Separate Statement of Commissioners Orson Swindle
in Alaska Healthcare Network, Inc., File No. 991 0103
Although we have voted to accept the consent agreement in this matter because we believe the conduct remedy is justified, we also believe that one component of the relief prescribed by the proposed order -- namely, the inclusion of a form of "structural" remedy to help cure the effects of respondent AHN's allegedly unlawful conduct -- is inappropriate in this particular case.
If AHN elects to function as a negotiator or merely as a "messenger," then Paragraph III of the proposed order will for five years impose, respectively, either a 30 percent or a 50 percent "cap" on the number of Fairbanks physicians in each of five "relevant physician markets" who may participate in AHN. Although we believe that limits on a physician group's "market shares" in particular specialties can be appropriate fencing-in relief for the type of conduct involved in this case, we are not persuaded that this provision will operate in a rational and predictable way in a market as small as Fairbanks. This concern is exacerbated by the first proviso to Paragraph III, which allows respondent to "grandfather" in "any one pre-existing practice group" -- no matter how large -- and thus to perpetuate a structure inconsistent with the goals of that paragraph.
The imposition of such structural relief in a setting like Fairbanks results in anomalies that would not arise in a larger urban area. For example, one of the five "relevant physician markets" affected by the order (pediatrics) has only seven practitioners, and five are in a grandfathered group; another "market" (ob/gyn) has only ten practitioners, six of whom are in a grandfathered group. We can certainly understand the desire to refrain from forcing the breakup of a presumably efficient practice group, but this proviso makes the percentage caps ineffective for those specialties. On the other hand, the order itself potentially inhibits the formation of similarly efficient practice groups in the specialties where the caps are effective.
Some form of structural relief might well be warranted in future cases in which the efficacy of a purely "conduct" (i.e., "cease-and-desist") order is in doubt. A formerly collusive group's compliance with the dictates of a conduct order (through the cessation of overtly conspiratorial behavior) does not necessarily spell the end of tacit coordination in the future. In a market with different characteristics from those involved in this case, some type of percentage cap on network membership could go a long way to bolster competition through the creation of one or more competing networks. In this market, however, we question whether the remedy makes sense.
We hope that the public comment period on this consent agreement will yield some illuminating advice from the bar, the medical community, and the public at large, both with respect to the general appropriateness of structural measures in "conduct" cases and with regard to whether such measures make sense in a thinly populated market such as Fairbanks.