Insights

FTC Settles Price Fixing Charges with Texas IPA

On February 13, 2006, subject to final approval, the Federal Trade Commission ("FTC") entered into a consent order ("Order") with Health Care Alliance of Laredo, L.C. ("HAL"). HAL is a physicians' independent practice association ("IPA"). The Order settles the FTC's allegations that HAL had negotiated and implemented agreements among competing physicians to fix prices and other contract terms, engaged in collective negotiations regarding those terms, and refused to deal with third-party payors except on the collectively-set terms. The FTC had charged that HAL was neither clinically- nor economically-integrated, and that its actions had increased the cost of health care in the Laredo, Texas area.

According to the FTC's Complaint, HAL consisted of approximately 80 physicians, most of whom would have been competitors but for the IPA. Although HAL referred to its contracting methods as a "messenger model," the FTC asserted that HAL's nine-member Board of Managers ("Board") only messengered contracts to its members if the contract rates first had been approved by the Board. The Director of the FTC's Bureau of Competition, Jeffrey Schmidt, warned against so-called "messenger model" structures that in fact involve negotiations, stating that "[a] messenger approach is a way to facilitate the flow of information between health plans and doctors, not a means of gaining bargaining leverage . . . . physician organizations will not avoid price fixing charges when they send contract offers to their members after negotiating to get the price the group wants." Allegedly HAL surveyed its members to obtain the maximum discount they were willing to accept for the twenty most common codes. The Complaint also contends that HAL urged members not to deal individually with payors and informed the payors that it would be acting on behalf of its members in negotiations.

The Order mandates, among other things, that HAL refrain from agreements: (1) to negotiate with payors on behalf of physicians; (2) to deal (or not deal) or threaten not to deal with payors; (3) regarding the terms on which physicians will deal, including price terms; (4) to refrain from dealing with payors individually or through arrangements other than HAL. The Order provides that agreements regarding, and conduct necessary for, qualified risk-sharing or clinically-integrated joint arrangements are not prohibited so long as they do not involve restricting physicians from dealing with payors outside of the arrangement. According to the Order, HAL must terminate each of its preexisting contracts at the earliest of: (1) the date requested in writing from a payor; (2) the contract's earliest termination or renewal date; (3) one year from the date the Order becomes final. The Order additionally contains certain notice requirements. It will expire in 20 years.

Copies of the Decision and OrderAnalysis to Aid Public Comment, and Complaint are available at these links.

For additional information about this Antitrust Development, please contact Toby G. Singer, leader of the Health Care Antitrust Practice.

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