UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION

COMMISSIONERS:
Robert Pitofsky, Chairman
Sheila F. Anthony
Mozelle W. Thompson
Orson Swindle
Thomas B. Leary

In the Matter of

Alaska Healthcare Network, Inc., a corporation.

Docket No. C-

DECISION AND ORDER

The Federal Trade Commission ("Commission") having initiated an investigation of certain acts and practices of Alaska Healthcare Network, Inc. ("AHN"), hereinafter sometimes referred to as "Respondent," and Respondent having been furnished thereafter with a copy of a draft of Complaint that the Bureau of Competition presented to the Commission for its consideration and which, if issued by the Commission, would charge Respondent with violation of Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. § 45; and

Respondent, its attorney, and counsel for the Commission having thereafter executed an Agreement Containing Consent Order ("Consent Agreement"), containing an admission by the Respondent of all the jurisdictional facts set forth in the aforesaid draft of Complaint, a statement that the signing of said Consent Agreement is for settlement purposes only and does not constitute an admission by Respondent that the law has been violated as alleged in such Complaint, or that the facts as alleged in such Complaint, other than jurisdictional facts, are true, and waivers and other provisions as required by the Commission's Rules; and

The Commission having thereafter considered the matter and having determined that it had reason to believe that the Respondent has violated the said Act, and that a Complaint should issue stating its charges in that respect, and having accepted the executed Consent Agreement and placed such Consent Agreement on the public record for a period of thirty (30) days for the receipt and consideration of public comments, now in further conformity with the procedure described in Commission Rule 2.34, 16 C.F.R. § 2.34, the Commission hereby issues its Complaint, makes the following jurisdictional findings and issues the following Order:

1. Respondent is a nonprofit corporation organized, existing, and doing business under and by virtue of the laws of the State of Alaska, with its office and principal place of business at 1867 Airport Way, Suite 115-A, Fairbanks, Alaska 99701.
 
2. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of Respondent, and the proceeding is in the public interest.

ORDER

I.

IT IS ORDERED that, as used in this order, the following definitions shall apply:

A. "Respondent" or "AHN" means Alaska Healthcare Network, Inc., its officers, directors, employees, agents and representatives, successors, and assigns, its subsidiaries, divisions, groups and affiliates controlled by AHN, and the respective officers, directors, employees, agents and representatives, successors, and assigns of each.

B. "Payor" means any person that purchases, reimburses for, otherwise pays for, or arranges for the payment of, all or any part of any health care services for itself or for any other person. Payor includes, but is not limited to, any health insurance company; preferred provider organization; prepaid hospital, medical, or other health service plan; health maintenance organization; government health benefits program; employer or other person providing or administering self-insured health benefits programs; and patients who purchase health care for themselves.

C. "Person" means both natural persons and artificial persons, including, but not limited to, corporations, unincorporated entities, and governments.

D. "Physician" means a doctor of allopathic medicine ("M.D.") or a doctor of osteopathic medicine ("D.O.").

E. "Participating physician" means any physician (1) who is a stockholder, owner, or member of AHN; (2) who has agreed to provide services through AHN; or (3) whose services have been offered to any payor through AHN.

F. "Pre-existing practice group" means an individual physician practice or a physician practice group existing as of the date of signing of the Consent Agreement. A pre-existing practice group may add any physician to the practice group after that date, without losing the status of "pre-existing" under this definition, so long as each additional physician added to the practice group is not a Fairbanks area physician at the time of the addition to the practice group.

G. "Provider" means any person that supplies health care services to any other person, including, but not limited to, hospitals, clinics, and physicians (except members or prospective members of AHN).

H. "Qualified risk-sharing joint arrangement" means an arrangement to provide physician services in which (1) all participating physicians share substantial financial risk from their participation in the arrangement and thereby create incentives for the participating physicians to jointly control costs and improve quality by managing the provision of physician services, such as risk-sharing involving: (a) the provision of physician services to payors or providers at a capitated rate, (b) the provision of physician services for a predetermined percentage of premium or revenue from payors or providers, (c) the use of significant financial incentives (e.g., substantial withholds) for its participating physicians, as a group, to achieve specified cost-containment goals, or (d) the provision of a complex or extended course of treatment that requires the substantial coordination of care by physicians in different specialties offering a complementary mix of services, for a fixed, predetermined payment, where the costs of that course of treatment for any individual patient can vary greatly due to the individual patient's condition, the choice, complexity, or length of treatment, or other factors; (2) any agreement concerning reimbursement or other terms or conditions of dealing entered into by or within the arrangement is reasonably necessary to obtain significant efficiencies through the joint arrangement; and (3) the arrangement does not restrict the ability, or facilitate the refusal, of physicians participating in the arrangement to deal with payors or providers on an individual basis or through any other arrangement.

