Pursuant to the provisions of the Federal Trade
Commission Act, as amended, and by virtue of the
authority vested in it by said Act, the Federal Trade
Commission, having reason to believe that the Montana
Associated Physicians, Inc. ("MAPI") and the
Billings Physician Hospital Alliance, Inc.
("BPHA"), hereinafter sometimes referred to as
respondents, have violated and are violating the
provisions of said Act, and it appearing to the
Commission that a proceeding by it in respect thereof
would be in the public interest, hereby issues its
complaint stating its charges in that respect as follows:
PARAGRAPH ONE: Respondent MAPI is a corporation
organized, existing, and doing business under and by
virtue of the laws of the State of Montana, with its
office and principal place of business located at
1242 North 28th Street, Suite 1A, Billings, Montana
59101.
PARAGRAPH TWO: There are approximately 115
shareholders of MAPI, all of whom are physicians, and
they constitute the membership of MAPI. MAPI's
members provide medical services in over 30
independent physician practices in Billings, Montana.
MAPI's members constitute approximately 43 percent of
all physicians in Billings, Montana, and primarily
practice fee-for-service medicine. An approximately
equal number of the other physicians in Billings are
part of a single multispecialty physician practice.
MAPI's members constitute over 80 percent of all
"independent" Billings physicians, that is,
those who are not part of the multispecialty
physician practice or employed by a hospital. A
significant portion of MAPI's activities furthers the
pecuniary interests of its members.
PARAGRAPH THREE: Respondent BPHA is a corporation
organized, existing, and doing business under and by
virtue of the laws of the State of Montana, with its
office and principal place of business located at
1233 North 30th Street, Billings, Montana 59101.
PARAGRAPH FOUR: BPHA is a physician-hospital
organization, whose membership consists of Saint
Vincent Hospital and Health Center ("Saint
Vincent") of Billings, Montana, and a majority
of the physicians on Saint Vincent's active medical
staff. Almost all of MAPI's members are also
physician members of BPHA. BPHA contracts with
third-party payers on behalf of its members to
provide services to third-party payers' subscribers
and enrollees. There are approximately 126 physician
members of BPHA, practicing in over 30 independent
physician practices, located almost exclusively in
Billings, Montana. Physician members of BPHA
constitute approximately 45 percent of all physicians
in Billings, Montana, and over 80 percent of all
independent Billings physicians. The single
multispecialty physician practice, referred to in
paragraph two, was acquired by the only other
hospital in Billings, and has approximately the same
number of physicians as BPHA. A significant portion
of BPHA's activities furthers the pecuniary interests
of its members.
PARAGRAPH FIVE: The general business practices of
MAPI, BPHA, and their members, including those herein
alleged, are in or affect "commerce" as
defined in the Federal Trade Commission Act, as
amended, 15 U.S.C. § 45.
PARAGRAPH SIX: Except to the extent that
competition has been restrained as alleged herein,
the physician members of MAPI and BPHA have been, and
are now, in competition among themselves and with
other providers of physician services in Billings,
Montana.
PARAGRAPH SEVEN: Physicians, including the
physician members of MAPI and BPHA, are often paid
directly or indirectly for their services by
third-party payers. Third-party payers such as health
insurance companies, preferred provider organizations
("PPOs"), and health maintenance
organizations ("HMOs"), reimburse for,
purchase, or pay for all or part of the health care
services provided to their enrollees or subscribers.
Third-party payers generally contract with physicians
to become participating providers in plans such
payers offer to consumers. These contracts establish
the terms and conditions of the relationship between
the physician and the third-party payer, including
the fees to be paid the physician for treating
subscribers or enrollees of the third-party payer.
Through such contracts, third-party payers may obtain
capitated payment systems or discounts from
physicians' usual fees, and physicians may obtain
access to additional patients.
PARAGRAPH EIGHT: Third-party payers in Billings,
Montana, compete with each other on the basis of
price, coverage offered, physician and hospital
quality and availability, and other factors that are
important to consumers. Payments to physicians for
services rendered to third-party payer subscribers
are a large component of a third-party payer's costs,
and, therefore, are significant to a third-party
payer in determining the price to charge consumers
for health care coverage.
PARAGRAPH NINE: Absent agreements among competing
physicians on the terms, including price, on which
they will provide services to subscribers or
enrollees in health care plans offered or provided by
third-party payers, competing physicians decide
individually whether to enter into contracts with
third-party payers to provide services to subscribers
or enrollees, and what prices to charge pursuant to
such contracts.
PARAGRAPH TEN: In 1986, most of the independent
physicians in Billings were members of an
organization called Ultracare. At this time, there
were no HMOs or PPOs operating in Billings. Ultracare
concluded that such plans would soon attempt to
contract with physicians in Billings, and that
competitive pressure could force physicians to deal
with such plans at reduced prices or on other than
fee-for-service terms. Accordingly, in March 1987,
physician members of Ultracare formed MAPI, in
substantial part to be a vehicle for its members to
deal collectively with managed care plans. The
purpose of engaging in collective dealings was to
obtain greater bargaining power with third-party
payers by presenting a united front, and thereby to
resist competitive pressures to discount fees and to
avoid accepting reimbursement on other than the
traditional fee-for-service basis.
PARAGRAPH ELEVEN: Beginning in 1986, and
continuing to the present, MAPI and MAPI's
predecessor, Ultracare, have acted as a combination
of their members, have combined with at least some of
their members, and have acted to implement agreements
among their members to restrain competition by, among
other things, facilitating, entering into, and
implementing agreements, express or implied, to delay
entry of HMOs and PPOs into Billings, to engage in
collective negotiations over terms and conditions of
dealing with third-party payers, to have MAPI members
refrain from negotiating directly with third-party
payers or contracting on terms other than those
endorsed by MAPI, and to resist cost containment
measures of third-party payers.
