FTC Settlement Order Bars Texas Doctors' Group from Joint Price Negotiations

An association representing 900 physicians in the Amarillo, Texas, area has agreed to a Federal Trade Commission order barring it from jointly negotiating the prices it charges insurance providers. The FTC alleged in a complaint filed with the order that the association, Southwest Health Alliances, Inc., d/b/a BSA Provider Network, has violated federal law since 2000 by fixing the prices its member doctors would charge insurers. This led to higher prices for consumers and businesses.

The FTC order settling the charges prohibits Southwest Health from similar conduct in the future. The association also is settling similar charges brought by the Office of the Texas Attorney General.

Southwest Health is an independent practice association (IPA) consisting of multiple, independent medical practices with approximately 900 physician members – 300 of whom provide primary care services – in the Amarillo area. According to the FTC’s complaint, since at least 2000, the network has restrained competition by entering into and implementing agreements to fix the prices and terms at which it would contract with health plans, and has collectively negotiated the terms and conditions under which it would deal with health plans.

The FTC contends that the agreements eliminated competition and harmed consumers by increasing prices for physician services. Collective price negotiation and agreements between IPAs and health care providers may be justified under some circumstances. For example, if an IPA clinically or financially integrates its members’ practices, this may create efficiencies that justify joint price negotiations. However, because Southwest Health’s doctors undertook no such integration, the agreements produced no beneficial efficiencies for consumers.

The proposed order settling the FTC’s complaint is designed to stop Southwest Health’s allegedly anticompetitive conduct, while allowing it to continue to engage in legitimate joint conduct. To do this, the FTC order bars Southwest Health from entering into or facilitating agreements among physicians: 1) to negotiate on behalf of any physician with any insurer; 2) to negotiate with any physician as an insurer; 3) to deal, refuse to deal, or threaten to refuse to deal with any insurer; and 4) not to deal individually with any insurer, or not to deal with any insurer, except through Southwest Health.

In addition, the proposed order prohibits Southwest Health from facilitating the exchange of information between physicians concerning the terms on which they will contract with insurers. These terms are similar to those found in other FTC cases of this type.

The proposed order does not preclude Southwest Health from engaging in conduct that is reasonably necessary to form or participate in legitimate “qualified risk-sharing” or “qualified clinically integrated” arrangements, as defined in the order. It also does not prohibit agreements that only involve doctors who are part of the same medical practice.

Finally, the proposed order contains notification provisions that will allow the FTC to monitor Southwest Health’s compliance with its terms, and will allow insurers to terminate any contracts, without penalty, entered into with the network since its alleged restraint of trade began in 2000. The proposed order will expire in 20 years.

The Commission vote approving the complaint and proposed settlement order was 5-0. The order will be published in the Federal Register subject to public comment for 30 days, until June 10, 2011, after which the Commission will decide whether to make it final. Comments can be submitted electronically here.

The FTC thanks the Office of the Texas Attorney General for its exemplary work and coordination on this matter.

NOTE: The Commission issues 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 issuance of a complaint is not a finding or ruling that the respondent has violated the law. A consent order 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 up to $16,000.

Copies of the complaint, consent order, and an analysis to aid public comment are available from the FTC’s website 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 works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to antitrust@ftc.gov, or write to the Office of Policy and Coordination, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, DC 20580. To learn more about the Bureau of Competition, read Competition Counts. “Like” the FTC on Facebook and “follow” us on Twitter.