San Franciscos Brown & Toland Medical Group Settles FTC Price Fixing Charges

San Francisco-based Brown & Toland Medical Group, which was sued by the Federal Trade Commission for allegedly fixing the prices and terms under which its doctors would contract with payors to provide services for preferred provider organization (PPO) enrollees, has agreed to settle charges that its business practices violated federal antitrust laws. The terms of the proposed consent agreement with California Pacific Medical Group, Inc., doing business as Brown & Toland Medical Group, prohibits the organization from negotiating with payors on behalf of physicians, refusing to deal with payors, and setting terms for physicians to deal with payors – unless the physicians are clinically or financially integrated. The settlement also provides for the termination of contracts that were allegedly obtained illegally. Brown & Toland’s network of physicians that contract with health maintenance organizations (HMOs) is financially integrated and was not targeted by the FTC’s litigation.

San Francisco-based Brown & Toland is a for-profit, multi-specialty independent physicians’ association (IPA) with more than 1,500 members. Historically, it has provided physician services to HMO members under capitated agreements with health plans, under which the plans pay a set rate each month per enrollee for certain services provided by the group’s doctors. In 2001, with a subset of its physician members, Brown & Toland formed a PPO network and began negotiating fee-for-service reimbursement rates on behalf of its PPO network members.

In July 2003, the FTC filed an administrative complaint alleging that Brown & Toland violated the FTC Act by organizing a horizontal agreement under which its competing member physicians agreed collectively on the price and other competitively significant terms on which they would enter into contracts with health plans or other third-party payors. To further the aims of this agreement, Brown & Toland also allegedly directed its physicians to terminate any preexisting contracts with payors, required its physician members to charge specified prices in all PPO contracts, and approached other physician’s organizations to invite them to enter into similar price-fixing agreements. The FTC contended that Brown & Toland’s conduct had the purpose and effect of raising prices for physician services in San Francisco.

The proposed consent agreement bars Brown & Toland from (1) negotiating with any payor on behalf of any physician; (2) dealing or refusing to deal with any payor based on price or other terms; and (3) jointly determining price or other terms upon which any physician deals with payors. Brown & Toland may engage in this conduct if such conduct is reasonably necessary to the formation of a “qualified risk-sharing joint arrangement” or a “qualified clinically-integrated joint arrangement,” as defined by the order. The consent agreement also orders Brown & Toland to notify the FTC at least 60 days before entering into any arrangement with physicians or contacting any payor, except for those arrangements under which Brown & Toland will be paid a capitated amount, and contains standard recordkeeping provisions to assist the FTC in monitoring the respondent’s compliance.

The Commission vote to place the proposed consent agreement on the public record for comment was 5-0. An announcement regarding the proposed consent agreement will be published in the Federal Register shortly. The agreement will be subject to public comment for 30 days, until Wednesday, March 10, 2004, 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 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, 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, 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/bc/compguide/index.htm.