[Federal Register Volume 70, Number 155 (Friday, August 12, 2005)]
[Notices]
[Pages 47202-47204]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-15984]


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FEDERAL TRADE COMMISSION

[File No. 041-0100]


Partners Health Network, Inc.; Analysis of Agreement Containing 
Consent Order 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 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 September 3, 2005.

ADDRESSES: Interested parties are invited to submit written comments. 
Comments should refer to ``Partners Health Network, Inc., et al., File 
No. 041 0100,'' 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 135-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 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.

FOR FURTHER INFORMATION CONTACT: Karan Singh, Bureau of Competition, 
600 Pennsylvania Avenue, NW., Washington, DC 20580, (202) 326-2274.

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 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 August 5, 2005), on the World Wide Web, at http://www.ftc.gov/os/2005/08/index.htm.1 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.

[[Page 47203]]

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 
Partners Health Network, Inc. The agreement settles charges that 
Partners Health violated Section 5 of the Federal Trade Commission Act, 
15 U.S.C. 45, by orchestrating and implementing agreements among 
members of Partners Health 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 Partners Health that it 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.
    Partners Health is a physician-hospital organization consisting of 
approximately 225 physicians, Palmetto Health Baptist Medical Center at 
Easley, and Cannon Memorial Hospital. Partners Health does business in 
the Pickens, South Carolina, area, which is located in northwestern 
South Carolina. Partners Health was ``created to develop, negotiate, 
enter into, and administer contracts'' for its physician members, and 
its ``primary function'' is described as ``centralized managed care 
contracting.''
    Partners Health's physician members account for approximately 75% 
of the physicians independently practicing (that is, those not employed 
by area hospitals) in and around the Pickens County area. To be 
marketable in this area, a health plan must have access to a large 
number of physicians who are members of Partners Health.
    Although Partners Health purports to operate as a ``messenger 
model'' \2\--that is, an arrangement that does not facilitate 
horizontal agreements on price--it orchestrated such price agreements. 
The Partners Health Executive Director negotiates physician contracts 
with payors using a physician fee schedule that he created with input 
from the Partners Health physician members. This contracting process is 
overseen from start to finish by the Advisory Board and the Board of 
Directors. The Advisory Board is a 12-member committee that provides 
consultation to both the Board of Directors and the Executive Director 
during contract negotiations.
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    \2\ Some arrangements can facilitate contracting between health 
care providers and payors without fostering an illegal 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#9.
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    The Executive Director creates the Partners Health fee schedule by 
first polling the Partners Health physician practices to determine what 
prices they would like to receive in managed care contracts. The 
Executive Director then takes the highest prices he receives from among 
the physicians' responses for a given medical procedure, and assembles 
those highest prices into a single fee schedule. The Executive Director 
uses this fee schedule to negotiate contract terms with health plans. 
Whenever a health plan rejects the Partners Health fee schedule, 
Partners Health's Executive Director negotiates, in consultation with 
the Advisory Board, a contract with a ``comparable'' fee schedule. 
After notifying the Board of Directors, the Executive Director 
transmits these contract terms to the Partners Health member practices 
for their review. Physician members are automatically bound by the 
contract unless they specifically opt out within 30 days of receiving 
the offer.
    When they join Partners Health, the physician members agree to 
refer the patients they see under Partners Health contracts only to 
other Partners Health physicians, except in medical emergencies. This 
requirement stands even if non-Partners Health physicians are in the 
contracted payor's network.
    Partners Health has orchestrated collective agreements on fees and 
other terms of dealing with health plans, carried out collective 
negotiations with health plans, fostered refusals to deal, and 
threatened to refuse to deal with health plans that resisted Partners 
Health's desired terms. Partners Health succeeded in forcing numerous 
health plans to raise the fees paid to Partners Health physician 
members, and thereby raised the cost of medical care in the Pickens 
County area. Partners Health engaged in no efficiency-enhancing 
integration sufficient to justify joint negotiation of fees. By the 
acts set forth in the Complaint, Partners Health 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 proposed order's specific provisions are as follows:
    Paragraph II.A prohibits Partners Health 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 Partners 
Health.
    Other parts of Paragraph II reinforce these general prohibitions. 
Paragraph II.B prohibits Partners Health 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 Partners Health from 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. Partners Health 
would not be precluded from engaging in conduct that is reasonably 
necessary to form or participate in legitimate joint contracting 
arrangements among competing physicians in 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 in 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

[[Page 47204]]

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 III, for three years, requires Partners Health 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 III also sets out the information 
necessary to make the notification complete.
    Paragraph IV, for three years, requires Partners Health to notify 
the Commission before participating in contracting with health plans on 
behalf of a qualified risk-sharing joint arrangement, or a qualified 
clinically-integrated joint arrangement. The contracting discussions 
that trigger the notice provision may be either among physicians, or 
between Partners Health and health plans. Paragraph IV also sets out 
the information necessary to satisfy the notification requirement.
    Paragraph V requires Partners Health to distribute the complaint 
and order to all physicians who have participated in Partners Health, 
and to payors that negotiated contracts with Partners Health or 
indicated an interest in contracting with Partners Health. Paragraph 
V.D. requires Partners Health, at any payor's request and without 
penalty, or, at the latest, within one year after the order is made 
final, to terminate its current contracts with respect to providing 
physician services. Paragraph V.D. also allows any contract currently 
in effect to be extended, upon mutual consent of Partners Health and 
the contracted payor, to any date no later than one year from when the 
order became final. This extension allows both parties to negotiate a 
termination date that would equitably enable them to prepare for the 
impending contract termination. Paragraph V.E requires Partners Health 
to distribute payor requests for contract termination to all physicians 
who participate in Partners Health.
    Paragraphs VI, VII, and VIII of the proposed order impose various 
obligations on Partners Health to report or provide access to 
information to the Commission to facilitate monitoring Partners 
Health's compliance with the order.
    The proposed order will expire in 20 years.

    By direction of the Commission, with Chairman Majoras recused.
Donald S. Clark,
Secretary.
[FR Doc. 05-15984 Filed 8-11-05; 8:45 am]
BILLING CODE 6750-01-P