The intent of state and federal antitrust
laws is to safeguard the public against the creation or perpetuation of monopolies
and to foster and encourage competition by prohibiting unfair and discriminatory
business practices that destroy or hamper competition. The laws affect the methods
chiropractors use to obtain competitive information, their practices in setting
prices, and the strategies involved in competing for and becoming involved in
managed care agreements. The laws also may impact other business practices of
chiropractors including how they determine staff salaries and the location and
operations of their practices.
The legislature intended
for the laws to be interpreted in a way that allows for maximum completion. The
legislature passed these laws to make competition the fundamental economic policy
of this state. Antitrust laws are designed to promote the maximum level of competition
within all businesses and the health care profession.
If
you question whether one of your business practices violates state or federal
antitrust law, it is important that you obtain a written opinion from an attorney
that specializes in anti-trust. Under no circumstances should you rely on the
word of another health care provider or a managed care company. Their assurances
will not protect from investigation or prosecution.
From
practical experience, our doctors have learned that if the state or federal government
inquires into your business practices because they suspect an anti-trust violation,
you will incur substantial costs, even if you are not charged with a violation.
These costs involve supplying documents, complying with subpoenas, and the costs
of consulting with legal counsel that are necessary if the state department of
justice or the federal trade commission interviews you.
¨ All of your managed care decisions
must be made as an individual or with members of your service corporation. You
may not call or meet with chiropractors outside your service corporation to decide
what managed care agreements to accept, reject, or negotiate.
¨ Encouraging
any chiropractor outside your service corporation not to sign a managed care agreement
for any reason is considered a boycott and is explicitly forbidden under state
and federal law.
¨ You may collect data on managed care contracts signed
by other chiropractors; however, you may not share that data with members outside
your service corporation.
¨ You may not attend a meeting in which the
terms of a managed care agreement is discussed unless the information is presented
under the FTC guidelines. If you are at a meeting in which managed care terms
or negotiating strategies are improperly discussed; you must leave the meeting
immediately. Sitting silent through the meeting may make you as responsible as
the people participating in the discussion.
¨ You may not allow someone
outside your service corporation (unless it is your attorney) to negotiate the
terms of a managed care agreement on your behalf, even if you are requested to
do so by the insurance or managed care company.
¨ Chiropractors seeking
to form an IPA or PPO should have qualified legal counsel to guide them through
the statutes and requirements of Wisconsin ‘s Insurance Commissioner.
¨
You may not serve as a director of more than one company at a time if the organizations
are competitors and any agreement between them would eliminate competition.
¨
The WCA cannot recommend whether or not you should join a particular managed care
company. The WCA provides general information on the risks in managed care agreements;
however, the decision of whether to sign an agreement is one that you should make
in consultation with your practice partners, attorney and/or accountant.
Prohibited
Merger and Acquisition Activity
¨ Chiropractors that are considering
buying or merging with other practices in which the resulting organization materially
reduces competition on a city or county basis should consult with an attorney
specializing in antitrust matters at the initial stages of any discussion. Organizations
that are created or expand to the point that they provide a major percentage of
the chiropractic services in an area have potential problems under the antitrust
laws.
Prohibited Joint Purchasing Activities
¨
Chiropractors that enter a relationship with other chiropractors to limit their
adminstrative costs by sharing or “pooling” staff, especially those
located in rural areas, should consult with an attorney specializing in antitrust
matters before any agreements are finalized.
Why
Antitrust Laws?
The United States economy is one of the strongest
and most productive in the world. Although the credit for our economic success
goes to the hard work and creativity of American workers and businesses, it is
the country’s policy of competition that spurs and rewards that work and
creativity. History has shown that societies that promote vigorous competition
among private companies have lower prices, better products, and greater consumer
choice. The chiropractic profession is one of the many industries that contribute
to the economic foundation of the country.
The antitrust laws are the basis
of the nation’s competitive policy. These laws, enforced by both the federal
and state governments, require health care providers to compete in the marketplace.
The Sherman Act, the first federal “antitrust law,” was enacted in 1890,
at a time when there was enormous concern about “trusts” — combinations
of companies that were able to control entire industries. Since then, other laws
have been enacted to supplement the Sherman Act, including the Federal Trade Commission
Act and the Clayton Act (1914). With some revisions, these laws still are in effect
today. They have the same basic objective: making sure there are strong economic
incentives for businesses to operate efficiently, keep prices down, and keep quality
up.
When consumers decide to purchase a product or service — a car,
a new refrigerator, or chiropractic services, for example — the goal of the
antitrust laws is to make sure their choices are not restricted unreasonably.
To ensure consumer choice, the antitrust laws set two basic requirements: companies
cannot agree to limit competition in ways that hurt consumers; and a single company
cannot monopolize or try to monopolize an industry through unfair practices.
The
antitrust laws prohibit certain kinds of agreements among businesses, including
health care providers. They require that each business establish prices or other
terms on its own, without agreeing with a competitor or supplier. For example,
chiropractors in a city cannot agree on the price that they will charge for an
adjustment. Domestic airlines cannot agree about how many flights they will offer
from a particular city. Internet service providers cannot agree on the monthly
terms for customers. And a clothing retailer cannot agree with a manufacturer
about the minimum price the retailer will charge for clothing.
Another
type of agreement among competitors involves an outright combination or merger
of the companies. These agreements to merge can be illegal if they significantly
undermine competition in the marketplace. These laws affect chiropractors as well
as other types of businesses.
In some cases, a single company can acquire
enough power unfairly to dominate a market. For example, if an airline —
for no reason other than to protect its market position — makes sure that
no other airlines can fly a particular route, the airline will be able to raise
prices well beyond competitive levels. A chiropractic organization that acquires
all its competitors might be able to do the same thing. In these cases, the companies
would have violated the antitrust prohibition on monopolizing a market. A court
would order the company to stop engaging in these unfair practices, and might
also require the company to pay damages to consumers who have been harmed. In
some cases, a court might even break up the monopoly into smaller companies.
If
all the major drug companies agree privately to set identical prices, the agreement
would be a clear violation of the antitrust laws. In fact, the people involved
probably would go to prison for such a clear and harmful violation. If only all
antitrust cases were that clear-cut. The fact is that most antitrust cases are
complex and require a detailed and painstaking examination of the facts.
Consider
a case where all the companies in a market are charging the same price —
for example, airline fares or prices for grocery products. Are these companies
violating antitrust laws? Identical prices can result from vigorous competition
as well as from an outright agreement. When uniform pricing results from competition,
the situation is legal; when identical pricing results from agreement, it is not.
To determine what is really going on, the courts and antitrust enforcement agencies
must analyze the facts.
The antitrust laws apply to almost everyone involved
in business — corporations, partnerships, sole proprietorships, individuals,
trade associations, professionals such as doctors and lawyers, and some activities
of non-profit organizations.
At the federal level, the Bureau of Competition
at the Federal Trade Commission and the Antitrust Division of the Department of
Justice enforce the antitrust laws. At the state level, they are enforced by the
State Attorney General. Private parties also can bring antitrust cases to redress
illegal injuries.
Illegal Business
Practices
Horizontal agreements among competitors. Agreements
among parties in a competing relationship can raise antitrust suspicions. Competitors
may be agreeing to restrict competition among themselves. Antitrust authorities
must investigate the effect and purpose of an agreement to determine its legality.
Agreements
on price. Agreements about price or price-related matters potentially are
the most serious. That’s because price often is the principal way that most
health care providers compete. A “naked” agreement on price — where
the agreement is not reasonably related to the practices’ business operations
— is illegal. Hard core — clear or blatant — price-fixing is subject
to criminal prosecution.
Are similarity of prices, simultaneous price changes
or high prices indications of price-fixing? Not always. These conditions can result
from price-fixing, but to prove the charge, antitrust authorities would need evidence
of an agreement to fix prices. Price similarities — or the appearance of
simultaneous changes in price — also can result from normal economic conditions.
Boycotts. A group boycott — an agreement among competitors
not to deal with another person or business — violates the law if it is used
to force another party to pay higher prices. Boycotts to prevent a firm from entering
a market or to disadvantage a competitor also are illegal.
Market division.
Agreements among competitors to divide territories or allocate customers —
essentially, agreements not to compete — are presumed to be illegal.
Agreements
to restrict advertising. Restrictions on price advertising can be illegal
if they deprive consumers of important information. Restrictions on non-price
advertising also may be illegal if the evidence shows the restrictions have anticompetitive
effects and lack reasonable business justification. The FTC recently charged the
California Dental Association dealers with restricting comparative and discount
advertising to the detriment of consumers.
Codes of ethics. A professional
code of ethics may be unlawful if it unreasonably restricts the ways professionals
may compete. Several years ago, for example, the FTC ruled that certain provisions
of the American Medical Association’s code of ethics restricted doctors from
participating in alternative forms of health care delivery, such as managed health
care programs, in violation of the antitrust laws.
Maintaining
or Creating a Monopoly
While it is not illegal to have a monopoly position
in a market, the antitrust laws make it unlawful to maintain or attempt to create
a monopoly through tactics that either unreasonably exclude firms from the market
or significantly impair their ability to compete. A single business may commit
a violation through its unilateral actions, or a violation may result if a group
of businesses work together to monopolize a market.
A common complaint is
that some companies try to monopolize a market through “predatory” or
below-cost pricing. This can drive out smaller companies that cannot compete at
those prices. But lower prices may simply reflect efficiencies from spreading
overhead costs over a larger volume of patients. Because the antitrust laws encourage
competition that leads to low prices, courts and antitrust authorities challenge
predatory activities only when they will lead to higher prices.
While the
FTC has not found predatory pricing violations in recent years, it examines potential
violations very carefully and maintains a close watch for other kinds of tactics
— like raising competitors’ costs — that may disadvantage rivals.
Statute
excerpts
Chiropractors, or their legal counsel seeking guidance,
as to how to stay within the “safe harbor” of state and federal antitrust
laws are encouraged to review the “Statements of Antitrust Enforcement Policy”
that follow the excerpts of Wisconsin Antitrust Laws.
133.02 Definitions
133.03 Unlawful contracts; conspiracies
133.04 Price discrimination; intent
to destory competition
133.05 Secret rebates; unfair trade practices
133.06
Interlocking directorates
133.10 Examination of adverse party
133.11
Investigatory proceeding
133.13 Interrogatories
133.14 Illegal contracts
void; recovery
133.15 No privilege from self-accusation
133.16 Injunction;
pleading; practice
133.18 Treble damages; statute of limitations
133.02 Definitions. In this chapter:
133.02(1)
“Commodity” includes, but is not limited to, goods, merchandise, produce
and any other article of commerce. “Commodity” includes services except
as used in s.13.04.
133.02(2) “Knowingly” means that the actor
believes that the specified fact exists.
133.02(3) “Person” includes
individuals, all corporations, limited liability companies, partnerships, associations,
companies, firms, joint ventures, joint stock companies, trusts, business trusts,
estates and other legal or commercial entitites existing under or authorized by
the laws of this or any other state, the United States or any of its territories
or any foreign country. Nothing in this definition may be construed to affect
associations or organizations intended to legitimately promote the interests of
trade, commerce or manufacturing in this state if such activities are exempted
under s.133.07, 133.08 or 133.09 or are otherwise lawful under this chapter.
133.03
Unlawful contracts; conspiracies.
133.03 (1) Every contract, combination
in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce
is illegal. Every person who makes any contract or engages in any combination
or conspiracy in restraint of trade or commerce may be fined not more than $100,000
if a corporation, or, if any other person, may be fined not more than $50,000
or imprisoned for not more than 7 years and 6 months or both.
133.03(2)
(2) Every person who monopolizes, or attempts to monopolize, or combines or conspires
with any other person or persons to monopolize any part of trade or commerce may
be fined not more than $100,000 if a corporation, or, if any other person, may
be fined not more than $50,000 or imprisoned for not more than 7 years and 6 months
or both.
133.03(3) As an alternative to the criminal penalties for violation
of this section, the department of justice or district attorney may bring an action
for a civil forfeiture. In an action for a civil forfeiture under this subsection
a corporation may be required to forfeit not more than $100,000 and any other
person may be required to forfeit not more than $50,000.
133.04 Price discrimination;
intent to destroy competition.
133.04(1) No person may discriminate, either
directly or indirectly, in price between different purchasers of commodities of
like grade and quality, for the purpose or intent of injuring or destroying competition
in any level of competition or any person engaged therein.
133.04(2) Any
person violating this section may be fined not more than $25,000 or imprisoned
in the county jail for not more than one year or both.
133.04(3) As an alternative
to the criminal penalty for violation of this section, the department of justice
or district attorney may bring an action for a civil forfeiture. In an action
for a civil forfeiture under this subsection a person who violates this section
may be required to forfeit not more than $25,000.
133.04(4) The provisions
of this section as they relate to the business of insurance are superseded by
the provisions of chs. 611, 613 and 628.
133.05
Secret rebates; unfair trade practices.
133.05(1) The secret payment
or allowance of rebates, refunds, commissions or unearned discounts, whether in
the form of money or otherwise, or the secret extension to certain purchasers
of special services or privileges not extended to all purchasers purchasing upon
like terms and conditions, such payment, allowance or extension injuring or tending
to injure a competitor or destroying or tending to destroy competition, is an
unfair trade practice and is prohibited.
133.05(2) No person may induce,
solicit or receive anything of value which is prohibited under sub. (1).
133.05(3)
Any person knowingly violating this section may be fined not more than $25,000
or imprisoned in the county jail for not more than one year or both.
133.05(4)
As an alternative to the criminal penalty for violation of this section, the department
of justice or district attorney may bring an action for a civil forfeiture. In
an action for a civil forfeiture under this subsection a person who violates this
section may be required to forfeit not more than $25,000.
133.05(5) This
section does not apply to the insurance business.
133.06 Interlocking
directorates. 133.06(1) No corporation with its principal place of business
in this state may elect or appoint any person as a director or permit any person
to serve as a director, if:
133.06(1)(a) That person was at the same time
a director of any other corporation; and
133.06(1)(b) Either corporation
has capital, surplus and undivided profits aggregating more than $100,000. In
this paragraph, the amount shall be determined by the aggregate amount of the
capital, surplus and undivided profits, exclusive of dividends declared but not
paid to stockholders, at the end of the fiscal year of the corporation next preceding
the election of directors; and
133.06(1)(c) Such corporations are, or have
been, by virtue of their business and location of operation, competitors, so that
the elimination of competition by agreement between them would violate this chapter.
133.06(2)
If a corporation has lawfully elected or appointed a director, the corporation
may permit the director to serve in such capacity for one year thereafter, notwithstanding
sub.
133.06(3) Any corporation violating this section may be enjoined from
permitting such person to serve as a director and from doing business in this
state, so long as such violation continues.
133.10 Examination of adverse
party.
133.10(1) The examination of any party, or if a corporation or limited
liability company be a party, of the president, secretary, other principal officer
or the general managing agent thereof, or of the person who was such president,
secretary, officer or agent at the time of the occurrence of the facts made the
subject of the examination, or of any person acting for another or for a corporation,
limited liability company or partnership, other than as a witness on a trial,
may be taken by deposition at the instance of the department of justice in any
such action or proceeding at any time between the commencement thereof and final
judgment. Such deposition shall be taken within the state before a judge at chambers
or a court commissioner on previous notice to such party and any other adverse
party or the attorney thereof of at least 5 days, and may be taken without the
state.
133.10(2) The attendance of the party to be examined may be compelled
by subpoena, without prepayment of witness fees, and the examination is subject
to the same rules as govern that of other witnesses; but such party shall not
be compelled to disclose anything not relevant to the controversy.
133.10(3)
The examination may not be compelled in any other county than that of the party’s
residence except in the county of Dane; but the deposition of a defendant who
is a nonresident of the state may be taken as in other cases.
133.11 Investigatory
proceeding.
