[Federal Register Volume 72, Number 4 (Monday, January 8, 2007)]
[Notices]
[Pages 784-787]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-27]


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FEDERAL TRADE COMMISSION

[File No. 031 0021]


Advocate Health Partners, 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 January 30, 2007.

ADDRESSES: Interested parties are invited to submit written comments. 
Comments should refer to ``Advocate Health Partners, File No. 031 
0021,'' 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 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

[[Page 785]]

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/
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privacy.htm.

FOR FURTHER INFORMATION CONTACT: Garth Huston (202) 326-3695, Bureau of 
Competition, Room NJ-7264, 600 Pennsylvania Avenue, NW., Washington, DC 
20580.

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 December 29, 2006), on the World Wide Web, at http://www.ftc.gov/os/2006/12/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 
Advocate Health Partners (``AHP'') and other related parties. The 
agreement settles charges that the proposed respondents violated 
Section 5 of the Federal Trade Commission Act, 15 U.S.C. 45, by 
orchestrating, implementing, and participating in agreements among 
physician practices to fix prices and other terms on which they would 
deal with health plans and to refuse to deal with certain health plans 
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 the 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.
    AHP is a ``super physician-hospital organization'' whose members 
consist of the non-profit Advocate Health Care Network (``AHCN'') 
hospital system and eight physician-hospital organizations organized at 
each of the AHCN hospital sites (the ``PHO Respondents''). Each PHO 
Respondent, in turn, consists of a hospital member (a non-profit 
subsidiary of AHCN) and a portion of physicians on staff at the 
hospital. Approximately 2,600 independently practicing physicians in 
the Chicago metropolitan area belong to the PHO Respondents. In 
addition, two AHCN for-profit subsidiaries named in the complaint (the 
``Advocate System Respondents'') contract with health plans, often 
through AHP, to provide the services of approximately 300 physicians 
who are employed by or under contract to provide services exclusively 
to the Advocate System Respondents.
    The complaint challenges conduct during the period 1995 to 2004, 
during which the respondents negotiated the prices and other terms at 
which their otherwise competing member physicians would provide 
services to the subscribers of health plans without any efficiency-
enhancing integration of their practices sufficient to justify their 
conduct. Between 1995 and 2001, AHP staff negotiated contracts on 
behalf of each PHO Respondent, with each PHO Respondent retaining 
authority to approve offers and counteroffers. Ultimately, each PHO 
Respondent would approve a negotiated contract on behalf of its member 
physicians, who could then opt in or opt out of the negotiated 
contract. In 2001, the respondents centralized contract approval at the 
super-PHO level. AHP staff continued to negotiate contracts, but AHP 
(rather than each PHO Respondent) had the authority to approve offers 
and counteroffers and, ultimately, to approve negotiated contracts on 
behalf of the AHP physicians, who could then opt in or opt out of the 
negotiated contract. At various times, the Advocate System Respondents 
participated in these collective negotiations by utilizing AHP to 
negotiate on their behalf, jointly with AHP's independent physicians. 
Under both approaches, AHP acted as the collective bargaining agent for 
physician practices that would otherwise compete.
    By 2002, AHP had served as the collective bargaining agent for 
member physicians in numerous contracts with health plans. Blue Cross 
Blue Shield of Illinois, however, was one of a few payors that had not 
contracted with AHP. Instead, Blue Cross contracted directly with the 
vast majority of AHP physicians. In early 2002, AHP began developing a 
strategy to force Blue Cross to replace those individual contracts with 
a group AHP contract, at higher rates than Blue Cross was paying AHP 
physicians under their individual contracts.
    To carry out its strategy to increase the prices Blue Cross paid to 
AHP physicians, AHP requested that all of its physicians submit what it 
termed ``Agency Agreements,'' which authorized AHP to terminate the 
physicians'' existing individual contracts with Blue Cross, and to 
collectively negotiate new contract terms on their behalf. In seeking 
this authority, AHP reminded its physicians that ``[a] major part'' of 
the value AHP offers ``has been your access to the favorable rates 
negotiated by AHP for many of your fee-for-service managed care 
contracts.'' Moreover, AHP's President instructed AHP staff to warn 
physicians attempting to rescind their Agency Agreement that ``if they 
rescind there is no hope of getting increases going forward and it will 
impact everyone's ability to get increases from other payors as [other 
payors] won't be able to compete [with Blue Cross].'' AHP obtained 
signed Agency Agreements from approximately 1,700 physicians and, on 
October 1, 2002, terminated the physicians' individual contracts with 
Blue Cross, effective January 1, 2003.
    AHP ultimately abandoned its plan to coerce Blue Cross to negotiate 
a group

