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WHAT DO THE RECENT FEDERAL ANTITRUST ENFORCEMENT ACTIVITIES MEAN TO YOUR PRACTICE?
By: Sheryl Tatar Dacso, J.D., Dr.P.H. Law Office of Sheryl Tatar Dacso, PLLC
The Federal Trade Commission (“FTC”) appears to be giving its top enforcement priority to cases alleging that physician organizations, such as independent practice associations (IPAs), very large medical groups and physician-hospital alliances (“PHOs”), are fixing the reimbursement rates that contractor physicians and groups receive from health insurers and plans for treatment of patients in preferred provider organization (PPO) networks maintained by the IPAs and large groups.
Out of 16 nonmerger antitrust enforcement cases approved for action (usually settlement by consent decree, or else litigation before an administrative law judge) by the five-member commission in all fields and industries in fiscal year 2003, which began on Oct. 1, 2002, eight -- or fully half -- have been against IPAs, large groups or physician-hospital alliances, alleging price fixing. A number of these cases have involved Texas IPAs and networks.
In the case of North Texas Specialty Physicians (NTSP,) a 1200 physician-member Dallas-Fort Worth IPA, the FTC claimed violation of antitrust laws based on the group’s negotiating agreements among its participating physicians on price and other terms, refusing to deal with payors except on collectively agreed-upon terms, and refusing to submit payor offers to participating physicians unless the terms complied with NTSP’s minimum-fee standards. The FTC alleged that NTSP discouraged payors and participating physicians from negotiating directly with one another. In at least one instance, after fee negotiations with a particular payor broke down, NTSP allegedly orchestrated the removal of NTSP physicians from other arrangements with that payor. The FTC alleges that the payor was forced to yield to NTSP’s pressure and contract with the participating physicians at higher prices.
How do these cases develop? Federal antitrust cases, which generally arise from investigations following complaints lodged by payers, usually allege that the IPA or group with an outside network took part in negotiating price, or required member practices to deal with payers through the IPA/group rather than directly. The agency claims that such actions necessarily raise prices for consumers -- although mention of today's reimbursement environment and of payers' roles in the health care cash flow process is notably absent from the allegations in and public explanations of these cases.
Why are we seeing so much antitrust activity in
Texas? One of the major reasons for the increased activity of the FTC in
Texas is because of the change in how managed care organizations reimburse physicians. IPAs are increasingly moving away from paying physicians on a capitated basis in favor of fee schedules and fee-for-service reimbursement. The former methodology is not subject to “price fixing” allegations while the latter is highly vulnerable. Network size coupled with pre-negotiated fee schedules, while giving the physicians the advantage of size and more acceptable payment methodology, have resulted in increased complaints by payors to the FTC for IPA’s refusal to “deal” and health plans being required to pay higher rates to physicians as a condition of contracting.
What can physicians do to obtain better reimbursement rates from managed care plans without violating antitrust laws? The FTC has already provided guidance to provider networks that use a third-party arrangement to contract on behalf of individual physicians. It is the intent of the antitrust laws to protect and foster competition, not competitors. IPAs that use capitation or are sufficiently integrated (economically or functionally) should have no problem negotiating terms on behalf of their members unless they become so large that the health plans can not obtain a contract under “fair” terms.” For non-risk, non-integrated models, there are published guidelines by the FTC for using the “messenger model” in negotiation of “price-sensitive” terms. This guidance can be found at: www.usdoj.gov.
What about the
Texas “collective bargaining” laws? In 1999, legislation was passed by the Texas Legislature to establish a “State-sanctioned” method for collective negotiations of managed care contracts that would be “safe” from antitrust scrutiny. [Texas Insurance Code, Chap. 29, Art. 29.1-29.14] Unfortunately, the law has not been utilized as envisioned by its sponsors and supporters as an alternative to IPA-negotiated contracts. The process involves a cumbersome process through the State Attorney General’s office in order to establish the requisite State action which pre-empt federal antitrust regulation of the conduct.
The purpose of this article is to educate the reader about the possibility of his/her inadvertently becoming a co-defendant with other health care providers in antitrust enforcement actions being directed at large medical groups, physician organizations and provider networks. Physicians who serve on the boards of these organizations should exercise discretion when developing contracting policies and assure that the parties engaged in negotiations on the behalf of the individual providers conduct their negotiations with proper attention to the slippery-slope of antitrust regulation.
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