133.11(1) Whenever the attorney general files with any court
commissioner a statement that the attorney general has reason to believe and does
believe that a violation of this chapter has occurred, the commissioner shall
issue a subpoena or a subpoena requiring the production of materials as requested
by the department of justice.
133.12 Domestic and foreign corporations
and limited liability companies; cancellation of charters or certificates of authority
for restraining trade; affidavit. Any corporation or limited liability company
organized under the laws of this state or foreign corporation or foreign limited
liability company authorized to transact business in this state pursuant to a
certificate of authority from the department of financial institutions which violates
any provision of this chapter, may, upon proof thereof, in any circuit court have
its charter or authority to transact business in this state suspended, canceled
or annulled.
133.13 Interrogatories.
133.13(1) If the department
of justice has reason to believe that any corporation or limited liability company
has violated any provision of this chapter, the department of justice may address
to any such corporation or limited liability company or to any director, officer
or manager interrogatories deemed necessary to determine whether or not the entity
has violated any provision of this chapter. The corporation, limited liability
company, director, officer or manager so addressed shall promptly and fully answer
in writing under oath the interrogatories; the failure or neglect by any such
corporation, limited liability company, director, officer or manager to do so
within 60 days from receipt of the interrogatories, unless the time is extended
in writing by the department of justice, shall constitute grounds for suspension,
cancellation or annulment of its corporate charter or authority to transact business
in this state under s. 133.12.
133.13(2) Any person providing information
under this section may designate the information as confidential business information
or a trade secret as defined in s. 134.90 (1) (c). The department of justice shall
notify the person providing the information 15 days before any information designated
as confidential or trade secret is disclosed to the legislature, a state agency,
a local unit of government or any other person. The person furnishing the information
may seek a court order limiting or prohibiting the disclosure. In such cases the
court shall weigh the need for confidentiality of the information against the
public interest in the disclosure. Confidentiality is waived if the person providing
the information consents to disclosure or if disclosure is authorized by a court.
133.14
Illegal contracts void; recovery. All contracts or agreements made by any person
while a member of any combination or conspiracy prohibited by s. 133.03, and which
contract or agreement is founded upon, is the result of, grows out of or is connected
with any violation of such section, either directly or indirectly, shall be void
and no recovery thereon or benefit therefrom may be had by or for such person.
Any payment made upon, under or pursuant to such contract or agreement to or for
the benefit of any person may be recovered from any person who received or benefited
from such payment in an action by the party making any such payment or the heirs,
personal representative or assigns of the party.133.15 No privilege from
self-accusation.
133.15(1) No person may be excused from answering any
of the interrogatories authorized under this chapter, nor from attending and testifying,
nor from producing any books, papers, contracts, agreements or documents in obedience
to a subpoena issued by any lawful authority in any action or proceeding based
upon or growing out of any alleged violation of any provision of this chapter
or of any law of this state in regard to trusts, monopolies or illegal combinations
on the ground of or for the reason that the answer, testimony or evidence, documentary
or otherwise, required may tend to incriminate or subject the person to a penalty
or forfeiture. No person may be prosecuted or subjected to any penalty or forfeiture
for or on account of testifying or producing evidence, documentary or otherwise,
in obedience to any request under this section or any subpoena, in any such action
or proceeding, except that the charter of any corporation or limited liability
company may be vacated and its corporate existence annulled or its certificate
of authority to transact business in this state may be canceled and annulled as
provided in this chapter, and except that no person testifying in any such action
or proceeding may be exempt from punishment for perjury committed in so testifying.
133.15(2)
The immunity provided under sub. (1) is subject to the restrictions under s. 972.085.
133.16
Injunction; pleading; practice. Any circuit court may prevent or restrain, by
injunction or otherwise, any violation of this chapter. The party commencing or
maintaining the action or proceeding may demand and recover the cost of suit including
reasonable attorney fees. In an action commenced by the department of justice,
the court may award the department of justice the reasonable and necessary costs
of investigation and an amount reasonably necessary to remedy the harmful effects
of the violation.
133.18 Treble damages;
statute of limitations.
133.18(1)(a) Except as provided under par.
(b), any person injured, directly or indirectly, by reason of anything prohibited
by this chapter may sue therefor and shall recover threefold the damages sustained
by the person and the cost of the suit, including reasonable attorney fees. Any
recovery of treble damages shall, after trebling, be reduced by any payments actually
recovered under s. 133.14 for the same injury.
133.18(1)(b) No damages,
interest on damages, costs or attorney fees may be recovered under this chapter
from any local governmental unit or against any official or employe of a local
governmental unit who acted in an official capacity.
133.18(2) A civil action
for damages or recovery of payments under this chapter is barred unless commenced
within 6 years after the cause of action accrued.
133.18(3) Whenever any
civil or criminal action or proceeding is instituted by the state under this chapter,
the running of the statute of limitations in respect of every other right of action
based in whole or in part on any matter complained of in the state’s action
or proceeding shall be suspended during the pendency thereof and for one year
thereafter.
133.18(5) Each civil action under this chapter and each motion
or other proceeding in such action shall be expedited in every way and shall be
heard at the earliest practicable date.
133.18(6) In a civil action against
a person or entity specified in s. 893.80, the amount recovered may not exceed
the amount specified in s. 893.80 (3).
Federal
Antitrust Law
The genesis for Wisconsin’s antitrust laws is the
federal Sherman Act that prohibits monopolization, attempts to monopolize, conspiracies
to monopolize, and agreements that restrain trade. In addition, the Clayton Act
prohibits price discrimination and Section 5 of the Federal Trade Commission that
prohibits unfair trade practices.
A Federal Antitrust Overview
Antitrust
laws describe unlawful practices in general terms, leaving it to the courts to
decide what specific practices are illegal based on the facts and circumstances
of each case.
= Section 1 of the Sherman Act outlaws “every contract,
combination . . . , or conspiracy, in restraint of trade,” but long ago,
the Supreme Court decided that the Sherman Act prohibits only those contracts
or agreements that restrain trade unreasonably. What kinds of agreements are unreasonable
is up to the courts.
= Section 2 of the Sherman Act makes it unlawful
for a company to “monopolize, or attempt to monopolize,” trade or commerce.
As that law has been interpreted, it is not necessarily illegal for a company
to have a monopoly or to try to achieve a monopoly position. The law is violated
only if the company tries to maintain or acquire a monopoly position through unreasonable
methods. For the courts, a key factor in determining what is unreasonable is whether
the practice has a legitimate business justification.
= Section 5 of
the Federal Trade Commission Act outlaws “unfair methods of competition”
but does not define unfair. The Supreme Court has ruled that violations of the
Sherman Act also are violations of Section 5, but Section 5 covers some practices
that are beyond the scope of the Sherman Act. It is the FTC’s job to enforce
Section 5.
= Section 7 of the Clayton Act prohibits mergers and acquisitions
where the effect “may be substantially to lessen competition, or to tend
to create a monopoly.” Determining whether a merger will have that effect
requires a thorough economic evaluation or market study.
When studying the
conduct of doctors or health care organizations, some cases are easier than others.
The courts decided many years ago that certain practices, such as price fixing,
are so inherently harmful to consumers that a detailed examination isn’t
necessary to determine whether they are reasonable. The law presumes that they
are violations (antitrust lawyers call these per se violations) and condemns them
almost automatically.
Other practices demand closer scrutiny based on principles
that the courts and antitrust agencies have developed. These cases are examined
under a “rule of reason” analysis. A practice is illegal if it restricts
competition in some significant way and has no overriding business justification.
Practices that meet both characteristics are likely to harm consumers — by
increasing prices, reducing availability of goods or services, lowering quality
or service, or significantly stifling innovation. The antitrust laws are further
complicated by the fact that many business practices can have a reasonable business
justification even if they limit competition in some way.
Like Wisconsin
laws, the federal statues are designed to protect competition and prevent restraints
of trade. Not only are doctors not exempt from antitrust laws there have been
significant enforcement efforts directed against health care professionals ever
since managed care changed the traditional business practices of doctors and insurance
companies.
The Department of Justice and the Federal Trade Commission investigate
and prosecute antitrust cases against doctors. Although the Federal Trade Commission
is authorized to bring only civil actions, the FTC can refer certain matters,
such as price-fixing, to the Department of Justice for criminal prosecution.
If
a doctor is found guilty of a criminal violation of the Sherman Act it is a felony,
punishable by a fine of up to $350,000 and three years imprisonment. The Sentencing
Guidelines promulgated by the United States Sentencing Commission recommend a
minimum sentence of 4 months per count for an individual defendant and a fine
of up to $250,000. Felony indictments have been returned against health care professionals.
Statements
of Antitrust Enforcement Policy in Health Care
Issued by the U.S. Department
of Justice and the Federal Trade Commission
Introduction
In
September 1993, the Department of Justice and the Federal Trade Commission (the
“Agencies”) issued six statements of their antitrust enforcement policies
regarding mergers and various joint activities in the health care area. The six
policy statements addressed: (1) hospital mergers; (2) hospital joint ventures
involving high-technology or other expensive medical equipment; (3) physicians’
provision of information to purchasers of health care services; (4) hospital participation
in exchanges of price and cost information; (5) health care providers’ joint
purchasing arrangements; and (6) physician network joint ventures.
The
1993 policy statements were designed to advise the health care community in a
time of tremendous change, and to address, as completely as possible, the problem
of uncertainty concerning the Agencies’ enforcement policy that some had
said might deter mergers, joint ventures, or other activities that could lower
health care costs. Sound antitrust enforcement, of course, continued to protect
consumers against anticompetitive activities.
When the Agencies issued
the 1993 health care antitrust enforcement policy statements, they recognized
that additional guidance might be desirable in the areas covered by those statements
as well as in other health care areas, and committed to issuing revised and additional
policy statements as warranted. In light of the comments the Agencies received
on the 1993 statements and the Agencies’ own experience, the Agencies revised
and expanded the health care antitrust enforcement policy statements in September
1994.
The 1994 statements, which superseded the 1993 statements, added
new statements addressing hospital joint ventures involving specialized clinical
or other expensive health care services, providers’ collective provision
of fee-related information to purchasers of health care services, and analytical
principles relating to a broad range of health care provider networks (termed
“multiprovider networks”), and expanded the antitrust “safety zones”
for several other statements. Reprinted in this text are those statements that
affect the chiropractic profession.
Since issuance of the 1994 statements,
health care markets have continued to evolve in response to consumer demand and
competition in the marketplace. New arrangements and variations on existing arrangements
involving joint activity by health care providers continue to emerge to meet consumers’,
purchasers’, and payers’ desire for more efficient delivery of high
quality health care services. During this period, the Agencies have gained additional
experience with arrangements involving joint provider activity. As a result of
these developments, the Agencies have decided to amplify the enforcement policy
statement on physician network joint ventures and the more general statement on
multiprovider networks.
In these revised statements, the Agencies continue
to analyze all types of health care provider networks under general antitrust
principles. These principles are sufficiently flexible to take into account the
particular characteristics of health care markets and the rapid changes that are
occurring in those markets. The Agencies emphasize that it is not their intent
to favor any particular structure of health care delivery over other forms. Rather,
their goal is to ensure a competitive marketplace in which consumers will have
the benefit of high quality, cost-effective health care and a wide range of choices,
including new provider-controlled networks that expand consumer choice and increase
competition.
The following statements affect the chiropractic profession.
4.
Statement of Department of Justice and Federal Trade Commission Enforcement Policy
On Providers’ Collective Provision Of Non-Fee-Related Information To Purchasers
Of Health Care Services
Introduction
The collective provision of non-fee-related
information by competing health care providers to a purchaser in an effort to
influence the terms upon which the purchaser deals with the provider does not
necessarily raise antitrust concerns. Generally, providers’ collective provision
of certain types of information to a purchaser is likely either to raise little
risk of anticompetitive effects or to provide procompetitive benefits.
This
statement sets forth an antitrust safety zone that describes providers’ collective
provision of non-fee-related information that will not be challenged by the Agencies
under the antitrust laws, absent extraordinary circumstances.12 It also describes
conduct that is expressly excluded from the antitrust safety zone.
A. Antitrust
Safety Zone: Providers’ Collective Provision Of Non—Fee-Related Information
That Will Not Be Challenged, Absent Extraordinary Circumstances, By The Agencies
Providers’
collective provision of underlying medical data that may improve purchasers’
resolution of issues relating to the mode, quality, or efficiency of treatment
is unlikely to raise any significant antitrust concern and will not be challenged
by the Agencies, absent extraordinary circumstances. Thus, the Agencies will not
challenge, absent extraordinary circumstances, a medical society’s collection
of outcome data from its members about a particular procedure that they believe
should be covered by a purchaser and the provision of such information to the
purchaser.
The Agencies also will not challenge, absent extraordinary circumstances,
providers’ development of suggested practice parameters –standards for
patient management developed to assist providers in clinical decision making –that
also may provide useful information to patients, providers, and purchasers. Because
providers’ collective provision of such information poses little risk of
restraining competition and help in the development of protocols that increase
quality and efficiency, the Agencies will not challenge such activity, absent
extraordinary circumstances.
In the course of providing underlying medical
data, providers may collectively engage in discussions with purchasers about the
scientific merit of that data. However, the antitrust safety zone excludes any
attempt by providers to coerce purchasers’ decision making by implying or
threatening a boycott of any plan that does not follow the providers’ joint
recommendation.
Providers who collectively threaten to or actually refuse
to deal with a purchaser because they object to the purchaser’s administrative,
clinical, or other terms governing the provision of services run a substantial
antitrust risk. For example, providers’ collective refusal to provide x-rays
to a purchaser that seeks them before covering a particular treatment regimen
would constitute an antitrust violation. Similarly, providers’ collective
attempt to force purchasers to adopt recommended practice parameters by threatening
to or actually boycotting purchasers that refuse to accept their joint recommendation
also would risk antitrust challenge.
5. STATEMENT OF DEPARTMENT OF JUSTICE
AND FEDERAL TRADE COMMISSION ENFORCEMENT POLICY ON PROVIDERS’ COLLECTIVE
PROVISION OF FEE-RELATED INFORMATION TO PURCHASERS OF HEALTH CARE SERVICES
Introduction
The collective provision by competing health care providers to purchasers
of health care services of factual information concerning the fees charged currently
or in the past for the providers’ services, and other factual information
concerning the amounts, levels, or methods of fees or reimbursement, does not
necessarily raise antitrust concerns. With reasonable safeguards, providers’
collective provision of this type of factual information to a purchaser of health
care services may provide procompetitive benefits and raise little risk of anticompetitive
effects.
This statement sets forth an antitrust safety zone that describes
collective provision of fee-related information that will not be challenged by
the Agencies under the antitrust laws, absent extraordinary circumstances. It
also describes types of conduct that are expressly excluded from the antitrust
safety zone, some clearly unlawful, and others that may be lawful depending on
the circumstances.
A. Antitrust Safety Zone: Providers’ Collective
Provision Of Fee-Related Information That Will Not Be Challenged, Absent Extraordinary
Circumstances, By The Agencies
Providers’ collective provision to
purchasers of health care services of factual information concerning the providers’
current or historical fees or other aspects of reimbursement, such as discounts
or alternative reimbursement methods accepted (including capitation arrangements,
risk-withhold fee arrangements, or use of all-inclusive fees), is unlikely to
raise significant antitrust concern and will not be challenged by the Agencies,
absent extraordinary circumstances. Such factual information can help purchasers
efficiently develop reimbursement terms to be offered to providers and may be
useful to a purchaser when provided in response to a request from the purchaser
or at the initiative of providers.
