For Release:
August 20, 2002 Denver-Area
Physician Practice Groups and Their Agent Agree to Settle FTC Charges of Fixing Fees
Competing Physicians Used Agent to
Negotiate Higher Fees with Payors
Eight Denver, Colorado, area physician practice groups
specializing in obstetrics and gynecology (OB/GYNs), along with their non-physician agent
and his corporation, have agreed to settle Federal Trade Commission charges that the
practice groups and other physicians, through their common agent, entered into agreements
to fix fees and to refuse to deal with payors except on collectively agreed-upon terms.
According to the FTC, the OB/GYNs engaged in anticompetitive conduct that has restrained
price and other forms of competition among Denver-area OB/GYNs; caused fees for OB/GYN
services to rise; and harmed purchasers of health care services, including health plans,
employers, and individual patients. The proposed settlement contains an order designed to
prevent recurrence of these illegal concerted actions.
The FTC alleges that the physician practice groups and their
agent violated Section 5 of the Federal Trade Commission Act by facilitating and
implementing agreements among the obstetricians and gynecologists represented by the agent
to fix prices and other terms of dealing with health insurance firms and other third-party
payors (payors), and to refuse to deal with payors except on collectively determined
terms.
"This case is part of our continuing law enforcement
efforts directed at anticompetitive conduct involving health care," said Joe Simons,
Director of the FTC's Bureau of Competition. "The Commission's settlement ensures
that the agent and physicians who participated in the illegal fee-fixing and refusals to
deal will not engage in such activities again."
The Complaint
The FTC's complaint names as respondents R. Todd Welter (a
non-physician consultant), R.T. Welter & Associates, Inc. (RTWA), and eight physician
practice groups: Cohen and Womack, M.D., P.C.; Consultants in Obstetrics and Gynecology,
P.C.; Mid Town Obstetrics & Gynecology, P.C.; Mile High OB/GYN Associates, P.C.; The
OB-GYN Associates Professional Corporation; Rocky Mountain OB-GYN, P.C.; The Women's
Health Group, P.C.; and Westside Women's Care, L.L.P.
According to the complaint, Welter organized competing
Denver-area OB/GYN practice groups (comprised of more than 80 physicians) into a concerted
arrangement for the purpose of engaging in collective contract negotiations with health
insurance firms and other third-party payors. Welter and the OB/GYNs named their concerted
arrangement "Professionals in Women's Care," or "PIWC." The complaint
alleges that Welter and the named practice groups orchestrated boycotts and agreements
among the PIWC physicians to fix the prices and other terms they would accept from payors.
The respondents did not engage in any cooperative joint activity that would justify their
collective contract negotiations with health plans, the FTC's complaint states.
Sometimes a network of competing physicians uses an agent to
convey to payors information obtained individually from the physicians about fees or other
significant contract terms that the physicians are willing to accept. The agent also may
convey all payor contract offers to the physicians, which the physicians then unilaterally
decide whether to accept or reject. Such a "messenger model" arrangement, which
is described in the 1996 Statements of Antitrust Enforcement Policy in Health Care jointly
issued by the FTC and U.S. Department of Justice (see http://www.ftc.gov/reports/hlth3s.htm),
can facilitate contracting between physicians and payors and minimize the costs involved,
without fostering an agreement among competing physicians on fees or fee-related terms.
According to the complaint, Welter and the named practice
groups purported, but failed, to operate a legitimate messenger arrangement. From 1999 to
2001, they negotiated fees and other competitively significant terms on behalf of the
physicians participating in PIWC. Welter refused to convey payor contract offers to the
PIWC physicians if he and the named practice groups considered the terms deficient. They
demanded and received fees and other terms that were more economically advantageous than
the physicians could have obtained by negotiating individually with the payors.
The complaint alleges that Welter and the named practice
groups enhanced PIWC's bargaining strength by convincing the PIWC physicians to terminate
relationships with independent practice associations and practice management groups. They
exploited this strength by demanding higher fees and more favorable price-related terms
from payors. Welter advised the PIWC physicians to terminate, or threaten to terminate,
their pre-existing individual contracts with payors. Many PIWC participants complied,
pressuring payors to offer new contracts with higher fees.
The complaint alleges that these terminations and threats of
termination forced payors to choose between either paying higher fees to PIWC physicians
or being denied the ability to include those physicians in their health plan provider
networks. The latter was not a plausible option for the payors. To be marketable in the
Denver area to employers and other purchasers, a health plan's network of participating
physicians must include an adequate number of OB/GYNs who practice in the Denver area.
Through the conduct described in the complaint, the PIWC physicians were able to obtain
payor contracts containing fees that were allegedly significantly higher than the fees
those payors were paying other OB/GYNs in the area.
The Proposed Settlement
The Commission has issued a proposed order applicable to
RTWA, Welter, and the eight named practice groups. The order is designed to prevent
recurrence of the illegal concerted action, while allowing the respondents to engage in
legitimate conduct that does not impair competition. Under the proposed order's core
provisions, the respondents would be prohibited from entering into, participating in, or
facilitating any agreement: 1) to negotiate on behalf of physicians with any payor or
health care provider; 2) to deal or, to refuse to deal, with any payor or health care
provider; 3) regarding any term or condition on which physicians deal, or are willing to
deal, with any payor; or 4) not to deal individually with any payor, or to deal with any
payor only through an arrangement involving the respondent(s). The proposed order also
would bar the respondents from exchanging information concerning any physician's
willingness to deal with a payor.
The order would not prohibit the respondents from
facilitating agreements between physicians, if the physicians are part of the same medical
group practice. In addition, the respondents would not be prohibited from participating in
a "qualified risk-sharing joint arrangement" or "qualified
clinically-integrated joint arrangement." As defined in the proposed order, a
"qualified risk-sharing joint arrangement" must satisfy two conditions. First,
all physician participants must share substantial financial risk through the arrangement
and thereby create incentives for the physician participants jointly to control costs and
improve quality by managing the provision of services. Second, any agreement concerning
reimbursement or other terms or conditions of dealing must be reasonably necessary to
obtain significant efficiencies through the joint arrangement.
Under the proposed order, a "qualified
clinically-integrated joint arrangement" also must satisfy two conditions. First, all
physician participants must participate in active and ongoing programs to evaluate and
modify their clinical practice patterns, creating a high degree of interdependence and
cooperation among physicians in order to control costs and ensure the quality of services
provided. Second, 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 would prohibit Welter, for three years, from
negotiating with any payor on behalf of any current or past participant in PIWC, and from
advising any current or past PIWC participant to accept or reject any term, condition, or
requirement of dealing with any payor.
The order also would require the respondent practice groups
to terminate, without penalty, at any payor's request, current contracts, with respect to
providing physician services, negotiated by Welter with payors. This provision is intended
to eliminate the effects of the respondents' anticompetitive concerted actions.
Finally, the proposed settlement contains a number of
record-keeping and reporting requirements designed to assist the FTC in monitoring
compliance with its terms.
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 September 19, 2002, 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, D.C. 20580.
On September 9-10, 2002, the Federal Trade Commission will
host a workshop to consider the impact of competition law and policy on the cost, quality,
and availability of health care, and on the incentives for innovation in the field. The
agenda for the workshop is available at the Web page for the workshop, which can be found
at http://www.ftc.gov/ogc/healthcare/index.htm. |