[Federal Register Volume 68, Number 198 (Tuesday, October 14, 2003)]
[Notices]
[Pages 59185-59187]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-25904]


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FEDERAL TRADE COMMISSION

[File No. 021 0242]


Surgical Specialists of Yakima, P.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 October 24, 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: Joseph Lipinsky, FTC, Northwest 
Regional Office, 915 Second Avenue, Suite 2896, Seattle, WA 98174, 
(206) 220-4473.

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 September 24, 2003), on the World Wide Web, at http://www.ftc.gov/os/2003/09/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

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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 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 
Surgical Specialists of Yakima, P.L.L.C. (SSY), and two general surgery 
groups--Cascade Surgical Partners, Inc., P.S. (CSP) and Yakima Surgical 
Associates, Inc., P.S. (YSA)--that are members of SSY. The agreement 
settles charges that these parties violated section 5 of the Federal 
Trade Commission Act, 15 U.S.C. 45, by orchestrating and implementing 
agreements among members of SSY to fix prices and other terms on which 
they would deal with health plans, agreements enforced by SSY's 
members' refusal 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 any Respondent that said Respondent violated the law or that the 
facts alleged in the complaint (other than jurisdictional facts) are 
true.

The Complaint

    The allegations of the complaint are summarized below.
    SSY was organized in 1996 by several independent medical practices. 
Those medical practices, which became ``members'' of SSY, were and are 
separate and independent in all material respects, are not subject to 
the control of SSY, have not unified their economic interests and 
incentives through SSY, and are not significantly integrated (either 
clinically or financially). SSY's activities on behalf of its members 
constitute the combined action of those members, and not unilateral 
action by SSY. SSY presently has 24 physician members that practice in 
five specialties, ENT, OB/GYN, Ophthalmology, Plastic Surgery, and 
General Surgery. SSY represents 90 percent of all physicians practicing 
general surgery in and around Yakima, Washington, which is located in 
south-central Washington.
    According to the complaint, SSY members refuse to negotiate or 
contract with health plans on an individual basis. Instead, all 
negotiations are conducted by SSY, and SSY's members accept only those 
contracts deemed acceptable by SSY. In accordance with this model, 
Respondents have orchestrated collective agreements on fees and other 
terms of dealing with health plans, have carried out collective 
negotiations with several health plans, and have refused and threatened 
to refuse to deal with health plans who resisted Respondents' desired 
terms.
    The complaint alleges that Respondents have succeeded in forcing 
health plans to raise fees paid to SSY members and thereby raised the 
cost of medical care in the Yakima area. As a result of the challenged 
actions of Respondents, SSY members receive the highest fees for 
surgical services in Washington. By orchestrating agreements among SSY 
members to deal only on collectively-determined price and other terms, 
Respondents have 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 prevent its recurrence. It is similar to 
many previous 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, but with one additional provision. 
In addition to the core prohibitions, the proposed order in this matter 
requires that SSY revoke the membership of either CSP or YSA. Such 
structural relief is not routinely imposed but is necessary in this 
case to reduce SSY's market power in general surgery.
    The proposed order's specific provisions are as follows:
    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, to refuse 
to deal, or to threaten to refuse to deal with payors; (3) regarding 
the terms of dealing with any payor; or (4) not to deal individually 
with any payor, or to deal with any payor only through an arrangement 
involving the Respondent SSY.
    Other parts of Paragraph II reinforce these general prohibitions. 
Paragraph II.B prohibits the Respondents from facilitating exchanges of 
information between physicians concerning whether, or on what terms, to 
deal with a payor. Paragraph II.C bars attempts to engage in any action 
prohibited by Paragraph II.A or II.B; and 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. 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 
physician participants jointly 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.
    Paragraph IV, which applies only to SSY, solves the market power 
issue by requiring SSY to revoke the membership of either CSP or YSA. 
It also requires

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SSY to distribute the complaint and order to all physicians who have 
participated in SSY, and to payors that negotiated or indicated an 
interest in negotiating contracts with SSY, and requires SSY to 
terminate, at any payor's request and without penalty, its current 
contracts with respect to providing physician services. Finally, SSY is 
prohibited from readmitting any physician from the revoked entity for 
five years and from readmitting the revoked entity for 10 years.
    Paragraph V, which applies only to CSP and YSA, requires them to 
distribute the complaint and order to all physicians who have 
participated in their activities and to any physicians who become 
involved with either CSP or YSA in the future.
    Paragraphs III, VI, and VII of the proposed order impose various 
obligations on Respondents to report or provide access to information 
to the Commission 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. 03-25904 Filed 10-10-03; 8:45 am]
BILLING CODE 6750-01-P