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 (Since 1993 Issuance of DOJ/FTC Health Care Antitrust Statements of Enforcement Policy: Current as of 1/27/97)
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.
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."
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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 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.
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.
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.
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.
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 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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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