Statement of Commissioners Orson Swindle and Thomas B.
Leary, Dissenting in Part
Although we have voted to issue the consent order in this matter because we believe the conduct remedy is justified, we dissent from 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 the respondent AHN's allegedly unlawful conduct. For five years, the structural provision of the order (Paragraph III) imposes 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, depending on whether AHN elects to function as a negotiator or merely as a "messenger."
When the Commission accepted this consent for public comment last year, we issued a separate statement inviting comments on (1) whether structural measures are generally appropriate in "conduct" cases and (2) whether such measures make sense in a thinly populated market like Fairbanks. We said, "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." We particularly noted 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.
We also explained how 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 (and assuming that things have not changed dramatically since the Commission accepted the consent agreement), 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 these 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.
The public comments received indicate considerable concern about the structural portion of the remedy. Although some of those concerns may stem from a misunderstanding about the structural portions of the decree or about the overall operation of the order, the public comments at least indicate that there is a lively controversy and confusion over the impact of the structural relief in a market like Fairbanks. We continue to believe that the structural provision is unlikely to have the intended impact because of the grandfather exception mentioned above as well as a provision in Paragraph III that allows AHN to exceed the 30 percent or 50 percent limitation when it results from the entry of a physician from outside the Fairbanks area to a pre-existing practice group. The "entry" exception does address concerns over the possibility that the order will chill the ability of Fairbanks to attract new doctors, but it also undercuts the basic rationale for structural relief.
In these circumstances, we dissent from the structural relief in the order. We are uncomfortable with its impact in the present situation and with the likelihood that it will be cited hereafter as precedent for structural relief in other minuscule markets. As we said before, 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 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 here, some type of percentage cap on network membership could bolster competition through the creation of one or more competing networks. We simply do not see how this model can be applied rationally to Fairbanks.