FTC Charges Mesa County, Colorado Physician Group with Acting To Raise Prices, Reduce Competition

The Federal Trade Commission has charged a western Colorado physicians’ organization -- which comprises at least 85 percent of the doctors in private practice in Mesa County -- with combining to fix the prices and other competitively significant terms of dealing with some third-party payers, and with collectively refusing to deal with other payers. The FTC alleged the result of this anticompetitive market structure and conduct is higher prices for physician services and the exclusion of a wide range of third-party payers who might offer alternative health insurance programs to the area’s consumers.

The agency said it is seeking an order that, among other things, would require the Mesa County Physicians Independent Practice Association, Inc. (Mesa IPA) to reduce its share of the primary care physicians in Mesa County to a level that will prevent the alleged anticompetitive conduct from continuing or recurring. The relief sought also may prohibit the Mesa IPA from fixing fees for physician services where such conduct is not ancillary to an integrated joint venture, and from operating any joint venture where its members agree to contract with third- party payers exclusively through the Mesa IPA.

The Grand Junction-based IPA was formed in 1987 and contracts with payers to provide services to subscribers of health benefit plans. The FTC complaint states that the Mesa IPA entered into a multi-year contract with the Rocky Mountain Health Maintenance Organization (RMHMO), the enrollees of which comprise at least 50 percent of the Mesa IPA members’ patient volume. Through its alliance with RMHMO, the Mesa IPA took steps to assure that its individual physician members would refuse to deal with other payers who could engender competition among physicians over fees, or would employ more aggressive mechanisms to control physician costs or utilization, the FTC said. This alliance has "created a substantial obstacle to the ability of other payers to contract with a physician panel in Mesa County," the complaint states.

Then, as early as 1993, according to the complaint, the Mesa IPA began negotiating on behalf of its members with several other third-party payers. Its board approved a set of guide lines and a fee schedule to be used by the IPA’s Contract Review Committee in reviewing contract offers from payers, and has urged members to forward to the Committee all contracts offered individually to them by payers. The Mesa IPA also has encouraged its physician members not to deal with new health plans or to do so only on terms approved by the IPA, and has invited or contemplated concerted action by its members to avoid signing payer contracts other than the one with RMHMO, the FTC charged. As a result, several payers were forced to contract with Mesa IPA to obtain physician services to market their plans, and a wide range of third-party payers have been excluded from doing business in Mesa County, the complaint states.

The FTC will present its case at a hearing before an administrative law judge. If the charges are upheld, the FTC may ask the judge to issue an order that would:

• require the Mesa IPA to reduce the share of the Mesa IPA’s practicing primary care physicians to a level that will prevent any continuation or recurrence of the anticompetitive conduct and effects;
• require the Mesa IPA to dissolve the Mesa IPA’s Contract Review Committee and stop using any committee of Mesa IPA members to review any term of third-party payer contracts, where that review is not ancillary to an integrated joint venture;
• prohibit the Mesa IPA from fixing, raising, establishing or tampering with any fee or aspect of the fee charged for any physician’s service, where such conduct is not ancillary to an integrated joint venture; and
• prohibit the Mesa IPA from operating or maintaining any joint venture where the members agree to contract with third-party payers exclusively through the Mesa IPA.

The FTC vote to issue the complaint and notice of contemplated relief was 5-0.

NOTE: The Commission issues a complaint when it has "reason to believe" that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The issuance of a complaint is not a finding or ruling that the respondent has violated the law. The complaint marks the beginning of a proceeding in which the allegations will be ruled upon after a formal hearing.

Copies of the complaint are available from the FTC’s web site at www.ftc.gov and also 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 202- 326-2502. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

(FTC File No.961 0027)