I. "Qualified clinically-integrated joint arrangement" means an arrangement to provide physician services in which (1) all participating physicians participate in active and ongoing programs of the arrangement to evaluate and modify the practice patterns of, and create a high degree of interdependence and cooperation among, the physicians participating in the arrangement, in order to control costs and ensure the quality of services provided through the arrangement; (2) any agreement concerning reimbursement or other terms or conditions of dealing entered into by or within the arrangement is reasonably necessary to obtain significant efficiencies through the joint arrangement; and (3) the arrangement does not restrict the ability, or facilitate the refusal, of physicians participating in the arrangement to deal with payors or providers on an individual basis or through any other arrangement.

J. "Fairbanks area physician" means any physician who has active staff privileges at Fairbanks Memorial Hospital.

K. "Relevant physician market" means each of the following types of Fairbanks area physicians who are board-certified, board eligible, or actually practicing in: (1) family practice and general internal medicine; (2) obstetrics and/or gynecology; (3) pediatrics; (4) general surgery; and (5) orthopedic surgery.

L. "Reimbursement" means any payment, whether cash or non-cash, or other benefit received for the provision of physician services.

II.

IT IS FURTHER ORDERED that AHN, directly or indirectly, or through any corporate or other device, in connection with the provision of physician services in or affecting commerce, as "commerce" is defined in Section 4 of the Federal Trade Commission Act, 15 U.S.C. § 44, do forthwith cease and desist from:

A. Entering into, adhering to, participating in, maintaining, organizing, implementing, enforcing, or otherwise facilitating any combination, conspiracy, agreement, or understanding among any Fairbanks area physicians:

1. To negotiate on behalf of any physician with any payor or provider;
2. To deal, refuse to deal, or threaten to refuse to deal, with any payor or provider;
3. Regarding any terms, conditions, or requirements upon which any physician deals, or is willing to deal, with any payor or provider, including, but not limited to, terms of reimbursement; or
4. To restrict the ability of any physician to deal with any payor or provider individually or through any arrangement outside AHN.

B. Exchanging, transferring, or facilitating in any manner the exchange or transfer of information (including, but not limited to, any views, intentions, positions, terms, proposals, or decisions) among any Fairbanks area physicians who are not in the same practice group concerning:

1. Negotiation of actual or proposed terms of reimbursement with any payor or provider; or
 
2. Any physician's actual or contemplated intention or decision with respect to:
a. Entering into, refusing to enter into, threatening to refuse to enter into, withdrawing from, or threatening to withdraw from any actual or proposed agreement with any payor or provider; or
b. Agreeing to, refusing to agree to, or willingness to agree to any actual or proposed term, condition, or requirement of dealing with any payor or provider.

C. Encouraging, suggesting, advising, pressuring, inducing, or attempting to induce any person to engage in any action that would be prohibited if the person were subject to this order.

PROVIDED THAT nothing in this Order shall prohibit conduct that is approved and supervised by the State of Alaska insofar as that conduct is protected from liability under the federal antitrust laws pursuant to the state action doctrine.

PROVIDED FURTHER that nothing in this Paragraph shall prohibit any agreement involving, or conduct by, Respondent that is reasonably necessary to form, participate in, or take any other action in furtherance of a qualified risk-sharing joint arrangement or a qualified clinically-integrated joint arrangement, so long as the formation or operation of the arrangement is consistent with Paragraph III below, and the notification provisions contained in Paragraph VI of this Order have been satisfied.

III.

IT IS FURTHER ORDERED that within five (5) days after the date the Consent Agreement in this matter is signed by Respondent, and for a period of five (5) years after the date this Order becomes final, AHN shall cease and desist from offering the services of its physicians to any payor or provider:

A. Through a qualified risk-sharing joint arrangement or a qualified clinically- integrated joint arrangement, unless AHN's participating physicians constitute no more than thirty (30) percent of physicians in any relevant physician market, or

B. Through any other arrangement, unless AHN's participating physicians constitute no more than fifty (50) percent of physicians in any relevant physician market.

