Diagnosing Physician-Hospital Organizations

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Remarks before the American Health Lawyers Association, Program on Legal Issues Affecting Academic Medical Centers and Other Teaching Institutions

Washington, D.C.

Date:
By: 
Susan Creighton, Former Director

I. Introduction

I have been asked to speak today about the Federal Trade Commission's enforcement approach to physician-hospital organizations, otherwise known as PHOs. (1) I am pleased to do so. The subject is certainly timely, as there have been several recent enforcement actions involving PHOs. (2) In addition, the recent FTC/DOJ hearings on competition law and policy in health care devoted a session to PHOs. (3) The record of those hearings is currently being reviewed by Commission staff and a report is expected later this year.

What I would like to do today is speak about the analytical framework we employ to analyze the competitive effects of PHOs, and highlight recent antitrust enforcement actions the FTC has taken against particular PHO arrangements. I think my remarks will be both reassuring and cautionary. They should be reassuring because the Commission recognizes that PHOs, like all joint ventures, have a potential for generating procompetitive, efficiency-enhancing benefits that may offset competitive restraints that might also be imposed. On the other hand, my remarks will also be cautionary, because there are significant antitrust risks when PHOs appear to have been used as a vehicle for restraining price competition among competing members, as demonstrated by our recent enforcement actions.

Although PHOs come in many forms, we understand that they may engage in a number of activities that do not raise antitrust issues. Competitive issues can arise, however, when a PHO acts as a contracting arrangement for a network of health care providers, consisting of a group of physicians, one or more hospitals, and perhaps other entities, that will offer a bundle of health care services to insurance companies and other payors. In its simplest form, a PHO consists of a single hospital and a group of physicians. (4) Other PHOs involve multiple hospitals and groups of physicians. (5) A third type we have encountered might be called a "super PHO" - a PHO superstructure that, in turn, owns or controls (or acts as an agent for) a group of other PHOs and involves multiple hospitals and physician groups. (6) We will address the role of PHOs in the report on the FTC/DOJ hearings on competition law and policy in health care, to be released later this year.

II. The Analytical Framework

Let me first give you an overview of the analytical framework we apply to PHOs. Most PHO memberships consist of health care providers that are rivals with one another - be they competing hospitals, competing community physicians, or hospital-employed physicians or medical school faculty on the one hand and community physicians on the other. It is a core antitrust law principle that it is illegal for such competitors to agree on the prices they will charge, except where they come together and integrate in a legitimate joint venture that results in efficiencies or other procompetitive benefits that outweigh the restriction of competition. We apply a joint venture analysis to determine the overall competitive effects of such integrated arrangements. This is described in Statement 9 of the DOJ/FTC Statements of Antitrust Enforcement Policy in Health Care (hereafter the "Health Care Statements"). (7) The same principles are discussed in the Antitrust Guidelines for Collaborations Among Competitors. (8)

A. Joint Venture Analysis

Joint venture analysis starts with the premise that, in general, joint ventures have the potential to make a positive contribution to the economy by integrating complementary resources, and that some collaborative arrangements, that would otherwise be illegal restraints on competition, may be necessary to achieve those benefits. (9) Such restraints are evaluated under the rule of reason, which entails a weighing of the potential efficiency-enhancing benefits against the competition-restraining effects. Statement 9 of the Health Care Statements thus states that

multiprovider networks will be evaluated under the rule of reason, and will not be viewed as per se illegal, if the providers' integration through the network is likely to produce significant efficiencies that benefit consumers, and any price agreements (or other agreements that would otherwise be per se illegal) by the network providers are reasonably necessary to realize those efficiencies. (10)

There are a number of important concepts in what I just stated, so let me elaborate a bit, starting with the concept of "economic integration." It is a term that is often used but seldom precisely defined. It could be described in simple terms as a pooling of economic interests or resources in some manner other than mere coordination of price or output. Whatever the form, we are looking for economic integrations that, in terms of the Health Care Statements, "produce significant efficiencies". As the Commission explained in a recent case, the claimed efficiencies must reflect "the realities of the present case;" they cannot be merely hypothetical. (11)

The Health Care Statements describe two particular forms of integration among health care providers that may yield significant efficiencies: the sharing of substantial financial risk for the services provided through the network, and substantial clinical integration among the providers. (12) These forms of integration operate in large part by creating interdependencies that produce benefits through mutual cooperation among the providers.