In assembling information to be collectively
provided to purchasers, providers need to be aware of the potential antitrust
consequences of information exchanges among competitors. The principles expressed
in the Agencies’ statement on provider participation in exchanges of price
and cost information are applicable in this context. Accordingly, in order to
qualify for this safety zone, the collection of information to be provided to
purchasers must satisfy the following conditions:
(1) the collection is
managed by a third party (e.g., a purchaser, government agency, health care consultant,
academic institution, or trade association);
(2) although current fee-related
information may be provided to purchasers, any information that is shared among
or is available to the competing providers furnishing the data must be more than
three months old; and
(3) for any information that is available to the
providers furnishing data, there are at least five providers reporting data upon
which each disseminated statistic is based, no individual provider’s data
may represent more than 25 percent on a weighted basis of that statistic, and
any information disseminated must be sufficiently aggregated such that it would
not allow recipients to identify the prices charged by any individual provider.
The conditions that must be met for an information exchange among providers
to fall within the antitrust safety zone are intended to ensure that an exchange
of price or cost data is not used by competing providers for discussion or coordination
of provider prices or costs. They represent a careful balancing of a provider’s
individual interest in obtaining information useful in adjusting the prices it
charges or the wages it pays in response to changing market conditions against
the risk that the exchange of such information may permit competing providers
to communicate with each other regarding a mutually acceptable level of prices
for health care services or compensation for employees.
B. The Agencies’
Analysis Of Providers’ Collective Provision Of Fee-Related Information That
Falls Outside The Antitrust Safety Zone
The safety zone set forth in this
policy statement does not apply to collective negotiations between unintegrated
providers and purchasers in contemplation or in furtherance of any agreement among
the providers on fees or other terms or aspects of reimbursement, or to any agreement
among unintegrated providers to deal with purchasers only on agreed terms. Providers
also may not collectively threaten, implicitly or explicitly, to engage in a boycott
or similar conduct, or actually undertake such a boycott or conduct, to coerce
any purchaser to accept collectively-determined fees or other terms or aspects
of reimbursement. These types of conduct likely would violate the antitrust laws
and, in many instances, might be per se illegal.
Also excluded from the
safety zone is providers’ collective provision of information or views concerning
prospective fee-related matters. In some circumstances, the collective provision
of this type of fee-related information also may be helpful to a purchaser and,
as long as independent decisions on whether to accept a purchaser’s offer
are truly preserved, may not raise antitrust concerns. However, in other circumstances,
the collective provision of prospective fee-related information or views may evidence
or facilitate an agreement on prices or other competitively significant terms
by the competing providers. It also may exert a coercive effect on the purchaser
by implying or threatening a collective refusal to deal on terms other than those
proposed, or amount to an implied threat to boycott any plan that does not follow
the providers’ collective proposal.
The Agencies recognize the need
carefully to distinguish possibly procompetitive collective provision of prospective
fee-related information or views from anticompetitive situations that involve
unlawful price agreements, boycott threats, refusals to deal except on collectively
determined terms, collective negotiations, or conduct that signals or facilitates
collective price terms. Therefore, the collective provision of such prospective
fee-related information or views will be assessed on a case-by-case basis. In
their case-by-case analysis, the Agencies will look at all the facts and circumstances
surrounding the provision of the information, including, but not limited to, the
nature of the information provided, the nature and extent of the communications
among the providers and between the providers and the purchaser, the rationale
for providing the information, and the nature of the market in which the information
is provided.
In addition, because the collective provision of prospective
fee-related information and views can easily lead to or accompany unlawful collective
negotiations, price agreements, or the other types of collective conduct noted
above, providers need to be aware of the potential antitrust consequences of information
exchanges among competitors in assembling information or views concerning prospective
fee-related matters. Consequently, such protections as the use of a third party
to manage the collection of information and views, and the adoption of mechanisms
to assure that the information is not disseminated or used in a manner that facilitates
unlawful agreements or coordinated conduct by the providers, likely would reduce
antitrust concerns.
6. STATEMENT OF DEPARTMENT OF JUSTICE AND FEDERAL
TRADE COMMISSION ENFORCEMENT POLICY ON PROVIDER PARTICIPATION IN EXCHANGES OF
PRICE AND COST INFORMATION
Introduction
Participation by competing
providers in surveys of prices for health care services, or surveys of salaries,
wages or benefits of personnel does not necessarily raise antitrust concerns.
In fact, such surveys can have significant benefits for health care consumers.
Providers can use information derived from price and compensation surveys to price
their services more competitively and to offer compensation that attracts highly
qualified personnel. Purchasers can use price survey information to make more
informed decisions when buying health care services.
Without appropriate
safeguards, however, information exchanges among competing providers may facilitate
collusion or otherwise reduce competition on prices or compensation, resulting
in increased prices, or reduced quality and availability of health care services.
A collusive restriction on the compensation paid to health care employees, for
example, could adversely affect the availability of health care personnel.
This
statement sets forth an antitrust safety zone that describes exchanges of price
and cost information among providers that will not be challenged by the Agencies
under the antitrust laws, absent extraordinary circumstances. It also briefly
describes the Agencies’ antitrust analysis of information exchanges that
fall outside the antitrust safety zone.
A. Antitrust Safety Zone: Exchanges
Of Price And Cost Information Among Providers That Will Not Be Challenged, Absent
Extraordinary Circumstances, By The Agencies
The Agencies will not challenge,
absent extraordinary circumstances, provider participation in written surveys
of (a) prices for health care services, or (b) wages, salaries, or benefits of
health care personnel, if the following conditions are satisfied:
(1) the
survey is managed by a third-party (e.g., a purchaser, government agency, health
care consultant, academic institution, or trade association);
(2) the information
provided by survey participants is based on data more than 3 months old; and
(3)
there are at least five providers reporting data upon which each disseminated
statistic is based, no individual provider’s data represents more than 25
percent on a weighted basis of that statistic, and any information disseminated
is sufficiently aggregated such that it would not allow recipients to identify
the prices charged or compensation paid by any particular provider.
The
conditions that must be met for an information exchange among providers to fall
within the antitrust safety zone are intended to ensure that an exchange of price
or cost data is not used by competing providers for discussion or coordination
of provider prices or costs. They represent a careful balancing of a provider’s
individual interest in obtaining information useful in adjusting the prices it
charges or the wages it pays in response to changing market conditions against
the risk that the exchange of such information may permit competing providers
to communicate with each other regarding a mutually acceptable level of prices
for health care services or compensation for employees.
B. The Agencies’
Analysis of Provider Exchanges Of Information That Fall Outside The Antitrust
Safety Zone
Exchanges of price and cost information that fall outside
the antitrust safety zone generally will be evaluated to determine whether the
information exchange may have an anticompetitive effect that outweighs any procompetitive
justification for the exchange. Depending on the circumstances, public, non-provider
initiated surveys may not raise competitive concerns. Such surveys could allow
purchasers to have useful information that they can use for procompetitive purposes.
Exchanges of future prices for provider services or future compensation of
employees are very likely to be considered anticompetitive. If an exchange among
competing providers of price or cost information results in an agreement among
competitors as to the prices for health care services or the wages to be paid
to health care employees, that agreement will be considered unlawful per se.
7. STATEMENT OF DEPARTMENT OF JUSTICE AND FEDERAL TRADE COMMISSION ENFORCEMENT
POLICY ON JOINT PURCHASING ARRANGEMENTS AMONG HEALTH CARE PROVIDERS
(Editors
Note: The most likely impact on the chiropractic profession would be if a group
of chiropractors were to enter a relationship designed to limit their adminstrative
costs by sharing or “pooling” office staff. This is especially true
for chiropractors located in rural areas. If you are considering such an arrangement,
or any activity involving joint purchasing you should consult with an attorney
specializing in antitrust matters before any agreements are finalized.)
Introduction
Most joint purchasing arrangements among hospitals or other health care providers
do not raise antitrust concerns. Such collaborative activities typically allow
the participants to achieve efficiencies that will benefit consumers. Joint purchasing
arrangements usually involve the purchase of a product or service used in providing
the ultimate package of health care services or products sold by the participants.
Examples include the purchase of laundry or food services by hospitals, the purchase
of computer or data processing services by hospitals or other groups of providers,
and the purchase of prescription drugs and other pharmaceutical products. Through
such joint purchasing arrangements, the participants frequently can obtain volume
discounts, reduce transaction costs, and have access to consulting advice that
may not be available to each participant on its own.
Joint purchasing arrangements
are unlikely to raise antitrust concerns unless (1) the arrangement accounts for
so large a portion of the purchases of a product or service that it can effectively
exercise market power in the purchase of the product or service, or (2) the products
or services being purchased jointly account for so large a proportion of the total
cost of the services being sold by the participants that the joint purchasing
arrangement may facilitate price fixing or otherwise reduce competition. If neither
factor is present, the joint purchasing arrangement will not present competitive
concerns.
This statement sets forth an antitrust safety zone that describes
joint purchasing arrangements among health care providers that will not be challenged,
absent extraordinary circumstances, by the Agencies under the antitrust laws.
It also describes factors that mitigate any competitive concerns with joint purchasing
arrangements that fall outside the antitrust safety zone.
A. Antitrust
Safety Zone: Joint Purchasing Arrangements Among Health Care Providers That Will
Not Be Challenged, Absent Extraordinary Circumstances, By The Agencies
The
Agencies will not challenge, absent extraordinary circumstances, any joint purchasing
arrangement among health care providers where two conditions are present: (1)
the purchases account for less than 35 percent of the total sales of the purchased
product or service in the relevant market; and (2) the cost of the products and
services purchased jointly accounts for less than 20 percent of the total revenues
from all products or services sold by each competing participant in the joint
purchasing arrangement.
The first condition compares the purchases accounted
for by a joint purchasing arrangement to the total purchases of the purchased
product or service in the relevant market. Its purpose is to determine whether
the joint purchasing arrangement might be able to drive down the price of the
product or service being purchased below competitive levels. For example, a joint
purchasing arrangement may account for all or most of the purchases of laundry
services by hospitals in a particular market, but represent less than 35 percent
of the purchases of all commercial laundry services in that market. Unless there
are special costs that cannot be easily recovered associated with providing laundry
services to hospitals, such a purchasing arrangement is not likely to force prices
below competitive levels. The same principle applies to joint purchasing arrangements
for food services, data processing, and many other products and services.
The
second condition addresses any possibility that a joint purchasing arrangement
might result in standardized costs, thus facilitating price fixing or otherwise
having anticompetitive effects. This condition applies only where some or all
of the participants are direct competitors. For example, if a nationwide purchasing
cooperative limits its membership to one hospital in each geographic area, there
is not likely to be any concern about reduction of competition among its members.
Even where a purchasing arrangement’s membership includes hospitals or other
health care providers that compete with one another, the arrangement is not likely
to facilitate collusion if the goods and services being purchased jointly account
for a small fraction of the final price of the services provided by the participants.
In the health care field, it may be difficult to determine the specific
final service in which the jointly purchased products are used, as well as the
price at which that final service is sold. Therefore, the Agencies will examine
whether the cost of the products or services being purchased jointly accounts,
in the aggregate, for less than 20 percent of the total revenues from all health
care services of each competing participant.
B. Factors Mitigating Competitive
Concerns With Joint Purchasing Arrangements That Fall Outside The Antitrust Safety
Zone
Joint purchasing arrangements among hospitals or other health care
providers that fall outside the antitrust safety zone do not necessarily raise
antitrust concerns. There are several safeguards that joint purchasing arrangements
can adopt to mitigate concerns that might otherwise arise.
First, antitrust
concern is lessened if members are not required to use the arrangement for all
their purchases of a particular product or service. Members can, however, be asked
to commit to purchase a voluntarily specified amount through the arrangement so
that a volume discount or other favorable contract can be negotiated.
Second,
where negotiations are conducted on behalf of the joint purchasing arrangement
by an independent employee or agent who is not also an employee of a participant,
antitrust risk is lowered.
Third, the likelihood of anticompetitive communications
is lessened where communications between the purchasing group and each individual
participant are kept confidential, and not discussed with, or disseminated to,
other participants.
These safeguards will reduce substantially, if not
completely eliminate, use of the purchasing arrangement as a vehicle for discussing
and coordinating the prices of health care services offered by the participants.
The adoption of these safeguards also will help demonstrate that the joint purchasing
arrangement is intended to achieve economic efficiencies rather than to serve
an anticompetitive purpose. Where there appear to be significant efficiencies
from a joint purchasing arrangement, the Agencies will not challenge the arrangement
absent substantial risk of anticompetitive effects.
The existence of a
large number and variety of purchasing groups in the health care field suggests
that entry barriers to forming new groups currently are not great. Thus, in most
circumstances at present, it is not necessary to open a joint purchasing arrangement
to all competitors in the market. However, if some competitors excluded from the
arrangement are unable to compete effectively without access to the arrangement,
and competition is thereby harmed, antitrust concerns will exist.
C. Example
— Joint Purchasing Arrangement Involving Both Hospitals In Rural Community
That The Agencies Would Not Challenge
Smalltown is the county seat of Rural
County. There are two general acute care hospitals, County Hospital (“County”)
and Smalltown Medical Center (“SMC”), both located in Smalltown. The
nearest other hospitals are located in Big City, about 100 miles from Smalltown.
County and SMC propose to join a joint venture being formed by several
of the hospitals in Big City through which they will purchase various hospital
supplies — such as bandages, antiseptics, surgical gowns, and masks. The
joint venture will likely be the vehicle for the purchase of most such products
by the Smalltown hospitals, but under the joint venture agreement, both retain
the option to purchase supplies independently.
The joint venture will be
an independent corporation, jointly owned by the participating hospitals. It will
purchase the supplies needed by the hospitals and then resell them to the hospitals
at average variable cost plus a reasonable return on capital. The joint venture
will periodically solicit from each participating hospital its expected needs
for various hospital supplies, and negotiate the best terms possible for the combined
purchases. It will also purchase supplies for its member hospitals on an ad hoc
basis.
Competitive Analysis
The first issue is whether the proposed
joint purchasing arrangement would fall within the safety zone set forth in this
policy statement. In order to make this determination, the Agencies would first
inquire whether the joint purchases would account for less than 35 percent of
the total sales of the purchased products in the relevant markets for the sales
of those products. Here, the relevant hospital supply markets are likely to be
national or at least regional in scope. Thus, while County and SMC might well
account for more than 35 percent of the total sales of many hospital supplies
in Smalltown or Rural County, they and the other hospitals in Big City that will
participate in the arrangement together would likely not account for significant
percentages of sales in the actual relevant markets. Thus, the first criterion
for inclusion in the safety zone is likely to be satisfied.
The Agencies
would then inquire whether the supplies to be purchased jointly account for less
than 20 percent of the total revenues from all products and services sold by each
of the competing hospitals that participate in the arrangement. In this case,
County and SMC are competing hospitals, but this second criterion for inclusion
in the safety zone is also likely to be satisfied, and the Agencies would not
challenge the joint purchasing arrangement.
8. STATEMENT OF DEPARTMENT
OF JUSTICE AND FEDERAL TRADE COMMISSION ENFORCEMENT POLICY ON PHYSICIAN NETWORK
JOINT VENTURES
(Editors Note: Please remember that while the DOJ and FTC
use the words “physician networks and hospitals” these apply equally
as well to chiropractors and the managed networks they join. Just substitute the
word “chiropractor” every time you read the work “physician”)
Introduction
In recent years, health plans and other purchasers of health care services
have developed a variety of managed care programs that seek to reduce the costs
and assure the quality of health care services. Many physicians and physician
groups have organized physician network joint ventures, such as individual practice
associations (“IPAs”), preferred provider organizations (“PPOs”),
and other arrangements to market their services to these plans.
Typically,
such networks contract with the plans to provide physician services to plan subscribers
at predetermined prices, and the physician participants in the networks agree
to controls aimed at containing costs and assuring the appropriate and efficient
provision of high quality physician services. By developing and implementing mechanisms
that encourage physicians to collaborate in practicing efficiently as part of
the network, many physician network joint ventures promise significant procompetitive
benefits for consumers of health care services.
