FTC Issues Final Order on Remand in Case of North Texas Specialty Physicians

Textual Changes Made to Paragraph II.A.2 to Ensure Consistency with Fifth Circuit Opinion

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The Federal Trade Commission today issued a Final Order on Remand from the Fifth Circuit Court of Appeals in the matter of North Texas Specialty Physicians v. FTC, 528 F.3d 346 (5th Cir. 2008). The FTC’s Final Order on Remand modifies the text in one paragraph of the remedial order (Paragraph II.A) to make it consistent with the Fifth Circuit opinion.
Paragraph II of the Commission’s order contains the core cease-and-desist provisions against North Texas Specialty Physicians (NTSP), prohibiting it from engaging in the anticompetitive price-fixing conduct alleged in the original complaint. Paragraph II.A includes provisions that specifically address types of joint activities that the FTC and the Court of Appeals found NTSP used to carry out its unlawful conduct. The Court of Appeals expressed concern that one provision of that paragraph was internally inconsistent and overly broad.

The Commission’s final order on remand, issued today, addresses these concerns. First, it deletes the reference to agreements “to deal” from Paragraph II.A.2, eliminating the internal inconsistency in the provision to which the Court of Appeals referred, while leaving intact the prohibition against NTSP involvement in collective decisions by physician members on whether, or on what terms, to participate in a payor network. Second, it modifies paragraph II.A.2 by adding the phrase “in furtherance of any conduct or agreement that is prohibited by any other provision of Paragraph II of this Order.”

Finally, the final order on remand rescinds the stay in enforcement of NTSP’s obligation to comply with two other paragraphs in the order (IV.B and IV.C).

Case History

In September 2003, the FTC issued an administrative complaint charging NTSP with unlawfully restraining competition, resulting in increased health care costs for consumers in the
Fort Worth area. The Commission charged the group with violating federal law by implementing agreements among its participating physicians on price and other terms, refusing to deal with payors except on collectively agreed-upon terms, and refusing to submit payor offers to participating doctors unless the offers’ terms complied with NTSP’s minimum-fee standards.

The Commission also alleged that NTSP’s unlawful practices included, among other things, polling its participating physicians to determine the minimum fee they would accept for medical services provided under a group payor agreement and communicating the results back to members, reducing competition among participating doctors. Finally, the Commission charged the group with discouraging payors and participating physicians from negotiating directly with one another and that the arrangements resulted in no increase in clinical integration.

In an initial decision filed on November 8, 2004, Administrative Law Judge (ALJ) D. Michael Chappell upheld the Commission’s complaint, finding that NTSP restrained trade by conspiring to fix prices in certain contracts its doctors entered into to provide medical services to health plan patients in Fort Worth. Chappell wrote in the decision that, “The government has proved its case . . .,” and that, “the appropriate remedy [is] an order to cease and desist.” NTSP subsequently appealed the decision to the full Commission, which issued its decision and order in December 2005.

The Commission’s decision, issued in favor of complaint counsel, was authored by Commissioner Thomas B. Leary and announced on December 1, 2005. In it, the FTC affirmed the ALJ’s initial decision that NTSP had illegally fixed prices in its negotiations with payors, including insurance companies and health plans. “This is not really a close case,” the Commission wrote in its opinion. “NTSP’s conduct is similar to conduct that has been found per se unlawful and summarily condemned in other contexts...” In issuing its accompanying order, the FTC required NTSP to cease and desist from engaging in the anticompetitive price-fixing conduct alleged in the complaint. The defendants appealed the Commission’s decision to the U.S. Court of Appeals for the Fifth Circuit, which issued a unanimous opinion in favor of the FTC on May 14, 2008.

In its opinion, the Fifth Circuit affirmed the FTC’s decision that found certain activities of NTSP violated Section 5 of the FTC Act. In particular, NTSP was found to have participated in horizontal price-fixing that was not related to any procompetitive efficiencies. The appellate court’s decision fully endorsed the analytical framework applied by the Commission in its decision, which found NTSP’s conduct to be “inherently suspect,” with “no procompetitive justification.” The Court did, however, find the FTC’s remedial order overly broad in one narrow respect and remanded it to the Commission for modification, leading to the final order on remand announced today.

The Commission vote approving the issuance of the final order on remand was 4-0.

Copies of the Commission’s final order on remand are available from the FTC's Web site at http://www.ftc.gov and the FTC's Consumer Response Center, Room 130, 600
Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to antitrust@ftc.gov, or write to the Office of Policy and Coordination, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, DC 20580. To learn more about the Bureau of Competition, read “Competition Counts” at http://www.ftc.gov/competitioncounts.

(FTC File No.: 021-0075; Docket No. 9312)
(NTSP Final Order.final.wpd)

Contact Information

MEDIA CONTACT:
Mitchell J. Katz,
FTC Office of Public Affairs
202-326-2161
STAFF CONTACT:
Michele Arington,
FTC Office of General Counsel
202-326-3157