Louisiana Group of Doctors to Settle FTC Charges That it Fixed Prices

A group of Louisiana physicians has agreed to settle Federal Trade Commission charges that it unlawfully fixed prices, which increased the cost of physician services and medical insurance coverage for consumers in the southwestern part of the state. The group of doctors, M.D. Physicians of Southwest Louisiana, Inc. (MDP), included a majority of the physicians in the area around Lake Charles, Louisiana. According to the Commission, MDP served as a vehicle for its doctors to fix prices charged to managed care. The effect of this agreement was to slow the entry of managed care into the Lake Charles area, the agency charged. The settlement of the charges would prevent MDP or its members from engaging in any joint price negotiations or price agreements in the future.

"This case is part of the Commission’s continuing effort to prevent anticompetitive conduct by health care providers who conspire to fix prices," said William J. Baer, Director of the FTC’s Bureau of Competition. “This illegal conduct resulted in increased prices for physician services in southwestern Louisiana and deprived consumers of the benefits of managed care. The settlement will ensure that those who participated in this illegal activity will not do so again."

All of the members of MDP are physicians practicing in and around Calcasieu Parish, Louisiana, the parish in which Lake Charles is located. According to the Commission, MDP was formed in 1987 as a vehicle for its members to deal with managed care organizations that were beginning to enter Calcasieu Parish.

The FTC’s complaint outlining the charges against MDP alleges that MDP conspired to fix the prices and other terms under which its members dealt with third-party payers. The complaint also charges that MDP conspired to prevent or delay the entry into Calcasieu Parish of managed care. The agency alleged that, until 1994, MDP members refused to participate in health care plans offered by Blue Cross and Blue Shield of Louisiana, the Louisiana State Employees Group Benefits Program, Aetna Insurance Company, Healthcare Advantage, Inc., and other third-party payers attempting to do business in Calcasieu Parish. Until 1994, the members of MDP dealt with third-party payers only through MDP.

MDP’s members had not integrated their medical practices in any economically significant way, nor had they created any efficiencies that might justify this conduct, the Commission alleged.

The proposed agreement to settle the FTC’s charges, announced today for public comment, would prevent the illegal activity as alleged in the complaint, but would allow MDP to engage in legitimate joint conduct. The agreement would, among other things, prohibit MDP from engaging in collective negotiations on behalf of its members or fixing prices.

The agreement would permit MDP to engage in conduct that is reasonably necessary to operate (a) any “qualified risk-sharing joint arrangement,” or (b) upon prior notice to the Commission, any “qualified clinically integrated joint arrangement.” For purposes of the order, a “qualified risk-sharing joint arrangement” must satisfy two conditions: (a) participating physicians must share financial risk and (b) the arrangements must be non-exclusive, both in name and in fact. A “qualified clinically integrated joint arrangement” includes arrangements in which the physicians undertake cooperative activities to achieve efficiencies in the delivery of clinical services, without necessarily sharing substantial financial risk. These arrangements also must be non-exclusive. In accordance with the Statements of Antitrust Enforcement Policy in Health Care, issued jointly by the FTC and the Department of Justice, the provisions of the order recognize that a physician network that engages in financial risk-sharing has the potential to generate substantial efficiencies. The provisions of the order also recognize that arrangements involving clinical integration may generate efficiencies, even if there is no risk-sharing. Nevertheless, given that arrangements not involving risk-sharing vary greatly in their potential for efficiencies, the proposed order requires that MDP give prior notice to the Commission before entering into clinically-integrated arrangements not involving risk-sharing.

Under the order, MDP would have to distribute copies of the order to certain parties, file compliance reports, and retain certain documents.

The Commission vote to accept the proposed settlement for public comment was 4-0.

An analysis of the proposed agreement will appear in the Federal Register shortly. The agreement 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 FTC, Office of the Secretary, 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 $11,000.

Copies of the complaint, the proposed consent order and the analysis of the proposed consent order 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, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 2020-326-4357; TDD for the hearing impaired 1-866-653-4261. Consent agreements subject to public comment also are available by calling 202-326-3627. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

(FTC File No. 941 0095)