As used in this statement,
a physician network joint venture is a physician-controlled venture in which the
network’s physician participants collectively agree on prices or price-related
terms and jointly market their services. Other types of health care network joint
ventures are not directly addressed by this statement.
This statement of
enforcement policy describes the Agencies’ antitrust analysis of physician
network joint ventures, and presents several examples of its application to specific
hypothetical physician network joint ventures. Before describing the general antitrust
analysis, the statement sets forth antitrust safety zones that describe physician
network joint ventures that are highly unlikely to raise substantial competitive
concerns, and therefore will not be challenged by the Agencies under the antitrust
laws, absent extraordinary circumstances.
The Agencies emphasize that merely
because a physician network joint venture does not come within a safety zone in
no way indicates that it is unlawful under the antitrust laws. On the contrary,
such arrangements may be procompetitive and lawful, and many such arrangements
have received favorable business review letters or advisory opinions from the
Agencies.
The safety zones use a few factors that are relatively easy to
apply, to define a category of ventures for which the Agencies presume no anticompetitive
harm, without examining competitive conditions in the particular case. A determination
about the lawfulness of physician network joint ventures that fall outside the
safety zones must be made on a case-by-case basis according to general antitrust
principles and the more specific analysis described in this statement.
A.
Antitrust Safety Zones
This section describes those physician network joint
ventures that will fall within the antitrust safety zones designated by the Agencies.
The antitrust safety zones differ for “exclusive” and “non-exclusive”
physician network joint ventures. In an “exclusive” venture, the network’s
physician participants are restricted in their ability to, or do not in practice,
individually contract or affiliate with other network joint ventures or health
plans. In a “non-exclusive” venture, on the other hand, the physician
participants in fact do, or are available to, affiliate with other networks or
contract individually with health plans.
This section explains how the
Agencies will determine whether a physician network joint venture is exclusive
or non-exclusive. It also illustrates types of arrangements that can involve the
sharing of substantial financial risk among a network’s physician participants,
which is necessary for a network to come within the safety zones.
1. Exclusive
Physician Network Joint Ventures That The Agencies Will Not Challenge, Absent
Extraordinary Circumstances
The Agencies will not challenge, absent extraordinary
circumstances, an exclusive physician network joint venture whose physician participants
share substantial financial risk and constitute 20 percent or less of the physicians
in each physician specialty with active hospital staff privileges who practice
in the relevant geographic market. In relevant markets with fewer than five physicians
in a particular specialty, an exclusive physician network joint venture otherwise
qualifying for the antitrust safety zone may include one physician from that specialty,
on a non-exclusive basis, even though the inclusion of that physician results
in the venture consisting of more than 20 percent of the physicians in that specialty.
2. Non-Exclusive Physician Network Joint Ventures That The Agencies
Will Not Challenge, Absent Extraordinary Circumstances The Agencies will not
challenge, absent extraordinary circumstances, a non-exclusive physician network
joint venture whose physician participants share substantial financial risk and
constitute 30 percent or less of the physicians in each physician specialty with
active hospital staff privileges who practice in the relevant geographic market.
In relevant markets with fewer than four physicians in a particular specialty,
a non-exclusive physician network joint venture otherwise qualifying for the antitrust
safety zone may include one physician from that specialty, even though the inclusion
of that physician results in the venture consisting of more than 30 percent of
the physicians in that specialty.
3. Indicia Of Non-Exclusivity
Because
of the different market share thresholds for the safety zones for exclusive and
non-exclusive physician network joint ventures, the Agencies caution physician
participants in a non-exclusive physician network joint venture to be sure that
the network is non-exclusive in fact and not just in name. The Agencies will determine
whether a physician network joint venture is exclusive or non-exclusive by its
physician participants’ activities, and not simply by the terms of the contractual
relationship. In making that determination, the Agencies will examine the following
indicia of non-exclusivity, among others:
(1) that viable competing networks
or managed care plans with adequate physician participation currently exist in
the market;
(2) that physicians in the network actually individually participate
in, or contract with, other networks or managed care plans, or there is other
evidence of their willingness and incentive to do so;
(3) that physicians
in the network earn substantial revenue from other networks or through individual
contracts with managed care plans;
(4) the absence of any indications of
significant de-participation from other networks or managed care plans in the
market; and (5) the absence of any indications of coordination among the physicians
in the network regarding price or other competitively significant terms of participation
in other networks or managed care plans.
Networks also may limit or condition
physician participants’ freedom to contract outside the network in ways that
fall short of a commitment of full exclusivity. If those provisions significantly
restrict the ability or willingness of a network’s physicians to join other
networks or contract individually with managed care plans the network will be
considered exclusive for purposes of the safety zones.
4. Sharing Of Substantial
Financial Risk By Physicians In A Physician Network Joint Venture
To qualify
for either antitrust safety zone, the participants in a physician network joint
venture must share substantial financial risk in providing all the services that
are jointly priced through the network. The safety zones are limited to networks
involving substantial financial risk sharing not because such risk sharing is
a desired end in itself, but because it normally is a clear and reliable indicator
that a physician network involves sufficient integration by its physician participants
to achieve significant efficiencies. Risk sharing provides incentives for the
physicians to cooperate in controlling costs and improving quality by managing
the provision of services by network physicians.
The following are examples
of some types of arrangements through which participants in a physician network
joint venture can share substantial financial risk:
(1) agreement by the
venture to provide services to a health plan at a “capitated” rate;
(2) agreement by the venture to provide designated services or classes
of services to a health plan for a predetermined percentage of premium or revenue
from the plan;
(3) use by the venture of significant financial incentives
for its physician participants, as a group, to achieve specified cost-containment
goals. Two methods by which the venture can accomplish this are:
(a) withholding
from all physician participants in the network a substantial amount of the compensation
due to them, with distribution of that amount to the physician participants based
on group performance in meeting the cost-containment goals of the network as a
whole; or
(b) establishing overall cost or utilization targets for the
network as a whole, with the network’s physician participants subject to
subsequent substantial financial rewards or penalties based on group performance
in meeting the targets; and
(4) agreement by the venture to provide a complex
or extended course of treatment that requires the substantial coordination of
care by physicians in different specialties offering a complementary mix of services,
for a fixed, predetermined payment, where the costs of that course of treatment
for any individual patient can vary greatly due to the individual patient’s
condition, the choice, complexity, or length of treatment, or other factors.
The
Agencies recognize that new types of risk-sharing
arrangements may develop.
The preceding examples do not foreclose consideration of other arrangements through
which the participants in a physician network joint venture may share substantial
financial risk in the provision of medical services through the network. Organizers
of physician networks who are uncertain whether their proposed arrangements constitute
substantial financial risk sharing for purposes of this policy statement are encouraged
to take advantage of the Agencies’ expedited business review and advisory
opinion procedures. B. The Agencies’ Analysis Of Physician Network Joint
Ventures That Fall Outside The Antitrust Safety Zones
Physician network
joint ventures that fall outside the antitrust safety zones also may have the
potential to create significant efficiencies, and do not necessarily raise substantial
antitrust concerns. For example, physician network joint ventures in which the
physician participants share substantial financial risk, but which involve a higher
percentage of physicians in a relevant market than specified in the safety zones,
may be lawful if they are not anticompetitive on balance. Likewise, physician
network joint ventures that do not involve the sharing of substantial financial
risk also may be lawful if the physicians’ integration through the joint
venture creates significant efficiencies and the venture, on balance, is not anticompetitive.
The Agencies emphasize that it is not their intent to treat such networks
either more strictly or more leniently than joint ventures in other industries,
or to favor any particular procompetitive organization or structure of health
care delivery over other forms that consumers may desire. Rather, their goal is
to ensure a competitive marketplace in which consumers will have the benefit of
high quality, cost-effective health care and a wide range of choices, including
new provider-controlled networks that expand consumer choice and increase competition.
1. Determining When Agreements Among Physicians In A Physician Network
Joint Venture Are Analyzed Under The Rule Of Reason
Antitrust law treats
naked agreements among competitors that fix prices or allocate markets as per
se illegal. Where competitors economically integrate in a joint venture, however,
such agreements, if reasonably necessary to accomplish the procompetitive benefits
of the integration, are analyzed under the rule of reason. In accord with general
antitrust principles, physician network joint ventures will be analyzed under
the rule of reason, and will not be viewed as per se illegal, if the physicians’
integration through the network is likely to produce significant efficiencies
that benefit consumers, and any price agreements (or other agreements that would
otherwise be per se illegal) by the network physicians are reasonably necessary
to realize those efficiencies.
Where the participants in a physician network
joint venture have agreed to share substantial financial risk as defined in Section
A.4. of this policy statement, their risk-sharing arrangement generally establishes
both an overall efficiency goal for the venture and the incentives for the physicians
to meet that goal. The setting of price is integral to the venture’s use
of such an arrangement and therefore warrants evaluation under the rule of reason.
Physician network joint ventures that do not involve the sharing of substantial
financial risk may also involve sufficient integration to demonstrate that the
venture is likely to produce significant efficiencies. Such integration can be
evidenced by the network implementing an active and ongoing program to evaluate
and modify practice patterns by the network’s physician participants and
create a high degree of interdependence and cooperation among the physicians to
control costs and ensure quality. This program may include: (1) establishing mechanisms
to monitor and control utilization of health care services that are designed to
control costs and assure quality of care; (2) selectively choosing network physicians
who are likely to further these efficiency objectives; and (3) the significant
investment of capital, both monetary and human, in the necessary infrastructure
and capability to realize the claimed efficiencies.
The foregoing are not,
however, the only types of arrangements that can evidence sufficient integration
to warrant rule of reason analysis, and the Agencies will consider other arrangements
that also may evidence such integration. However, in all cases, the Agencies’
analysis will focus on substance, rather than form, in assessing a network’s
likelihood of producing significant efficiencies. To the extent that agreements
on prices to be charged for the integrated provision of services are reasonably
necessary to the venture’s achievement of efficiencies, they will be evaluated
under the rule of reason.
In contrast to integrated physician network joint
ventures, such as these discussed above, there have been arrangements among physicians
that have taken the form of networks, but which in purpose or effect were little
more than efforts by their participants to prevent or impede competitive forces
from operating in the market. These arrangements are not likely to produce significant
procompetitive efficiencies. Such arrangements have been, and will continue to
be, treated as unlawful conspiracies or cartels, whose price agreements are per
se illegal.
Determining that an arrangement is merely a vehicle to fix
prices or engage in naked anticompetitive conduct is a factual inquiry that must
be done on a case-by-case basis to determine the arrangement’s true nature
and likely competitive effects. However, a variety of factors may tend to corroborate
a network’s anticompetitive nature, including: statements evidencing anticompetitive
purpose; a recent history of anticompetitive behavior or collusion in the market,
including efforts to obstruct or undermine the development of managed care; obvious
anticompetitive structure of the network (e.g., a network comprising a very high
percentage of local area physicians, whose participation in the network is exclusive,
without any plausible business or efficiency justification); the absence of any
mechanisms with the potential for generating significant efficiencies or otherwise
increasing competition through the network; the presence of anticompetitive collateral
agreements; and the absence of mechanisms to prevent the network’s operation
from having anticompetitive spillover effects outside the network.
2. Applying
The Rule Of Reason
A rule of reason analysis determines whether the formation
and operation of the joint venture may have a substantial anticompetitive effect
and, if so, whether that potential effect is outweighed by any procompetitive
efficiencies resulting from the joint venture. The rule of reason analysis takes
into account characteristics of the particular physician network joint venture,
and the competitive environment in which it operates, that bear on the venture’s
likely effect on competition.
A determination about the lawfulness of a
network’s activity under the rule of reason sometimes can be reached without
an extensive inquiry under each step of the analysis. For example, a physician
network joint venture that involves substantial clinical integration may include
a relatively small percentage of the physicians in the relevant markets on a non-exclusive
basis. In that case, the Agencies may be able to conclude expeditiously that the
network is unlikely to be anticompetitive, based on the competitive environment
in which it operates.
In assessing the competitive environment, the Agencies
would consider such market factors as the number, types, and size of managed care
plans operating in the area, the extent of physician participation in those plans,
and the economic importance of the managed care plans to area physicians. See
infra Example 1. Alternatively, for example, if a restraint that facially appears
to be of a kind that would always or almost always tend to reduce output or increase
prices, but has not been considered per se unlawful, is not reasonably necessary
to the creation of efficiencies, the Agencies will likely challenge the restraint
without an elaborate analysis of market definition and market power.
The
steps ordinarily involved in a rule of reason analysis of physician network joint
ventures are set forth below.
Step one: Define the relevant market. The
Agencies evaluate the competitive effects of a physician network joint venture
in each relevant market in which it operates or has substantial impact. In defining
the relevant product and geographic markets, the Agencies look to what substitutes,
as a practical matter, are reasonably available to consumers for the services
in question. The Agencies will first identify the relevant services that the physician
network joint venture provides. Although all services provided by each physician
specialty might be a separate relevant service market, there may be instances
in which significant overlap of services provided by different physician specialties,
or in some circumstances, certain nonphysician health care providers, justifies
including services from more than one physician specialty or category of providers
in the same market. For each relevant service market, the relevant geographic
market will include all physicians (or other providers) who are good substitutes
for the physician participants in the joint venture.
Step two: Evaluate
the competitive effects of the physician joint venture. The Agencies examine the
structure and activities of the physician network joint venture and the nature
of competition in the relevant market to determine whether the formation or operation
of the venture is likely to have an anticompetitive effect. Two key areas of competitive
concern are whether a physician network joint venture could raise the prices for
physician services charged to health plans above competitive levels, or could
prevent or impede the formation or operation of other networks or plans.
In
assessing whether a particular network arrangement could raise prices or exclude
competition, the Agencies will examine whether the network physicians collectively
have the ability and incentive to engage in such conduct. The Agencies will consider
not only the proportion of the physicians in any relevant market who are in the
network, but also the incentives faced by physicians in the network, and whether
different groups of physicians in a network may have significantly different incentives
that would reduce the likelihood of anticompetitive conduct.
The Department
of Justice has entered into final judgments that permit a network to include a
relatively large proportion of physicians in a relevant market where the percentage
of physicians with an ownership interest in the network is strictly limited, and
the network subcontracts with additional physicians under terms that create a
sufficient divergence of economic interest between the subcontracting physicians
and the owner physicians so that the owner physicians have an incentive to control
the costs to the network of the subcontracting physicians. Evaluating the incentives
faced by network physicians requires an examination of the facts and circumstances
of each particular case.
The Agencies will assess whether different groups
of physicians in the network actually have significantly divergent incentives
that would override any shared interest, such as the incentive to profit from
higher fees for their medical services. The Agencies will also consider whether
the behavior of network physicians or other market evidence indicates that the
differing incentives among groups of physicians will not prevent anticompetitive
conduct.
If, in the relevant market, there are many other networks or many
physicians who would be available to form competing networks or to contract directly
with health plans, it is unlikely that the joint venture would raise significant
competitive concerns. The Agencies will analyze the availability of suitable physicians
to form competing networks, including the exclusive or non-exclusive nature of
the physician network joint venture.
The Agencies recognize that the competitive
impact of exclusive arrangements or other limitations on the ability of a network’s
physician participants to contract outside the network can vary greatly. For example,
in some circumstances exclusivity may help a network serve its subscribers and
increase its physician participants’ incentives to further the interests
of the network. In other situations, however, the anticompetitive risks posed
by such exclusivity may outweigh its procompetitive benefits. Accordingly, the
Agencies will evaluate the actual or likely effects of particular limitations
on contracting in the market situation in which they occur.
