FTC Staff Has Advised the Eastern Ohio Physicians Organization, Inc. (EOPO) that Its Proposed Method of Operating is Unlikely To Violate Federal Antitrust Laws.

Federal Trade Commission staff have advised the Eastern Ohio Physicians Organization, Inc. (EOPO), a multi-speciality physician organization to operate in northeastern Ohio and northwestern Pennsylvania, that its proposed method of operation does not appear to violate federal antitrust laws. EOPO, based in Youngstown, Ohio, and established to contract on behalf of participating physicians with third-party payers in the area, had sought an FTC staff opinion on the antitrust implications of its formation and operation.

EOPO plans to contract initially with approximately 400 physicians to provide health care services to health plan beneficiaries residing in Mahoning, Trumbull, Columbiana, Portage, Stark and Ashtabula Counties in Ohio, and Lawrence and Mercer Counties in Pennsylvania. The physicians will constitute a little more than 31 percent of the primary care physicians and slightly more than 23 percent of the specialty physicians in the area.

EOPO plans to contract with payers primarily on a capitated basis, but also will enter into some discounted fee-for-service contracts. The primary care doctors will manage patient care and make referrals to specialists. Participating physicians will share risk under both capitation and fee-for-service contracts that medical costs will exceed budgeted amounts, and may also receive additional payments from set-aside funds based on their individual performance relating to standards of quality and efficiency.

EOPO will be a non-exclusive joint venture, which means that participating physicians may also participate in other networks. And EOPO will compete with several other networks in the area.

In a letter signed by Mark J. Horoschak, Assistant Director for Health Care in the FTC's Bureau of Competition, the FTC staff said that while it appears that the proposed operation of EOPO does not in all respects fall within the safety zone for non-exclusive physician network joint ventures that generally would not be challenged by the federal antitrust agencies, EOPO does not appear to pose a significant danger to competition in the relevant market. The safety zone applies to physician network joint ventures when they comprise 30 percent or less of the physicians in each physician specialty with active hospital staff privileges who practice in the relevant geographic area and who share substantial risk. In particular, the staff noted, EOPO appears to involve substantial risk sharing by participating physicians, providing provide incentives for physicians to achieve quality and cost-containment goals. Although the share of participating physicians slightly exceeds the safety zone's 30 percent criterion in some specialities, it does not appear likely to confer on the network the power to raise prices above the competitive level or to impede the development of competing physician networks, and it holds the potential for creating significant efficiencies, the staff said.

NOTE: This letter sets out the views of the staff of the FTC's Bureau of Competition, as authorized by the Commissionþs Rules of Practice. It has not been reviewed or approved by the Commission. As the Commission's rules explain, the staff's advice is rendered without prejudice to the right of the Commission later to rescind the advice and, where appropriate, to commence an enforcement proceeding. Staff advice concerning issues covered by the Federal Trade Commission/Department of Justice Health Care Policy Statements will be given within 90 to 120 days (depending on the topic) after all necessary information is provided.

Copies of the staff advisory opinion letter, the original inquiry, and the FTC/DOJ Health Care Policy Statements containing the safety zone referenced above are available from the FTCþs Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest FTC news as it is announced, call the FTC NewsPhone recording at 202-326- 2710. FTC news releases and other materials also are available on the Internet at the FTCþs World Wide Web site at: http://www.ftc.gov