The significance of sharing financial risk, of course, is that it generally creates an incentive for providers to be attentive to efficiency in the provision of services, and it encourages the creation of mechanisms to promote efficiency among other providers in the network. The Health Care Statements provide some examples of risk-sharing arrangements; the list is not exhaustive, so we are not limited in the kinds of arrangements we consider.

By clinical integration, we do not necessarily mean physical integration, but, rather, the establishment of systems and procedures that promote greater interdependence and joint responsibility in managing the cost and quality of care rendered by network providers. Examples include the establishment of goals, standards, and protocols to govern treatment and utilization of services by the providers, both individually and as a group, active review of performance, and corrective action if necessary. (13) The Health Care Statements provide an example of clinical integration in part D.1 of Statement 9. In addition, the MedSouth advisory opinion issued last year by Commission staff contains a detailed discussion of potentially significant clinical integration in the context of physician IPAs. (14) I commend it to your attention; the Health Care Statements reflect that there may be arrangements among hospitals that similarly involve integrative efficiencies.

I would also emphasize that active monitoring of practices and enforcement of standards are important elements of meaningful clinical integration. A case in point is the Commission's enforcement action last summer against a physician PPO, California Pacific Medical Group, Inc., dba Brown and Toland Medical Group. (15) Brown & Toland is a multi-specialty IPA that entered into risk-sharing contracts with HMOs in the San Francisco area. That is not what we challenged. What concerned us is what Brown & Toland did next. The Complaint alleges that Brown & Toland, faced with declining HMO revenues, then formed a PPO network comprising approximately one-third of its IPA members and entered into collectively negotiated PPO contracts without sharing financial risk. (16) Even if Brown & Toland physicians may have achieved clinical efficiencies under their HMO risk-sharing contracts - as Brown & Toland asserted - any such efficiencies could not save the PPO contracts from antitrust challenge because, among several other things, there were no ongoing mechanisms to ensure that those potential efficiencies would be replicated in PPO services. The Complaint thus alleges that "Brown & Toland does not monitor practice patterns and quality of care, or enforce utilization standards regarding services provided by its PPO network." (17)

That brings me to what is meant by "reasonably necessary." The threshold requirement is that there must be a "specific link" between the challenged restraint and the purported justification. (18) As explained by one court, there must be an "organic connection" - a logical nexus - between the restraint and the efficiency. (19) Thus, for example, joint fee setting by hospitals likely would not be reasonably related to clinical integration among physicians, and vice-versa. The Brown & Toland case is another illustration. There was no specific link between the group's collective negotiation of its PPO contracts, and either its financial integration or its alleged clinical integration relating to those contracts. In other words, its price fixing was not necessary to achieve any of the efficiencies it purported to have realized.

Beyond that threshold requirement, a restraint must serve to make the integration more effective in achieving its goals. (20) A restraint is not reasonably necessary if there are practical, significantly less restrictive means available to achieve the efficiency, although we do not insist that the parties search for and adopt the least restrictive means. (21)

The MedSouth advisory opinion, again, contains a helpful discussion of the concept of reasonable necessity. The staff concluded in that case that joint negotiation of fees appeared to be reasonably related to the efficiency goals of the clinical integration planned by the parties. The opinion notes that "[i]n order to establish and maintain the on-going collaboration and interdependence among physicians from which the projected efficiencies flow, the doctors need to be able to rely on the participation of other members of the group in the network and its activities on a continuing basis. This does not appear to be possible if contracting for the sale of services is done individually." (22)

Let me now turn to the rule of reason analysis we apply when there is a tenable threshold showing of a potential efficiency-enhancing integration.

B. The Rule of Reason

The rule of reason is not a rigid form of analysis, but, rather, a flexible analytical framework that encompasses a range of inquiries appropriate under the circumstances to provide a meaningful analysis of likely competitive effects. (23) For example, a full-blown rule of reason analysis often requires a detailed examination of whether the providers are able to exercise market power in a relevant market. This entails the delineation of relevant markets, the identification of providers both within and outside the network who serve the relevant markets, the calculation of market shares and concentration, an assessment of the ability and willingness of payors to switch to alternative providers, and the possibility of new entry into the market, as well as an overall assessment of competitive conditions in the market. Here we would apply the analytical approach detailed in the Horizontal Merger Guidelines, (24) which are referenced by both the Health Care Statements and the Competitor Collaboration Guidelines.