An additional
area of possible anticompetitive concern involves the risk of “spillover”
effects from the venture. For example, a joint venture may involve the exchange
of competitively sensitive information among competing physicians and thereby
become a vehicle for the network’s physician participants to coordinate their
activities outside the venture. Ventures that are structured to reduce the likelihood
of such spillover are less likely to result in anticompetitive effects. For example,
a network that uses an outside agent to collect and analyze fee data from physicians
for use in developing the network’s fee schedule, and avoids the sharing
of such sensitive information among the network’s physician participants,
may reduce concerns that the information could be used by the network’s physician
participants to set prices for services they provide outside the network.
Step
three: Evaluate the impact of procompetitive efficiencies. This step requires
an examination of the joint venture’s likely procompetitive efficiencies,
and the balancing of these efficiencies against any likely anticompetitive effects.
The greater the venture’s likely anticompetitive effects, the greater must
be the venture’s likely efficiencies. In assessing efficiency claims, the
Agencies focus on net efficiencies that will be derived from the operation of
the network and that result in lower prices or higher quality to consumers. The
Agencies will not accept claims of efficiencies if the parties reasonably can
achieve equivalent or comparable savings through significantly less anticompetitive
means. In making this assessment, however, the Agencies will not search for a
theoretically least restrictive alternative that is not practical given business
realities.
Experience indicates that, in general, more significant efficiencies
are likely to result from a physician network joint venture’s substantial
financial risk sharing or substantial clinical integration. However, the Agencies
will consider a broad range of possible cost savings, including improved cost
controls, case management and quality assurance, economies of scale, and reduced
administrative or transaction costs.
In assessing the likelihood that efficiencies
will be realized, the Agencies recognize that competition is one of the strongest
motivations for firms to lower prices, reduce costs, and provide higher quality.
Thus, the greater the competition facing the network, the more likely it is that
the network will actually realize potential efficiencies that would benefit consumers.
Step four: Evaluation of collateral agreements. This step examines whether
the physician network joint venture includes collateral agreements or conditions
that unreasonably restrict competition and are unlikely to contribute significantly
to the legitimate purposes of the physician network joint venture. The Agencies
will examine whether the collateral agreements are reasonably necessary to achieve
the efficiencies sought by the joint venture. For example, if the physician participants
in a physician network joint venture agree on the prices they will charge patients
who are not covered by the health plans with which their network contracts, such
an agreement plainly is not reasonably necessary to the success of the joint venture
and is an antitrust violation.
Similarly, attempts by a physician network
joint venture to exclude competitors or classes of competitors of the network’s
physician participants from the market could have anticompetitive effects, without
advancing any legitimate, procompetitive goal of the network. This could happen,
for example, if the network facilitated agreements among the physicians to refuse
to deal with such competitors outside the network, or to pressure other market
participants to refuse to deal with such competitors or deny them necessary access
to key facilities.
C. Examples Of Physician Network Joint Ventures
The
following are examples of how the Agencies would apply the principles set forth
in this statement to specific physician network joint ventures. The first three
are new examples: 1) a network involving substantial clinical integration, that
is unlikely to raise significant competitive concerns under the rule of reason;
2) a network involving both substantial financial risk-sharing and non-risk-sharing
arrangements, which would be analyzed under the rule of reason; and 3) a network
involving neither substantial financial risk-sharing nor substantial clinical
integration, and whose price agreements likely would be challenged as per se unlawful.
The last four examples involve networks that operate in a variety of market settings
and with different levels of physician participants; three are networks that involve
substantial financial risk-sharing and one is a network in which the physician
participants do not jointly agree on, or negotiate, price.
1. Physician
Network Joint Venture Involving Clinical Integration
Charlestown is a relatively
isolated, medium-sized city. For the purposes of this example, the services provided
by primary care physicians and those provided by the different physician specialties
each constitute a relevant product market; and the relevant geographic market
for each of them is Charlestown.
Several HMOs and other significant managed
care plans operate in Charlestown. A substantial proportion of insured individuals
are enrolled in these plans and enrollment in managed care is expected to increase.
Many physicians in each of the specialties participate in more than one of these
plans. There is no significant overlap among the participants on the physician
panels of many of these plans.
A group of Charlestown physicians establishes
an IPA to assume greater responsibility for managing the cost and quality of care
rendered to Charlestown residents who are members of health plans. They hope to
reduce costs while maintaining or improving the quality of care, and thus to attract
more managed care patients to their practices.
The IPA will implement systems
to establish goals relating to quality and appropriate utilization of services
by IPA participants, regularly evaluate both individual participants’ and
the network’s aggregate performance with respect to those goals, and modify
individual participants’ actual practices, where necessary, based on those
evaluations. The IPA will engage in case management, preauthorization of some
services and concurrent and retrospective review of inpatient stays. In addition,
the IPA is developing practice standards and protocols to govern treatment and
utilization of services, and it will actively review the care rendered by each
doctor in light of these standards and protocols.
There is a significant
investment of capital to purchase the information systems necessary to gather
aggregate and individual data on the cost, quantity, and nature of services provided
or ordered by the IPA physicians; to measure performance of the group and the
individual doctors against cost and quality benchmarks; and to monitor patient
satisfaction. The IPA will provide payers with detailed reports on the cost and
quantity of services provided, and on the network’s success in meeting its
goals.
The IPA will hire a medical director and a support staff to perform
the above functions and to coordinate patient care in specific cases. The doctors
also have invested appreciable time in developing the practice standards and protocols,
and will continue actively to monitor care provided through the IPA. Network participants
who fail to adhere to the network’s standards and protocols will be subject
to remedial action, including the possibility of expulsion from the network.
The
IPA physicians will be paid by health plans on a fee-for-service basis; the physicians
will not share substantial financial risk for the cost of services rendered to
covered individuals through the network. The IPA will retain an agent to develop
a fee schedule, negotiate fees, and contract with payers on behalf of the venture.
Information about what participating doctors charge non-network patients will
not be disseminated to participants in the IPA, and the doctors will not agree
on the prices they will charge patients not covered by IPA contracts.
The
IPA is built around three geographically dispersed primary care group practices
that together account for 25 percent of the primary care doctors in Charlestown.
A number of specialists to whom the primary care doctors most often refer their
patients also are invited to participate in the IPA. These specialists are selected
based on their established referral relationships with the primary care doctors,
the quality of care provided by the doctors, their willingness to cooperate with
the goals of the IPA, and the need to provide convenient referral services to
patients of the primary care doctors. Specialist services that are needed less
frequently will be provided by doctors who are not IPA participants. Participating
specialists constitute from 20 to 35 percent of the specialists in each relevant
market, depending on the specialty. Physician participation in the IPA is non-exclusive.
Many IPA participants already do and are expected to continue to participate in
other managed care plans and earn substantial income from those plans.
Competitive
Analysis
Although the IPA does not fall within the antitrust safety zone
because the physicians do not share substantial financial risk, the Agencies would
analyze the IPA under the rule of reason because it offers the potential for creating
significant efficiencies and the price agreement is reasonably necessary to realize
those efficiencies. Prior to contracting on behalf of competing doctors, the IPA
will develop and invest in mechanisms to provide cost-effective quality care,
including standards and protocols to govern treatment and utilization of services,
information systems to measure and monitor individual physician and aggregate
network performance, and procedures to modify physician behavior and assure adherence
to network standards and protocols. The network is structured to achieve its efficiencies
through a high degree of interdependence and cooperation among its physician participants.
The price agreement, under these circumstances, is subordinate to and reasonably
necessary to achieve these objectives.
Furthermore, the Agencies would
not challenge under the rule of reason the doctors’ agreement to establish
and operate the IPA. In conducting the rule of reason analysis, the Agencies would
evaluate the likely competitive effects of the venture in each relevant market.
In this case, the IPA does not appear likely to limit competition in any relevant
market either by hampering the ability of health plans to contract individually
with area physicians or with other physician network joint ventures, or by enabling
the physicians to raise prices above competitive levels. The IPA does not appear
to be overinclusive: many primary care physicians and specialists are available
to other plans, and the doctors in the IPA have been selected to achieve the network’s
procompetitive potential. Many IPA participants also participate in other managed
care plans and are expected to continue to do so in the future. Moreover, several
significant managed care plans are not dependent on the IPA participants to offer
their products to consumers. Finally, the venture is structured so that physician
participants do not share competitively sensitive information, thus reducing the
likelihood of anticompetitive spillover effects outside the network where the
physicians still compete, and the venture avoids any anticompetitive collateral
agreements.
Since the venture is not likely to be anticompetitive, there
is no need for further detailed evaluation of the ventures potential for generating
procompetitive efficiencies. For these reasons, the Agencies would not challenge
the joint venture. However, they would reexamine this conclusion and do a more
complete analysis of the procompetitive efficiencies if evidence of actual anticompetitive
effects were to develop.
2. Physician Network Joint Venture Involving Risk-Sharing
And Non-Risk-Sharing Contracts
An IPA has capitation contracts with three
insurer-developed HMOs. Under its contracts with the HMOs, the IPA receives a
set fee per member per month for all covered services required by enrollees in
a particular health plan. Physician participants in the IPA are paid on a fee-for-service
basis, pursuant to a fee schedule developed by the IPA. Physicians participate
in the IPA on a non-exclusive basis. Many of the IPA’s physicians participate
in managed care plans outside the IPA, and earn substantial income from those
plans.
The IPA uses a variety of mechanisms to assure appropriate use of
services under its capitation contracts so that it can provide contract services
within its capitation budgets. In part because the IPA has managed the provision
of care effectively, enrollment in the HMOs has grown to the point where HMO patients
are a significant share of the IPA doctors’ patients.
The three insurers
that offer the HMOs also offer PPO options in response to the request of employers
who want to give their employees greater choice of plans. Although the capitation
contracts are a substantial majority of the IPA’s business, it also contracts
with the insurers to provide services to the PPO programs on a fee-for-service
basis. The physicians are paid according to the same fee schedule used to pay
them under the IPA’s capitated contracts. The IPA uses the same panel of
providers and the same utilization management mechanisms that are involved in
the HMO contracts. The IPA has tracked utilization for HMO and PPO patients, which
shows similar utilization patterns for both types of patients.
Competitive
Analysis
Because the IPA negotiates and enters into both capitated and
fee-for-service contracts on behalf on its physicians, the venture is not within
a safety zone. However, the IPA’s HMO contracts are analyzed under the rule
of reason because they involve substantial financial risk sharing. The PPO contracts
also are analyzed under the rule of reason because there are significant efficiencies
from the capitated arrangements that carry over to the fee-for-service business.
The IPA’s procedures for managing the provision of care under its capitation
contracts and its related fee schedules produce significant efficiencies; and
since those same procedures and fees are used for the PPO contracts and result
in similar utilization patterns, they will likely result in significant efficiencies
for the PPO arrangements as well.
3. Physician Network That Is Per Se Unlawful
A group of physicians in Clarksville forms an IPA to contract with managed
care plans. There is some limited managed care presence in the area, and new plans
have announced their interest in entering. The physicians agree that the only
way they can effectively combat the power of the plans and protect themselves
from low fees and intrusive utilization review is to organize and negotiate with
the plans collectively through the IPA, rather than individually.
Membership
in the IPA is open to any licensed physician in Clarksville. Members contribute
$2,000 each to fund the legal fees associated with incorporating the IPA and its
operating expenses, including the salary of an executive director who will negotiate
contracts on behalf of the IPA. The IPA will enter only into fee-for-service contracts.
The doctors will not share substantial financial risk under the contracts. The
Contracting Committee, in consultation with the executive director, develops a
fee schedule.
The IPA establishes a Quality Assurance and Utilization Review
Committee. Upon recommendation of this committee, the members vote to have the
IPA adopt two basic utilization review parameters: strict limits on documentation
to be provided by physicians to the payers, and arbitration of disputes regarding
plan utilization review decisions by a committee of the local medical society.
The IPA refuses to contract with plans that do not accept these utilization review
parameters. The IPA claims to have its own utilization review/quality assurance
programs in development, but has taken very few steps to create such a program.
It decides to rely instead on the hospital’s established peer review mechanisms.
Although there is no formal exclusivity agreement, IPA physicians who are
approached by managed care plans seeking contracts refer the plans to the IPA.
Except for some contracts predating the formation of the IPA, the physicians do
not contract individually with managed care plans on terms other than those set
by the IPA.
Competitive Analysis
This IPA is merely a vehicle for
collective decisions by its physicians on price and other significant terms of
dealing. The physicians’ purpose in forming the IPA is to increase their
bargaining power with payers. The IPA makes no effort to selectively choose physicians
who are likely to further the network’s achievement of efficiencies, and
the IPA involves no significant integration, financial or otherwise. IPA physicians’
participation in the hospital’s general peer review procedures does not evidence
integration by those physicians that is likely to result in significant efficiencies
in the provision of services through the IPA. The IPA does not manage the provision
of care or offer any substantial potential for significant procompetitive efficiencies.
The physicians are merely collectively agreeing on prices they will receive for
services rendered under IPA contracts and not to accept certain aspects of utilization
review that they do not like.
The physicians’ contribution of capital
to form the IPA does not make it a legitimate joint venture. In some circumstances,
capital contributions by an IPA’s participants can indicate that the participants
have made a significant commitment to the creation of an efficiency-producing
competitive entity in the market. Capital contributions, however, can also be
used to fund a cartel. The key inquiry is whether the contributed capital is being
used to further the network’s capability to achieve substantial efficiencies.
In this case, the funds are being used primarily to support the joint negotiation,
and not to achieve substantial procompetitive efficiencies. Thus, the physicians’
agreement to bargain through the joint venture will be treated as per se illegal
price fixing.
4. Exclusive Physician Network Joint Venture With Financial
Risk-Sharing And Comprising More Than Twenty Percent Of Physicians With Active
Admitting Privileges At A Hospital
County Seat is a relatively isolated,
medium-sized community of about 350,000 residents. The closest town is 50 miles
away. County Seat has five general acute care hospitals that offer a mix of basic
primary, secondary, and tertiary care services.
Five hundred physicians
have medical practices based in County Seat, and all maintain active admitting
privileges at one or more of County Seat’s hospitals. No physician from outside
County Seat has any type of admitting privileges at a County Seat hospital. The
physicians represent 10 different specialties and are distributed evenly among
the specialties, with 50 doctors practicing each specialty.
One hundred
physicians (also distributed evenly among specialties) maintain active admitting
privileges at County Seat Medical Center. County Seat’s other 400 physicians
maintain active admitting privileges at other County Seat hospitals.
Half
of County Seat Medical Center’s 100 active admitting physicians propose to
form an IPA to market their services to purchasers of health care services. The
physicians are divided evenly among the specialties. Under the proposed arrangement,
the physicians in the network joint venture would agree to meaningful cost containment
and quality goals, including utilization review, quality assurance, and other
measures designed to reduce the provision of unnecessary care to the plan’s
subscribers, and a substantial amount (in this example 20 percent) of the compensation
due to the network’s physician participants would be withheld and distributed
only if these measures are successfully met. This physician network joint venture
would be exclusive: Its physician participants would not be free to contract individually
with health plans or to join other physician joint ventures.
A number of
health plans that contract selectively with hospitals and physicians already operate
in County Seat. These plans and local employers agree that other County Seat physicians,
and the hospitals to which they admit, are good substitutes for the active admitting
physicians and the inpatient services provided at County Seat Medical Center.
Physicians with medical practices based outside County Seat, however, are not
good substitutes for area physicians, because such physicians would find it inconvenient
to practice at County Seat hospitals due to the distance between their practice
locations and County Seat.
Competitive Analysis
A key issue is whether
a physician network joint venture, such as this IPA, comprising 50 percent of
the physicians in each specialty with active privileges at one of five comparable
hospitals in County Seat would fall within the antitrust safety zone. The physicians
within the joint venture represent less than 20 percent of all the physicians
in each specialty in County Seat.
County Seat is the relevant geographic
market for purposes of analyzing the competitive effects of this proposed physician
joint venture. Within each specialty, physicians with admitting privileges at
area hospitals are good substitutes for one another.