PROVIDED THAT nothing in this Paragraph shall be construed to prohibit AHN from including as a participating physician in any arrangement, for each relevant physician market, any single physician, or any one pre-existing practice group.

PROVIDED FURTHER that AHN may at any time exceed the 30 percent or 50 percent limitations as a result of (a) any physician's exiting any relevant physician market or (b) the addition by new entry of a non-Fairbanks area physician to a pre-existing practice group; however, AHN may not exceed the 30 percent or 50 percent limitations by any greater degree than is directly caused by such exit or entry.

IV.

IT IS FURTHER ORDERED that AHN shall:

A. Within thirty (30) days after the date on which this Order becomes final, distribute by first-class mail a copy of this Order and the Complaint to each participating physician, officer, director, manager, and employee of AHN, and to each payor enumerated in Attachment A to this order; and

B. For a period of five (5) years after the date this Order becomes final:

1. Distribute by first-class mail a copy of this Order and the Complaint to each new participating physician, officer, director, manager, and employee of AHN within thirty (30) days of his or her admission, election, appointment, or employment;
2. Annually publish in an official annual report or newsletter sent to all participating AHN physicians, a copy of this Order and the Complaint with such prominence as is given to regularly featured articles.

V.

IT IS FURTHER ORDERED that AHN shall file verified written reports within sixty (60) days after the date this Order becomes final, annually thereafter for five (5) years on the anniversary of the date this Order becomes final, and at such other times as the Commission may by written notice require, setting forth in detail the manner and form in which it has complied and is complying with the Order. In addition to any other information that may be necessary to demonstrate compliance, AHN shall include in such reports: (1) information identifying each payor that has contacted AHN for the purpose of contracting for physician services; (2) information sufficient to describe the manner in which participating physicians share financial risk in each qualified risk-sharing joint arrangement in which they participate; and (3) copies of the minutes of AHN's annual meetings.

VI.

IT IS FURTHER ORDERED that, for a period of ten (10) years after the date this Order is entered:

A. Respondent shall notify the Commission in writing at least forty-five (45) days prior to forming, participating in, or taking any action, other than planning, in furtherance of any:

1. Qualified risk-sharing joint arrangement or qualified clinically-integrated joint arrangement involving two (2) or more Fairbanks area physicians who are not in the same physician practice group; or
2. Other arrangement that, in dealing or negotiating with any payor or provider, is using, or intends to use, AHN or an agent that represents two (2) or more Fairbanks area physicians who are not in the same physician practice group.

B. If a representative of the Commission makes a written request for information within thirty (30) days after receipt of a notice pursuant to Paragraph VI.A of this Order, Respondent shall not form, participate in, or take any action, other than planning, in furtherance of the arrangement until thirty (30) days after substantially complying with such request for information or such shorter waiting period as may be granted by letter from the Bureau of Competition.

VII.

IT IS FURTHER ORDERED that AHN shall notify the Commission at least thirty (30) days prior to any proposed change in AHN such as dissolution, assignment, sale resulting in the emergence of a successor corporation, the creation or dissolution of subsidiaries, or any other change in AHN that may affect compliance obligations arising out of this Order.

VIII.

IT IS FURTHER ORDERED that, for the purpose of determining or securing compliance with this Order, AHN shall permit any duly authorized representative of the Commission:

A. Access, during office hours and in the presence of counsel, to inspect and copy all books, ledgers, accounts, correspondence, memoranda, calendars, and other records and documents in its possession or under its control relating to any matter contained in this Order; and

B. Upon five (5) days' notice to AHN, and without restraint or interference from it, to interview officers, directors, or employees of AHN.

IX.

IT IS FURTHER ORDERED that this Order shall terminate twenty (20) years from the date this Order was issued by the Commission.

By the Commission.

Donald S. Clark
Secretary

SEAL

ISSUED:

ATTACHMENT A

Adar Corporation
Aetna U.S. Healthcare
Blue Cross of Washington & Alaska
First Health
GERA
Private Health Care System
TRICARE