South Carolina Physician-hospital Organization Agrees To Settle Physician Price-fixing Charges

Partners Health Network, Inc., a physician-hospital organization (PHO) operating in northwestern South Carolina, has agreed to settle Federal Trade Commission charges that it orchestrated and carried out agreements among its physician members to set the prices they would accept from health plans, and to refuse to deal with health plans that did not agree to its collectively determined prices. The consent order settling the FTC’s charges would prohibit the PHO from engaging in such anticompetitive conduct in the future, to the benefit of consumers in the Pickens County, SC area.

Partners Health

Partners Health is a PHO consisting of approximately 225 doctors, as well as Palmetto Health Baptist Medical Center and Cannon Memorial Hospital. The organization does business in the Pickens County, SC, area, which is in the northwestern part of the state. The PHO’s physician members make up approximately 75 percent of all independently practicing doctors in and around Pickens County.

The Commission’s Complaint Allegations

Partners Health was created to develop, negotiate, enter into, and administer contracts for its member physicians. To be marketable in the Pickens County area, a health plan must have access to a large number of physicians who are Partners Health members.

Partners Health is charged with violating Section 5 of the FTC Act by orchestrating and implementing agreements among its physician members to fix prices and other terms on which they would deal with health plans, and to refuse to deal with such plans except on collectively determined terms. Partners Health at times has claimed to be a “messenger model” – that is, an arrangement that does not facilitate horizontal agreements on price. The FTC complaint, however, charges Partners Health with: 1) orchestrating collective agreements on fees and other terms of dealing with health plans; 2) carrying out collective negotiations with health plans;
3) fostering refusals to deal; and 4) threatening to refuse to deal with health plans that resisted Partner Health’s desired terms.

As a result of these actions, the complaint alleges, Partners Health succeeded in forcing many health plans to raise the fees paid to its physician members, thereby raising the cost of medical care in the Pickens County, SC, area. Further, according to the complaint, the PHO engaged in no efficiency-enhancing integration that would justify its joint fee negotiations.

The Consent Order

The Commission’s proposed consent order is designed to eliminate the illegal anticompetitive conduct alleged in the complaint. It would prohibit Partners Health from entering into or facilitating agreements between or among physicians: 1) to negotiate on behalf of any physician with any payor; 2) to deal, refuse to deal, or threaten to refuse to deal with any payor; 3) to designate the terms, conditions, or requirements upon which any physician deals, or is willing to deal, with any payor, including, but not limited to price terms; 4) not to deal individually with any payor, or not to deal with any payor through any arrangement other than one involving Partners Health.

The consent order allows Partners Health to undertake certain kinds of joint contracting arrangements – “qualified risk-sharing joint arrangements” and “qualified clinically integrated joint arrangements” – terms that are defined in the order. These are types of arrangements in which physician participants engage in joint activities to control costs and improve quality by managing the provision of services, and any agreement concerning reimbursement or other terms or conditions of dealing must be reasonably necessary to obtain significant efficiencies through the joint arrangement.

The order requires Partners Health to notify the FTC for three years before participating in contracting with health plans on behalf of a qualified risk-sharing joint arrangement or clinically integrated joint arrangement, or before entering into any arrangement under which it would act as a messenger or agent on behalf of any physicians with payors regarding contracts.

Finally, the order requires Partners Health to distribute the complaint and order to all doctors who have participated in it, and to payors with which it has negotiated contracts or which have expressed interest in contracting with Partners Health. The order requires that Partners Health must terminate its current contracts with respect to providing physician services within one year, and it also contains compliance and reporting requirements. The order will expire in 20 years.

The Commission vote to place the consent order on the public record for comment and publish a copy in the Federal Register was 3-0-1, with Chairman Deborah Platt Majoras recused. The Commission is accepting public comments on the order for 30 days, until September 3, 2005, after which it will decide whether to make it final. Comments should be sent to: FTC Office of the Secretary, 600 Pennsylvania Ave., 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, consent 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 Bureau 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.

(FTC File No. 041-0100)