However, physicians with
practices based elsewhere are not considered good substitutes. For purposes
of analyzing the effects of the venture, all of the physicians in County Seat
should be considered market participants. Purchasers of health care services consider
all physicians within each specialty, and the hospitals at which they have admitting
privileges, to be relatively interchangeable. Thus, in this example, any attempt
by the joint venture’s physician participants collectively to increase the
price of physician services above competitive levels would likely lead third-party
purchasers to recruit non-network physicians at County Seat Medical Center or
other area hospitals.
Because physician network joint venture participants
constitute less than 20 percent of each group of specialists in County Seat and
agree to share substantial financial risk, this proposed joint venture would fall
within the antitrust safety zone.
5. Physician Network Joint Venture With
Financial Risk-Sharing And A Large Percentage Of Physicians In A Relatively Small
Community
Smalltown has a population of 25,000, a single hospital, and
50 physicians, most of whom are family practitioners. All of the physicians practice
exclusively in Smalltown and have active admitting privileges at the Smalltown
hospital. The closest urban area, Big City, is located some 35 miles away and
has a population of 500,000. A little more than half of Smalltown’s working
adults commute to work in Big City. Some of the health plans used by employers
in Big City are interested in extending their network of providers to Smalltown
to provide coverage for subscribers who live in Smalltown, but commute to work
in Big City (coverage is to include the families of commuting subscribers). However,
the number of commuting Smalltown subscribers is a small fraction of the Big City
employers’ total workforce.
Responding to these employers’ needs,
a few health plans have asked physicians in Smalltown to organize a non-exclusive
IPA large enough to provide a reasonable choice to subscribers who reside in Smalltown,
but commute to work in Big City. Because of the relatively small number of potential
enrollees in Smalltown, the plans prefer to contract with such a physician network
joint venture, rather than engage in what may prove to be a time-consuming series
of negotiations with individual Smalltown physicians to establish a panel of physician
providers there.
A number of Smalltown physicians have agreed to form a
physician network joint venture. The joint venture will contract with health plans
to provide physician services to subscribers of the plans in exchange for a monthly
capitation fee paid for each of the plans’ subscribers. The physicians forming
this joint venture would constitute about half of the total number of physicians
in Smalltown. They would represent about 35 percent of the town’s family
practitioners, but higher percentages of the town’s general surgeons (50
percent), pediatricians (50 percent), and obstetricians (67 percent). The health
plans that serve Big City employers say that the IPA must have a large percentage
of Smalltown physicians to provide adequate coverage for employees and their families
in Smalltown and in a few scattered rural communities in the immediate area and
to allow the doctors to provide coverage for each other.
In this example,
other health plans already have entered Smalltown, and contracted with individual
physicians. They have made substantial inroads with Smalltown employers, signing
up a large number of enrollees. None of these plans has had any difficulty contracting
with individual physicians, including many who would participate in the proposed
joint venture.
Finally, the evidence indicates that Smalltown is the relevant
geographic market for all physician services. Physicians in Big City are not good
substitutes for a significant number of Smalltown residents.
Competitive
Analysis
This proposed physician network joint venture would not fall within
the antitrust safety zone because it would comprise over 30 percent of the physicians
in a number of relevant specialties in the geographic market. However, the Agencies
would not challenge the joint venture because a rule of reason analysis indicates
that its formation would not likely hamper the ability of health plans to contract
individually with area physicians or with other physician network joint ventures,
or enable the physicians to raise prices above competitive levels. In addition,
the joint venture’s agreement to accept capitated fees creates incentives
for its physicians to achieve cost savings.
That health plans have requested
formation of this venture also is significant, for it suggests that the joint
venture would offer additional efficiencies. In this instance, it appears to be
a low-cost method for plans to enter an area without investing in costly negotiations
to identify and contract with individual physicians.
Moreover, in small
markets such as Smalltown, it may be necessary for purchasers of health care services
to contract with a relatively large number of physicians to provide adequate coverage
and choice for enrollees. For instance, if there were only three obstetricians
in Smalltown, it would not be possible for a physician network joint venture offering
obstetrical services to have less than 33 percent of the obstetricians in the
relevant area. Furthermore, it may be impractical to have less than 67 percent
in the plan, because two obstetricians may be needed in the venture to provide
coverage for each other.
Although the joint venture has a relatively
large percentage of some specialties, it appears unlikely to present competitive
concerns under the rule of reason because of three factors: (1) the demonstrated
ability of health plans to contract with physicians individually; (2) the possibility
that other physician network joint ventures could be formed; and (3) the potential
benefits from the coverage to be provided by this physician network joint venture.
Therefore, the Agencies would not challenge the joint venture. 6. Physician
Network Joint Venture With Financial Risk Sharing And A Large Percentage Of Physicians
In A Small, Rural County
Rural County has a population of 15,000, a small
primary care hospital, and ten physicians, including seven general and family
practitioners, an obstetrician, a pediatrician, and a general surgeon. All of
the physicians are solo practitioners. The nearest urban area is about 60 miles
away in Big City, which has a population of 300,000, and three major hospitals
to which patients from Rural County are referred or transferred for higher levels
of hospital care. However, Big City is too far away for most residents of Rural
County routinely to use its physicians for services available in Rural County.
Insurance Company, which operates throughout the state, is attempting to
offer managed care programs in all areas of the state, and has asked the local
physicians in Rural County to form an IPA to provide services under the program
to covered persons living in the County. No other managed care plan has attempted
to enter the County previously.
Initially, two of the general practitioners
and two of the specialists express interest in forming a network, but Insurance
Company says that it intends to market its plan to the larger local employers,
who need broader geographic and specialty coverage for their employees. Consequently,
Insurance Company needs more of the local general practitioners and the one remaining
specialist in the IPA to provide adequate geographic, specialty, and backup coverage
to subscribers in Rural County. Eventually, four of the seven general practitioners
and the one remaining specialist join the IPA and agree to provide services to
Insurance Company’s subscribers, under contracts providing for capitation.
While the physicians’ participation in the IPA is structured to be
non-exclusive, no other managed care plan has yet entered the local market or
approached any of the physicians about joining a different provider panel. In
discussing the formation of the IPA with Insurance Company, a number of the physicians
have made clear their intention to continue to practice outside the IPA and have
indicated they would be interested in contracting individually with other managed
care plans when those plans expand into Rural County.
Competitive Analysis
This proposed physician network joint venture would not fall within the
antitrust safety zone because it would comprise over 30 percent of the general
practitioners in the geographic market. Under the circumstances, a rule of reason
analysis indicates that the Agencies would not challenge the formation of the
joint venture, for the reasons discussed below.
For purposes of this analysis,
Rural County is considered the relevant geographic market. Generally, the Agencies
will closely examine joint ventures that comprise a large percentage of physicians
in the relevant market. However, in this case, the establishment of the IPA and
its inclusion of more than half of the general practitioners and all of the specialists
in the network is the result of the payer’s expressed need to have more of
the local physicians in its network to sell its product in the market. Thus, the
level of physician participation in the network does not appear to be overinclusive,
but rather appears to be the minimum necessary to meet the employers’ needs.
Although the IPA has more than half of the general practitioners and all
of the specialists in it, under the particular circumstances this does not, by
itself, raise sufficient concerns of possible foreclosure of entry by other managed
care plans, or of the collective ability to raise prices above competitive levels,
to warrant antitrust challenge to the joint venture by the Agencies. Because it
is the first such joint venture in the county, there is no way absolutely to verify
at the outset that the joint venture in fact will be non-exclusive.
However,
the physicians’ participation in the IPA is formally non-exclusive, and they
have expressed a willingness to consider joining other managed care programs if
they begin operating in the area. Moreover, the three general practitioners who
are not members of the IPA are available to contract with other managed care plans.
The IPA also was established with participation by the local area physicians at
the request of Insurance Company, indicating that this structure was not undertaken
as a means for the physicians to increase prices or prevent entry of managed care
plans.
Finally, the joint venture can benefit consumers in Rural County
through the creation of efficiencies. The physicians have jointly put themselves
at financial risk to control the use and cost of health care services through
capitation. To make the capitation arrangement financially viable, the physicians
will have to control the use and cost of health care services they provide under
Insurance Company’s program. Through the physicians’ network joint venture,
Rural County residents will be offered a beneficial product, while competition
among the physicians outside the network will continue.
Given these facts,
the Agencies would not challenge the joint venture. If, however, it later became
apparent that the physicians’ participation in the joint venture in fact
was exclusive, and consequently other managed care plans that wanted to enter
the market and contract with some or all of the physicians at competitive terms
were unable to do so, the Agencies would re-examine the joint venture’s legality.
The joint venture also would raise antitrust concerns if it appeared that participation
by most of the local physicians in the joint venture resulted in anticompetitive
effects in markets outside the joint venture, such as uniformity of fees charged
by the physicians in their solo medical practices.
7. Physician Network
Joint Venture With No Price Agreement And Involving All Of The Physicians In A
Small, Rural County
Rural County has a population of 10,000, a small primary
care hospital, and six physicians, consisting of a group practice of three family
practitioners, a general practitioner, an obstetrician, and a general surgeon.
The nearest urban area is about 75 miles away in Big City, which has a population
of 200,000, and two major hospitals which patients from Rural County are referred
or transferred to for higher levels of hospital care. Big City is too far away,
however, for most residents of Rural County to use for services available in Rural
County.
HealthCare, a managed care plan headquartered in another state,
is thinking of marketing a plan to the larger employers in Rural County. However,
it finds that the cost of contracting individually with providers, administering
the system, and overseeing the quality of care in Rural County is too high on
a per capita basis to allow it to convince employers to switch from indemnity
plans to its plan. HealthCare believes its plan would be more successful if it
offered higher quality and better access to care by opening a clinic in the northern
part of the county where no physicians currently practice.
All of the local
physicians approach HealthCare about contracting with their recently-formed, non-exclusive,
IPA. The physicians are willing to agree through their IPA to provide services
at the new clinic that HealthCare will establish in the northern part of the county
and to implement the utilization review procedures that HealthCare has adopted
in other parts of the state.
HealthCare wants to negotiate with the new
IPA. It believes that the local physicians collectively can operate the new clinic
more efficiently than it can from its distant headquarters, but HealthCare also
believes that collectively negotiating with all of the physicians will result
in it having to pay higher fees or capitation rates. Thus, it encourages the IPA
to appoint an agent to negotiate the non-fee-related aspects of the contracts
and to facilitate fee negotiations with the group practice and the individual
doctors.
The group practice and the individual physicians each will sign
and negotiate their own individual contracts regarding fees and will unilaterally
determine whether to contract with HealthCare, but will agree through the IPA
to provide physician, administrative, and utilization review services. The agent
will facilitate these individual fee negotiations by discussing separately and
confidentially with each physician the physician’s fee demands and presenting
the information to HealthCare. No fee information will be shared among the physicians
Competitive Analysis
For purposes of this analysis, Rural County is
considered the relevant geographic market. Generally, the Agencies are concerned
with joint ventures that comprise all or a large percentage of the physicians
in the relevant market. In this case, however, the joint venture appears on balance
to be procompetitive. The potential for competitive harm from the venture is not
great and is outweighed by the efficiencies likely to be generated by the arrangement.
The physicians are not jointly negotiating fees or engaging in other activities
that would be viewed as per se antitrust violations. Therefore, the IPA would
be evaluated under the rule of reason. Any possible competitive harm would be
balanced against any likely efficiencies to be realized by the venture to see
whether, on balance, the IPA is anticompetitive or procompetitive.
Because
the IPA is non-exclusive, the potential for competitive harm from foreclosure
of competition is reduced. Its physicians are free to contract with other managed
care plans or individually with HealthCare if they desire. In addition, potential
concerns over anticompetitive pricing are minimized because physicians will continue
to negotiate prices individually. Although the physicians are jointly negotiating
non-price terms of the contract, agreement on these terms appears to be necessary
to the successful operation of the joint venture.
The small risk of anticompetitive
harm from this venture is outweighed by the substantial procompetitive benefits
of improved quality of care and access to physician services that the venture
will engender. The new clinic in the northern part of the county will make it
easier for residents of that area to receive the care they need. Given these facts,
the Agencies would not challenge the joint venture.
9. STATEMENT OF DEPARTMENT
OF JUSTICE AND FEDERAL TRADE COMMISSION ENFORCEMENT POLICY ON MULTIPROVIDER NETWORKS
Introduction
The health care industry is changing rapidly
as it looks for innovative ways to control costs and efficiently provide quality
services. Health care providers are forming a wide range of new relationships
and affiliations, including networks among otherwise competing providers, as well
as networks of providers offering complementary or unrelated services. These affiliations,
referred to herein as multiprovider networks, can offer significant procompetitive
benefits to consumers. They also can present antitrust questions, particularly
if the network includes otherwise competing providers.
As used in this
statement, multiprovider networks are ventures among providers that jointly market
their health care services to health plans and other purchasers. Such ventures
may contract to provide services to subscribers at jointly determined prices and
agree to controls aimed at containing costs and assuring quality. Multiprovider
networks vary greatly regarding the providers they include the contractual relationships
among those providers, and the efficiencies likely to be realized by the networks.
Competitive conditions in the markets in which such networks operate also may
vary greatly.
In this statement, the Agencies describe the antitrust principles
that they apply in evaluating multiprovider networks, address some issues commonly
raised in connection with the formation and operation of such networks, and present
examples of the application of antitrust principles to hypothetical multiprovider
networks. Because multiprovider networks involve a large variety of structures
and relationships among many different types of health care providers, and new
arrangements are continually developing, the Agencies are unable to establish
a meaningful safety zone for these entities.
A. Determining When Agreements
Among Providers In A Multiprovider Network Are Analyzed Under The Rule Of Reason
Antitrust law condemns as per se illegal naked agreements among competitors
that fix prices or allocate markets. Where competitors economically integrate
in a joint venture, however, such agreements, if reasonably necessary to accomplish
the procompetitive benefits of the integration, are analyzed under the rule of
reason. In accord with general antitrust principles, multiprovider networks will
be evaluated under the rule of reason, and will not be viewed as per se illegal,
if the providers’ integration through the network is likely to produce significant
efficiencies that benefit consumers, and any price agreements (or other agreements
that would otherwise be per se illegal) by the network providers are reasonably
necessary to realize those efficiencies.
In some multiprovider networks,
significant efficiencies may be achieved through agreement by the competing providers
to share substantial financial risk for the services provided through the network.
In such cases, the setting of price would be integral to the network’s use
of such an arrangement and, therefore, would warrant evaluation under the rule
of reason.
The following are examples of some types of arrangements through
which substantial financial risk can be shared among competitors in a multiprovider
network:
(1) agreement by the venture to provide services to a health plan
at a “capitated” rate;
(2) agreement by the venture to provide
designated services or classes of services to a health plan for a predetermined
percentage of premium or revenue from the plan;
(3) use by the venture
of significant financial incentives for its provider participants, as a group,
to achieve specified cost-containment goals. Two methods by which the venture
can accomplish this are:
(a) withholding from all provider participants
a substantial amount of the compensation due to them, with distribution of that
amount to the participants based on group performance in meeting the cost-containment
goals of the network as a whole; or
(b) establishing overall cost or utilization
targets for the network as a whole, with the provider participants subject to
subsequent substantial financial rewards or penalties based on group performance
in meeting the targets; and
(4) agreement by the venture to provide a complex
or extended course of treatment that requires the substantial coordination of
care by different types of providers offering a complementary mix of services,
for a fixed, predetermined payment, where the costs of that course of treatment
for any individual patient can vary greatly due to the individual patient’s
condition, the choice, complexity, or length of treatment, or other factors.
