[Federal Register Volume 67, Number 71 (Friday, April 12, 2002)]
[Notices]
[Pages 18010-18011]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-8860]


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FEDERAL TRADE COMMISSION

[File No. 011 0153]


Obstetrics and Gynecology Medical Corporation of Napa Valley, et 
al.; Analysis To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair or deceptive acts or 
practices or unfair methods of competition. The attached Analysis to 
Aid Public Comment describes both the allegations in the draft 
complaint that accompanies the consent agreement and the terms of the 
consent order--embodied in the consent agreement--that would settle 
these allegations.

DATES: Comments must be received on or before May 6, 2002.

ADDRESSES: Comments filed in paper form should be directed to: FTC/
Office of the Secretary, Room 159-H, 600 Pennsylvania Avenue, NW., 
Washington, DC 20580. Comments filed in electronic form should be 
directed to: [email protected], as prescribed below.

FOR FURTHER INFORMATION CONTACT: Sylvia Kundig, FTC Western Regional 
Office, 901 Market St., Suite 570, San Francisco, CA. 94103. (415) 848-
5188.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Section 2.34 
of the Commission's rules of practice, 16 CFR 2.34, notice is hereby 
given that the above-captioned consent agreement containing a consent 
order to cease and desist, having been filed with and accepted, subject 
to final approval, by the Commission, has been placed on the public 
record for a period of thirty (30) days. The following Analysis to Aid 
Public Comment describes the terms of the consent agreement, and the 
allegations in the complaint. An electronic copy of the full text of 
the consent agreement package can be obtained from the FTC Home Page 
(for April 5, 2002), on the World Wide Web, at ``http://www.ftc.gov/os/2002/index.htm.'' A paper copy can be obtained from the FTC Public 
Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW., Washington, 
DC, 20580, either in person or by calling (202) 326-2222.
    Public comments are invited, and may be filed with the Commission 
in either paper or electronic form. Comments filed in paper form should 
be directed to: FTC/Office of the Secretary, Room 159-H, 600 
Pennsylvania Avenue, NW., Washington, DC 20580. If a comment contains 
nonpublic information, it must be filed in paper form, and the first 
page of the document must be clearly labeled ``confidential.'' Comments 
that do not contain any nonpublic information may instead be filed in 
electronic form (in ASCII format, WordPerfect, or Microsoft Word) as 
part of or as an attachment to e-mail messages directed to the 
following e-mail box: [email protected]. Such comments will be 
considered by the Commission and will be available for inspection and 
copying at its principal office in accordance with section 
4.9(b)(6)(ii) of the Commission's rules of practice, 16 CFR 
4.9(b)(6)(ii)).

Analysis of Agreement Containing Consent Order To Aid Public 
Comment

    The Federal Trade Commission has accepted, subject to final 
approval, an agreement with Obstetrics & Gynecology Medical Corp. of 
Napa Valley and its shareholders (collectively ``OGMC'' or

[[Page 18011]]

``proposed respondents'') containing a proposed consent order. The 
proposed order settles charges that OGMC violated Section 5 of the 
Federal Trade Commission Act, 15 U.S.C. 45, by facilitating or 
implementing agreements among its members to fix prices and other terms 
of dealing with payors, and to refuse to deal with payors except on 
collectively-determined terms. The proposed consent order has been 
placed on the public record for 30 days to receive comments from 
interested persons. Comments received during this period will become 
part of the public record. After 30 days, the Commission will review 
the agreement and the comments received, and will decide whether it 
should withdraw from the agreement or make the proposed order final.
    The purpose of this analysis is to facilitate public comment on the 
proposed order. The analysis is not intended to constitute an official 
interpretation of the agreement and proposed order, or to modify their 
terms in any way. Further, the proposed consent order has been entered 
into for settlement purposes only and does not constitute an admission 
by the proposed respondents that they violated the law or that the 
facts alleged in the complaint (other than jurisdictional facts) are 
true.

