[Federal Register Volume 71, Number 38 (Monday, February 27, 2006)]
[Notices]
[Pages 9823-9825]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-2721]


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FEDERAL TRADE COMMISSION

[File No. 041 0097]


Health Care Alliance of Laredo, L.C.; Analysis of Proposed 
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 March 15, 2006.

ADDRESSES: Interested parties are invited to submit written comments. 
Comments should refer to ``Health Care Alliance of Laredo, File No. 041 
0097,'' 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 e-mail box: [email protected].
    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

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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: John DeGeeter, Bureau of Competition, 
600 Pennsylvania Avenue, NW., Washington, DC 20580, (202) 326-2783.

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 February 13, 2006), on the World Wide Web, at http://www.ftc.gov/os/2006/02/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 Health 
Care Alliance of Laredo, L.C. (``HAL''). The agreement settles charges 
that HAL violated section 5 of the Federal Trade Commission Act, 15 
U.S.C. 45, by orchestrating and implementing agreements among physician 
members of HAL 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 HAL 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.
    HAL is a multi-specialty independent practice association (``IPA'') 
in the Laredo, Texas, area with approximately 80 member physicians, a 
substantial majority of whom are competitors of one another. HAL 
contracts with payors on behalf of its member physicians and thereby 
establishes uniform prices and other contract terms applicable to its 
members.
    Although purporting to employ a ``messenger model,'' \2\ from 1998 
to 2005, HAL attempted to and did negotiate higher reimbursement rates 
for its member physicians, sent payor offers to its members only after 
HAL negotiated and approved the rates, and urged its members not to 
deal individually with payors.
    HAL's Board of Managers, nine physicians who are elected by and 
represent HAL's physician members, authorized and directed each step of 
the contracting process. The Board initiated negotiations by directing 
HAL personnel to contact a payor. On several occasions, HAL personnel 
contacted payors after learning that the payors were soliciting 
contracts with individual physicians. HAL personnel told the payors 
that HAL would represent and contract on behalf of HAL's physician 
members. As negotiations between payors and HAL personnel proceeded, 
HAL personnel were required to report to the Board on the progress of 
negotiations, and to seek authorization from the Board before making 
counterproposals. Ultimately, the Board either accepted or rejected 
contracts which HAL personnel presented to it. If the Board accepted 
the contract, HAL would then, and only then, ``messenger'' the contract 
to HAL's members for their individual acceptance or rejection. HAL did 
not messenger any rates proposed by the payors during negotiations, and 
messengered only the rates that the Board approved.
    HAL members were fully aware of the payor negotiations HAL 
conducted on their behalf. HAL's staff provided updates to members on 
the status of contract negotiations via telephone, monthly newsletters, 
and monthly meetings. On several occasions, as HAL personnel were 
attempting to negotiate a group contract, HAL urged its members not to 
negotiate individually with the health plans, and significant numbers 
of HAL members refused to deal individually with those payors.
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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).
    \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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    HAL members also had direct input in payor negotiations, aside from 
their representation on the Board. In 1999, HAL surveyed its members, 
asking them for ``the 20 most common codes used in the office and the 
maximum discount that you are willing to accept.'' HAL's Executive 
Director explained that ``[t]his will help me when I negotiate 
contracts on behalf of the organization, since I would present these 
codes as those for which I will seek the advantageous rates.'' In 
addition to the 1999 survey, HAL personnel and Board members regularly 
solicited input on acceptable rates from HAL's members, which were then 
used in negotiations with payors.
    HAL has orchestrated collective agreements on fees and other terms 
of dealing with health plans, carried out collective negotiations with 
health plans, and fostered refusals to deal. HAL succeeded in forcing 
numerous health plans to raise the fees paid to HAL physician members, 
and thereby raised the cost of medical care in the Laredo, Texas, area. 
HAL engaged in no efficiency-enhancing integration sufficient to 
justify joint negotiation of fees. By the acts set forth in the 
Complaint, HAL 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

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to raise fees they receive from health plans.
    The proposed order's specific provisions are as follows:
    Paragraph II.A prohibits HAL 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 HAL.
    Other parts of Paragraph II reinforce these general prohibitions. 
Paragraph II.B prohibits HAL 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 HAL 
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. HAL 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 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 HAL 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 HAL 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 HAL and health plans. Paragraph IV also sets out the 
information necessary to satisfy the notification requirement.
    Paragraph V requires HAL to distribute the complaint and order to 
all physicians who have participated in HAL, and to payors that 
negotiated contracts with HAL or indicated an interest in contracting 
with HAL. Paragraph V.D requires HAL, 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 HAL 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 HAL to 
distribute payor requests for contract termination to all physicians 
who participate in HAL.
    Paragraphs VI, VII, and VIII of the proposed order impose various 
obligations on HAL to report or provide access to information to the 
Commission to facilitate monitoring HAL's compliance with the order.
    The proposed order will expire in 20 years.
    The purpose of this analysis is to facilitate public comment on the 
proposed order. It is not intended to constitute an official 
interpretation of the proposed order to modify its terms in any way.
By direction of the Commission.

Donald S. Clark,
Secretary.
[FR Doc. E6-2721 Filed 2-24-06; 8:45 am]
BILLING CODE 6750-01-P