The
Agencies recognize that new types of risk-sharing arrangements may develop. The
preceding examples do not foreclose consideration of other arrangements through
which the participants in a multiprovider network joint venture may share substantial
financial risk in the provision of health care services or products through the
network. Organizers of multiprovider networks who are uncertain whether their
proposed arrangements constitute substantial financial risk sharing for purposes
of this policy statement are encouraged to take advantage of the Agencies’
expedited business review and advisory opinion procedures.
Multiprovider
networks that do not involve the sharing of substantial financial risk may also
involve sufficient integration to demonstrate that the venture is likely to produce
significant efficiencies. For example, as discussed in the Statement Of Enforcement
Policy On Physician Network Joint Ventures, substantial clinical integration among
competing physicians in a network who do not share substantial financial risk
may produce efficiency benefits that justify joint pricing. However, given the
wide range of providers who may participate in multiprovider networks, the types
of clinical integration and efficiencies available to physician network joint
ventures may not be relevant to all multiprovider networks.
Accordingly,
the Agencies will consider the particular nature of the services provided by the
network in assessing whether the network has the potential for producing efficiencies
that warrant rule of reason treatment. In all cases, the Agencies’ analysis
will focus on substance, not form, in assessing a network’s likelihood of
producing significant efficiencies. To the extent that agreements on prices to
be charged for the integrated provision of services promote the venture’s
achievement of efficiencies, they will be evaluated under the rule of reason.
A multiprovider network also might include an agreement among competitors
on service allocation or specialization. The Agencies would examine the relationship
between the agreement and efficiency-enhancing joint activity. If such an agreement
is reasonably necessary for the network to realize significant procompetitive
benefits, it similarly would be subject to rule of reason analysis. For example,
competing hospitals in an integrated multiprovider network might need to agree
that only certain hospitals would provide certain services to network patients
in order to achieve the benefits of the integration. The hospitals, however, would
not necessarily be permitted to agree on what services they would provide to non-network
patients.
B. Applying The Rule Of Reason
A rule of reason analysis
determines whether the formation and operation of the joint venture may have a
substantial anticompetitive effect and, if so, whether that potential effect is
outweighed by any procompetitive efficiencies resulting from the venture. The
rule of reason analysis takes into account characteristics of the particular multiprovider
network and the competitive environment in which it operates to determine the
network’s likely effect on competition.
A determination about the
lawfulness of a multiprovider network’s activity under the rule of reason
sometimes can be reached without an extensive inquiry under each step of the analysis.
For example, a multiprovider network that involves substantial integration may
include a relatively small percentage of the providers in each relevant product
market on a non-exclusive basis. In that case, the Agencies may be able to conclude
expeditiously that the network is unlikely to be anticompetitive, based on the
competitive environment in which it operates.
In assessing the competitive
environment, the Agencies would consider such market factors as the number, type,
and size of managed care plans operating in the area, the extent of provider participation
in those plans, and the economic importance of the managed care plans to area
providers. Alternatively, for example, if a restraint that facially appears to
be of a kind that would always or almost always tend to reduce output or increase
prices, but has not been considered per se unlawful, is not reasonably necessary
to the creation of efficiencies, the Agencies will likely challenge the restraint
without an elaborate analysis of market definition and market power.
The
steps ordinarily involved in a rule of reason analysis of multiprovider networks
are set forth below.
1. Market Definition
The Agencies will evaluate
the competitive effects of multiprovider networks in each of the relevant markets
in which they operate or have substantial impact. In defining the relevant product
and geographic markets, the Agencies look to what substitutes, as a practical
matter, are reasonably available to consumers for the services in question.
A
multiprovider network can affect markets for the provision of hospital, medical,
and other health care services, and health insurance/financing markets. The possible
product markets for analyzing the competitive effects of multiprovider networks
likely would include both the market for such networks themselves, if there is
a distinct market for such networks, and the markets for service components of
the network that are, or could be, sold separately outside the network. For example,
if two hospitals formed a multiprovider network with their medical and other health
care professional staffs, the Agencies would consider potential competitive effects
in each market affected by the network, including but not necessarily limited
to the markets for inpatient hospital services, outpatient services, each physician
and non-physician health care service provided by network members, and health
insurance/financing markets whose participants may deal with the network and its
various types of health care providers.
The relevant geographic market
for each relevant product market affected by the multiprovider network will be
determined through a fact-specific analysis that focuses on the location of reasonable
alternatives. The relevant geographic markets may be broader for some product
markets than for others.
2. Competitive Effects
In applying the
rule of reason, the Agencies will examine both the potential “horizontal”
and “vertical” effects of the arrangement. Agreements between or among
competitors (e.g., competing hospitals or competing physicians) are considered
“horizontal” under the antitrust laws. Agreements between or among parties
that are not competitors (such as a hospital and a physician in a physician-hospital
organization (“PHO”)),
may be considered “vertical” in
nature. a. Horizontal Analysis
In evaluating the possible horizontal
competitive effects of multiprovider networks, the Agencies will define the relevant
markets (as discussed earlier) and evaluate the network’s likely overall
competitive effects considering all market conditions.
Determining market
share and concentration in the relevant markets is often an important first step
in analyzing a network’s competitive effects. For example, in analyzing a
PHO, the Agencies will consider the network’s market share (and the market
concentration) in such service components as inpatient hospital services (as measured
by such indicia as number of institutions, number of hospital beds, patient census,
and revenues), physician services (in individual physician specialty or other
appropriate service markets), and any other services provided by competing health
care providers, institutional or noninstitutional, participating in the network.
If a particular multiprovider network had a substantial share of any of
the relevant service markets, it could, depending on other factors, increase the
price of such services above competitive levels. For example, a network that included
most or all of the surgeons in a relevant geographic market could create market
power in the market for surgical services and thereby permit the surgeons to increase
prices.
If there is only one hospital in the market, a multiprovider network,
by definition, cannot reduce any existing competition among hospitals. Such a
network could, however, reduce competition among other providers, for example,
among physicians in the network and, thereby, reduce the ability of payers to
control the costs of both physician and hospital services. It also could reduce
competition between the hospital and non-hospital providers of certain services,
such as outpatient surgery.
Although market share and concentration are
useful starting points in analyzing the competitive effects of multiprovider networks,
the Agencies’ ultimate conclusion is based upon a more comprehensive analysis.
This will include an analysis of collateral agreements and spillover effects.
In addition, in assessing the likely competitive effects of a multiprovider network,
the Agencies are particularly interested in the ability and willingness of health
plans and other purchasers of health care services to switch between different
health care providers or networks in response to a price increase, and the factors
that determine the ability and willingness of plans to make such changes.
The
Agencies will consider not only the proportion of the providers in any relevant
market who are in the network, but also the incentives faced by providers in the
network, and whether different groups of providers in a network may have significantly
different incentives that would reduce the likelihood of anticompetitive conduct.
If plans can contract at competitive terms with other networks or with individual
providers, and can obtain a similar quality and range of services for their enrollees,
the network is less likely to raise competitive concerns.
In examining
a multiprovider network’s overall competitive effect, the Agencies will examine
whether the competing providers in the network have agreed among themselves to
offer their services exclusively through the network or are otherwise operating,
or are likely to operate, exclusively. Such exclusive arrangements are not necessarily
anticompetitive. Exclusive networks, however, mean that the providers in the network
are not available to join other networks or contract individually with health
plans, and thus, in some circumstances, exclusive networks can impede or preclude
competition among networks and among individual providers.
In determining
whether an exclusive arrangement of this type raises antitrust concerns, the Agencies
will examine the market share of the providers subject to the exclusivity arrangement;
the terms of the exclusive arrangement, such as its duration and providers’
ability and financial incentives or disincentives to withdraw from the arrangement;
the number of providers that need to be included for the network and potentially
competing networks to compete effectively; and the justification for the exclusivity
arrangement.
Networks also may limit or condition provider participants’
freedom to contract outside the network in ways that fall short of a commitment
of full exclusivity. The Agencies recognize that the competitive impact of exclusive
arrangements or other limitations on the ability of a network’s provider
participants to contract outside the network can vary greatly.
b. Vertical
Analysis
In addition to the horizontal issues discussed above, multiprovider
networks also can raise vertical issues. Generally, vertical concerns can arise
if a network’s power in one market in which it operates enables it to limit
competition in another market.
Some multiprovider networks involve “vertical”
exclusive arrangements that restrict the providers in one market from dealing
with non-network providers that compete in a different market, or that restrict
network provider participants’ dealings with health plans or other purchasers.
For example, a multiprovider network owned by a hospital and individually contracting
with its participating physicians might limit the incentives or ability of those
physicians to participate in other networks. Similarly, a hospital might use a
multiprovider network to block or impede other hospitals from entering a
market
or from offering competing services. In evaluating whether such exclusive arrangements
raise antitrust concerns, the Agencies will examine the degree to which the arrangement
may limit the ability of other networks or health plans to compete in the market.
The factors the Agencies will consider include those set forth in the discussion
of exclusive arrangements as described in other policy statements.
For
example, if the multiprovider network has exclusive arrangements with only a small
percentage of the physicians in a relevant market, and there are enough suitable
alternative physicians in the market to allow other competing networks to form,
the exclusive arrangement is unlikely to raise antitrust concerns. On the other
hand, a network might contract exclusively with a large percentage of physicians
in a relevant market, for example general surgeons. In that case, if purchasers
or payers could not form a satisfactory competing network using the remaining
general surgeons in the market, and could not induce new general surgeons to enter
the market, those purchasers and payers would be forced to use this network, rather
than put together a panel consisting of those providers of each needed service
who offer the most attractive combination of price and quality. Thus, the exclusive
arrangement would be likely to restrict competition unreasonably, both among general
surgeons (the horizontal effect) and among health care providers in other service
markets and payers (the vertical effects).
The Agencies recognize that
exclusive arrangements, whether they are horizontal or vertical, may not be explicit,
so that labeling a multiprovider network as “non-exclusive” will not
be determinative. In some cases, providers will refuse to contract with other
networks or purchasers, even though they have not entered into an agreement specifically
forbidding them from doing so. For example, if a network includes a large percentage
of physicians in a certain market, those physicians may perceive that they are
likely to obtain more favorable terms from plans by dealing collectively through
one network, rather than as individuals.
In determining whether a network
is truly non-exclusive, the Agencies will consider a number of factors, including
the following:
(1) that viable competing networks or managed care plans
with adequate provider participation currently exist in the market;
(2)
that providers in the network actually individually participate in, or contract
with, other networks or managed care plans, or there is other evidence of their
willingness and incentive to do so;
(3) that providers in the network earn
substantial revenue from other networks or through individual contracts with managed
care plans;
(4) the absence of any indications of substantial departicipation
from other networks or managed care plans in the market; and
(5) the absence
of any indications of coordination among the providers in the network regarding
price or other competitively significant terms of participation in other networks
or managed care plans.
c. Exclusion Of Particular Providers
Most
multiprovider networks will contract with some, but not all, providers in an area.
Such selective contracting may be a method through which networks limit their
provider panels in an effort to achieve quality and cost-containment goals, and
thus enhance their ability to compete against other networks. One reason often
advanced for selective contracting is to ensure that the network can direct a
sufficient patient volume to its providers to justify price concessions or adherence
to strict quality controls by the providers. It may also help the network create
a favorable market reputation based on careful selection of high quality, cost-effective
providers. In addition, selective contracting may be procompetitive by giving
non-participant providers an incentive to form competing networks.
A rule
of reason analysis usually is applied in judging the legality of a multiprovider
network’s exclusion of providers or classes of providers from the network,
or its policies on referring enrollees to network providers. The focus of the
analysis is not on whether a particular provider has been harmed by the exclusion
or referral policies, but rather whether the conduct reduces competition among
providers in the market and thereby harms consumers. Where other networks offering
the same types of services exist or could be formed, there are not likely to be
significant competitive concerns associated with the exclusion of particular providers
by particular networks.
Exclusion or referral policies may present competitive
concerns, however, if providers or classes of providers are unable to compete
effectively without access to the network, and competition is thereby harmed.
In assessing such situations, the Agencies will consider whether there are procompetitive
reasons for the exclusion or referral policies.
3. Efficiencies
Finally,
the Agencies will balance any potential anticompetitive effects of the multiprovider
network against the potential efficiencies associated with its formation and operation.
The greater the network’s likely anticompetitive effects, the greater must
be the network’s likely efficiencies. In assessing efficiency claims, the
Agencies focus on net efficiencies that will be derived from the operation of
the network and that result in lower prices or higher quality to consumers. The
Agencies will not accept claims of efficiencies if the parties reasonably can
achieve equivalent or comparable savings through significantly less anticompetitive
means. In making this assessment, however, the Agencies will not search for a
theoretically least restrictive alternative that is not practical given business
realities.
Experience indicates that, in general, more significant efficiencies
are likely to result from a multiprovider network joint venture’s substantial
financial risk-sharing or substantial clinical integration. However, the Agencies
will consider a broad range of possible cost savings, including improved cost
controls, case management and quality assurance, economies of scale, and reduced
administrative or transaction costs.
In assessing the likelihood that efficiencies
will be realized, the Agencies recognize that competition is one of the strongest
motivations for firms to lower prices, reduce costs, and provide higher quality.
Thus, the greater the competition facing the network, the more likely the network
will actually realize potential efficiencies that would benefit consumers.
4.
Information Used In The Analysis
In conducting a rule of reason analysis,
the Agencies rely upon a wide variety of data and information, including the information
supplied by the participants in the multiprovider network, purchasers, providers,
consumers, and others familiar with the market in question. The Agencies may interview
purchasers of health care services, including self-insured employers and other
employers that offer health benefits, and health plans (such as HMOs and PPOs),
competitors of the providers in the network, and any other parties who may have
relevant information for analyzing the competitive effects of the network.
The
Agencies do not simply count the number of parties who support or oppose the formation
of the multiprovider network. Instead, the Agencies seek information concerning
the competitive dynamics in the particular community where the network is forming.
For example, in defining relevant markets, the Agencies are likely to give substantial
weight to information provided by purchasers or payers who have attempted to switch
between providers in the face of a price increase. Similarly, an employer or payer
with locations in several communities may have had experience with a network comparable
to the proposed network, and thus be able to provide the Agencies with useful
information about the likely effect of the proposed network, including its potential
competitive benefits.
In assessing the information provided by various
parties, the Agencies take into account the parties’ economic incentives
and interests. In addition, the Agencies attach less significance to opinions
that are based on incomplete, biased, or inaccurate information, or opinions of
those who, for whatever reason, may be simply indifferent to the potential for
anticompetitive harm.
C. Arrangements That Do Not Involve Horizontal Agreements
On Prices Or Price-Related Terms
Some networks that are not substantially
integrated use a variety of “messenger model” arrangements to facilitate
contracting between providers and payers and avoid price-fixing agreements among
competing network providers. Arrangements that are designed simply to minimize
the costs associated with the contracting process, and that do not result in a
collective determination by the competing network providers on prices or price-related
terms, are not per se illegal price fixing.
Messenger models can be organized
and operate in a variety of ways. For example, network providers may use an agent
or third party to convey to purchasers information obtained individually from
the providers about the prices or price-related terms that the providers are willing
to accept. In some cases, the agent may convey to the providers all contract offers
made by purchasers, and each provider then makes an independent, unilateral decision
to accept or reject the contract offers. In others, the agent may have received
from individual providers some authority to accept contract offers on their behalf.
The agent also may help providers understand the contracts offered, for example
by providing objective or empirical information about the terms of an offer (such
as a comparison of the offered terms to other contracts agreed to by network participants).
The key issue in any messenger model arrangement is whether the arrangement
creates or facilitates an agreement among competitors on prices or price-related
terms. Determining whether there is such an agreement is a question of fact in
each case. The Agencies will examine whether the agent facilitates collective
decision-making by network providers, rather than independent, unilateral, decisions.
