Associates in Neurology

Staff of the Federal Trade Commission have advised a group of neurologists in the Los Angeles area that they do not intend to recommend a challenge to the neurologists' plan to establish an independent provider association known as Associates in Neurology (AIN). AIN, which plans to contract with managed care organizations to provide in-office neurology services and hospital visits on a capitated basis, will be composed of 11 independent neurologists who currently practice in various communities in north Los Angeles County.

AIN's "target geographic market" includes central Los Angeles and the northern part of Los Angeles County. AIN members are only about 12 percent of the neurologists it has been able to identify who practice within this area.

The FTC staff advice was contained in a letter signed by Robert F. Leibenluft, Assistant Director for Healthcare at the FTC, responding to a request by counsel for AIN for the advisory opinion. The staff letter noted that under Statement 8 of the Statements of Antitrust Enforcement Policy and Analytical Principles Relating to Health Care and Antitrust, jointly issued by the Commission and the Department of Justice, the federal antitrust enforcement agencies will not challenge, absent extraordinary circumstances, physician network joint ventures in which physician participants share substantial financial risk and constitute 20 percent or less (in the case of exclusive ventures) or 30 percent or less (in the case of non-exclusive ventures) of the physicians in each physician specialty who practice in the relevant geographic market. Because AIN members will share substantial financial risk through the acceptance of capitated contracts, and its members are fewer than 20 percent of the neurologists in the area it identified as the market, the letter noted, AIN appears to fall within the safety zone for physician networks.

While AIN characterizes itself as a nonexclusive network, and will permit members to contract individually on a non-capitated basis, the staff advisory noted that AIN reserved a right of first refusal to enter into contracts on behalf of all members for services to be provided on a capitated basis. "For purposes of the safety zones," staff said, "a network is 'exclusive' if participants are restricted in their ability to, or do not in practice, individually contract with other network joint ventures or health plans," even if the restrictions fall short of a commitment of full exclusivity. While AIN's right of first refusal may have this effect, the letter stated, FTC staff did not examine the potential effects of the first refusal right in detail because AIN qualifies for the safety zone for exclusive 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-HELP; 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