Appendix

Appendix of Federal Trade Commission Cases Cited in the
Prepared Statement of the Federal Trade Commission

Presented by

Robert Pitofsky, Chairman
Federal Trade Commission

Before The
Committee on the Judiciary
United States House of Representatives

Concerning H.R. 130
the "Quality Health-Care Coalition Act of 1999"

June 22, 1999

1. Association of Independent Dentists, 100 F.T.C. 518 (1982) (consent order).: A dental association in Pueblo County, Colorado, agreed to a consent order settling complaint charges that association members had threatened to refuse to execute participating dentist agreements with third-party payers in order to pressure these payers to increase or maintain the level of reimbursement paid for dental services. The consent order prohibits the association from coercing third-party payers to accept its positions about reimbursement in dental care coverage plans.

2. Michigan State Medical Society, 101 F.T.C. 191 (1983).: The Commission held that a medical society had illegally conspired to obstruct insurers' cost containment programs by orchestrating a group boycott of its members for the purpose of obtaining higher reimbursement. The society, through a proxy campaign, obtained its members' permission to collectively terminate participation in third-party payer and Medicaid insurance programs if these payers did not adopt reimbursement policies acceptable to the society. The Commission's order prohibits the society from orchestrating agreements among its members to affect the amount, manner of calculating, or other terms of reimbursement, and from agreeing with any third-party payer on terms or conditions of any participation agreement.

3. North Carolina Orthopaedic Association, 108 F.T.C. 116 (1986) (consent order).: An orthopaedic association agreed to a consent order settling complaint charges that the association had orchestrated an agreement among its members to exclude or unreasonably discriminate against podiatrists who sought hospital privileges or access to hospitals. The order prohibits the association from unreasonably restricting podiatrists from gaining surgical privileges or access to hospitals in North Carolina.

4. Preferred Physicians, Inc., 110 F.T.C. 157 (1988) (consent order).: Two hundred fifty physicians in Tulsa, Oklahoma, who effectively controlled patient access to the leading hospital in the area, formed a stock corporation to conduct joint negotiations with third-party payers on the members' behalf. The corporation agreed to a consent order settling complaint charges that the corporation had been formed as an exclusive negotiating agent of the otherwise competing members for the purpose of resisting pressure to provide discounts to HMOs and other third-party payers who might seek contracts with members of the corporation. The order prohibits the corporation from entering into agreements with its members to deal with third-party payers on collectively determined terms and communicating to third-party payers that its members would not participate in plans on terms unacceptable to the corporation.

5. Rochester Anesthesiologists, 110 F.T.C. 175 (1988) (consent order).: Thirty-one anesthesiologists in Rochester, New York, agreed to a consent order settling complaint charges that the anesthesiologists had conspired to increase their fees by negotiating collectively with third-party payers over reimbursement terms and by threatening not to participate in certain plans. It was further alleged that the anesthesiologists had jointly departicipated from Blue Shield when it refused to accede to their demand for higher reimbursement rates. The order prohibits the anesthesiologists from conspiring to deal with third-party payers on collectively determined terms or coercing third-party payers.

6. Medical Staff of Memorial Medical Center, 110 F.T.C. 541 (1988) (consent order).: A medical staff of a hospital in Savannah, Georgia, agreed to a consent order settling charges that the medical staff, acting through its credentials committee, had conspired to suppress competition by denying without a reasonable basis a certified nurse-midwife's application for hospital privileges. The order prohibits the staff from denying or restricting hospital privileges to certified nurse-midwives unless the staff has a reasonable basis for believing that the restriction would serve the interests of the hospital in providing for the efficient and competent delivery of health care services.

7. Patrick S. O'Halloran, M.D., 111 F.T.C. 35 (1988) (consent order).: Five obstetricians in the Newport, Rhode Island, area agreed to a consent order settling complaint charges that the physicians concertedly forced the state to raise Medicaid payments to obstetricians by threatening to refuse to accept new Medicaid patients if the state did not raise the payments. The order prohibits the doctors from conspiring to deal with any governmental health care program on collectively determined terms or coercing any governmental health care program.

8. New York State Chiropractic Association, 111 F.T.C. 331 (1988) (consent order).: A chiropractic association agreed to a consent order settling complaint charges that the association had conspired with its members to increase the level of reimbursement paid for chiropractic services by collectively threatening not to participate in, and by departicipating from, a program of a third-party payer. The order prohibits the association from conspiring to deal with third-party payers on collectively determined terms, acting on behalf of its members to negotiate with third-party payers, or coercing third-party payers.