Such a detailed inquiry is not always necessary, however. As explained by the Commission in Schering-Plough and Three Tenors, the appropriate methods of analysis extend over a continuum in which a challenged practice is examined in the detail necessary to understand its competitive effect. (25) At one end of the continuum are restraints that are characterized as "inherently suspect." In that kind of case, the likelihood of competitive harm is either readily apparent or can "easily be ascertained." (26) The focus of the analysis is on the nature of the restraint, and a prosecutor's burden of showing likely anticompetitive effect can be satisfied on the basis of "past judicial experience and current economic learning." (27) If the restraint is appropriately characterized as inherently suspect, the defendant can avoid summary condemnation only by carrying a burden to advance a legitimate justification for those practices. (28) I would certainly place in that category collective fee setting by competing health care providers.

If the anticompetitive character of the restraint is not so clear - i.e., not inherently suspect - the prosecutor has the burden of demonstrating actual or likely market effects "by reference to the facts specific to the case." (29)

This entails a more detailed inquiry, but it does not necessarily require a full-blown rule of reason analysis. For example, if there is direct evidence of significant competitive harm, there is no need for a full inquiry into market power, since the purpose of the market power inquiry in the first place is to determine the likelihood that competition was or can be harmed by imposition of the restraint. (30) As the Supreme Court stated in Indiana Federation of Dentists, "the finding of actual, sustained adverse effects on competition . . . is legally sufficient to support a finding that the challenged restraint was unreasonable even in the absence of elaborate market analysis." (31)

C. Collateral Restraints

Let me now turn to two other kinds of restraints that may be particularly important in the analysis of some PHO joint ventures: exclusivity arrangements and "most-favored-nation" (MFN) clauses.

Exclusivity arrangements among providers restrict their ability to join other networks or contract individually with health plans. Such arrangements are relevant to assessing the market power of providers in the network since they limit the scope of competition outside the network and the range of alternatives available to payors. (32) The presence of such an arrangement was alleged in a number of the Commission's recent PHO cases. In some cases, exclusivity arrangements themselves can be anticompetitive, by impeding or precluding competition among networks or blocking the entry of new networks. (33) However, exclusivity arrangements are not regarded as inherently anticompetitive, since they may have some justification such as helping ensure the network's ability to serve its subscribers and increase its providers' incentives to further the interests of the network. Health Care Statement 9 provides guidance on how we assess the competitive significance of exclusivity arrangements. It should be noted that we look for both explicit and de facto exclusivity arrangements.

Certain kinds of most-favored-nation clauses are another possible means of sustaining collusive agreements. This is a complicated subject, because the competitive significance of MFN clauses depends on the market context, and the effects can differ depending on whether they are negotiated by buyers or adopted by providers as a governing mechanism within the organization. Let me give you an example of an MFN clause that raised substantial concerns. Our South Georgia PHO case alleged that the hospital members adopted, among themselves, a MFN clause that created a disincentive for members to deviate from the agreed-upon price by contracting outside the PHO. (34) The Complaint alleged that if a member offered a lower price to any payor outside the PHO contract, it would have to offer the same discount to all payors with which it was under contract. This can create a significant disincentive against selective discounting. Again, MFN clauses are not always anticompetitive - they may be procompetitive or competitively neutral in certain circumstances - but they are a factor we examine with considerable care.

III. Recent Cases

Let me now review the Commission's recent enforcement actions involving PHOs. There are several of them, but you will note that the Commission's complaint in each of them alleged the lack of meaningful integration among the providers. I'll start with our most recent enforcement action.

Piedmont Health Alliance (35)

Last month, the Commission issued an administrative complaint against Piedmont Health Alliance, Inc. (PHA), a physician-hospital organization in North Carolina, and ten individual physicians, alleging that they engaged in a price fixing arrangement involving physician services. In a related action, Frye Regional Medical Center, an acute care hospital in Hickory, North Carolina, and its parent company Tenet Healthcare Corporation, settled FTC charges concerning their role in PHA's allegedly unlawful activities. (36) The settlement with Frye and Tenet represents the first case in which the FTC has named a hospital as a participant in an alleged physician price-fixing conspiracy.

