[Federal Register Volume 68, Number 144 (Monday, July 28, 2003)]
[Notices]
[Pages 44337-44339]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-19148]


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FEDERAL TRADE COMMISSION

[File No. 021 0178]


Physician Network Consulting, L.L.C., 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 August 19, 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: [email protected], as prescribed in the 
Supplementary Information section.

FOR FURTHER INFORMATION CONTACT: Jeffrey Brennan, FTC, Bureau of 
Competition, 600 Pennsylvania Avenue, NW., Washington, DC 20580, (202) 
326-3688.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Sec.  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 22, 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 email messages directed to the following 
email 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 Sec.  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 an 
independent practice association (``IPA'') of

[[Page 44338]]

physicians who practice orthopedic medicine, its members physician 
practices, their negotiating agent, and the agent's managing director. 
The agreement settles charges that the respondents violated section 5 
of the Federal Trade Commission Act, 15 U.S.C. 45, by orchestrating and 
implementing agreements to fix prices and other terms on which they 
would deal with a payor, and to refuse to deal with that payor except 
on collectively-determined terms. The respondents named in the 
complaint are the agent, Physician Network Consulting, L.L.C., and its 
managing director, Michael J. Taylor; the IPA, Professional Orthopedic 
Services, Inc.; and the three physician practices whose physicians are 
members of the IPA, The Bone & Joint Clinic of Baton Rouge, Inc., Baton 
Rouge Orthopaedic Clinic, L.L.C., and Orthopaedic Surgery Associates of 
Baton Rouge, L.L.C. 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 respondents that they violated the law or that the facts alleged in 
the complaint (other than jurisdictional facts) are true.

The Complaint Allegations

    Professional Orthopedic Services consists of approximately 28 
physicians who provide approximately 70 percent of the orthopedic 
medicine services in the Baton Rouge, Louisiana, area. To be 
competitively marketable in the Baton Rouge area, a payor's health 
insurance plan must include in its physician network members of 
Professional Orthopedic Services, including physicians from at least 
The Bone and Joint Clinic or Baton Rouge Orthopaedic Clinic.
    Physician Network Consulting is an agent for Professional 
Orthopedic Services' members. It represents physicians in contract 
negotiations with health insurance firms and other third-party payors. 
Physician Network Consulting's client base includes physicians in 
approximately seven states. Michael J. Taylor is the founder and 
managing director of Physician Network Consulting.
    As the complaint alleges, this matter involves the fixing of price 
terms demanded from United HealthCare of Louisiana, Inc., by 
Professional Orthopedic Services' members. With and through Mr. Taylor, 
the members agreed to terminate their respective contracts with United. 
They authorized Physician Network Consulting to be their common agent 
to negotiate more lucrative price terms with United. Although Physician 
Network Consulting purported to operate as a ``messenger''--that is, an 
arrangement that does not facilitate horizontal agreements on price--it 
engaged in various actions that reflected or orchestrated such 
agreements.\1\
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    \1\ Some arrangements can facilitate contracting between 
physicians and payors without fostering an agreement among competing 
physicians on fees or fee-related terms. One such approach, 
sometimes referred to as a ``messenger model'' arrangement, is 
described in the 1996 Statements of Antitrust Enforcement Policy in 
Health Care jointly issued by the Federal Trade Commission and U.S. 
Department of Justice. See http://www.ftc.gov/reports/hlth3s.htm.
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    According to the complaint, respondents succeeded in coercing 
United to accept their price demands, and thereby raised the cost of 
orthopedic services in the Baton Rouge area. Professional Orthopedic 
Services engaged in no efficiency-enhancing integration sufficient to 
justify respondents' agreement on price. By orchestrating agreements 
among Professional Orthopedic Services' members to deal only on 
collectively-determined terms, and by refusing to deal with United 
unless it would meet those terms, respondents violated section 5 of the 
FTC Act.

The Proposed Consent Order

    The proposed order is designed to remedy the illegal conduct 
charged in the complaint and to prevent its recurrence. It is similar 
to recent consent orders that the Commission has issued to settle 
charges that physician groups engaged in unlawful agreements to raise 
fees they receive from health plans. The order also includes temporary 
``fencing-in'' relief to ensure that the alleged unlawful conduct by 
respondents does not continue. Respondents Physician Network Consulting 
and Mr. Taylor conduct business in a number of states, and the order 
applies to their activities in all such states.
    The proposed order's specific provisions are as follows:
    Paragraph II. contains the proposed order's core prohibitions 
against collectively negotiating prices or organizing group boycotts of 
payors. Paragraph II.A prohibits the respondents 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 any arrangement other than Professional 
Orthopedic Services.
    Other parts of Paragraph II reinforce these general prohibitions. 
Paragraph II.B prohibits the respondents from facilitating exchanges of 
information among physicians concerning whether, or on what terms, to 
contract with a payor. Paragraph II.C bars attempts to engage in any 
action prohibited by Paragraphs 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, respondents 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.''
    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

[[Page 44339]]

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.
    Second, because the order is intended to reach agreements among 
horizontal competitors, Paragraph II would not bar agreements that only 
involve physicians who are part of the same medical group practice 
(defined in Paragraph I.I).
    Paragraph III, for three years, bars Physician Network Consulting 
and Mr. Taylor from negotiating with any payor on behalf of the other 
respondents, and from advising any physician who participates in 
Professional Orthopedic Services, or advising the respondent Physician 
Practices (defined in Paragraph I.G), to accept or reject any term, 
condition, or requirement of dealing with any payor. This temporary 
``fencing-in'' relief will ensure that the alleged unlawful conduct by 
these respondents does not continue.
    Paragraph IV, for three years, requires Physician Network 
Consulting and Mr. Taylor to notify the Commission before entering into 
any arrangement to act as a messenger, or as an agent on behalf of any 
physicians, with payors regarding contracts. Paragraph IV sets out the 
information necessary to make the notification complete.
    Paragraph V requires Professional Orthopedic Services to send the 
complaint and order to all physicians who have participated in 
Professional Orthopedic Services, and to payors that contract with 
Professional Orthopedic Services.
    Paragraphs VI and VII generally require Physician Network 
Consulting to distribute the complaint and order to physicians who have 
participated in any group that has been represented by Physician 
Network Consulting since January 1, 1999, and each payor with which 
Physician Network Consulting has dealt since January 1, 1999, for the 
purpose of contracting.
    Paragraph VI.B requires Physician Network Consulting to distribute 
the complaint and order to present and past employees, and to each 
individual who has acted as a contractor for Physician Network 
Consulting relating to contracting or advising physicians with regard 
to their dealings with payors. Paragraph VI.B is intended to ensure 
that past as well as present employees and contractors of Physician 
Network Consulting are made aware of the complaint and consent in order 
to discourage similar illegal conduct.
    In the event that Physician Network Consulting fails to comply with 
the requirements set forth in Paragraphs IV, VI, VII.A.2, VII.B, or 
VII.C, Mr. Taylor must do so pursuant to Paragraph VIII.
    Paragraph IX requires the respondent Physician Practices to 
terminate any contract with United HealthCare at United HealthCare's 
request and without penalty.
    Paragraphs VII.B, VII.C, X, and XI of the proposed order impose 
various obligations on respondents to report or provide access to 
information to the Commission in order to facilitate monitoring 
respondents' compliance with the order.
    The proposed order will expire in 20 years.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 03-19148 Filed 7-25-03; 8:45 am]
BILLING CODE 6750-01-P