[Federal Register Volume 68, Number 141 (Wednesday, July 23, 2003)]
[Notices]
[Pages 43517-43519]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-18744]


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FEDERAL TRADE COMMISSION

[File No. 021 0188]


Washington University Physician Network; 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 August 11, 2003.

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:

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[email protected], as prescribed in the SUPPLEMENTARY 
INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Garry Gibbs, FTC, Bureau of 
Competition, 600 Pennsylvania Avenue, NW., Washington, DC 20580, (202) 
326-2767.

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 July 11, 2003), on the World Wide Web, at http://www.ftc.gov/os/2003/07/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 containing a proposed consent order with the 
Washington University Physician Network (WUPN). The agreement settles 
charges that WUPN violated Section 5 of the Federal Trade Commission 
Act, 15 U.S.C. 45, by orchestrating and implementing agreements among 
WUPN and its independent, community-based physician members 
(``community physicians''), and facilitating agreements among its 
community physicians and its Washington University School of Medicine 
full-time faculty physician members (``faculty physicians''), to fix 
prices and other terms on which they would deal with health plans, and 
to refuse to deal with such purchasers 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 WUPN that it violated the law or that the facts alleged in the 
complaint (other than jurisdictional facts) are true.

The Complaint Allegations

    WUPN consists of 900 faculty physicians and 600 community 
physicians who provide health care services in St. Louis, Missouri and 
four neighboring counties (``the greater St. Louis area''). WUPN was 
established in 1993 to facilitate, among competing physicians, 
collective bargaining with health plans in order to obtain more 
favorable reimbursement rates and other ``very favorable terms when 
compared to contracts entered into on an individual basis or through 
another organization.''
    WUPN is a not-for-profit corporation, and its sole legal member is 
Washington University (``WU''), also a non-profit entity. Section 4 of 
the FTC excludes certain types of non-profit corporations from its 
definition of entities under its jurisdiction. However, the Commission 
has jurisdiction over WUPN because WUPN's community physicians, who 
operate for profit, are ``members'' of WUPN due to their significant 
role in governing the organization. Also, WUPN provides substantial 
economic benefits for its community physician members, who make up a 
minority of the membership but are granted a substantial role in WUPN 
to enhance their incomes and bargaining power.
    WUPN is managed and controlled by a Board of Directors made up of 
16 community physicians and 13 faculty physicians. Contracts with 
health plans are negotiated by representatives of WUPN's Management 
Committee, and progress of its negotiations is reported to WUPN's 
Board. The Committee recommends to the Board whether to accept or 
reject a payor's fee schedule, or whether to terminate or extend a 
payor's existing contract. The Board votes on the recommendation, which 
requires majority approval.
    WUPN has successfully coerced a number of health plans to increase 
the fees they pay to WUPN members, and thereby raised the cost of 
medical care in the greater St. Louis area. As a result of the 
challenged actions of WUPN, consumers in the greater St. Louis area are 
deprived of the benefits of competition among physicians. By 
facilitating agreements among WUPN members to deal only on 
collectively-determined terms, and actual or threatened refusals to 
deal with health plans that would not meet those terms, WUPN has 
violated Section 5 of the FTC Act.
    WUPN's collective negotiations with payors are not justified by any 
efficiency-enhancing integration among the community physicians, or 
among the community physicians and the faculty physicians.

The Proposed Consent Order

    The proposed order is designed to prevent recurrence of the illegal 
conduct charged in the complaint, while allowing WUPN to engage in 
legitimate conduct that does not impair competition. It is similar to 
recent orders that the Commission has issued to settle charges that 
physician groups engaged in unlawful agreements to raise the fees they 
receive from health plans.
    The proposed order's specific provisions are as follows:
    Paragraph II.A prohibits WUPN from entering into or facilitating 
any agreement between or among any physicians: (1) To negotiate with 
payors on any physician's behalf; (2) to deal, refuse to deal, or 
threaten not to deal with payors; (3) on what terms to deal with any 
payor; or (4) not to deal individually with any payor, or not to deal 
with any payor through an arrangement other than WUPN.
    Other parts of Paragraph II reinforce these general prohibitions. 
Paragraph II.B prohibits WUPN from facilitating exchanges of 
information among

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physicians concerning whether, or on what terms, to contract with a 
payor. Paragraph II.C bars attempts to engage in any action prohibited 
by Paragraph II.A or II.B. Paragraph II.D proscribes inducing anyone to 
engage in any action prohibited by Paragraphs II.A through II.C.
    As in other orders addressing providers' collective bargaining with 
health care purchasers, certain kinds of agreements are excluded from 
the general bar on joint negotiations.
    First, WUPN would not be precluded from engaging in conduct that is 
reasonably necessary to form or participate in legitimate joint 
contracting arrangements among competing physicians, whether a 
``qualified risk-sharing joint arrangement'' or a ``qualified 
clinically-integrated joint arrangement.'' Second, WUPN would be 
permitted to enter into any agreement or engage in any conduct that 
only involves WU faculty members with respect to services provided by 
WU physicians.
    As defined in the proposed order, a ``qualified risk-sharing joint 
arrangement'' possesses two key characteristics. First, all physician 
participants must share substantial financial risk through the 
arrangement, such that the arrangement creates incentives for the 
participants 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.
    A ``qualified clinically-integrated joint arrangement,'' on the 
other hand, need not involve any sharing of financial risk. Instead, as 
defined in the proposed order, physician participants must participate 
in active and ongoing programs to evaluate and modify their clinical 
practice patterns in order to control costs and ensure the quality of 
services provided, and the arrangement must create a high degree of 
interdependence and cooperation among physicians. As with qualified 
risk-sharing arrangements, any agreement concerning price or other 
terms of dealing must be reasonably necessary to achieve the efficiency 
goals of the joint arrangement.
    Paragraphs III.A and III.B require WUPN to send notice of the order 
and complaint to all WUPN participating physicians, WUPN employees and 
principals, and all payors WUPN has contacted since January 1, 1998, 
concerning the provision of physician services. Paragraph III.C. 
requires WUPN to terminate, without penalty, any preexisting contract 
with a payor upon receipt of a payor's written request to terminate the 
contract. This provision is intended to eliminate the effects of WUPN's 
anticompetitive actions. Paragraph III.D of the proposed order requires 
WUPN to distribute the order and complaint prospectively to new 
members, newly contracted payors, and new employees for a period of 
three years, and Paragraphs IV through VI set out WUPN's requirements 
to report or provide access to information to the Commission to 
facilitate monitoring of WUPN's compliance with the order.
    The proposed order will expire in 20 years.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 03-18744 Filed 7-22-03; 8:45 am]
BILLING CODE 6750-01-P