Physicians Group, Inc.

A Danville, Virginia physicians' group and its board of directors have agreed to settle Federal Trade Commission charges that they conspired to prevent third-party payors from doing business, to fix terms of reimbursement from payors, and to resist their cost-containment measures. The FTC alleged that the conduct of Physicians Group, Inc. and its board, among other things, prevented a managed care plan from establishing itself in the area of Danville and Pittsylvania County and delayed estab- lishment of another plan for state employees. The settlement would require the dissolution of Physicians Group, Inc. and prohibit its seven board members from engaging in similar anticompetitive conduct with regard to third-party payors.

The FTC received substantial assistance in this case from the Virginia Attorney General's office, which is announcing a settlement resolving similar allegations today.

According to the FTC complaint detailing the charges in the case, Physicians Group, Inc. was formed in 1986 as a vehicle for its members to bargain collectively with managed care plans in the area of Danville and Pittsylvania county. Its members, the complaint alleges, are not economically integrated so as to create efficiencies that might justify their agreement to act collectively. The board members of Physicians Group, Inc., all physicians, also are named as defendants: Edwin J. Harvie, Jr., Eric N. Davidson, Milton Greenberg, Noah F. Gibson, IV, William W. Henderson, IV, Douglas W. Shiflett, and Lawrence G. Fehrenbaker. They all have medical offices in Danville.

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Physicians Group--04/26/95)

The complaint cites examples of the alleged illegal conduct. In 1988 and 1989, the complaint alleges, Physicians Group, Inc. and its board members conspired to fix, and collectively dic- tated, the terms of dealing that they would accept from the Virginia Health Network, a managed care organization. This concerted conduct effectively prevented the plan from estab- lishing a network of health care providers in the area, the FTC charged.

The FTC also alleged that the respondents engaged in a similar conspiracy in 1992 and 1993 against the Key Advantage Plan, a managed care insurance plan for employees of Virginia. The conduct allegedly delayed full implementation of the plan in the area until 1994. The respondents also conspired to refuse to deal with, and to fix the terms of dealing with, other third- party payers attempting to do business in the area, the FTC charged.

According to the complaint, the alleged concerted conduct unduly restrained competition among physicians in Danville and Pittsylvania County, deprived consumers of the benefits of such competition and of managed care, and fixed or increased the prices paid for physician services in the area.

The proposed consent agreement to settle these charges, announced today for public comment before the Commission deter- mines whether to make it binding, would require dissolution of Physicians Group, Inc. within 120 days. The settlement also contains provisions that would prohibit Physicians Group, Inc., until it is dissolved, and its seven board members from attempting to engage in an agreement or agreeing with other physicians, to:

• negotiate or refuse to deal with a payor; or
  
  
• determine any terms or conditions upon which physicians will deal with a payor.

Further, it would prohibit them from encouraging or inducing any physician to:

• refuse to deal with a payor; or
  
  
• deal with a payor on terms collectively determined by physicians.

Further, the settlement would require Physicians Group, Inc. to distribute copies of the complaint and settlement to both past and present members and to each payor who communicated any interest in contracting for physician services with Physicians Group, Inc. or its directors since it was established.

Physicians Group--04/26/95)

The settlement would not prohibit physicians who practice together as partners or employees or who participate in inte- grated joint ventures from collectively dealing with payors; nor would it prohibit the respondents from petitioning governmental entities or from participating at the request of a payor in certain utilization review activities.

Finally, the settlement contains various reporting provi- sions designed to assist the FTC in monitoring compliance. The Commission vote to accept the proposed consent agreement for public comment was 5-0. It will be published in the Federal Register shortly and will be subject to public comment for 60 days, after which the Commission will decide whether to make it final. Comments should be addressed to the Office of the Secre- tary, FTC, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 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 $10,000.

Copies of the complaint, proposed consent agreement and an analysis of the agreement to assist the public in commenting are available from the FTC's Public Reference Branch, Room 130, same address as above.

(FTC File No. 931 0083)