The price-fixing charge is based on an alleged arrangement whereby PHA's physician members agreed to use PHA as their bargaining agent, agreed to participate in all contracts PHA entered, and agreed to accept PHA-negotiated prices. The complaints also state that, starting in 2001, PHA began using what PHA calls a "modified messenger model" to enter into contracts with some payors. Legitimate messenger arrangements can reduce contracting costs between payors and physicians, but without involving or facilitating coordinated responses by the physicians. In this case, however, the FTC alleges that the approach employed by PHA was a price-fixing mechanism. Although PHA did ask each member physician individually what minimum price he or she would accept under payor contracts, according to the complaint the contract price was not individually negotiated. PHA allegedly helped its physicians set a minimum price by sending preexisting, PHA-negotiated contract prices to its physician members, which many used to develop their individual prices. PHA then allegedly negotiated with payors on the overall average price levels to be paid to its physician members, and then set individual fee schedules based on those price levels. According to the complaint, the essence of this pricing conduct is that the physicians, through PHA, collectively determined the size of the overall pie, and the fee schedules were a means of dividing up the pie. The complaint alleges that PHA's collective negotiation on behalf of its physician members was not reasonably necessary to achieving any efficiency-enhancing integration.

Frye and its parent company, Tenet Healthcare, were charged for their alleged role in facilitating and participating in the physician price fixing. The complaints allege that Frye was instrumental in PHA's formation, expansion, and operation. Frye's Board of Directors allegedly authorized Frye's CEO to use Frye funds to develop a PHO that would include Frye and physicians who practiced at Frye, and Frye's Chief Operating Officer (COO) initially directed PHA's operations. The complaints state that Frye subsequently coordinated the inclusion of two other hospitals - Caldwell Memorial Hospital and Grace Hospital - and their respective medical staffs in the PHO, and has invested substantial funds in the project. Frye's Chief Financial Officer and COO served as PHA's principal contract negotiators from 1994 to 1996. Frye's representative on the PHA Board also participated in the Board's actions regarding payor contracts and physician fees.

This case shows that hospitals face significant antitrust risks if they facilitate or participate in price fixing by physicians, absent a legitimate efficiency justification.

South Georgia Health Partners (37)

In another action last year, the Commission charged South Georgia Health Partners, L.L.C. (SGHP) - a large Georgia physician-hospital organization - along with its five owner PHOs and three associated physician IPAs - with illegally entering into agreements to fix both physician and hospital prices and refusing to deal with third-party payors such as insurance companies, except on collectively agreed-upon terms. (38)

The FTC's complaint charges that four PHOs organized SGHP in 1995 as a vehicle through which competing hospitals and physicians could bargain collectively with health plans to obtain higher fees for themselves. A fifth PHO joined SGHP in 2001. The owner PHOs, member hospitals, and member physicians canceled contracts with payors and informed them that SGHP would be the sole entity through which they would enter into payor contracts. SGHP established a Contract Review Committee to handle all evaluation and negotiation of payor contracts, subject to final approval of the Board of Directors. SGHP then negotiated fee-for-service contracts on behalf of its physician and hospital members as one entity.

SGHP had a single price list for its member physicians. Physicians may opt out of contracts negotiated by SGHP, but as a practical matter they did not contract with payors separately from SGHP. SGHP's hospital members unilaterally established their own respective price lists, which they submitted to SGHP's negotiators, but SGHP allegedly fixed the maximum allowable discount at 10% off hospital list prices. An agreement on the maximum discount is just as unlawful as an agreement on other elements of price.

The SGHP operating agreement also restricted member hospitals' ability to contract outside the PHO. The hospitals agreed not to deal independently for most payor contracts unless authorized to do so by 75% of the SGHP Board. SGHP hospitals also agreed that even if a member hospital was authorized by the Board to contract independently with a payor, that hospital could not offer a greater than 10% discount off its list prices unless it offered the deeper discount to every payor with which SGHP has a contract. That is the MFN clause that I referred to earlier; in this case, it appeared to create a substantial disincentive against discounting.

Finally, the complaint alleges that SGHP members did not integrate in a manner that was sufficient to create efficiencies and to justify their price-fixing practices.

