FTC Settles Price-Fixing Charges Brought Against Baton Rouge Physician Groups and Their Agent

The Federal Trade Commission today announced a proposed consent agreement with a Baton Rouge, Louisiana-based independent practice association (IPA), the three orthopedic practices whose doctors are members of the IPA, the IPA's agent, and the agent's managing director, settling charges that the respondents orchestrated and implemented agreements to fix prices and other terms on which they would deal with a health insurance company. The FTC alleges that the respondents' anticompetitive conduct has resulted in higher costs for orthopedic services in the Baton Rouge area.

"These physicians violated fundamental antitrust principles by agreeing to demand common price terms," said Joe Simons, Director of the FTC's Bureau of Competition, "and their agent crossed an impermissible line by participating in the price-fixing activity. The FTC will continue to bring appropriate law enforcement to eradicate such anticompetitive conduct."

The Respondents

The respondents named in the Commission's complaint are the IPA, Professional Orthopedic Services, Inc.; the three physician practices whose doctors are members of the IPA - The Bone & Joint Clinic of Baton Rouge, Inc., Baton Rouge Orthopaedic Clinic, L.L.C., and Orthopaedic Surgery Associates of Baton Rouge, L.L.C.; and the IPA's negotiating agent, Physician Network Consulting, L.L.C., and its managing director, Michael J. Taylor. Professional Orthopedic Services consists of 28 doctors who provide approximately 70 percent of the orthopedic medicine services in Baton Rouge. To be competitively marketable in the Baton Rouge area, an insurance plan must include in its physician network members of Professional Orthopedic Services, including doctors from at least The Bone & Joint Clinic or Baton Rouge Orthopaedic Clinic.

Physician Network Consulting is an agent for Professional Orthopedic Services' members. It represents physicians in contract negotiations with health insurance firms and other third-party payors. Physician Network Consulting's client base includes physicians in approximately seven states. Michael J. Taylor is the founder and managing director of Physician Network Consulting.

The Commission's Complaint

The complaint alleges that, acting with and through their IPA and Physician Network Consulting, the members of Professional Orthopedic Services agreed to terminate their contracts with United HealthCare of Louisiana, Inc. (United), and authorized Physician Network Consulting to be their common agent to negotiate more lucrative price terms with United. Although Physician Network Consulting purported to operate as a "messenger" - that is, an arrangement that does not facilitate horizontal agreements on price - the FTC states that it engaged in various actions that reflected or orchestrated such agreements.

The complaint further alleges that by orchestrating agreements among Professional Orthopedic Services' members to deal only on collectively-determined terms, and by refusing to deal with United unless it would meet those terms, respondents violated Section 5 of the FTC Act. The respondents' anticompetitive conduct allegedly coerced United into accepting their price demands, thereby raising the cost of orthopedic services in the Baton Rouge area. There was no efficiency-enhancing integration that would justify this conduct, according to the FTC.

Terms of the Proposed Consent Order

The proposed consent order reached with the Commission bars the respondents from collectively negotiating prices or engaging in other anticompetitive collusive conduct. It specifically prohibits them from entering into or facilitating any agreement between or among any physicians: 1) to negotiate with payors on any physician's behalf; 2) to deal, refuse to deal, or threaten not to deal with payors; 3) to determine on what terms to deal with any payor; or 4) not to deal individually with any payor, or not to deal with any payor through any arrangement other than Professional Orthopedic Services. In addition, the proposed order bars the respondents from facilitating exchanges of information among physicians concerning whether, or on what terms, to contract with a payor, as well as from attempting to induce others to engage in conduct prohibited by the order.

As in other Commission orders addressing such conduct, certain types of agreements are excluded from the general bar on joint negotiations. First, the respondents would not be barred from engaging in conduct that is reasonably necessary to form or participate in a "qualified risk-sharing joint arrangement" or a "qualified clinically integrated joint arrangement," as those terms are defined in the order. Second, because the proposed order is intended to reach agreements among horizontal competitors, it will not bar agreements that involve only physicians who are part of the same medical group practice.

For three years, the proposed order bars Physician Network Consulting and Taylor from negotiating with any payor on behalf of the other respondents, and from advising any physician who participates in Professional Orthopedic Services or any respondent physician practice to accept or reject any term, condition, or requirement of dealing with any payor. In addition, Physician Network Consulting and Taylor will be required to notify the FTC before entering into any arrangement to act as a messenger or agent for any physicians with payors regarding contracts. The proposed order describes to whom the complaint and order must be distributed and, finally, requires the respondent physician practices to terminate any contract with United at United's request and without penalty. The proposed order will expire in 20 years.

The Commission vote to place the proposed consent order on the public record for comment was 5-0. An announcement regarding the proposed order will be published in the Federal Register shortly. It will be subject to public comment for 30 days, until August 19, 2003, after which the Commission will decide whether to make it final. Comments should be addressed to the FTC, Office of the Secretary, 600 Pennsylvania Avenue, N.W., Washington, DC 20580.

NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000.

Copies of the Commission's complaint, proposed consent order, and analysis to aid public comment are available from the FTC's Web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. The FTC's Bureau of Competition seeks to prevent business practices that restrain competition. The Bureau carries out its mission by investigating alleged law violations and, when appropriate, recommending that the Commission take formal enforcement action. To notify the Bureau concerning particular business practices, call or write the Office of Policy and Evaluation, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, D.C. 20580, Electronic Mail: antitrust@ftc.gov; Telephone (202) 326-3300. For more information on the laws that the Bureau enforces, the Commission has published "Promoting Competition, Protecting Consumers: A Plain English Guide to Antitrust Laws," which can be accessed at http://www.ftc.gov/bc/compguide/index.htm.

(FTC File No.: 021-0178)