[Federal Register Volume 71, Number 168 (Wednesday, August 30, 2006)]
[Notices]
[Pages 51620-51623]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-14360]


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FEDERAL TRADE COMMISSION

[File No. 051 0137]


New Century Health Quality Alliance, Inc., Prime Care of 
Northeast Kansas, L.L.C., et al.; 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 22, 2006.

ADDRESSES: Interested parties are invited to submit written comments. 
Comments should refer to ``New Century Health Quality Alliance, et al., 
File No. 051 0137,'' 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

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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 e-mail messages 
directed to the following e-mail 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 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: David Narrow, Bureau of Competition, 
600 Pennsylvania Avenue, NW., Washington, DC 20580, (202) 326-2744.

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 24, 2006), on the World Wide Web, at http://www.ftc.gov/os/2006/08/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 New 
Century Health Quality Alliance, Inc. (``New Century''), Prime Care of 
Northeast Kansas (``Prime Care''), four current or former officials of 
New Century or Prime Care, and 18 physician practices that are members 
of New Century or Prime Care (collectively referred to as ``Proposed 
Respondents'').
    New Century and Prime Care each are a type of physician joint 
venture known as an independent practice association (IPA). The New 
Century and Prime Care IPAs were comprised of competing physician 
practices in the Kansas City area who came together to jointly offer 
their services to certain payors who sought to purchase the physicians' 
services under capitation payment arrangements. Through the IPAs, the 
physicians shared financial risk that the services provided under the 
contracts might exceed the capitation payment from the payor to the 
IPA. In addition to together offering capitation risk-sharing contracts 
through the IPAs, each individual physician practice also continued to 
offer and sell its medical services to individual patients and payors 
on a fee-for-service basis as the physician practice's primary method 
of doing business.
    At various times, certain payors attempted to purchase the services 
of the individual physician practices in New Century and Prime Care not 
as part of the IPAs' risk-sharing capitation contracts as the payors 
had done in the past, but rather directly and on an individual fee-for-
service basis. Although the physician practices continued to offer 
their services in competition with one another individually and on a 
fee-for-service basis in the market to other payors, the physician 
practices, acting through New Century and Prime Care and their 
officials, agreed that they would only sell their services to those 
payors through capitation contracts entered into between the payors and 
the IPAs. The physician practices did this because they believed that 
they would receive lower payments under the direct, fee-for-service 
arrangements than they were making under the capitation contracts with 
the payors.
    The four named officials led New Century's and Prime Care's efforts 
to force the payors to deal through the IPAs in order to obtain access 
to the services of those physician practices, and actively encouraged 
the physician practice members of New Century and Prime Care to refuse 
to deal individually with health plans outside the IPAs. Each of the 18 
named physician practices took one or more affirmative actions in 
furtherance of the illegal agreement alleged in the proposed Complaint.
    In the absence of market power, jointly offering medical services 
on a capitation risk-sharing basis through New Century and Prime Care 
may be lawful and even procompetitive. However, the agreement by the 
physician members of New Century and Prime Care, respectively, to 
provide capitation risk contracts through each IPA does not justify 
their agreements not to deal, or only to deal on collectively 
determined terms, including price terms, regarding the sale of the 
individual physician practices' services outside the joint ventures. 
The member physicians' practices have not been fully integrated through 
either of the IPAs, and the individual physician practices in each IPA 
continue to compete with each other outside the IPAs in the sale of 
their services on a fee-for-service basis. Moreover, the offering by 
each IPA of capitation risk contracts does not justify the agreement of 
the two IPAs, at various times, to coordinate their actions, and the 
actions of their physician members, regarding the separate capitation 
risk contracts that each IPA had with payors. Neither the two IPAs, nor 
their respective physician memberships, were integrated at all with 
each other regarding those separate capitation risk contracts. 
Likewise, the IPAs' offering of capitation risk contracts, either 
separately or together, does not justify the two IPAs' agreement to act 
together, and their joint actions, regarding the sale of their 
individual member physician practices' medical services on a fee-for-
service basis outside of the IPAs.
    The agreement settles charges that the Proposed Respondents 
violated Section 5 of the Federal Trade Commission Act, 15 U.S.C. 45, 
by entering into, orchestrating, and implementing agreements to fix 
prices and other contract terms on which the physician practice members 
of the IPAs would deal with health plans. Even though the physician 
practice members offered their services jointly regarding their 
capitation risk contracts through the IPAs, they remained competitors 
in the sale of physician services and their refusals to deal with 
health plans except collectively and on collectively-determined terms 
through the IPAs violated Section 5.
    The proposed consent order has been placed on the public record for 
30 days to receive comments from interested