The Complaint

    The allegations in the Commission's proposed complaint are 
summarized below.
    Respondent OGMC is a for-profit corporation and a single-specialty 
independent practice association (``IPA'') composed of virtually all of 
the OB/GYNs with active medical staff privileges at the two general 
acute care hospitals in Napa County, California. OGMC's physicians had 
been members of Napa Valley Physicians (``NVP''), a multispecialty IPA 
in Napa County. An IPA is a vehicle through which physicians can 
contract with health plans to provide services to health plan 
enrollees. At times, physicians who participate in IPAs share the risk 
of financial loss with other participants if the total costs of 
services provided to patients exceed the anticipated volume of service. 
NVP was such a risk-sharing IPA. As is typical of such IPAs, NVP also 
provided quality assurance and utilization review.
    Beginning in 1998, NVP's OB/GYNs became dissatisfied with the level 
and timeliness of reimbursement from NVP. The OB/GYNs resigned from 
NVP, and then in February 2000, formed OGMC to promote, among other 
things, their collective economic interests by increasing their 
negotiating power with NVP. Prior to the formation of OGMC, and 
continuing into 2001, these OB/GYNs agreed among themselves to refuse 
to contract individually with NVP or any health plan. During this time, 
the OB/GYNs also agreed on the fees they would charge, and to boycott 
NVP to coerce it to meet their fee demands. As a consequence of the 
proposed respondents' conduct, NVP did not have sufficient OB/GYNs to 
serve adequately the HMO enrollees under NVP's HMO contracts. NVP 
ceased doing business in early 2001, and some health plans discontinued 
providing HMO coverage in Napa County.
    OGMC did not engage in any activity that might justify collective 
agreements on the prices its members would accept for their services. 
For example, the OB/GYNs have not clinically or financially integrated 
their practices to create efficiencies sufficient to justify their acts 
and practices. The proposed respondents' actions have restrained price 
and other forms of competition among OB/GYNs in Napa County, 
California, and thereby harmed consumers (including health plans, 
employers, and individual consumers) by increasing the prices for 
physician services.

The Proposed Consent Order

    The proposed order is designed to prevent recurrence of the illegal 
concerted actions alleged in the complaint, while allowing the OB/GYNs 
to engage in legitimate joint conduct. The core prohibitions of the 
proposed order are contained in Paragraph II. Paragraph II.A prohibits 
the proposed respondents from entering into, participating, or 
facilitating: (1) Any agreement to negotiate on behalf of any 
physicians with any payor or provider; (2) any agreement to deal or 
refuse to deal with any payor or provider; or (3) any agreement 
regarding any term on which any physicians deal, or are willing to 
deal, with any payor or provider.
    Paragraph II.B prohibits the proposed respondents from attempting 
to engage in a violation of Paragraph II.A. Paragraph II.C prohibits 
them from encouraging, suggesting, advising, pressuring, inducing, or 
attempting to induce any person to engage in any action that would be 
prohibited if the person were subject to the order.
    A proviso to Paragraph II allows the proposed respondents to engage 
in conduct (including collectively determining reimbursement and other 
terms of contracts) that is reasonably necessary to operate any 
``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. (The definition of financial 
risk-sharing tracks the discussion of that term contained in the 1996 
FTC/DOJ Statements of Antitrust Enforcement Policy in Health Care.) 
Second, any agreement on prices or terms of reimbursement must be 
reasonably necessary to obtain significant efficiencies through the 
joint arrangement.
    A ``qualified clinically-integrated joint arrangement'' is defined 
as one in which the physicians undertake cooperative activities to 
achieve efficiencies in the delivery of clinical services, without 
necessarily sharing substantial financial risk. (This definition also 
reflects the analysis contained in the 1996 FTC/DOJ Statements of 
Antitrust Enforcement Policy in Health Care.) Under this analysis, 
participating physicians must establish a high degree of 
interdependence and cooperation through their use of programs to 
evaluate and modify their clinical practice patterns, in order to 
control costs and assure the quality of physician services provided. In 
addition, any agreement on prices or terms of reimbursement must be 
reasonably necessary to obtain significant efficiencies through the 
joint arrangement.
    Paragraph III of the proposed order requires OGMC to dissolve. The 
remaining provisions of the proposed order impose obligations on the 
proposed respondents with respect to facilitating OGMC's dissolution; 
distributing the order and complaint to specified persons; and 
reporting information to the Commission. The order terminates 20 years 
after it issues.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 02-8860 Filed 4-11-02; 8:45 am]
BILLING CODE 6750-01-M