Physician Practice Association’s Negotiations with Health Plans Should Not Be Challenged: FTC Staff

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

A multi-specialty physician practice association—serving the greater Rochester, New York, area—can proceed with its proposal to engage in joint contract negotiations with health plans on behalf of its members, after the FTC staff informed the group that it had no present intention to recommend a challenge to its proposed operation as a non-exclusive physician network joint venture.

In a 30-page letter sent September 17, the FTC Bureau of Competition staff concluded (1) that the program would involve substantial clinical integration, (2) that the joint contracting would be subordinate and reasonably related to the association’s plan to integrate, and (3) that the joint contracting would be reasonably necessary to achieve the plan's efficiency benefits.

Text of the letter (Greater Rochester Independent Practice Association, Inc., Advisory Opinion) appears on the FTC web site.

Conference Discussion Topic

The staff letter was released in time to serve as a topic of discussion for a gathering of antitrust and health care attorneys in Washington, D.C. on September 17 and 18, sponsored by the American Health Lawyers Association and the American Bar Association Sections of Health Law and Antitrust Law.

In an address entitled "Clinical Integration in Antitrust: Prospects for the Future," FTC Commissioner J. Thomas Rosch explained that "the agencies identified the concept of clinical integration to the 1996 Statements [of Antitrust Enforcement Policy in Health Care] as an additional means for physician groups to avoid antitrust liability for joint negotiation of fees."

Previous Advisory Opinions

Noting that physician groups have not made a lot of progress in establishing clinical integration, as opposed to financial integration, Rosch cited two previous letters by Commission staff addressing the topic.

In February 2002, the FTC staff notified MedSouth, Inc., a multi-specialty physician practice association in the Denver area, that its plans to operate as a nonexclusive physician network joint venture would not be challenged. Under the proposal, the association would coordinate and integrate its members' provision of medical services to patients through a clinical resource management program, then would contract for the sale of participating physicians' services to health plans on a fee-for-service basis.

Four years later, in March 2006, the FTC staff rejected a proposal by Suburban Health Organization, Inc. to serve as the exclusive bargaining and contracting agent with most insurers for 192 primary care physicians employed at Suburban Health Organization's eight member hospitals in Indiana. The Commission staff concluded that the proposal involved some potentially beneficial integration among the participants, but that the reasons given for collective bargaining did not justify that elimination of competition.