9. Eugene M. Addison, M.D., 111 F.T.C. 339 (1988) (consent order).: Fourteen physicians in the Huntsville, Texas, area agreed to a consent order settling complaint charges that the physicians collectively sought to obtain from HMOs more advantageous terms of participation and, when those efforts proved unsuccessful, collectively refused to deal with the HMOs and attempted to restrict the hospital privileges of physicians associated with the HMOs. The consent order prohibits the doctors from dealing collectively with HMOs or health plans, denying hospital staff privileges solely because the applicant was associated with an HMO or health plan, and changing the hospital's rules or medical staff bylaws in order to limit the participation of any physician in governance of the hospital or medical staff because of his or her affiliation with an HMO or health plan.

10. Pharmaceutical Society of the State of New York, Inc., 113 F.T.C. 661 (1990) (consent order).: The consent order settled charges that the Pharmaceutical Society of the State of New York conspired to boycott the New York State Employees Prescription Plan in order to force an increase in reimbursement rates for plan participants who provide prescription drugs to state employees. According to the complaint, the society's actions reduced price competition, forced the state to pay substantial additional sums for prescription drugs, and coerced the state into raising the prices paid to pharmacies under the state plan. Under the consent agreement, the society agreed not to enter into any agreement between pharmacy firms to withdraw from or refuse to enter into any participation agreement.

11. Medical Staff of Broward General Medical Center, 114 F.T.C. 542 (1991) (consent order).: Physicians and other health practitioners with privileges to practice at a Fort Lauderdale, Florida, hospital agreed to a consent order settling complaint charges that the medical staff had conspired with its members to threaten to boycott the hospital in order to coerce the hospital not to enter a business relationship with the Cleveland Clinic or grant privileges to Clinic physicians. The order, among other things, prohibits the staff from (1) refusing to deal or threatening to refuse to deal with the hospital or any other provider of health care services; (2) denying, impeding, or refusing to consider any application for hospital privileges or for changes in hospital privileges by any person solely because of his or her affiliation with the Cleveland Clinic; and (3) denying or recommending to deny, limit, or otherwise restrict hospital privileges for any Cleveland Clinic physician without a reasonable basis for concluding that the denial, limitation, or restriction serves the interests of the hospital in providing for the efficient and competent delivery of health care services.

12. Medical Staff of Holy Cross Hospital, 114 F.T.C. 555 (1991) (consent order).: Physicians and other health practitioners with privileges to practice at a Fort Lauderdale, Florida, hospital agreed to a consent order settling complaint charges that the medical staff had conspired with its members to threaten to boycott the hospital in order to coerce the hospital not to enter a business relationship with the Cleveland Clinic or grant privileges to Clinic physicians. The order, among other things, prohibits the staff from (1) refusing to deal or threatening to refuse to deal with the hospital or any other provider of health care services; (2) refusing or threatening to refuse to provide, or delaying unreasonably in providing, an application for medical staff privileges to any Cleveland Clinic physician; (3) denying, impeding, or refusing to consider any application for hospital privileges or for changes in hospital privileges by any person solely because of his or her affiliation with the Cleveland Clinic; and (4) (i) denying or recommending to deny, limit, or otherwise restrict hospital privileges for any Cleveland Clinic physician, or (ii) closing or recommending to close the medical staff, without a reasonable basis for concluding that the denial, limitation, or restriction serves the interests of the hospital in providing for the efficient and competent delivery of health care services.

13. Southbank IPA, Inc., 114 F.T.C. 783 (1991) (consent order).: Twenty-three obstetrician/gynecologists in Jacksonville, Florida, agreed to a consent order settling complaint charges that the physicians had illegally conspired to fix the fees they charged to third-party payers, to boycott or threaten to boycott third-party payers, and otherwise to restrain competition among obstetrician/gynecologists in the Jacksonville, Florida, area. The order prohibits the doctors from entering or attempting to enter into any agreement or understanding with any competing physician to fix, stabilize, or tamper with any fee, price, or any other aspect of the fees charged for any physician's services; and from dealing with any third-party payer on collectively-determined terms unless they are participating in an "integrated" joint venture as defined by the order, or in a partnership or professional corporation.

