Puerto Rican Physicians Agree To Settle FTC Charges that they Conspired To Fix Prices and Engaged in an Illegal Boycott Denying Healthcare to Residents of Puerto Rico

Agreement Calls for $300,000 to be Paid to "Catastrophic Fund" Administered by the Puerto Rico Department of Health

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The College of Physician-Surgeons of Puerto Rico ("College") and three physician groups have agreed to settle charges that they engaged in illegal conduct when they collectively demanded price-related changes under Puerto Rico's government managed care plan for the indigent. The Federal Trade Commission and Puerto Rico Attorney General José Fuentes Agostini filed a complaint today in the U.S. District Court in Puerto Rico. The complaint charged the defendants with violating the antitrust laws by attempting to coerce the Puerto Rican government to recognize the College as the exclusive bargaining agent for all physicians of Puerto Rico, and by calling a strike of all physicians in Puerto Rico for all non-emergency patient care. According to the FTC's complaint, the boycott forced many people to go to local hospital emergency rooms to receive care that they ordinarily would have received in a physician's office, while other consumers were forced to forego medical care during the boycott. Under the settlement, the College and three large physician groups that actively supported the boycott would be prohibited from jointly participating in boycotts or refusing to provide medical services, and from jointly negotiating prices or other more favorable economic terms for doctors. The agreement also calls for the college to pay $300,000 to the catastrophic fund administered by the Puerto Rico Department of Health. All 8,000 doctors in Puerto Rico are members of the college.

"Boycotts by health care providers deprive consumers of needed medical services," said William J. Baer, Director of the FTC's Bureau of Competition. "Any illegal behavior that puts the lives of patients at risk for personal gain will feel the full force of the federal government. These cases are a top priority for federal antitrust authorities. Today's action is also important because the Commission has obtained restitution for the consequences of the boycott."

According to the FTC and Commonwealth of Puerto Rico complaint, during 1996 officers of the College met with the Administracion de Seguros de Salud ("ASES"), the Puerto Rican public corporation responsible for administrating a health insurance system that seeks to provide the medically indigent residents with access to quality medical and hospital care. The College demanded that ASES recognize the College as the sole representative and bargaining agent of Puerto Rico's physicians, allow the College to collectively negotiate contracts for the physicians, give the physicians more control over the distribution of funds, and decrease the financial risk held by the physicians. Because these demands were not met, the complaint alleges, the College and three large medical groups (CentralMED Inc.; Fajardo Group Practice, Inc.; and Norte Med, Inc.) called for the boycott.

The complaint alleges that in order to achieve their goals, the members of the College voted to call a strike on October 29, 1996. On October 30, many members of the College and the medical group defendants closed their offices and ceased providing non-emergency services to all patients. Lasting eight days, the strike harmed consumers by denying them access to medical services, the FTC said. According to the complaint, the strike also tended to cause other anticompetitive effects such as: restraining competition among physicians; fixing prices that are paid to physicians who provide medical services; raising the cost to insurers and ASES; and depriving consumers of the benefits of independently determined reimbursement policies and the health care cost containment efforts of ASES and insurers.

The consent order to settle the charges would prohibit the College and defendant medical groups from jointly: boycotting or refusing to deal with any third party payer; refusing to provide services to persons covered by payers; and negotiating or fixing the fees charged for physicians' services. In addition, the College would be ordered to pay $300,000 in restitution to the catastrophic fund of the government of Puerto Rico.

The order would not prevent the defendant medical groups from operating or participating in qualifying integrated joint ventures that do hold promise of producing significant efficiencies. The parties are permitted to operate ventures that enter into agreements with physicians regarding terms of dealing with payers if the physicians have integrated their practices and share a substantial risk of loss. The defendant medical groups also would be permitted to operate or participate in other types of joint ventures involving collective price setting by physicians if they receive prior approval of the Commission. In accordance with joint FTC/Department of Justice health care guidelines, through this prior approval mechanism, the order allows for a variety of types of potentially procompetitive joint ventures (including those that do not involve sharing of substantial financial risk), while not attempting to define in advance all the possibilities that would be permitted. Thus, the remedy is tailored to permit the defendant medical groups to respond to changes in health care markets in ways that promote competition.

The College also would be required to distribute copies of the consent order to certain third party payers and publish the order and complaint in Spanish in an issue of the College's official publication, El Galeno, that would be distributed to all College members.

The Commission vote to approve the complaint for injunctive and other equitable relief, the stipulation and the final order and stipulated permanent injunction was 4-0 with Commissioner Mary L. Azcuenaga dissenting from the perpetual prior approval requirement. The complaint, stipulation and order were filed in the U.S. District Court for the District of Puerto Rico, in San Juan on October 2, 1997.

NOTE: This stipulated final judgment, which is subject to the court's approval, is for settlement purposes only and does not constitute an admission by the defendant of a law violation.

Judgments have the force of law when signed by the judge.

Copies of the complaint and stipulated final order are available on the Internet at the FTC's World Wide Web site at http://www.ftc.gov and from the FTC'S Public Reference Branch, Room 130, 600 Pennsylvania Ave., N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

(FTC File No. 9710011)

Contact Information

Media Contact:
Victoria Streitfeld
Office of Public Affairs
Staff Contact:

William J. Baer
Bureau of Competition

Michael E. Antalics
Bureau of Competition