[Federal Register Volume 69, Number 114 (Tuesday, June 15, 2004)]
[Notices]
[Pages 33385-33387]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-13483]


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FEDERAL TRADE COMMISSION

[File No. 031 0134]


Southeastern New Mexico Physicians IPA, Inc., 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 July 6, 2004.

ADDRESSES: Comments should refer to ``Southeastern New Mexico 
Physicians IPA, Inc., et al., File No. 031 0134,'' to facilitate the 
organization of comments. A comment filed in paper form should include 
this reference both in the text and on the envelope, and should be 
mailed or delivered to the following address: Federal Trade Commission/
Office of the Secretary, Room H-159, 600 Pennsylvania Avenue, NW., 
Washington, DC 20580. Comments containing confidential material must be 
filed in paper form, as explained in the Supplementary Information 
section. The FTC is requesting that any comment filed in paper form be 
sent by courier or overnight service, if possible, because U.S. postal 
mail in the Washington area and at the Commission is subject to delay 
due to heightened security precautions. Comments filed in electronic 
form (except comments containing any confidential material) should be 
sent to the following email box: [email protected].

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 Section 2.34 
of the Commission's Rules of Practice, 16 CFR 2.34, notice is hereby 
given that the

[[Page 33386]]

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 June 7, 2004), on the World Wide Web, at http://www.ftc.gov/os/2004/06/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. Written comments must be submitted 
on or before July 6, 2004. Comments should refer to ``Southeastern New 
Mexico Physicians IPA, Inc., et al., File No. 031 0134,'' to facilitate 
the organization of comments. A comment filed in paper form should 
include this reference both in the text and on the envelope, and should 
be mailed or delivered to the following address: Federal Trade 
Commission/Office of the Secretary, Room H-159, 600 Pennsylvania 
Avenue, NW., Washington, DC 20580. If the comment contains any material 
for which confidential treatment is requested, it must be filed in 
paper (rather than electronic) form, and the first page of the document 
must be clearly labeled ``Confidential.'' \1\ The FTC is requesting 
that any comment filed in paper form be sent by courier or overnight 
service, if possible, because U.S. postal mail in the Washington area 
and at the Commission is subject to delay due to heightened security 
precautions. Comments filed in electronic form should be sent to the 
following e-mail box: [email protected].
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    \1\ Commission Rule 4.2(d), 16 CFR 4.2(d). The comment must be 
accompanied by an explicit request for confidential treatment, 
including the factual and legal basis for the request, and must 
identify the specific portions of the comment to be withheld from 
the public record. The request will be granted or denied by the 
Commission's General Counsel, consistent with applicable law and the 
public interest. See Commission Rule 4.9(c), 16 CFR 4.9(c).
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    The FTC Act and other laws the Commission administers permit the 
collection of public comments to consider and use in this proceeding as 
appropriate. All timely and responsive public comments, whether filed 
in paper or electronic form, will be considered by the Commission, and 
will be available to the public on the FTC Web site, to the extent 
practicable, at http://www.ftc.gov. As a matter of discretion, the FTC 
makes every effort to remove home contact information for individuals 
from the public comments it receives before placing those comments on 
the FTC Web site. More information, including routine uses permitted by 
the Privacy Act, may be found in the FTC's privacy policy, at http://www.ftc.gov/ftc/privacy.htm.

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 
Southeastern New Mexico Physicians IPA, Inc. (SENM), and two of its 
non-physician employees. 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 SENM 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 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.
    SENM is an independent practice association (IPA) with 68 physician 
members. SENM's members represent 73% percent of all physicians 
independently practicing (that is, those not employed by area 
hospitals) in and around Roswell, New Mexico, which is located in 
southeastern New Mexico.
    SENM members refuse to deal with health plans on an individual 
basis. Instead, two SENM employees, Barbara Gomez and Lonnie Ray, 
negotiate price and other contract terms with health plans that desire 
to contract with SENM members.
    Contracts that Ms. Gomez and Ms. Ray negotiate for SENM with health 
plans are presented to SENM's Managed Care Contract Committee for 
approval, then to SENM's Board of Directors. After SENM's Board 
approves it, a contract is presented to the general membership, which 
votes on whether SENM should accept the contract. If a majority of SENM 
members vote to accept, SENM's president signs the contract. Following 
this process, respondents have orchestrated collective agreements on 
fees and other terms of dealing with health plans, have carried out 
collective negotiations with health plans, and have orchestrated 
refusals to deal and threats to refuse to deal with health plans that 
resisted respondents' desired terms. Although SENM 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.\2\
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    \2\ 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 at 125. See http://www.ftc.gov/reports/hlth3s.htm#8.
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    Respondents have succeeded in forcing numerous health plans to 
raise fees paid to SENM members, and thereby raised the cost of medical 
care in the Roswell area. SENM engaged in no efficiency-enhancing 
integration sufficient to justify respondents' joint negotiation of 
fees. By orchestrating agreements among SENM members to deal only on 
collectively-determined terms, and actual or threatened refusals to 
deal with health plans that would not meet those 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 
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.

[[Page 33387]]

    The proposed order's specific provisions are as follows:
    Paragraph II.A prohibits 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, not 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 to 
deal with any payor only through an arrangement involving the 
respondents.
    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 
contract 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 Commission 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.'' The arrangement, however, must not facilitate the 
refusal of, or restrict, physicians from contracting with payors 
outside of the 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.
    Also, 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.E).
    Paragraph III, for a period of three years, bars Ms. Gomez and Ms. 
Ray from negotiating with any payor on behalf of SENM or any SENM 
member, and from advising any SENM member to accept or reject any term, 
condition, or requirement of dealing with any payor. This temporary 
``fencing-in'' relief is included to ensure that the alleged unlawful 
conduct by these respondents does not continue.
    Paragraph IV, for three years, requires respondents 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, which applies only to SENM, requires SENM to 
distribute the complaint and order to all physicians who have 
participated in SENM, and to payors that negotiated contracts with SENM 
or indicated an interest in contracting with SENM. Paragraph V.B 
requires SENM, at any payor's request and without penalty, or within 
one year after the Order is made final, to terminate its current 
contracts with respect to providing physician services. Paragraph V.C 
requires SENM to distribute payor requests for contract termination to 
all physicians who participate in SENM. Paragraph V.D.1.b requires SENM 
to distribute the complaint and order to any payors that negotiate 
contracts with SENM in the next three years.
    In the event that SENM fails to comply with the requirements of 
Paragraph V.A or Paragraph V.D.1.b, Paragraph VI would require Ms. Ray 
to do so.
    Paragraphs VII and VIII generally require Ms. Gomez and Ms. Ray to 
distribute the complaint and order to physicians who have participated 
in any group that has been represented by Ms. Gomez or Ms. Ray since 
August 1, 2001, and to each payor with which Ms. Gomez or Ms. Ray has 
dealt since August 1, 2001, for the purpose of contracting.
    Paragraphs V.E, V.F, VIII.B, IX, and X 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. 04-13483 Filed 6-14-04; 8:45 am]
BILLING CODE 6750-01-P