14. Peterson Drug Company, Inc., 115 F.T.C. 492 (1992) (consent order).: As a member firm of Chain Pharmacy Association, Peterson Drug Company was charged with conspiracy to restrain trade in its refusal to participate in the New York State Employees Prescription Plan. An order was entered prohibiting the company from entering into any agreement among pharmacy firms to withdraw from or refuse to enter into a third-party payer prescription plan. See also Chain Pharmacy Association of New York State, 114 F.T.C. 28 (1991) (consent order) (settled charges that the Chain Pharmacy Association and its members conspired to boycott the New York State Employees Prescription Plan in order to force an increase in reimbursement rates).

15. Southeast Colorado Pharmacal Association, 116 F.T.C. 51 (1993) (consent order).: The complaint alleged that the Southeast Colorado Pharmacal Association illegally conspired to boycott a prescription drug program offered through a state-retirees health plan in an attempt to force the program to increase its reimbursement rate for prescriptions filled by its pharmacy members. The order prohibits the association from entering or threatening to enter into any agreement with pharmacies to withdraw from or refuse to participate in similar reimbursement programs in the future.

16. Baltimore Metropolitan Pharmaceutical Association, Inc. and Maryland Pharmacists Association, 117 F.T.C. 95 (1994) (consent order).: The complaint alleged that the Maryland Pharmacists Association (MPhA) and the Baltimore Metropolitan Pharmaceutical Association (BMPA), in response to cost-containment measures initiated by the Baltimore city government employees prescription-drug plan, illegally conspired to boycott the plan in order to force higher reimbursement rates for prescriptions. According to the complaint, the associations' actions increased the cost of obtaining drugs through prescription drug plans and reduced price competition among the firms providing these prescriptions. Under the consent order, MPhA and BMPA are prohibited from entering into, organizing, or encouraging any agreement between or among pharmacy firms to refuse to enter into, or to withdraw from, any participation agreement offered by a third-party payer.

17. McLean County Chiropractic Association, 117 F.T.C. 396 (1994) (consent order).: An association of chiropractors in McLean County, Illinois, agreed to a consent order settling charges that the association had set maximum fees for its members and had attempted to negotiate collectively on behalf of those members the terms and conditions of agreements with third-party payers. The order prohibited the association from organizing agreements among chiropractors to collectively determine fees or to deal with payers on collectively determined terms.

18. La Asociacion Medica de Puerto Rico, 119 F.T.C. 772 (1995) (consent order).: The Medical Association of Puerto Rico, its Physiatry Section, and two of its physiatrist members agreed to a consent order settling complaint charges that the respondents illegally conspired to boycott a government insurance program in order to obtain exclusive referral powers from insurers and to increase reimbursement rates. The doctors agreed not to boycott or refuse to deal with any third-party payer, or refuse to provide services to patients covered by any third-party payer.

19. Physicians Group, Inc., 120 F.T.C. 567 (1995) (consent order).: Physicians Group Inc. and seven physicians on the board of directors of that organization settled complaint charges that they conspired to prevent or delay the entry of third-party payers into Pittsylvania County and Danville, Virginia. The complaint also charged that respondents fixed the terms on which they would deal with third-party payers, including not only price terms but also terms and conditions of cost containment. The order prohibits such conduct.

20. Montana Associated Physicians, Inc./ Billings Physician Hospital Alliance, Inc., 123 F.T.C. 62 (1997) (consent order ).: A physician association (MAPI) and a physician-hospital organization (BPHA) in Billings, Montana, signed a consent order settling complaint charges that MAPI blocked the entry of an HMO into Billings, obstructed a PPO that was seeking to enter, recommended physician fee increases, and later acted through BPHA to maintain fee levels. The order prohibits the respondents from: (1) boycotting or refusing to deal with third-party payers; (2) determining the terms upon which physicians deal with such payers; and (3) fixing the fees charged for any physician services. MAPI also is prohibited from advising physicians to raise, maintain, or adjust the fees charged for their medical services, or creating or encouraging adherence to any fee schedule. The order does not prevent these associations from entering into legitimate joint ventures that are non-exclusive and involve the sharing of substantial financial risk. Other types of joint ventures are subject to prior approval by the Commission.