Maine Health Alliance (39)

The Commission's case against The Maine Health Alliance, also last year, similarly alleged price fixing by a PHO in both physician services and hospital services. (40) The case was the first brought by the FTC involving charges that a provider organization engaged in price-fixing and other anticompetitive collusive conduct in the provision of hospital services.

According to the complaint, the purpose of the Alliance, which consists of approximately 325 physicians and 11 hospitals, was to negotiate payor contracts that contained higher compensation and more advantageous contract terms than the doctors and hospitals could have achieved by negotiating individually. More than 85% of the doctors on staff at Alliance-member hospitals were Alliance members, as were nearly 70% of the hospitals in the five-county area. The doctor and hospital members designated the Alliance as their negotiating agent to contract with payors, and also authorized the Alliance to enter into contracts with payors on their behalf.

The physicians' delegation of contracting authority to a common agent constituted price fixing. Alliance hospitals, on the other hand, determined their own price lists, but the Alliance fixed the maximum percentage discount allowable off a member's price list. That, again, constitutes price fixing. While the Alliance did not prohibit its members from joining other networks or contracting independently with payors, it repeatedly convinced its members to contract exclusively through the PHO. Finally, the complaint alleges that the Alliance and its members did not engage in any significant form of financial risk sharing or clinical integration.

In the next two cases I will mention, the Commission's complaint challenged alleged price fixing by physician members of organizations affiliated with other medical institutions - a hospital in one case, and a medical school in the other.

Memorial Herman Health Network Providers (41)

In Memorial Herman, a Houston, Texas-based physicians' group agreed to settle FTC charges that it engaged in unlawful price fixing.(42) Memorial Hermann Health Network Providers (MHHNP) is a non-profit corporation with approximately 3,000 participating physician members. It is governed by a Board of Directors which includes 16 voting directors, all of whom are physician members. The Board members are elected by MHHNP's physician members. Among other things, the Board develops guidelines for payor contracts; approves price terms for dealing with payors; establishes procedures for selecting new members; and establishes certain payment and billing procedures for physician members. MHHNP's "Membership and Credentialing Committee," a 13-member panel of Board members and appointees, evaluates the credentials of each potential physician member and recommends to the Board the physician's eligibility for membership.

Prior to 1999, MHHNP engaged in risk contracting with some payors. In 1999 or 2000, MHHNP terminated all such existing contracts and renegotiated non-risk contracts with those payors. The complaint alleges that MHHNP regularly negotiated with payors fees and other terms of service. MHHNP allegedly periodically polled its members, asking each to disclose the minimum fee he or she would accept in return for providing medical services. The Board then calculated minimum acceptable fees for use in payor negotiations and told payors that it would not enter into any offer that does not satisfy the fee minimums.

MHHNP also refused to submit payor offers that did not meet MHHNP's minimum fees to its members to permit them to decide unilaterally to accept or reject the offers. In addition, the complaint charges that MHHNP discouraged and prevented participating physicians from contracting directly with payors. Finally, the complaint alleges that MHHNP's negotiation of fees and other competitively significant terms on behalf of its members was not reasonably related to an efficiency-enhancing integration.

Washington University Physician Network (43)

The Commission's case against Washington University Physician Network (WUPN) likewise involved charges that a physicians' organization engaged in price-fixing on behalf of its members. (44) WUPN consists of Washington University, which has a medical school, its 900 faculty physicians, and 600 community physicians who provide health care services in St. Louis and four neighboring counties.

The complaint alleges that WUPN was established in 1993 to promote, among other things, the collective economic interests of its community physicians by increasing their negotiating leverage with payors. Among other things, WUPN, through its board, developed guidelines for negotiating, reviewing, approving, rejecting, terminating, and renewing payor contracts; approved price terms for dealing with payors; established procedures for credentialing WUPN's physicians; approved formulas for distributing revenues among the School of Medicine and community physicians from payor contracts; and established billing and payment procedures for the community physicians.

WUPN's member physicians signed an agreement appointing WUPN as their agent in contract negotiations with payors. WUPN then negotiated payor contracts, including price terms, on the collective behalf of its faculty physicians and community physicians. Representatives of WUPN's management committee, a 12-member panel consisting of physician board members and other board appointees, negotiated directly with payors and reported on the progress of their negotiations to the board. This committee advised the board on which proposed payor price terms to accept or reject, and which payor contracts to terminate or continue. The board decided whether to accept or reject a payor contract, including the price, upon the approval of a majority of the community physician directors and of the faculty physician directors present at the board meeting, so long as a majority of the board was present.

