FTC Settles Price-Fixing Charges Against Washington Doctors Group and Two of its Members

A group of surgeons in Yakima, Washington, has settled Federal Trade Commission charges that it increased the cost of health care for consumers in Yakima by jointly fixing prices in contract negotiations with insurers in violation of federal laws. The proposed consent order with Surgical Specialists of Yakima, P.L.L.C. (SSY) and two of its members – Cascade Surgical Partners, Inc., P.S. (CSP) and Yakima Surgical Associates, Inc., P.S. (YSA) – is designed to remedy SSY’s allegedly anticompetitive collective-bargaining practices. According to the FTC, such conduct is detrimental to consumers in the Yakima, Washington, area and has resulted in higher prices for services SSY’s doctors provide.

SSY is a for-profit corporation with 24 physician members practicing in five unrelated surgical specialties, including general surgery; ear, nose, and throat; obstetrics and gynecology; plastic surgery; and ophthalmology. Included in this membership are two general surgery practices, CSP and YSA. Founded in 1996, SSY presently represents 90 percent of all physicians practicing general surgery in and around Yakima. The membership of YSA and CSP greatly contributes to SSY’s market power in the area.

The FTC’s complaint charges that SSY acted anticompetitively and in violation of the FTC Act by orchestrating and implementing agreements among members of SSY to fix prices and other terms on which they would deal with health plans. The FTC contends that SSY has successfully coerced a number of health plans to increase the fees they pay to the group’s member physicians, thereby raising the cost of medical care in the Greater Yakima area. The complaint states that as a result of SSY’s actions, consumers have been deprived of the benefits of competition among the group’s doctors. According to the complaint, SSY’s members have continued to operate independent practices without significant clinical or financial integration among them. Thus, SSY’s joint negotiation of prices is not related to any efficiency-enhancing integration.

The proposed consent agreement prohibits SSY from entering into any agreement between physicians: to negotiate with payors on behalf of any physician, to refuse or threaten to refuse to deal with payors, regarding the terms for dealing with any payor, and refusing to deal individually with any payor outside an arrangement involving SSY. As in other orders addressing providers’ collective bargaining with health care purchasers that the FTC has entered into, the proposed order addresses certain kinds of agreements that are excluded from the generic ban on joint negotiations, including SSY’s participation in a “qualified risk-sharing arrangement” or a “qualified clinically integrated joint arrangement,” as those terms are defined in the proposed order.

Finally, the proposed order requires SSY to revoke the membership of CSP or YSA, to reduce SSY’s market power in general surgery in Yakima. The Commission vote to place the proposed consent agreement on the public record for comment was 4-0-1, with Commissioner Pamela Jones Harbour not participating. 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 October 24, 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, 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 Commission enforces, the FTC 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.

This case was filed in cooperation with the Office of the Attorney General of the State of Washington.

FTC File No. 021-0242