FTC Charges Physician Groups With Price Fixing

The Federal Trade Commission today announced its decision to challenge the conduct of two independent practice associations (IPAs) and 18 member physician practices in the Kansas City area for refusing to deal with health care plans, except on collectively agreed-upon terms, including price. The FTC’s complaint charged that their actions unreasonably restrained competition, in violation of Section 5 of the FTC Act. In settling the FTC’s charges, they will refrain from engaging in such anticompetitive conduct in the future.

“Legitimate joint contracting arrangements among competing physicians can be lawful and pro-competitive,” said Jeffrey Schmidt, Director of the FTC’s Bureau of Competition. “The physicians in this case went too far, however, when they agreed to restrict the traditional competition among themselves for services offered outside of the joint venture.”

The FTC’s complaint alleges that the 127 primary care physicians who are members of the IPAs, New Century Health Quality Alliance, Inc. and Prime Care of Northeast Kansas, L.L.C., engaged in anticompetitive conduct on two levels: (1) they agreed to refuse to deal, and refused to deal, with health plans regarding fee-for-service contracts with individual physician practices; and (2) they joined together through the IPAs, acting together, to increase their bargaining power with payors, and to attempt to force payors to accept the terms agreed upon through the IPAs on behalf of their combined membership. According to the FTC, the challenged behavior was not reasonably related to any efficiency-enhancing integration that benefits consumers.

The complaint alleges that four current or former officials of the IPAs, physicians Elizabeth Gallup, Steven Buie, Thomas Allen, and G. Robert Powers, orchestrated the challenged activities, and that the 18 member physician practices acted to further the alleged anticompetitive agreements and actions taken by the IPAs on their behalf. The physician practices named in the complaint are Associates in Family Medicine, P.A., Briarcliff Medical Associates, P.C., College Park Family Care Center, P.A., Family Health Group, Chartered, Family Medical Group, P.A., Hickman Mills Clinic, Inc., Kanza Multispecialty Group, P.A., Landmark Medical Center, Inc., Michael E. Monaco, M.D., d/b/a/ Select Healthcare, P.A., Kenneth Norton, M.D., P.A., Overland Park Family Health Partners, P.A., Quivera Internal Medicine, L.L.C., Seaport Family Practice, P.C., Shawnee Family Care, P.A., Statland Clinic, Ltd., Sunflower Medical Group, P.A., United Medical Group, L.L.C., and Kimberly M. Wirths, M.D., P.A.

The proposed consent order would prohibit the parties from entering into, or facilitating, any agreement between or among physicians: (1) to negotiate with payors on any physician’s behalf; (2) to deal, not to deal, or threaten not to deal with payors; (3) regarding on what terms to deal with any payor; or (4) not to deal individually with any payor, or to deal with any payor only through an arrangement involving either IPA. Certain kinds of agreements are excluded from the proposed order’s general prohibitions, including “qualified risk-sharing arrangements” and “qualified clinically integrated joint arrangements,” as those terms are defined in the proposed order.

The proposed order also prohibits the four named individuals, for a period of three years, from negotiating or acting as an agent on behalf of any physician or medical group practice that participates or has participated in either IPA, or advising any physician or medical group practice that participates in or has participated in either IPA on contracts, offers, contract terms, conditions, or requirements for dealing with any payors.

The Commission vote to accept the consent order subject to public comment was 5-0. The Commission is accepting public comment on the order for 30 days, until September 22, after which it will decide whether to make it final. Comments should be sent to: FTC Office of the Secretary, 600 Pennsylvania Ave., N.W., Washington, DC 20580.

NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000.

(FTC File No. 051-0137)