Mobile Health Resources, L.L.C.

Staff of the Federal Trade Commission will not recommend an antitrust challenge to a proposed network of ambulance companies to provide medically-related transportation services on a regional or statewide basis to health care plans, health maintenance organizations, and other large purchasers in Michigan. FTC staff was responding to a request by Mobile Health Resources, L.L.C. ("MHR") for an advisory opinion concerning a proposal to offer services throughout a fifty-county area in the lower half of Michigan’s lower peninsula. MHR will be formed and operated by seven private ambulance companies that currently do business, for the most part, in different geographic areas in Michigan.

MHR proposes to offer a system of "integrated mobile health care services" under which participating providers will operate interdependently and cooperatively in order to manage the volume and quality of transportation services delivered by the network as a whole. The network proposes to use triage services and protocols (also known as "advanced pathway management") to ensure the provision of cost-effective, medically appropriate transportation services to beneficiaries of health plans or other large purchasers that contract with the network. MHR also intends to coordinate scheduling and dispatching of participating providers; to establish a patient identification system so that beneficiaries can be transported whenever possible to a facility that belongs to the network of the beneficiary’s health plan, and to implement utilization review and quality assurance programs. The letter noted that MHR members "will invest significant capital in the staff, computer systems and programs necessary to offer these services, and the network will use a risk withhold arrangement to provide additional incentives for participating providers to achieve the network’s goals." According to the staff letter, MHR expects that the services provided by the network will reduce both payers’ direct transportation costs and their overall medical care costs.

MHR proposes to contract with third-party payers primarily on a capitated basis. Under these contracts, the network will bear the full risk that the cost of covered services rendered to a beneficiary will exceed the capitated rate. MHR also proposes to negotiate with certain third-party payers "shared risk" contracts or fee-for-service contracts subject to a risk-withhold.

The staff letter, signed by Robert F. Leibenluft, Assistant Director for Health Care at the FTC advised that the general antitrust analysis applicable to multiprovider network joint ventures is described in Statement 9 of the Department of Justice/Federal Trade Commission 1996 Statements of Antitrust Enforcement Policy and Analytical Principles Relating to Health Care and Antitrust ("Health Care Statements"). As discussed in the Statements, the staff letter said, "the rule of reason applies to price-related agreements that are reasonably necessary to achieve the procompetitive benefits of a joint venture involving significant economic integration among competitors." "Economic integration warranting rule of reason analysis of accompanying price- related agreements can be evidenced by an agreement to share substantial financial risk for services provided through the network, as well as by other types of integration that provide efficiency benefits," the letter said.

According to the staff letter, the formation and operation of MHR will involve direct agreement among the participating providers concerning the prices to be charged for medically- related transportation services, and the staff analyzes the price agreement as one among competitors. The letter concludes that the proposed network merits rule of reason analysis because the proposed price-related agreements appear to be reasonably necessary to the achievement of the efficiencies that may flow from the integrated provision of services by the network. FTC staff said that MHR appears to involve both economic and functional integration among participating providers. The letter concludes that contracts on a capitated basis involve the sharing among participating providers of substantial financial risk for services provided through the network. While the information available did not allow a determination to be made whether the other types of proposed contacts would involve the sharing of substantial financial risk, the letter stated that MHR appears to involve substantial service integration among its members through the use of protocols and triage methods, the centralized coordination of transportation services, and the use of risk withholds to provide additional incentives for participating providers to achieve the network’s goals.

The staff letter noted that because MHR has not provided sufficient information to define the relevant geographic markets in which the network or its participating providers operate, or to confirm their approximate market shares, the staff could not offer a definitive opinion that the venture would be found to be permissible after a full rule of reason analysis. The letter concludes, however, that the available information does not suggest that the proposed network is likely to reduce competition substantially in any relevant geographic market. First, formation of the network is not likely to affect significantly competition among network members for non- network business, since each of the seven companies currently operates in a fairly distinct geographic area and is not a significant direct competitor of any other member. "Moreover," according to the letter, "there do not appear to be agreements concerning prices to be charged for services provided outside the network, or reasons for concern that providers intend to use the venture to coordinate their activities outside the venture." Second, the letter states that the network does not appear likely to impair competition for regional or statewide transportation contracts, because other transportation companies are available to form competing networks, and payers are able to contract directly with MHR members if they desire to assemble their own networks.

NOTE: This letter sets out the views of the staff of the FTC's Bureau of Competition, as authorized by the Commission's Rules of Practice. It has not been reviewed or approved by the Commission. As the Commission's rules explain, the staff's advice is rendered "without prejudice to the right of the Commission later to rescind the advice and, where appropriate, to commence an enforcement proceeding."

Copies of the letter are available from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710. FTC news releases and other materials also are available on the Internet at the FTC’s World Wide Web site at: http://www.ftc.gov