Two San Diego County Anesthesiology Groups Agree to Settle FTC Charges of Fixing Prices

Two San Diego County, California, anesthesiologists groups have agreed to settle Federal Trade Commission charges that they jointly agreed on certain fees and other competitively significant terms that they would demand from Grossmont Hospital for providing on-call services. The two groups, Anesthesia Service Medical Group, Inc. (ASMG) and Grossmont Anesthesia Services Medical Group, Inc. (GAS), ceased implementing the anticompetitive agreements after being contacted by the Commission. The settlement precludes further alleged illegal activity by the groups.

"This was a naked agreement to fix prices without even a pretense of financial or clinical integration between the parties. Price-fixing is inimical to competition, and illegal under long-settled law," said Joseph Simons, Director of the FTC's Bureau of Competition. "The fact that Grossmont Hospital, the victim of the conspiracy, did not give in to the respondents' demands before the FTC investigation halted these practices does not provide them with a defense."

Parties to the Complaint

ASMG, with approximately 180 physicians, and GAS, with approximately 10 physicians, are competing anesthesiology groups that provide anesthesiology services to patients in San Diego County. Anesthesiologists from both groups are members of the medical staff at Grossmont Medical Hospital in La Mesa, a town in central San Diego County. ASMG and GAS make up approximately three-quarters of the anesthesiologists with active medical staff privileges at Grossmont and work on approximately 70 percent of the hospital's cases requiring anesthesiology services. In addition to staffing scheduled medical procedures, the hospital's anesthesiologists at times remain available to work on unscheduled cases - a practice known as "taking call." Anesthesiologists in San Diego County are reimbursed for the services they provide in a variety of ways, including payments from health insurance companies and other third-party payors. Also, some hospitals pay anesthesiologists through "stipends" for taking call and/or for providing services to uninsured patients. At times, these stipends are paid through contracts that establish a stipend amount and other competitively significant terms. Without entering into agreement with other competing groups, individual groups of anesthesiologists may normally decide whether to seek a stipend from a hospital, along with the amount of that stipend. These individual groups may also independently decide if they will terminate, or restrict, the services they provide to unscheduled or uninsured patients if the hospital refuses to pay the stipend. As of the time of the alleged agreements, Grossmont Hospital did not pay its anesthesiologists, including ASMG and GAS, stipends for taking call or for rendering services to uninsured emergency room patients.

The Commission's Complaint

According to the Commission's complaint, from as early as February 2001 through May of last year, ASMG and GAS discussed a joint strategy to secure stipends from Grossmont Hospital for taking call for obstetrics and providing services to uninsured emergency room patients. Eventually, the complaint contends, the groups agreed on a stipend that both ASMG and GAS would demand from the hospital for taking call for obstetrics. The groups allegedly also discussed reducing the hours their participating doctors were available to take call to increase their negotiating power with the hospital and agreed to maintain a solid front against the hospital to prevent it from negotiating separately with either group and excluding the other.

The complaint alleges that ASMG and GAS ceased this collusive and illegal anticompetitive behavior only after the FTC contacted them about their conduct. While, as a result, their scheme did not succeed, the FTC stated it was a "naked restraint," constituting an unfair method of competition in violation of Section 5 of the FTC Act.

The Proposed Consent Order

The proposed consent order is designed to address the alleged anticompetitive behavior described in the Commission's complaint, while allowing the parties to engage in legitimate joint conduct. First, it prohibits ASMG and GAS from entering into or facilitating agreements between or among medical practices to: 1) negotiate, fix, or establish any fee, stipend, or any other term of reimbursement for the provision of anesthesia services; 2) deal, refuse to deal, or threaten to refuse to deal with any payor of anesthesia services; or 3) reduce, or threaten to reduce, the quantity of anesthesia services provided to any purchaser of such services.

In addition, ASMG and GAS are prohibited from attempting to engage in any of these actions and from encouraging, pressuring, or attempting to induce any person to engage in such actions. Finally, the order contains a proviso that would allow ASMG and GAS to engage in conduct that is reasonably necessary to the formation or operation of a "qualified risk-sharing joint agreement" or "qualified clinically integrated joint arrangement," as these terms are defined in the settlement. The proposed order, which will expire in 20 years, also contains reporting and record-keeping requirements.

The Commission vote to place the proposed consent agreement on the public record for comment was 5-0. An announcement regarding the proposed consent agreements will be published in the Federal Register shortly. The agreement will be subject to public comment for 30 days, until June 30, 2003, after which the Commission will decide whether to make it final. Comments should be addressed to the FTC, Office of the Secretary, 600 Pennsylvania Avenue, N.W., Washington, DC 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, proposed consent agreement and order, and an analysis to aid in 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, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC's Bureau of Competition seeks to prevent business practices that restrain competition. The Bureau carries out its mission by investigating alleged law violations and, when appropriate, recommending that the Commission take formal enforcement action. To notify the Bureau concerning particular business practices, call or write the Office of Policy and Evaluation, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, D.C. 20580, Electronic Mail: antitrust@ftc.gov; Telephone (202) 326-3300. For more information on the laws that the Commission enforces, the Commission has published "Promoting Competition, Protecting Consumers: A Plain English Guide to Antitrust Laws," which can be accessed at http://www.ftc.gov/bc/compguide/index.htm.

(FTC File No.: 021-0006)