In particular, the Agencies will examine whether the agent coordinates the providers’
responses to a particular proposal, disseminates to network providers the views
or intentions of other network providers as to the proposal, expresses an opinion
on the terms offered, collectively negotiates for the providers, or decides whether
or not to convey an offer based on the agent’s judgment about the attractiveness
of the prices or price-related terms. If the agent engages in such activities,
the arrangement may amount to a per se illegal price-fixing agreement.
D.
Examples Of Multiprovider Network Joint Ventures
The following are four
examples of how the Agencies would
apply the principles set forth in this
statement to specific multiprovider network joint ventures, including: 1) a PHO
involving substantial clinical integration, that does not raise significant competitive
concerns under the rule of reason; 2) a PHO providing services on a per case basis,
that would be analyzed under the rule of reason; 3) a PHO involving substantial
financial risk sharing and including all the physicians in a small rural county,
that does not raise competitive concerns under the rule of reason; and 4) a PHO
that does not involve horizontal agreements on price. 1. PHO Involving Substantial
Clinical Integration
Roxbury is a relatively isolated, medium-sized city.
For the purposes of this example, the services provided by primary care physicians
and those provided by the different physician specialists each constitute a relevant
product market; and the relevant geographic market for each of them is Roxbury.
Several HMOs and other significant managed care plans operate in Roxbury.
A substantial proportion of insured individuals are enrolled in these plans and
enrollment in managed care is expected to increase. Many physicians in each of
the specialties and Roxbury’s four hospitals participate in more than one
of these plans. There is no significant overlap among the participants on the
physician panels of many of these plans, or among the active medical staffs of
the hospitals, except in a few specialties. Most plans include only 2 or 3 of
Roxbury’s hospitals, and each hospital is a substitute for any other.
One
of Roxbury’s hospitals and the physicians on its active medical staff establish
a PHO to assume greater responsibility for managing the cost and quality of care
rendered to Roxbury residents who are members of health plans. They hope to reduce
costs while maintaining or improving the quality of care, and thus to attract
more managed care patients to the hospital and their practices.
The PHO
will implement systems to establish goals relating to quality and appropriate
utilization of services by PHO participants, regularly evaluate both the hospital’s
and each individual doctor’s and the network’s aggregate performance
concerning those goals, and modify the hospital’s and individual participants’
actual practices, where necessary, based on those evaluations. The PHO will engage
in case management, preadmission authorization of some services, and concurrent
and retrospective review of inpatient stays. In addition, the PHO is developing
practice standards and protocols to govern treatment and utilization of services,
and it will actively review the care rendered by each doctor in light of these
standards and protocols.
There is a significant investment of capital to
purchase the information systems necessary to gather aggregate and individual
data on the cost, quantity, and nature of services provided or ordered by the
hospital and PHO physicians; to measure performance of the PHO, the hospital,
and the individual doctors against cost and quality benchmarks; and to monitor
patient satisfaction. The PHO will provide payers with detailed reports on the
cost and quantity of services provided, and on the network’s success in meeting
its goals.
The PHO will hire a medical director and support staff to perform
the above functions and to coordinate patient care in specific cases. The doctors
and the hospital’s administrative staff also have invested appreciable time
in developing the practice standards and protocols, and will continue actively
to monitor care provided through the PHO. PHO physicians who fail to adhere to
the network’s standards and protocols will be subject to remedial action,
including the possibility of expulsion from the network.
Under PHO contracts,
physicians will be paid by health plans on a fee-for-service basis; the hospital
will be paid a set amount for each day a covered patient is in the hospital, and
will be paid on a fee-for-service basis for other services. The physicians will
not share substantial financial risk for the cost of services rendered to covered
individuals through the network. The PHO will retain an agent to develop a fee
schedule, negotiate fees, and contract with payers. Information about what participating
doctors charge non-network patients will not be disseminated to participants of
the PHO, and the doctors will not agree on the prices they will charge patients
not covered by PHO contracts.
All members of the hospital’s medical
staff join the PHO, including its three geographically dispersed primary care
group practices that together account for about 25 percent of the primary care
doctors in Roxbury. These primary care doctors generally refer their patients
to specialists on the hospital’s active medical staff. The PHO includes all
primary care doctors and specialists on the hospital’s medical staff because
of those established referral relationships with the primary care doctors, the
admitting privileges all have at the hospital, the quality of care provided by
the medical staff, their commitment to cooperate with the goals of the PHO, and
the need to provide convenient referral services to patients of the primary care
doctors. Participating specialists include from 20 to 35 percent of specialists
in each relevant market, depending on the specialty. Hospital and physician participation
in the PHO is non-exclusive. Many PHO participants, including the hospital, already
do and are expected to continue to participate in other managed care plans and
earn substantial income from those plans.
Competitive Analysis
The
Agencies would analyze the PHO under the rule of reason because it offers the
potential for creating significant efficiencies and the price agreement among
the physicians is reasonably necessary to realize those efficiencies. Prior to
contracting on behalf of competing physicians, the PHO will develop mechanisms
to provide cost-effective, quality care, including standards and protocols to
govern treatment and utilization of services, information systems to measure and
monitor both the individual performance of the hospital and physicians and aggregate
network performance, and procedures to modify hospital and physician behavior
and assure adherence to network standards and protocols. The network is structured
to achieve its efficiencies through a high degree of interdependence and cooperation
among its participants.
The price agreement for physician services, under
these circumstances, is subordinate to and reasonably necessary to achieve these
objectives.
Furthermore, the Agencies would not challenge establishment
and operation of the PHO under the rule of reason. In conducting the rule of reason
analysis, the Agencies would evaluate the likely competitive effects of the venture
in each relevant market. In this case, the PHO does not appear likely to limit
competition in any relevant market either by hampering the ability of health plans
to contract individually with area hospitals or physicians or with other network
joint ventures, or by enabling the hospital or physicians to raise prices above
competitive levels. The PHO does not appear to be overinclusive: many primary
care physicians as well as specialists are available to other plans, and the doctors
in the PHO have been included to achieve the network’s procompetitive potential.
Many PHO doctors also participate in other managed care plans and are expected
to continue to do so in the future. Moreover, several significant managed care
plans are not dependent on the PHO doctors to offer their products to consumers.
Finally, the venture is structured so that physician participants do not share
competitively sensitive information, thus reducing the likelihood of anticompetitive
spillover effects outside the network where the physicians still compete, and
the venture avoids any anticompetitive collateral agreements.
Since the
venture is not likely to be anticompetitive, there is no need for further detailed
evaluation of the venture’s potential for generating procompetitive efficiencies.
For these reasons, the Agencies would not challenge the joint venture. They would
reexamine this conclusion, however, and do a more complete analysis of the procompetitive
efficiencies if evidence of actual anticompetitive effects were to develop.
2.
PHO That Provides Services On A Per Case Basis
Goodville is a large city
with a number of hospitals. One of Goodville’s hospitals, together with its
oncologists and other relevant health care providers, establishes a joint venture
to contract with health plans and other payers of health care services to provide
bone marrow transplants and related cancer care for certain types of cancers based
on an all inclusive per case payment. Under these contracts, the venture will
receive a single payment for all hospital, physician, and ancillary services rendered
to covered patients requiring bone marrow transplants. The venture will be responsible
for paying for and coordinating the various forms of care provided. At first,
it will pay its providers using a fee schedule with a withhold to cover unanticipated
losses on the case rate. Based on its operational experience, the venture intends
to explore other payment methodologies that may most effectively provide the venture’s
providers with financial incentives to allocate resources efficiently in their
treatment of patients.
Competitive Analysis
The joint venture is
a multiprovider network in which competitors share substantial financial risk,
and the price agreement among members of the venture will be analyzed under the
rule of reason. The per case payment arrangement involves the sharing of substantial
financial risk because the venture will receive a single, predetermined payment
for a course of treatment that requires the substantial coordination of care by
different types of providers and can vary significantly in cost and complexity
from patient to patient. The venture will pay its provider participants in a way
that gives them incentives to allocate resources efficiently, and that spreads
among the participants the risk of loss and the possibility of gain on any particular
case. The venture adds to the market another contracting option for health plans
and other payers that is likely to result in cost savings because of its use of
a per case payment method. Establishment of the case rate is an integral part
of the risk sharing arrangement.
3. PHO With All The Physicians In A Small,
Rural County
Frederick County has a population of 15,000 and a 50-bed hospital
that offers primary and some secondary services. There are 12 physicians on the
active medical staff of the hospital (six general and family practitioners, one
internist, two pediatricians, one otolaryngologist, and two general surgeons)
as well as a part-time pathologist, anesthesiologist, and radiologist. Outside
of Frederick County, the nearest hospitals are in Big City, 25 miles away. Most
Frederick County residents receive basic physician and hospital care in Frederick
County, and are referred or transferred to the Big City physician specialists
and hospitals for higher levels of care.
No managed care plans currently
operate in Frederick County. Nor are there any large employers who selectively
contract with Frederick County physicians. Increasingly, Frederick County residents
who work for employers in Big City are covered under managed care contracts that
direct Frederick County residents to hospitals and to numerous primary care and
specialty physicians in Big City. Providers in Frederick County who are losing
patients to hospitals and doctors in Big City want to contract with payers and
employers so that they can retain these patients. However, the Frederick County
hospital and doctors have been unsuccessful in their efforts to obtain contracts
individually; too few potential enrollees are involved to justify payers’
undertaking the expense and effort of individually contracting with Frederick
County providers and administering a utilization review and quality assurance
program for a provider network in Frederick County.
The hospital and all
the physicians in Frederick County want to establish a PHO to contract with managed
care plans and employers operating in Big City. Managed care plans have expressed
interest in contracting with all Frederick County physicians under a single risk-sharing
contract. The PHO also will offer its network to employers operating in Frederick
County.
The PHO will market the services of the hospital on a per diem
basis, and physician services on the basis of a fee schedule that is significantly
discounted from the doctors’ current charges. The PHO will be eligible for
a bonus of up to 20 percent of the total payments made to it, depending on the
PHO’s success in meeting utilization targets agreed to with the payers. An
employee of the hospital will develop a fee schedule, negotiate fees, and contract
with payers on behalf of the PHO. Information about what participating doctors
charge non-PHO patients will not be disseminated to the doctors, and they will
not agree on the prices they will charge patients not covered by PHO contracts.
Physicians’ participation in the PHO is structured to be non-exclusive.
Because no other managed care plans operate in the area PHO physicians do not
now participate in other plans and have not been approached by other plans. The
PHO physicians have made clear their intention to continue to practice outside
the PHO and to be available to contract individually with any other managed care
plans that expand into Frederick County.
Competitive Analysis
The
agreement of the physicians on the prices they will charge through the PHO would
be analyzed under the rule of reason, because they share substantial financial
risk through the use of a pricing arrangement that provides significant financial
incentives for the physicians, as a group, to achieve specified cost-containment
goals. The venture thus has the potential for creating significant efficiencies,
and the setting of price promotes the venture’s use of the risk-sharing arrangement.
The Agencies would not challenge formation and operation of the PHO under
the rule of reason. Under the rule of reason analysis, the Agencies would evaluate
the likely competitive effects of the venture. The venture does not appear likely
to limit competition in any relevant market. Managed care plans’ current
practice of directing patients from Frederick County to Big City suggests that
the physicians in the PHO face significant competition from providers and managed
care plans that operate in Big City. Moreover, the absence of managed care contracting
in Frederick County, either now or in the foreseeable future, indicates that the
network is not likely to reduce any actual or likely competition for patients
who do not travel to Big City for care.
While the venture involves all
of the doctors in Frederick County, this was necessary to respond to competition
from Big City providers. It is not possible to verify at the outset that the venture
will in fact be non-exclusive, but the physicians’ participation in the venture
is structured to be non-exclusive, and the doctors have expressed a willingness
to consider joining other managed care plans if they begin operating in the area.
For these reasons, the Agencies would not challenge the joint venture.
However, if it later became apparent that the physicians’ participation in
the PHO was exclusive in fact, and consequently managed care plans or employers
that wanted to contract with some or all of the physicians at competitive terms
were unable to do so, or that the PHO doctors entered into collateral agreements
that restrained competition for services furnished outside the PHO, the Agencies
likely would challenge the joint venture.
4. PHO That Does Not Involve
Horizontal Agreements On Price
A hospital and doctors and other health
care providers on its medical staff have established a PHO to market their services
to payers, including employers with self-funded health benefits plans. The PHO
contracts on a fee-for-service basis. The physicians and other health care providers
who are participants in the PHO do not share substantial financial risk or otherwise
integrate their services so as to provide significant efficiencies. The payers
prefer to continue to use their existing third-party administrators for contract
administration and utilization management, or to do it in-house.
There
is no agreement among the PHO’s participants to deal only through the PHO,
and many of them participate in other networks and HMOs on a variety of terms.
Some payers have chosen to contract with the hospital and some or all of the PHO
physicians and other providers without going through the PHO, and a significant
proportion of the PHO’s participants contract with payers in this manner.
In an effort to avoid horizontal price agreements among competing participants
in the PHO while facilitating the contracting process, the PHO considers using
the following mechanisms:
A. An agent of the PHO, not otherwise affiliated
with any PHO participant, will obtain from each participant a fee schedule or
conversion factor that represents the minimum payment that participant will accept
from a payer. The agent is authorized to contract on the participants’ behalf
with payers offering prices at this level or better. The agent does not negotiate
pricing terms with the payer and does not share pricing information among competing
participants. Price offers that do not meet the authorized fee are conveyed to
the individual participant. B. The same as option A, with the added feature
that the agent is authorized, for a specified time, to bind the participant to
any contract offers with prices equal, to or better than, those in a contract
that the participant has already approved.
C. The same as option A, except
that in order to assist payers in developing contract offers, the agent takes
the fee authorizations of the various participants and develops a schedule that
can be presented to a payer showing the percentages of participants in the network
who have authorized contracts at various price levels.
D. The venture hires
an agent to negotiate prices with payers on behalf of the PHO’s participants.
The agent does not disclose to the payer the prices the participants are willing
to accept, as in option C, but attempts to obtain the best possible prices for
all the participants. The resulting contract offer then is relayed to each participant
for acceptance or rejection.
Competitive Analysis
In the circumstances
described in options A through D, the Agencies would determine whether there was
a horizontal agreement on price or any other competitively significant terms among
PHO participants. The Agencies would determine whether such agreements were subject
to the per se rule or the rule of reason, and evaluate them accordingly.
The
existence of an agreement is a factual question. The PHO’s use of options
A through C does not establish the existence of a horizontal price agreement.
Nor is there sharing of price information or other evidence of explicit or implicit
agreements among network participants on price. The agent does not inform PHO
participants about others’ acceptance or rejection of contract offers; there
is no agreement or understanding that PHO participants will only contract through
the PHO; and participants deal outside the network on competitive terms.
The
PHO’s use of option D amounts to a per se unlawful price agreement. The participants’
joint negotiation through a common agent confronts the payer with the combined
bargaining power of the PHO participants, even though they ultimately have to
agree individually to the contract negotiated on their behalf.
Competing
providers who are considering jointly providing non-fee-related information to
a purchaser and are unsure of the legality of their conduct under the antitrust
laws can take advantage of the Department of Justice’s expedited business
review procedure announced on December 1, 1992 (58 Fed. Reg. 6132 (1993) ) or
the Federal Trade Commission’s advisory opinion request on behalf of providers
who are considering jointly providing such information within 90 days after all
necessary information is submitted. The Department’s December 1, 1992 announcement
contains specific guidance as to the information that should be submitted.
12
This statement addresses only provider’s collective activities. As a general
proposition, providers acting individually may provide any information to any
purchaser without incurring liability under federal antitrust law. This statement
also does not address the collective provision of information through an integrated
joint venture or the exchange of information that necessarily occurs among providers
involved in legitimate joint venture activities. Those activities generally do
not raise antitrust concerns.
