[Federal Register Volume 70, Number 68 (Monday, April 11, 2005)]
[Notices]
[Pages 18397-18399]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-7244]


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FEDERAL TRADE COMMISSION

[Docket No. 9315]


Evanston Northwestern Healthcare Corporation and ENH Medical 
Group, Inc.; 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 Count III of the 
complaint 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 2, 2005.

ADDRESSES: Interested parties are invited to submit written comments. 
Comments should refer to ``Evanston Northwestern Healthcare 
Corporation, et al., Docket No. 9315,'' 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 159-H, 600 Pennsylvania Avenue, NW., Washington, DC 
20580. Comments containing confidential material must be filed in paper 
form, must be clearly labeled ``Confidential,'' and must comply with 
Commission Rule 4.9(c). 16 CFR 4.9(c) (2005).\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 that do not contain any nonpublic information may 
instead be filed in electronic form as part of or as an attachment to 
email messages directed to the following email box: 
[email protected].
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    \1\ 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 website, to the extent 
practicable, at 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 website. More information,

[[Page 18398]]

including routine uses permitted by the Privacy Act, may be found in 
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the FTC's privacy policy, at http://www.ftc.gov/ftc/privacy.htm.

FOR FURTHER INFORMATION CONTACT: Elizabeth A. Piotrowski, Bureau of 
Competition, 600 Pennsylvania Avenue, NW., Washington, DC 20580, (202) 
326-2623.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Sec.  3.25(f) 
of the Commission Rules of Practice, 16 CFR 3.25(f), 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, 2005), on the World Wide Web, at http://www.ftc.gov/os/2005/04/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. All comments should be filed as 
prescribed in the ADDRESSES section above, and must be received on or 
before the date specified in the DATES section.

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 
Evanston Northwestern Healthcare Corporation (``ENH''), ENH Medical 
Group, Inc. (``ENH Medical Group''), and ENH Faculty Practice 
Associates (``Faculty Practice Associates''). On February 10, 2004, the 
Commission issued a three-count complaint, alleging in Count III that 
ENH and ENH Medical Group (``Respondents'') violated Section 5 of the 
Federal Trade Commission Act, 15 U.S.C. 45, by negotiating price and 
other competitive terms on the collective behalf of otherwise 
independent, competing physicians. The proposed consent order, should 
the Commission accept it, would settle solely the allegations that are 
set forth in Count III of the complaint. The hearing on the remaining 
charges in the complaint is scheduled to commence before the 
Administrative Law Judge on February 10, 2005.
    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 its 
terms in any way. Further, the proposed consent order has been entered 
into for settlement purposes only and does not constitute an admission 
by ENH, ENH Medical Group, or Faculty Practice Associates that they 
violated the law or that the facts alleged in the complaint (other than 
jurisdictional facts) are true.

The Complaint Allegations Pertaining to Count III

    ENH, a non-profit corporation, owns Faculty Practice Associates, 
which is also a non-profit corporation. Faculty Practice Associates 
employs approximately 460 physicians (``salaried physicians'') who 
practice medicine in several offices either in Cook or Lake Counties, 
Illinois, and who primarily serve ENH's patients. Faculty Practice 
Associates is the sole shareholder of ENH Medical Group, a for-profit 
corporation. ENH Medical Group, on behalf of physicians whom it 
represents, negotiates and enters into contracts with health plans and 
other third-party payors (``payors''), pursuant to which the physicians 
provide services to the payors'' insureds in exchange for a fee. Among 
the contract terms that ENH Medical Group negotiates is the price by 
which payors compensate physicians for their provision of services.
    ENH Medical Group jointly represented two categories of physicians 
in its negotiations with payors for contracts: The salaried physicians, 
and about 450 other, independent physicians, who also practice medicine 
throughout Cook and Lake Counties (``independent physicians''). The 
salaried and independent physicians both include within their ranks 
specialists and primary care physicians. In the absence of their 
collective price fixing through ENH Medical Group, these physicians 
compete in the same geographic area for the sale of comparable 
physician services.
    Competition has the effect of lowering the costs, and improving the 
quality, of physician services. ENH Medical Group deprived payors, 
employers, and individuals of the benefits of physician competition, by 
orchestrating agreements among rival physicians on price and other 
competitively significant terms, and by negotiating with payors for 
contracts that contained such fixed terms. By eliminating physician 
competition, ENH Medical Group was able to obtain increases in the 
prices that payors paid to the salaried and independent physicians.
    The salaried physicians and independent physicians have not 
integrated their practices in a meaningful manner to enhance 
efficiency. In connection with the activities described in the 
complaint, the physicians have not shared financial risk. They also 
have not shared information technology systems, or complied with common 
performance standards or clinical protocols, to enhance services. ENH 
Medical Group's contracting practices violate of Section 5 of the 
Federal Trade Commission Act.