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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 
Proposed Respondents that they 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.
    New Century is an independent practice association (``IPA'') that 
consists of 16 medical practice groups with a total of approximately 87 
primary care physicians who treat patients in the Kansas City area. 
Prime Care also is an IPA, and consists of nine medical practice groups 
with a total of about 40 primary care physicians who treat patients in 
the Kansas City area. In 2002, the two IPAs began combining their Board 
meetings, offices, and administrative staff and operations. They voted 
to merge into a single entity, effective January 1, 2005, but never 
completed the steps legally necessary to consolidate.
    At various times, the physician practice members of New Century and 
Prime Care, acting jointly through those IPAs and their officials, and 
with the two IPAs acting either in concert or separately on different 
occasions, refused to deal with various health plans on any terms 
except by contracting through the IPAs and on a capitated basis.
    Most recently, in 2004 and 2005, the physician practice members of 
New Century and Prime Care, acting together through the two IPAs and 
their officials, agreed to refuse to contract, and did refuse to 
contract, with Humana Health Plan, Inc. (``Humana'') regarding its 
offers of fee-for-service payment contracts with the individual 
physician practices. Humana notified New Century and Prime Care of its 
intention to eliminate its use of capitated arrangements in the Kansas 
City area, and also notified them of its intention to terminate the 
separate, pre-existing, capitated contracts it had with each IPA. 
Before the capitated contract terminations were to become effective, 
Humana attempted to enter into new, individual, fee-for-service 
contracts with each of the physician practices that were members of New 
Century or Prime Care. However, New Century's and Prime Care's 
physician members agreed that they would deal with Humana only through 
their IPAs, acting in concert, and only on terms, including price 
terms, that were collectively agreed upon by the IPAs' physician 
practice members. These demands included, among other things, continued 
joint contracting, payment by capitation, and a 30% increase in 
physician reimbursement under one health plan contract.
    New Century and Prime Care, and their physician practice members, 
realized that together, with approximately 125 primary care physicians 
concentrated in certain parts of the Kansas City Area, they would have 
a better chance of forcing health plans, including Humana, to accept 
their contract demands. For example, they and their member physician 
practices were aware that Humana would be unable to offer certain of 
its programs to customers in the Kansas City area without the New 
Century and Prime Care physicians under contract as participating 
providers, and used that information to attempt to coerce Humana to 
accede to their contract demands.
    When Humana objected to New Century and Prime Care's demands, and 
refused to contract on a capitated basis or otherwise to deal with New 
Century or Prime Care in attempting to contract with the physician 
practices, New Century and Prime Care embarked on a multi-faceted 
campaign to encourage employers, brokers, and patients to put pressure 
on Humana to accept the contract terms demanded by the IPAs. Among the 
actions taken in furtherance of the challenged agreement were that 
various physician practice members of New Century and Prime Care, with 
the active encouragement and assistance of New Century and Prime Care 
officials: notified Humana that they were closing their medical 
practices to new patients covered by Humana's programs; mailed or 
distributed notices to patients covered by Humana programs informing 
the patients of impending disruption in their physician care due to 
Humana's refusal to enter into a contract with the physicians on 
acceptable terms; and rebuffed efforts by Humana to contract with the 
individual physician practices, referring Humana back to New Century 
and Prime Care for all contracting issues. By the acts set forth in the 
Complaint, the Proposed Respondents 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 the Proposed 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) regarding 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 
New Century or Prime Care.
    Other parts of Paragraph II reinforce these general prohibitions. 
Paragraph II.B prohibits the Proposed Respondents from facilitating 
exchanges of information between or among 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 the Proposed Respondents 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. The Proposed 
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 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

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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 New Century and Prime Care 
to notify the Commission before entering into any arrangement to act 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 the Proposed Respondents 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 New Century or Prime Care and health plans. 
Paragraph IV also sets out the information necessary to satisfy the 
notification requirement.
    Paragraph V provides that, for three years, the New Century and 
Prime Care officials named in the proposed complaint and order may not: 
(1) Negotiate or act as an agent on behalf of any physician or medical 
group practice that participates or has participated in either New 
Century or Prime Care; or (2) advise any physician or medical group 
practice that participates in or has participated in either New Century 
or Prime Care on contracts, offers, contract terms, conditions, or 
requirements for dealing with any payors. Exempted from Paragraph V's 
prohibition are the officials' participation in: (1) Certain qualified 
risk-sharing joint arrangements; (2) certain qualified clinically-
integrated joint arrangements; and (3) activities that solely involve 
physicians in a medical group practice in which the official 
participates.
    For three years, Paragraph VI requires both New Century and Prime 
Care, respectively, to distribute the complaint and order: (1) To all 
physicians who have participated in the IPAs, who currently participate 
in the IPAs, or who express interest in participating in the IPAs; and 
(2) to payors that have negotiated contracts with the IPAs, or that 
contract with the IPAs in the future.
    Paragraphs VII, VIII, IX, and X of the proposed order impose 
various obligations on the Proposed Respondents to report or provide 
access to information to the Commission to facilitate the monitoring of 
compliance with the order. Paragraph XI provides that the proposed 
order will expire in 20 years.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. E6-14360 Filed 8-29-06; 8:45 am]
BILLING CODE 6750-01-P