21. College of Physicians-Surgeons of Puerto Rico, FTC File No. 971-0011, Civil No. 97-2466-HL (District of Puerto Rico) (Oct. 2, 1997).: The Federal Trade Commission and the Commonwealth of Puerto Rico filed a complaint charging that the College of Physicians-Surgeons of Puerto Rico (comprising 8,000 physicians in Puerto Rico) and three physician independent practice associations attempted to coerce the Puerto Rico government into recognizing the College as the exclusive agent, for all physicians in Puerto Rico, for bargaining with the public corporation responsible for administering a health insurance system that provides medical and hospital care to indigent residents. The complaint also charged that, to achieve their goals, members of the College called an eight-day strike, during which they ceased providing non-emergency services to patients. A final order and stipulated permanent injunction filed in the U.S. District Court in Puerto Rico prohibited the defendants from boycotting or refusing to deal with any third-party payer, refusing to provide medical services to patients of any third-party payer, or jointly negotiating prices or other more favorable economic terms. The order also required the College to pay $300,000 to the catastrophic fund administered by the Puerto Rico Department of Health. The order does not prevent the defendants from participating in joint ventures that involve financial risk-sharing or that receive the prior approval of the Commission, from petitioning the government, or from communicating purely factual information about health plans.

22. Institutional Pharmacy Network (IPN) Dkt. No. C-3822 (Aug. 11, 1998) (consent order).: The complaint alleged that five institutional pharmacies unlawfully fixed prices and restrained competition among institutional pharmacies in Oregon, leading to higher reimbursement levels for serving Medicaid patients in Oregon long-term care institutions. The five pharmacies, which provide institutional pharmacy services for 80% of those patients in Oregon receiving such services, compete to provide prescription drugs and services to long-term care institutions. According to the complaint, the pharmacies formed IPN to offer their services collectively and maximize their leverage in bargaining over reimbursement rates, but did not share risk or provide new or efficient services. The order prohibits IPN and the institutional pharmacy respondents from entering into similar price fixing arrangements. The order, however, allows the respondents to engage in any "qualified clinically integrated joint arrangement" (with prior notice to the Commission), and conduct that is reasonably necessary to operate any "qualified risk-sharing joint arrangement" as set forth in the 1996 DOJ/FTC Statements of Antitrust Enforcement Policy in Health Care.

23. M.D. Physicians of Southwest Louisiana, Inc., Dkt. No. C-3824 (Aug. 31, 1998) (consent order).: The consent order settled complaint charges that M.D. Physicians of Southwest Louisiana, Inc. (MDP), a physician group comprising a majority of the physicians in the Lake Charles area of Louisiana, fixed the prices and other terms on which it would deal with third-party payers, collectively refused to deal with third-party payers, and conspired to obstruct the entry of managed care. According to the complaint, the group was formed in 1987 as a vehicle for its members to deal concertedly with the entry of managed care, and until 1994, the members of MDP dealt with third-party payers only through the group. As a result of this conduct, the complaint alleged, MDP restrained competition among physicians, increased the prices that consumers pay for physician services and medical insurance coverage, and deprived consumers of the benefits of managed care. The order prohibits MDP from engaging in collective negotiations on behalf of its members, orchestrating concerted refusals to deal, fixing prices or terms on which its members deal, or encouraging or pressuring others to engage in any activities prohibited by the order. The order does allow MDP to operate any "qualified risk-sharing joint arrangement" or, upon prior notice to the Commission, any "qualified clinically integrated joint arrangement," as reflected in the 1996 FTC/DOJ Statements of Antitrust Enforcement Policy in Health Care.

24. Ernesto L. Ramirez Torres, D.M.D., et al, Dkt. No. C-3851 (Feb. 5, 1999) (consent order).: A group of dentists, comprising a majority of the dentists in Juana Diaz, Coamo, and Santa Isabel, Puerto Rico, agreed to a consent order settling complaint charges that the dentists threatened to boycott a government program to provide dental care for indigent patients if they were not reimbursed at certain prices, and then boycotted the program. After several months, the dentists' price demands were met and they agreed to participate in the program. The order prohibits the dentists from jointly boycotting or refusing to deal with third-party payers or collectively determining any terms or conditions for dealing with third-party payers. The order does allow the dentists to operate any "qualified risk-sharing joint arrangement" or, upon prior notice to the Commission, any "qualified clinically integrated joint arrangement," as reflected in the 1996 FTC/DOJ Statements of Antitrust Enforcement Policy in Health Care.