Finally, according to the complaint, WUPN's joint negotiation of prices and other challenged conduct was not related to any efficiency-enhancing integration.

These cases collectively illustrate a number of points:

  • Collective price setting, through a common agent or otherwise, is illegal unless it is reasonably necessary to the achievement of significant integrative efficiencies.
  • PHOs with multiple hospital members face the same kinds of antitrust risks regarding price fixing as do the physician members.
  • Hospital members of PHOs can be held accountable for their role in facilitating price fixing by physician members.
  • Labeling a contracting mechanism a "messenger model" does not necessarily give you a clean bill of health. We look to the realities of the arrangement.
  • Exclusivity arrangements can sometimes heighten competitive concerns.
  • Some MFN clauses likewise can sometimes heighten competitive concerns.

Conclusion

In sum, while PHOs offer the potential of achieving significant integrative efficiencies, there are substantial antitrust risks if they fail to implement meaningful forms of integration. We apply a joint venture analysis based on their potential for producing consumer benefits, and we make a serious and cautious appraisal of that potential. We do not want to do anything that discourages efficiency-enhancing arrangements and will fully take into account credible and documented efficiency explanations. On the other hand, we review horizontal agreements on price with great skepticism, and evaluate claims of efficiencies in the context of horizontal price fixing with considerable care. Our enforcement challenges to PHO contractual arrangements to date have been in situations where, according to the Commission's complaints, the competitive restraint was not reasonably necessary to the achievement of efficiencies, if any were even proffered. When we reach that determination, it becomes clear that collective fee setting arrangements are anticompetitive, but we undertake a careful analysis before reaching that point.

Thank you for inviting me to speak today.

Endndotes:

1. The views expressed are my own and do not necessarily reflect the views of the Federal Trade Commission or any Commissioner.

2. Piedmont Health Alliance, Inc., Dkt. No. 9314 (Complaint, December 22, 2003); Tenet Healthcare Corp., FTC File No. 021 0119 (December 22, 2003) (consent agreement accepted for public comment); South Georgia Health Partners, L.L.C., Dkt. C-4100 (Oct. 31, 2003) (consent order); The Maine Health Alliance, Dkt. C-4095 (Aug. 27, 2003) (consent order); see also Memorial Herman Health Network Providers, Dkt. No. C-4104 (Jan. 8, 2004) (consent order); Washington University Physician Network, Dkt. No. C-4093 (Aug. 22, 2003) (organization of community physicians and medical school faculty) (consent order); Montana Associated Physicians, Inc. and Billings Physician Hospital Alliance, Inc., C-3794 (1996) (consent order).

3. Federal Trade Commission and Department of Justice Hearings on Health Care and Competition Law and Policy, February, 2003 - October, 2003. The agenda and other materials are available at /ogc/healthcarehearings/index.htm.

4. E.g., Montana Associated Physicians, Inc. and Billings Physician Hospital Alliance, C-3794 (1996) (consent order).

5. E.g.., Piedmont Health Alliance, Inc., Dkt. No. 9314 (Complaint, December 22, 2003); Tenet Healthcare Corp., FTC File No. 021 0119 (December 22, 2003) (consent agreement accepted for public comment); The Maine Health Alliance, Dkt. C-4095 (Aug. 27, 2003) (consent order).

6. South Georgia Health Partners, L.L.C., Dkt. C-4100 (Oct. 31, 2003) (consent order).

7. Department of Justice and Federal Trade Commission, Statements of Antitrust Enforcement Policy in Health Care (August 1996), available at /reports/hlth3s.htm.

8. Federal Trade Commission and the Department of Justice, Antitrust Guidelines for Collaborations Among Competitors (April 2000), available at /os/2000/04/ftcdojguidelines.pdf.

