UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION

In the Matter of

M.D. PHYSICIANS OF SOUTHWEST LOUISIANA, INC.
a corporation.

DOCKET NO.

COMPLAINT

Pursuant to the provisions of the Federal Trade Commission Act, and by virtue of the authority vested in it by said Act, the Federal Trade Commission (“Commission”), having reason to believe that M.D. Physicians of Southwest Louisiana, Inc. ("respondent MDP") has violated the provisions of said Act, and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest, hereby issues its complaint, stating its charges as follows:

PARAGRAPH ONE: Respondent MDP is a business corporation organized, existing, and doing business under and by virtue of the laws of the State of Louisiana, with its principal place of business in Lake Charles, Louisiana, the parish seat of Calcasieu Parish, Louisiana. Respondent MDP's address is P.O. Box 1832, Lake Charles, Louisiana 70602.

PARAGRAPH TWO: All of the members of respondent MDP are physicians practicing in and around Calcasieu Parish, Louisiana. Much of the population of Calcasieu Parish resides in Lake Charles, Louisiana, and surrounding communities, which include Sulphur, Moss Bluff, and Westlake, Louisiana (“Lake Charles area”). The population of the Lake Charles area is approximately 150,000. Most of the members of respondent MDP, as well as most of the physicians practicing in Calcasieu Parish, practice in the Lake Charles area.

PARAGRAPH THREE: During most of the time period during which the acts and practices described in Paragraphs TEN through FIFTEEN below took place (“the relevant time period”), the members of respondent MDP constituted a majority of all physicians practicing in Calcasieu Parish, Louisiana. In certain physician specialties, the members of respondent MDP constituted all or most of the physician specialists practicing in Calcasieu Parish. More than 200 physicians have been members of respondent MDP since it was formed in 1987. During the relevant time period, respondent MDP has had as many as 165 members at one time.

PARAGRAPH FOUR: Respondent MDP exists in substantial part for the pecuniary benefit of its members. By virtue of its purposes and activities, respondent MDP is a "corporation" within the meaning of Section 4 of the Federal Trade Commission Act, as amended, 15 U.S.C. 44.

PARAGRAPH FIVE: The acts and practices of respondent MDP, including those herein alleged, are in or affect commerce within the meaning of Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. 45.

PARAGRAPH SIX: Except to the extent that competition has been restrained as alleged herein, some or all of the members of respondent MDP have been, and are now, in competition among themselves and with other providers of physician services in Calcasieu Parish, Louisiana.

PARAGRAPH SEVEN: Physicians often contract with health insurance firms and other third-party payers. Such contracts typically establish the terms and conditions under which the physicians will render services to the subscribers of the third-party payers, including terms and conditions of physician compensation and of cost containment. In many cases, physicians entering into such contracts agree to reductions in their compensation and to various cost containment procedures, including procedures for reviewing the utilization of medical resources by physicians and for dealing with physicians who have overutilized such resources. By lowering their costs in this manner, third-party payers are able to reduce the cost of medical care for their subscribers. The extensive use of such methods of lowering costs can be described as "managed care."

PARAGRAPH EIGHT: Absent agreements among competing physicians on the terms upon which they will deal with third-party payers, competing physicians each decide individually whether to enter into contracts with third-party payers, and on the terms and conditions under which they are willing to enter into such contracts.

PARAGRAPH NINE: In engaging in the acts and practices described in Paragraphs TEN through FIFTEEN below, respondent MDP has acted as a combination of its members and has conspired with at least some of its members.

PARAGRAPH TEN: Respondent MDP was formed in March 1987 as a vehicle for its members to deal concertedly with the impending entry into Calcasieu Parish, Louisiana, of managed care. The members of respondent MDP agreed that respondent MDP would represent them in negotiations with third-party payers.

PARAGRAPH ELEVEN: Beginning in 1987, and continuing until at least 1994, respondent MDP conspired to fix the terms and conditions, including terms of financial compensation, under which its members deal with third-party payers and conspired to prevent or delay the entry into Calcasieu Parish, Louisiana, of managed care.

PARAGRAPH TWELVE: Beginning in 1988, respondent MDP negotiated on behalf of its members with Blue Cross and Blue Shield of Louisiana ("Blue Cross") the terms and conditions of member participation in Blue Cross health insurance plans. In 1989, respondent MDP terminated those negotiations, when it failed to reach agreement with Blue Cross on the terms of physician compensation. Until 1994, when respondent MDP first learned that it was under investigation by the staff of the Commission, the members of respondent MDP uniformly refused to participate in any Blue Cross plan.

PARAGRAPH THIRTEEN: Beginning in 1991, respondent MDP negotiated on behalf of its members with the Louisiana State Employees Group Benefits Program ("State Employees Program"), the health insurance plan for employees of the State of Louisiana, the terms and conditions of member participation in the State Employees Program. In 1993, those negotiations ended when respondent MDP and the State Employees Program failed to reach agreement on the terms of physician compensation. In 1994, the president of respondent MDP exhorted the members of respondent MDP not to deal with the State Employees Program, and none of the members did until 1995.

PARAGRAPH FOURTEEN: Beginning in 1987 and continuing until at least 1994, respondent MDP conspired to refuse to deal with, and to fix the terms and conditions of dealing with, other third-party payers attempting to do business in Calcasieu Parish, Louisiana, including, but not limited to, Aetna Insurance Company and Healthcare Advantage, Inc.

PARAGRAPH FIFTEEN: Respondent MDP functioned de facto as the exclusive representative of its members. Although respondent MDP did not contractually prevent its members from dealing with third-party payers directly, and although it issued statements that its members were free to deal with third-party payers directly, the members allowed MDP to function as their exclusive representative. Until 1994, when respondent MDP first learned that it was under investigation by the staff of the Commission, the members of respondent MDP dealt with third-party payers only through respondent MDP. Furthermore, the members of respondent MDP all refused to meet individually with, and listen to presentations by, representatives of some third-party payers. Respondent MDP facilitated the collective refusal of its members to deal directly with third-party payers when it repeatedly collected from, and disseminated to, its members information concerning the members' refusal to deal with third-party payers directly.

PARAGRAPH SIXTEEN: The members of respondent MDP have not integrated their medical practices in any economically significant way, nor have they created any efficiencies that might justify the acts and practices described in Paragraphs TEN through FIFTEEN.

PARAGRAPH SEVENTEEN: The purpose, tendency, effects, or capacity of respondent MDP’s acts and practices as described in Paragraphs TEN through FIFTEEN are and have been to restrain trade unreasonably and hinder competition in the provision of physician services in Calcasieu Parish, Louisiana, in the following ways, among others:

A.to restrain competition among physicians;

B.to deprive consumers of the benefits of competition among physicians;

C.to fix or increase the prices that consumers pay for physician services;

D.to fix the terms and conditions upon which physicians would deal with third- party payers, including terms of physician compensation, and thereby raising the price to consumers of medical insurance coverage issued by third-party payers; and

E.to deprive consumers of the benefits of managed care.

PARAGRAPH EIGHTEEN: The combination or conspiracy and the acts and practices of respondent MDP, as herein alleged, constitute unfair methods of competition in violation of Section 5 of the Federal Trade Commission Act, 15 U.S.C. 45. The violation or the effects thereof, as herein alleged, will continue or recur in the absence of the relief herein requested.

WHEREFORE, THE PREMISES CONSIDERED, the Federal Trade Commission on this _____ day of ____________, 199 , issues its complaint against respondent MDP.

By the Commission.

SEAL Donald S. Clark
Secretary