Activities Allegedly Led to Higher Prices for Local Consumers
Carlsbad Physician Association (CPA), a New Mexico physicians' organization, along with its Executive Director and certain Board and Contract Committee members, has agreed to settle Federal Trade Commission charges that the organization and its members entered into agreements to fix prices and to refuse to deal with payors except on collectively agreed-upon terms. Through the proposed consent order, designed to address the allegedly illegal anticompetitive conduct, CPA will be dissolved, and the association and individual respondents will be prohibited from engaging in similar action in the future and from acting as the messenger or agent in other health plan contracting matters.
"CPA served no function other than to jointly fix prices on behalf of its members during the health plan contracting process" said Joe Simons, Director of the FTC's Bureau of Competition. "As a result, and because CPA includes most of the doctors in the Carlsbad area, health plans had no choice but to contract with them, ultimately to the detriment of the area's consumers."
The Commission Complaint
The FTC complaint states that CPA was organized in 1998 to serve as a vehicle for competing physicians to bargain collectively with health plans in an effort to obtain "favorable reimbursement" for its members. Its physician members represent more than three-quarters of all doctors practicing in and around Carlsbad, in southeastern New Mexico, and more than 80 percent of the primary care physicians in the area.
According to the complaint, CPA does not engage in any cooperative activities to benefit consumers in connection with health plan contracting, and instead has: 1) orchestrated collective agreements on fees and other terms of dealing with health plans; 2) carried out collective negotiations with several health plans, and 3) orchestrated refusals to deal and threats to refuse to deal with health plans who resisted their desired terms. These alleged actions, the Commission contends, are anticompetitive, harmful to Carlsbad consumers, and violate the FTC Act.
The complaint charges CPA members have refused to deal with health plans on an individual basis, and instead have acted collectively through CPA to obtain higher prices for their medical services. CPA leadership directly negotiated contracts with health plans and members voted on whether CPA should accept the contract. The individual physicians named in the Commission's complaint are alleged to have actively participated in negotiations with payors.
The complaint further states that CPA and the respondent physicians have succeeded in forcing numerous health plans to raise prices paid to CPA members and therefore raised the cost of medical care in the Carlsbad area. As a result of the agreements among CPA members to deal only on collectively-determined terms, the FTC states, the Carlsbad consumers have had to pay more for physician services, health plans have been forced to raise prices, and CPA's members are paid the highest prices in New Mexico.
The Proposed Settlement
The proposed consent order is designed to remedy the alleged illegal conduct described in the complaint. Accordingly, CPA and the respondent physicians will be prohibited in the future from entering into or facilitating any agreement between or among any physicians: 1) to negotiate with payors on any physician's behalf; 2) to deal, or to refuse to deal, or threaten to refuse to deal with payors; 3) to determine 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 CPA. These prohibitions are similar to those put in place in other cases involving allegations of illegal collective bargaining by a physicians' group.
In addition to these core provisions, the order requires that CPA dissolve itself to ensure that it is not able to engage in unlawful collective bargaining activities in the future. The proposed order also contains fencing-in relief, which for three years bars all individuals named in the order from acting as an agent in health-plan contracting matters, and bars individual physicians named in the order from using a similar agent as any other physician to contract with health plans for three years from the date the order becomes final.
As in other cases of this type, the proposed order excludes certain kinds of agreements from the general bar on collective bargaining with health care purchasers. First, CPA and the individual respondents would not be precluded from engaging in conduct that is reasonably necessary to form or participate in legitimate joint contracting agreements among competing physicians, whether they are "qualified risk-sharing joint agreements" or "qualified clinically integrated joint agreements." Each of these terms is defined in the Commission's proposed order.
The proposed order, which CPA is required to distribute along with the complaint to all physicians who have participated in the association, expires 20 years from the date it becomes final.
The Commission vote to place the proposed consent agreement on the public record for comment was 5-0. An announcement regarding the proposed consent agreements will be published in the Federal Register shortly. The agreement will be subject to public comment for 30 days, until May 30, 2003, after which the Commission will decide whether to make it final. Comments should be addressed to the FTC, Office of the Secretary, 600 Pennsylvania Avenue, 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.
Copies of the complaints, proposed consent agreements and orders, and an analysis of each to aid in public comment are available from the FTC's Web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC's Bureau of Competition seeks to prevent business practices that restrain competition. The Bureau carries out its mission by investigating alleged law violations and, when appropriate, recommending that the Commission take formal enforcement action. To notify the Bureau concerning particular business practices, call or write the Office of Policy and Evaluation, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, D.C. 20580, Electronic Mail: firstname.lastname@example.org; Telephone (202) 326-3300. For more information on the laws that the Commission enforces, the FTC has published "Promoting Competition, Protecting Consumers: A Plain English Guide to Antitrust Laws," which can be accessed at http://www.ftc.gov/bc/compguide/index.htm.
(FTC File No.: 031-0002)
Office of Public Affairs
Bureau of Competition