25. Asociacion de Farmacias Region de Arecibo, Dkt. No. C-3855 (Mar. 2, 1999) (consent order).: An association composed of approximately 125 pharmacies in northern Puerto Rico agreed to a consent order settling charges that it threatened to withhold services from a government program to provide health care services for indigent patients. According to the complaint, the association was formed in 1994 as a vehicle to negotiate with health plans, and in January 1995 it refused to contract with Triple-S, the payer for the reform program in northern Puerto Rico, until Triple-S raised the fees paid to the association's members. Furthermore, in March 1996, the association threatened to withhold its members' services unless Triple-S rescinded a new fee schedule calling for lower reimbursement fees for the pharmacies. Triple-S acceded to the association's demands and increased fees by 22%. The consent order prohibits the association from negotiating on behalf of any pharmacies with any payer or provider, jointly boycotting or refusing to deal with third-party payers, restricting the ability of pharmacies to deal with payers individually, or determining the terms or conditions for dealing with third-party payers. The order does allow the association to operate any "qualified risk-sharing joint arrangement" or, upon prior notice to the Commission, any "qualified clinically integrated joint arrangement," as reflected in the 1996 FTC/DOJ Statements of Antitrust Enforcement Policy in Health Care.

26. North Lake Tahoe Medical Group, Inc., FTC File No. 981-0261, 64 Fed. Reg. 14730 (Mar. 26, 1999) (proposed consent order).: North Lake Tahoe Medical Group, Inc. ("Tahoe IPA"), an independent physician association, agreed to a consent order settling Commission charges that from 1994 to 1998 the association restrained competition among physicians and delayed the entry of managed care in the Lake Tahoe Basin in California. Tahoe IPA, based in Truckee, California, is composed of 91 physicians comprising 70% of the physicians practicing in the Lake Tahoe area. The complaint alleges that the IPA conspired to fix prices, engaged in collective negotiations over prices with payers, and refused to deal with Blue Shield of California and other third-party payers when they did not comply with Tahoe IPA's plans. The proposed order prohibits the IPA from (1) engaging in collective negotiations on behalf of its members; (2) orchestrating concerted refusals to deal; (3) fixing prices, or any other terms, on which its members deal; and (4) restricting the ability of any physician to deal with any payer or provider individually or through any arrangement outside of Tahoe IPA. The proposed order also requires Tahoe IPA to terminate the membership of physicians who refused to deal (or gave notice of their intent to refuse to deal) with Blue Shield, unless the physicians make a good faith effort to reparticipate and continue to participate in Blue Shield for a period of six months. The order does allow the IPA to operate any "qualified risk-sharing joint arrangement" or, upon prior notice to the Commission, any "qualified clinically integrated joint arrangement," as reflected in the 1996 FTC/DOJ Statements of Antitrust Enforcement Policy in Health Care.

27. Mesa County Physicians Independent Practice Association, Inc., Dkt. No. 9284 (May 4, 1999) (consent order).: The complaint alleged that the Mesa County IPA, an organization whose members comprise 85% of all physicians and 90% of primary care physicians in Mesa County, Colorado, acted to restrain trade by combining to fix prices and other competitively significant terms of dealing with payers, and by collectively refusing to deal with third-party payers. According to the complaint, the conduct of the Mesa County IPA hindered the development of alternative health care financing and delivery systems and resulted in higher prices for physician services in Mesa County. The complaint also alleged that the IPA's Contract Review Committee negotiated collectively on behalf of the IPA's members with several third-party payers, using an IPA Board-approved set of guidelines and fee schedule. The consent order prohibits the Mesa County IPA, among other things, from (1) engaging in collective negotiations on behalf of its members; (2) collectively refusing to contract with third-party payers; (3) acting as the exclusive bargaining agent for its members; (4) restricting its members from dealing with third-party payers through an entity other than the IPA; (5) coordinating the terms of contracts with third-party payers with other physician groups in Mesa County area; (6) exchanging information among physicians about the terms upon which physicians are willing to deal with third-party payers; and (7) encouraging other physicians to engage in activities prohibited by the order. The order, however, allows the respondents to engage in any "qualified clinically integrated joint arrangement" (with prior notice to the Commission) and in conduct that is reasonably necessary to operate any "qualified risk-sharing joint arrangement" as set forth in the 1996 DOJ/FTC Statements of Antitrust Enforcement Policy in Health Care