provide services at outlying
hospitals. Within that area, the group would comprise 36% of all
board-certified gastroenterologists.
REJECTED: Managed care payers told the Department that
they could not market a product that excluded gastroenterologists, and
the Department concluded that the medical specialty of gastroenterology
was the appropriate product or service market for analyzing the merger.
The Department also found the relevant geographic market to be at most
the cities of Allentown and Bethlehem, and possibly only the city of
Allentown. Managed care payers told the Department that they could not
ask enrollees to travel to distant counties or, in many instances, even
from Allentown to Bethlehem, to obtain gastroenterologic services in
order to defeat a price increase by the merging firms. Based on its
investigation, the Department concluded there was a substantial
likelihood that the merging group would cause anticompetitive harm in
the market for gastroenterologic services in the Allentown/Bethlehem
area. It was not apparent that entry within two years of additional
gastroenterologists would occur to defeat a price increase, particularly
as it appeared there was already an oversupply of gastroenterologists in
the area. The parties demonstrated no merger-specific efficiencies to
counteract the potential anticompetitive harm posed by this merger. As a
result, the Department could not state that it would not take
enforcement action against the merger were it consummated as described.
- Vermont Physicians Clinic ("VPC")
July 30, 1997
Approximately 40 physicians from various medical specialties in
Rutland, Vermont, proposed to have their jointly-owned corporation
negotiate risk contracts collectively on their behalf with third-party
payers. With three different types of exceptions, VPC's participating
physicians will not exceed 30 percent of the physicians in any
specialty. The exceptions are for: 1) specialties in which all of VPC's
physicians are in a pre-existing integrated group practice not formed or
expanded to avoid the 30 percent limitation; 2) internal medicine
practitioners, who were properly considered part of a larger market that
includes family practitioners; and 3) three specialties, each of which
represents a small percentage of the total number of VPC's physicians.
Safeguards will be established to ensure that VPC's competing physicians
do not learn of their competitors' fees and prices through its
operations. VPC will provide utilization review, quality improvement
services, and some administrative services. VPC's individual physicians
and practice groups have no current intention of terminating their
existing contracts with third-party payers, or refusing to negotiate
individually with them in the future.
APPROVED: VPC's physicians will share substantial
financial risk by providing services on either a capitated or
substantial (at least 20%) withhold-of-compensation basis. In addition,
with exceptions deemed not likely to have any substantial adverse
competitive effect, VPC will limit the number of its participating
physicians to 30 percent of the physicians in each specialty. VPC's
physicians will be free to contract with other managed care entities
independently or through other provider networks. The proposed
operations of VPC could produce significant efficiencies, and managed
care plans and other third-party payers expressed no concern that VPC's
proposed operations would likely cause any substantial anticompetitive
effects. Many payers believed that VPC would bring much-needed
competition to the managed care panel of physicians formed by the only
hospital in the Rutland area.
- First Priority Health System ("FPHS")
November 3, 1997
First Priority Health ("FPH"), an HMO subsidiary of Blue Cross of
Northeastern Pennsylvania, and NEPPO Ltd, a limited partnership of 166
specialist and primary care physicians ("PCPs") practicing primarily in
Lackawanna County, Pennsylvania (Scranton) proposed to form FPHS, a
risk-bearing 50/50 joint venture, to provide and manage medical services
for FPH's HMO enrollees in Scranton and surrounding counties. The PCPs
in NEPPO would agree not to provide gatekeeper services for any other
gatekeeper-type managed care plan. They would be free to contract with
non-gatekeeper plans. Neither the specialists in NEPPO, nor any
non-NEPPO specialists or PCPs hired by FPHS would be restricted from
contracting with other plans, and some NEPPO PCPs would be excused from
the exclusivity requirement because of shortages of PCPs in the towns
where they practice. Fees for FPHS would be set by a Reimbursement
Committee made up of only payer representatives on the FPHS Board of
Directors; thus, no providers would be involved in setting provider
fees. In addition, highly regarded Community Medical Center ("CMC"), one
of three hospitals in Scranton, would continue an agreement not to
contract with any other gatekeeper-type HMO, and FPHS would agree to
send all of its Lackawanna County area enrollees to CMC unless medical
necessity dictated otherwise.
APPROVED: While other area managed care plans and some
area employers felt that the loss of 38 NEPPO PCPs (most of whom will
have to withdraw from other plans) could cause competitive harm to rival
plans, the Department concluded that roughly 70% of area PCPs would
still be available to the rival plans, and that other area hospitals,
IPAs and PHOs would provide adequate competition to the FPHS system.
Although FPH currently controls 60% of the managed care lives in
Lackawanna County, there are three other active gatekeeper-type plans
currently operating there, and a fourth about to enter. At least two of
these are strong national competitors that have formed relationships
with the other two Scranton hospitals. NEPPO physicians will be at risk
for any losses of FPHS through their ownership interest and capitation,
and are thus motivated to effect cost-saving measures and other
efficiencies. On balance, we are reluctant to discourage an innovative
and potentially procompetitive venture but remain free to challenge FPHS
should anticompetitive effects result.
- AHA Pharmaceutical Roundtable
March 20, 1998
The Pharmaceutical Roundtable ("PRT") of the American Heart
Association ("AHA") proposed changes to PRT operations, which were the
subject of a business review in 1989 when the PRT was formed. The PRT
sponsors and funds basic biomedical research in the cardiovascular field
by independent researchers. It proposed changes to: (1) increase the
annual contribution of PRT members to $1,000,000; (2) decrease the terms
of its members' agreements from five years to three years; and (3) use
members' contributions also to fund targeted research in specific areas
of interest in the cardiovascular field.
