FTC Charges North Texas Specialty Physicians with Price Fixing

The Federal Trade Commission has issued an administrative complaint against a group of Texas physicians, charging that they unlawfully restrained competition, increasing the cost of health care for consumers in the Fort Worth area. The FTC alleges that North Texas Specialty Physicians (NTSP) violated federal law by negotiating agreements among its participating physicians on price and other terms, refusing to deal with payors except on collectively agreed-upon terms, and refusing to submit payor offers to participating physicians unless the terms complied with NTSP’s minimum-fee standards.

NTSP is a nonprofit corporation funded through fees paid by participating physicians. Organized in 1995, NTSP presently is composed of approximately 600 physicians, of whom approximately 130 are primary care physicians. Its board of directors consists of participating physicians elected to three-year terms by the members of each of NTSP’s sections. A physician may participate in NTSP-payor contracts by granting NTSP the authority to arrange for his or her services to be provided to consumers covered by the payors.

The Commission’s complaint states that nearly all of NTSP’s participating physicians participate in some non-risk contracts. The FTC alleges that, “With respect to these non-risk contracts, NTSP often has sought to negotiate for, and often has obtained, higher fees and other more advantageous terms than its individual physicians could obtain by negotiating individually with payors.”

The FTC complaint charges that NTSP’s polling practices are illegal. NTSP polls its participating physicians to determine the minimum fee that they would accept for medical services provided pursuant to an NTSP-payor agreement. Once this information is collected, NTSP then calculates the averages of the reported minimum acceptable fees and reports these measures to its participating physicians, confirming to the participating physicians that these will be the minimum fees that NTSP collectively will entertain when negotiating any contract with a payor. The FTC alleges that the exchange of prospective price information among otherwise competing physicians reduces price competition and enables the participating physicians to achieve supra-competitive prices.

The Commission’s complaint further charges that NTSP sometimes begins contract discussions with payors by identifying the fee minimums determined by its participating physicians, and states that NTSP will not enter into an agreement with any payor unless the payor agrees to satisfy these fee minimums. The FTC alleges that in other instances, payors have proposed agreements to NTSP that did not satisfy the organization’s fee minimums. In those cases, NTSP allegedly required that the payors resubmit their proposals, or otherwise actively bargained to get the fees they wanted. As a result, the FTC alleges, payors sometimes were forced to accept the higher fees. Additionally, the Commission’s complaint states that in at least one instance, NTSP rejected a payor’s offer after finding that the offer approximated the agreed-to minimums as to some of its insurance plans, but fell below the minimums with respect to other plans. In that case, the FTC alleges, NTSP entered into a contract with the payor only after the payor increased its proposed fees.

The FTC also alleges that NTSP discouraged payors and participating physicians from negotiating directly with one another. In at least one instance, after fee negotiations with a particular payor broke down, NTSP allegedly orchestrated the removal of NTSP physicians from other arrangements with that payor. The FTC alleges that the payor was forced to yield to NTSP’s pressure and contract with the participating physicians at higher prices.

The Commission’s complaint charges that none of NTSP’s negotiating practices significantly increase efficiency, because its participating physicians are not integrated in ways that would increase the quality and reduce the cost of health care in the Fort Worth area. The Commission alleges that because of NTSP’s practices: price and other forms of competition among the participating physicians were unreasonably restrained; prices for physician services were increased; and health plans, employers, and individual consumers were deprived of the benefits of robust competition among physicians.

The Commission vote authorizing the staff to file the administrative complaint was 5-0. In addition to filing the complaint, the FTC filed a notice of contemplated relief in which it identifies provisions that may be appropriate in a final order resolving the charges. These include: 1) cease-and-desist provisions related to the direct negotiation of contracts by NTSP on behalf of member physicians without clinical or financial integration; and 2) termination of contracts that NTSP has negotiated with any payor.

NOTE: The Commission issues or files 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 complaint is not a finding or ruling that the named parties have violated the law. The administrative complaint marks the beginning of a proceeding in which the allegations will be ruled upon after a formal hearing by an administrative law judge.

Copies of the Commission’s complaint 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, DC 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, DC 20580, Electronic Mail: antitrust@ftc.gov; Telephone (202) 326-3300. For more information on the laws that the FTC 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.