Announced Action for September 23, 2003

Issuance of staff advisory opinion: The staff of the FTC's Bureau of Competition has advised counsel for Bay Area Preferred Physicians (BAPP) that it does not presently intend to recommend law enforcement action if BAPP establishes a "messenger" arrangement to minimize the costs associated with contracting between physicians and health plans and other third-party payors. BAPP is a nonprofit mutual benefit society formed by six county medical societies in seven adjacent counties in the San Francisco Bay area: Alameda-Contra Costa Medical Association, San Mateo County Medical Association, San Francisco Medical Society, Sonoma County Medical Association, Napa County Medical Association, and Solano County Medical Society. The staff letter, signed by Jeffrey W. Brennan, Assistant Director of the Bureau of Competition, Health Care Services and Products Division, is available on the FTC's Web site as a link to this release.

BAPP proposes to develop a physician network to help create new contracting opportunities between medical society physician members that choose to participate in the network and third-party payors in northern California. A non-physician employee of BAPP will act as a "messenger" to convey payor offers to physician members and to communicate to payors which BAPP physician members will accept the payor's offer. BAPP will execute and administer a contract if 50 percent or more of its physicians are willing to accept a particular payor's offer, or if the payor bears contract administration costs. Alternatively, a payor whose offer is not accepted by 50 percent of the doctors may elect to approach physicians directly to negotiate individual contracts. In that case, BAPP will provide the payor with the names of the physicians who were willing to accept the contract offer.

The staff letter concludes that on its face nothing in BAPP's proposal appears to constitute an unlawful price agreement or be designed to engender anticompetitive collective action by its member physicians. According to the request letter, BAPP will not negotiate price or price-related terms on behalf of physician members, or facilitate horizontal agreements among the physicians in responding to the payor's offer. BAPP also will not disclose to its members the number of physicians who accept a contract, or directly or indirectly advise, instruct, or recommend that its members refuse to contract individually with any payor. The letter notes, however, that BAPP's administration of contracts could, in some circumstances, constitute an information-sharing device that could facilitate tacit agreements among physicians to demand higher prices, only if at least 50 percent of its members accept a contact offer. BAPP will mitigate that risk by executing and administering contracts on behalf of fewer than 50 percent of member physicians if the payor covers contract administration costs, and by not disclosing to the members how many of them have accepted the contract or that a payor is bearing administration costs.

Based on analysis of BAPP's proposal and the market context in which it will operate, the FTC staff concludes that the contract administration policy likely would not reveal information that could be used strategically for anticompetitive purposes by BAPP's member physicians. The staff letter cautions, however, that if BAPP orchestrates or facilitates anticompetitive agreements among its competing physician members on price or other terms of dealing with payors, the staff will recommend that the Commission take appropriate law enforcement action. (Staff contact is Judith A. Moreland, Bureau of Competition, 202-326-2776.)

Copies of the documents mentioned in this release 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, DC 20580. Call toll-free: 1-877-FTC-HELP.