APPROVED: Legitimate research ventures are not usually on
balance anticompetitive, particularly in the case of joint ventures to
perform basic, non-appropriable research. The PRT, which has been and
will remain essentially a funding device, appears to constitute such a
joint venture. Knowledge obtained from research funded by the PRT will
continue to be made public. Moreover, the PRT's proposed operations
appear to contain sufficient limitations to prevent significant
anticompetitive spill-over effects in any market, including the market
for biomedical research.
- Heritage Alliance/Lackawanna Physicians' Organization
September
15, 1998
Two independent practice organizations in northeastern Pennsylvania
(principally Lackawanna County) proposed to merge to form a nonexclusive
risk-bearing multi-specialty physician network and associated management
services organization (AMSO@) to contract with payers for the provision
of physician services. The Heritage Alliance's members were 90 primary
care physicians (APCPs@) practicing in six counties, while the
Lackawanna Physician's Organization consisted of 167 specialists and 23
PCPs, all located in Lackawanna County. Negotiated terms for physician
compensation would be either capitation or fee schedules from which 15%
would be withheld pending accomplishment of efficiency goals. Contracts
would be negotiated through the MSO, which would also market the
Network's services and provide medical management services and practice
management support. An actuarial firm might eventually develop a fee
schedule for various payers based on demographic and market conditions,
but in no case would prices charged by individual physicians be
solicited or communicated to other physicians, or used to set fees for
the network. The Network would limit its membership to no more than 30%
of the non-employed pediatricians or any other specialists currently
constituting less than 30% of the group in any relevant geographic
market, and would add no members in any specialty where the group
already represented more than 30% of physicians in the area.
APPROVED: Members of the Network propose to share
substantial financial risk , and it appears that the establishment of
common prices is reasonably necessary to achieve anticipated
efficiencies. Thus, a Rule of Reason analysis is appropriate. The
Network would account for approximately 39% of non-pediatrician PCPs in
Lackawanna County, the primary geographic market, and 28% of
pediatricians. These percentages are not likely to cause substantial
adverse competitive effects in this market. However, a rise in the 39%
figure might cause concern. As for specialists, in eight of 27 medical
specialties represented, the Network will account for more than 50% of
Lackawanna County physicians. While these numbers might also be cause
for concern, they represent the pre-merger composition of Lackawanna
Physicians Organization, which does not appear to have caused
competitive harm at those levels. In general, payers interviewed
supported formation of the Network and did not consider anticompetitive
effects likely. In addition, the Network could well provide significant
competition to another physician network operating in Lackawanna County.
Thus the Department does not intend to challenge the Network if it
operates as proposed.
- Preferred Physicians Medical Group ("PPMG")
July 23, 1999
Multispecialty practice group consisting of 103 members, including 54
primary physicians, proposed to contract on a shared risk basis with
multiple payers in the Southside Hampton Roads, Virginia, area. PPMG
represented fewer than 10 percent of the providers in any given
specialty (including general practitioners and family practice
physicians) in the coverage area, which is comprised of the cities of
Virginia Beach, Chesapeake, Portsmouth, and Norfolk, Virginia, and the
surrounding residential areas. Even with growth, PPMG did not plan to
exceed 15 percent of the providers in any one specialty, or 10 percent
of all physicians in the coverage area. PPMG would be a limited
liability company owned entirely by its physician members. Group members
would contract exclusively through PPMG and would not contract
individually with the payers contracting with PPMG. All revenues would
be derived from risk contracts, with risk arrangements including
all-inclusive case rates, capitated rates, percentage of premium rates,
or use of a 15% risk pool, to be distributed upon attainment of quality
and utilization targets by the group as a whole. PPMG would establish
numerous internal protocols to monitor its utilization and efficiency
goals.
APPROVED: Assuming that PPMG's membership continues to
constitute 20 percent or fewer of the physicians in any given physician
specialty with active hospital staff privileges who practice in the
relevant geographic market, PPMG would appear to fall within the safety
zone for exclusive physician network joint ventures described in
Statement 8 of the Statements of Antitrust Enforcement Policy in
Health Care, issued jointly by the Department and Federal Trade
Commission. Thus the Department stated it had no intention to challenge
the network if it operates as proposed.
- Midwest Behavioral Health Care LLC ("MBH")
February 4, 2000
Providers of ten types of behavioral health care services--general
psychiatrists, child and adolescent psychiatrists, psychologists,
nurses, social workers, counselors, foster parents, therapists,
technicians, and case managers--in six geographic areas of North Dakota
and Northwestern Minnesota--Fargo, ND-Moorhead, MN; Grand
Forks, ND-East Grand Forks, MN; Bismarck, ND; Minot, ND;
Alexandria, MN; and Bemidji, MN--proposed to form MBH, a non-exclusive
network of behavioral health care providers. Initially, the network will
hire or employ a "messenger" who will convey contracting information
between managed care and other third-party payers and MBH's individual
member providers. Within approximately two years after beginning
operations, the network plans to shift to a risk-sharing joint venture
among its member providers that will negotiate with payers collectively
on behalf of the entire network. MBH intends to limit the number of
competing members of each of the ten types of behavioral health care
services, in each of the six geographic areas, to either one
pre-existing provider or one integrated group practice of providers. In
the event additional providers are needed, MBH will include additional
pre-existing providers, provided no more than 30% of the pre-existing
providers of each type of service in each geographic area are included
in the network.
APPROVED: MBH appears to have properly structured its
messenger arrangement to avoid agreements between competing member
providers on prices or other competitively sensitive matters. When MBH
shifts to a joint venture arrangement, its members will share
substantial risk and have incentives to achieve cost containment and
utilization goals. Third-party payers have indicated that MBH's
inclusion in its non-exclusive network of no more than 30% of each type
of provider in each geographic area is not likely to produce any
substantial anticompetitive effects. The Department has no present
intention to challenge the proposal.
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