9. The analysis thus applies the doctrine of ancillarity. Restraints are ancillary to competitor collaboration if they are subordinate to and reasonably necessary to the achievement of procompetitive or efficiency-enhancing goals of the integration. See Health Care Statement 9; Competitor Collaboration Guidelines § 3.2; United States v. Addyston Pipe & Steel Co., 85 F. 271, 282 (6th Cir. 1898), aff'd 175 U.S. 211 (1899). See also Polygram Holding, Inc. ("Three Tenors"), FTC Dkt. 9298, Slip Op. at 32 n.42 (July 24, 2003) ("The concept of ancillarity is implicit in our Collaboration Guidelines . . . which recognize that restraints that otherwise might be considered illegal per se warrant a more elaborate analysis when they are reasonably related to, and reasonably necessary for the achievement of, procompetitive benefits."), available at /os/caselist/d9298.htm.

10. Health Care Statement 9.

11. See Schering-Plough Corp.,. FTC Dkt. No. 9297, Slip Op. at 37 (Dec. 8, 2003), available at /opa/2003/12/schering.htm.

12. Health Care Statement 9 at part A.

13. Physicians participating in risk-sharing contracts also typically agree to follow guidelines relating to quality assurance, utilization review, and administrative efficiency.

14. MedSouth, Inc., Letter from Jeffrey W. Brennan to John J. Miles, Ober, Kaler, Grimes & Shriver, Feb. 19, 2002, available at/bc/advisory.htm.

15. FTC Dkt. No. 9306, complaint issued July 8, 2003.

16. Id. at ¶¶ 10-11.

17. Id. at ¶ 12.

18. Polygram Holding, Inc., Slip Op. at 31; see also Competitor Collaboration Guidelines at § 3.2 (restraint in question must be "reasonably related to the integration").

19. General Leaseways, Inc. v. Nat'l Truck Leasing Ass'n, 744 F.2d 588, 595 (7th Cir. 1984).

20. Rothery Storage & Van Co. v. Atlas Van Lines, 792 F.2d 210, 224 (D.C. Cir. 1986), cert. denied 479 U.S. 1033 (1987).

21. Health Care Statement 9 at part B.3; Competitor Collaboration Guidelines § 3.36(b).

22. MedSouth, Inc. The opinion also notes that "joint contracting may permit the network to allocate the returns among members of the network in a way that creates incentives for the physicians to make appropriate investments of time and effort in setting up and implementing the proposed program."

23. E.g., California Dental Ass'n v. Federal Trade Commission, 526 U.S. 756, 780-81 (1999); Polygram Holdings, Slip Op. at 27-28; Schering-Plough Corp., Slip Op. at 7.

24. Department of Justice and Federal Trade Commission, 1992 Horizontal Merger Guidelines (1992, rev.1997), available at/bc/docs/horizmer.htm.

25. Schering-Plough, Slip Op. at 7, 14, 18; Polygram Holdings, Slip Op. at 22, 27-29.

26. California Dental Ass'n v. FTC, 526 U.S. at 770.

27. Polygram Holding, Slip Op. at 29; Schering-Plough, Slip Op. at 11.

28. Polygram Holdings, Slip Op. at 29.

29. Schering-Plough, Slip Op. at 11.

30. See Schering-Plough, Slip Op. at 16-18.

31. Federal Trade Commission v. Indiana Federation of Dentists, 476 U.S. 447, 460-61 (1986).

32. Health Care Statement 9; Competitor Collaboration Guidelines § 3.34, 3.34(a).

33. Health Care Statement 9.

34. South Georgia Health Partners, Complaint ¶¶ 36-38.

35. Piedmont Health Alliance, Inc., Dkt. No. 9314 (Complaint, December 22, 2003); Tenet Healthcare Corp., FTC File No. 021 0119 (December 22, 2003) (consent agreement accepted for public comment).

36. See Press Release and related documents available at /opa/2003/12/piedmont.htm.

37. South Georgia Health Partners, L.L.C., Dkt. C-4100 (Oct. 31, 2003) (consent order).

38. See Press Release and related documents available at /opa/2003/09/sgeorgia.htm.

39. The Maine Health Alliance, Dkt. C-4095 (Aug. 27, 2003) (consent order).

40. See Press Release and other documents available at /opa/2003/07/maine.htm.

41. Memorial Herman Health Network Providers, Dkt. No. C-4104 (Jan. 8, 2004) (consent order).

42. See News Release and accompanying documents available at /opa/2003/11/hermann.htm.

43. Washington University Physician Network, Dkt. No. C-4093 (Aug. 22, 2003) (consent order).

44. See News Release and accompanying documents available at /opa/2003/07/wupn.htm.