The Proposed Consent Order

    The proposed consent order is designed to remedy the illegal 
conduct charged in the complaint and prevent its recurrence, while 
allowing Respondents to engage in legitimate conduct that does not 
impair competition. The proposed order is similar to recent orders that 
the Commission has issued to settle charges relating to unlawful 
agreements to raise physician prices.
    The proposed order's specific provisions are as follows:
    The order's core prohibitions are contained in Paragraphs II, III, 
and IV. 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 Respondents' arrangements.
    Other parts of Paragraph II reinforce these general prohibitions. 
Paragraph II.B prohibits the Respondents from facilitating exchanges of 
information between or among physicians concerning whether, or on what 
terms, to contract with a payor. Paragraph II.C bans them from 
attempting to engage in any action prohibited by Paragraph II.A or 
II.B. Paragraph II.D prohibits Respondents from inducing anyone to 
engage in any action prohibited by Paragraphs II.A through II.C.

[[Page 18399]]

    As in other orders addressing health care providers' collective 
contracting with payors, certain kinds of agreements are excluded from 
the general bar on joint negotiations. Respondents are not 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.'' However, such arrangements must not restrict the 
ability, or facilitate the refusal, of the arrangements' physician 
members to deal with payors on an individual basis or through any other 
arrangement. As discussed below in connection with Paragraph IV, 
Respondents are required to notify the Commission about such an 
arrangement prior to negotiating on behalf of the arrangement's 
members, or before those members jointly discuss any terms of dealing 
with a payor.
    Respondents would not be barred from activities solely involving 
the salaried physicians with respect to ENH physician services.
    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 and thereby create incentives for the physician 
participants jointly to control costs and improve quality by managing 
the provision of services. Second, any agreements concerning 
reimbursement or other terms or conditions of dealing must be 
reasonably necessary to obtain significant efficiencies through the 
joint arrangement.
    As defined in the proposed order, a ``qualified clinically-
integrated joint arrangement'' also must satisfy two conditions. First, 
all physician participants must participate in active and ongoing 
programs to evaluate and modify their clinical practice patterns, 
creating a high degree of interdependence and cooperation among 
physicians, in order to control costs and ensure the quality of 
services provided. Second, any agreements concerning reimbursement or 
other terms or conditions of dealing must be reasonably necessary to 
obtain significant efficiencies through the joint arrangement.
    Paragraph III 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. The 
paragraph also sets out the information necessary to make the 
notification complete.
    In the event that a Respondent forms a qualified risk-sharing joint 
arrangement or a qualified clinically-integrated joint arrangement, 
Paragraph IV requires the Respondent, for five years, to notify the 
Commission at least 90 days prior to initially contacting, negotiating, 
or entering into agreements with payors concerning the arrangement. 
Notification is not required for subsequent negotiations or agreements 
with payors pursuant to any arrangement for which notice was already 
given under Paragraph IV, nor is notice required for renegotiation of 
any risk-sharing contract identified at confidential Appendix 1 of the 
Order. The final proviso to Paragraph IV sets out the information 
necessary to make the notification complete, and establishes the 
Commission's right to obtain additional information regarding the 
arrangement.
    Paragraph V, which applies only to ENH Medical Group, requires ENH 
Medical Group to distribute the complaint and order to: (1) All 
physicians that have participated in ENH Medical Group since January 1, 
2000, and (2) payors that ENH Medical Group has a record of having been 
in contact with regarding contracting for the provision of affiliated 
physician services since January 1, 2000. Paragraph V.B requires ENH 
Medical Group, 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. However, ENH 
Medical Group is not required by Paragraph V.B to terminate its risk-
sharing contracts identified in confidential Appendix 1 of the order. 
Paragraph V.C requires ENH Medical Group to distribute payor requests 
for contract termination to all physicians who participate in ENH 
Medical Group.
    The remaining provisions of Paragraph V, and Paragraphs VI through 
X, of the proposed order impose obligations on ENH Medical Group and 
ENH 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, Chairman Majoras not 
participating.
Donald S. Clark,
Secretary.
[FR Doc. 05-7244 Filed 4-8-05; 8:45 am]
BILLING CODE 6750-01-U