FYI: FTC Grants Petition to Reopen and Set Aside California Medical Association (CMA) Consent Order...

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The Federal Trade Commission has granted the petition of the California Medical Association (CMA) to reopen and set aside a consent order so that CMA can establish and operate a managed care plan, under which it would use a fee schedule to pay physicians providing services under the plan. CMA is based in San Francisco.

The 1979 order at issue settled charges that CMA"s publication and dissemination of a relative values study (RVS) had the effect of establishing, maintaining, or otherwise influencing fees charged by physicians. The RVS assigns numerical values to different medical and surgical procedures which could be converted, by physicians, into fee schedules. The order barred CMA and its subsidiaries from, among other things, participating in the creation or dissemination of fee schedules relating to physician compensation.

CMA petitioned the FTC in June to set aside the order entirely or, alternatively, to add a paragraph stating that the order does not prohibit CMA from operating a managed care company and disseminating fee schedules to its physician members and other health care providers with whom the managed care company contracts.

The Commission determined that the public interest requires reopening and setting aside the order. The order "presents an obstacle to CMA forming and operating a managed care subsidiary," the Commission said, adding: "CMA"s formation of a managed care organization is not inherently illegal, and may be procompetitive" by contributing to competition in the managed care market in California. The order was intended to inhibit the distribution of RVSs that might facilitate price-fixing by CMA's members, the Commission said, not to inhibit lawful entry by CMA into managed care markets.

According to the Commission, however, the danger that CMA members will use the reimbursement schedules created by the proposed managed care organization as a basis for an unlawful agreement to fix prices has not been eliminated. Although distribution of such reimbursement schedules through the proposed managed care organization may serve the public interest, the Commission said, CMA and its members still remain subject to antitrust laws against price fixing.

The Commission vote to grant the petition was 5-0, with Commissioner Roscoe B. Starek, III concurring in the result only. In a separate statement, Commissioner Starek said that he concurs in the Commission's decision to set aside the order in this case because CMA "discharged its burden of showing that the order's ban on the development and distribution of relative value studies is likely to impede CMA's formation and operation of a managed care subsidiary... ." According to Starek, in keeping with the Commission's practice in previous cases, he reached this determi- nation because "it is merited under an overall weighing of the benefits and the costs of granting the relief requested by CMA." Starek, however, did not join in the other Commissioners' view that CMA "must demonstrate as a threshold matter some affirmative need to modify the order." Said Starek: "Neither the statute nor the Commission rule governing our consideration of such petitions says anything about 'affirmative need." ... Under my reading of the governing statute and Commission rule ... all that is required is the balancing of overall costs and benefits to which I alluded above."

Copies of the order reopening and setting aside the 1979 order, Commissioner Starek's statement, as well as other documents associated with this case, are available from the FTC"s Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580: 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it happens, call the FTC"s NewsPhone at 202-326-2710. FTC news releases and other documents also are available on the Internet at the FTC"s World Wide Web Site at http://www.ftc.gov

(FTC Docket No. C-2967)

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