PARAGRAPH TWELVE: During 1987 and continuing into
1993, MAPI acted to prevent and delay HMO Montana, an
HMO owned and operated by Blue Cross/Blue Shield of
Montana, from successfully contracting with
physicians in Billings. Beginning in 1987, Blue
Cross/Blue Shield of Montana sought to enter into
agreements with MAPI's members to participate in HMO
Montana. MAPI, on behalf of its members collectively,
negotiated with HMO Montana concerning the terms of
physicians' contracts with HMO Montana, including
price terms, and rejected all contracts proposed by
HMO Montana. Members of MAPI told Blue Cross/Blue
Shield of Montana that they would negotiate with HMO
Montana only through MAPI, and no member of MAPI
entered into a contract with HMO Montana.
PARAGRAPH THIRTEEN: Beginning in 1987, MAPI
gathered detailed fee information from individual
competing MAPI physicians and their physician
practices, which enabled MAPI to determine for most
physician services the prevailing fees and the
maximum reimbursement allowed by Blue Cross/Blue
Shield of Montana. After collecting and analyzing
this fee information, MAPI advised certain physicians
to raise their fees, and some fees were increased in
accordance with these recommendations.
PARAGRAPH FOURTEEN: Beginning in 1988, MAPI acted
to obstruct efforts by a health plan seeking to
establish the first PPO program in Billings. The
health plan entered into a PPO contract with Saint
Vincent in November 1988 and then sought to contract
with physicians on the hospital's medical staff. Some
members of MAPI indicated to the plan that they would
follow MAPI's recommendations in regard to dealings
with the plan. MAPI, on behalf of its members
collectively, offered its own proposed physician
contract to the plan that provided for physicians to
be paid their usual fees with no discounts,
represented to the plan that this was what MAPI's
members would accept, and objected to any discounts
in fees to be paid by MAPI members. After negotiating
with MAPI for a year without MAPI ever agreeing to
MAPI physicians charging less than their usual fees,
the plan contacted individual physicians about
signing a PPO contract. When the plan sought to
collect current fee information from MAPI members in
order to devise a proposed fee schedule to offer to
physicians, MAPI urged its members to submit prices
higher than they were currently charging in order to
inflate the fee schedule. By June 1990, the plan had
contracts with only about 30 percent of MAPI's
members.
PARAGRAPH FIFTEEN: MAPI was actively involved in
the formation of BPHA, which was created in 1991 by
Saint Vincent and physicians on its medical staff. A
substantial majority of BPHA's physician members are
also members of MAPI. Through BPHA's Physician
Agreements, MAPI is designated as the agent of almost
all MAPI physician members of BPHA with respect to
their membership in BPHA. As a result, MAPI has the
authority to elect and remove physician members of
BPHA's Board of Directors. Until 1993, MAPI's agency
authority extended to the acceptance or rejection of
any contract negotiated by BPHA with any third-party
payer.
PARAGRAPH SIXTEEN: The physician members of BPHA,
most of whom are MAPI members, concertedly control
BPHA's pricing and other terms of contracts for
physician services. BPHA's Bylaws designate that its
Contracting Committee shall negotiate the terms and
conditions of contracts for physician services with
third-party payers, including price terms of those
contracts, and recommend acceptance or rejection of
said contracts to the members of BPHA. BPHA's
Contracting Committee consists almost entirely of
physicians and their employees and agents, including
for a significant period of time the Executive
Director of MAPI. No action of BPHA's Contracting
Committee or BPHA's Board of Directors can be taken
without the support of a majority of physician
representatives on each body. BPHA did not enter into
any contract for physician services until nearly two
years after its creation.
PARAGRAPH SEVENTEEN: MAPI has combined and is
combining with its physician members, and has acted
and is acting to implement an agreement among them,
to restrain competition among physicians, through an
agreement, express or implied, that BPHA would
negotiate the terms and conditions of agreements
between BPHA physician members and others, including
the prices to be paid for their services.
PARAGRAPH EIGHTEEN: The physician members of MAPI
and the physician members of BPHA have not integrated
their practices in any economically significant way,
nor have they created efficiencies sufficient to
justify their acts or practices described in
paragraphs ten through seventeen.
PARAGRAPH NINETEEN: By engaging in the acts or
practices described above, both MAPI and BPHA have
combined or conspired with their respective physician
members to fix and/or increase the fees received from
third-party payers for the provision of physician
services, to conduct boycotts, or otherwise to
restrain competition among physicians in Billings,
Montana.
PARAGRAPH TWENTY: The actions of the respondents
described in this complaint have had and have the
purpose, tendency, and capacity to result in the
following effects, among others:
A. restraining competition among physicians in
Billings, Montana;
B. fixing or increasing the prices that are
paid for physician services in Billings, Montana;
and
C. depriving third-party payers, their
subscribers, and patients of the benefits of
competition among physicians in Billings,
Montana.
PARAGRAPH TWENTY-ONE: The combinations or
conspiracies and the acts and practices described
above constitute unfair methods of competition in
violation of Section 5 of the Federal Trade
Commission Act, 15 U.S.C. § 45. The acts and
practices, as herein alleged, are continuing and will
continue in the absence of the relief herein
requested.
WHEREFORE, THE PREMISES CONSIDERED, the Federal Trade
Commission on this thirteenth day of January, 1997,
issues its complaint against said respondents.
By the Commission.
Donald S. Clark
Secretary