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contract on price terms set by AHP, but only after Blue Cross sued AHP 
for violating the antitrust laws and agreed to make certain payments to 
AHP as part of the settlement of that dispute. Although Blue Cross's 
payments to AHP were supposed to be used by AHP to ``encourage outcome-
based reimbursement'' and to support efforts to implement electronic-
claim-submission capabilities for all AHP physicians, in fact AHP 
distributed the money only to physicians that had collectively 
threatened not to deal with Blue Cross.
    The complaint also discusses AHP's dealings with United Healthcare 
of Illinois, Inc. in 2001, as an example of AHP's collective bargaining 
on behalf of its member physicians. In order to establish a minimum 
acceptable rate for the United negotiations, AHP obtained input from 
each PHO Respondent's Board of Directors and established a single 
benchmark for the entire group that was higher than the minimum rate 
that some PHO Respondent's Boards were willing to accept. Ten days 
after United failed to agree to AHP's benchmark price for physician 
services, AHP terminated United's contracts not only with the AHP 
physicians, but also with the AHCN hospitals. After United attempted to 
enter into direct contracts with AHP physicians, AHP threatened that 
United would be unable to contract for AHCN hospital services unless 
United agreed to a group contract for AHP physician services. United 
ultimately agreed to a group contract containing fees for physician 
services that were 20 to 30 percent higher than United's direct 
contracts with individual physicians in the Chicago area.
    As the complaint alleges, the respondents engaged in no efficiency-
enhancing integration sufficient to justify the conduct challenged in 
the complaint. Accordingly, the complaint alleges that they 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 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 the 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, Paragraph II excludes certain 
kinds of agreements from its prohibitions. First, the respondents are 
not 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, for three years, restrict the ability 
of, or facilitate the refusal of, physicians who participate in it to 
contract 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. Second, the respondents are not 
precluded by Paragraph II. from engaging in conduct that solely 
involves the Advocate System Respondents, which are subsidiaries of the 
AHCN hospital system, and other physicians employed by AHCN because 
they are all part of a single entity.
    Finally, the order does not prohibit the respondents from engaging 
in conduct solely related to their participation in a program that AHP 
refers to as its ``Clinical Integration Program'' (the ``Program''). 
The complaint does not allege a violation of the FTC Act with respect 
to that conduct, and the Commission has made no determination with 
respect to its legality. The order, while not prohibiting conduct 
related to the Program, ensures that the illegal conduct charged in the 
complaint does not continue or recur. In addition, Paragraph VI.D. 
provides certain mechanisms designed to allow the Commission to monitor 
the further development, implementation, and results of the Program. 
The Commission retains the ability to challenge conduct related to the 
Program if it later determines that such a challenge is warranted and 
would be in the public interest.
    Paragraph III., for three years, requires the 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 III. also sets out the information 
necessary to make the notification complete.
    Paragraph IV., for three years, requires the 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 AHP and health plans. Paragraph IV. also sets out the 
information necessary to satisfy the notification requirement.
    Paragraph V. imposes certain notification obligations on AHP and 
requires the termination of contracts that were entered into illegally. 
Paragraphs V.A. and V.D. require AHP to distribute the complaint and 
order to (1) Physicians who have participated in AHP and the PHO 
Respondents in the past or who do so within the next three years; (2) 
to various past and future personnel of the respondents and AHCN

[[Page 787]]

subsidiaries that offer physician services to payors; and (3) to payors 
with whom the respondents have dealt in the past or deal with in the 
next three years. Paragraph V.B. requires AHP, at any payor's request 
and without penalty, or, at the latest, within one year after the order 
is made final, to terminate its existing contracts for the provision of 
physician services to payors, other than those contracts covering the 
program which AHP refers to as its Clinical Integration Program. 
Paragraph V.B. also allows any such contract currently in effect to be 
extended, upon mutual consent of AHP 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.C. requires AHP to distribute payor requests 
for contract termination to physicians who participate in the 
respondents. Paragraph V.E. requires AHP to notify the Commission of 
certain organizational changes to any respondent or other changes that 
may affect compliance with the order.
    Paragraphs VI., VIII., and IX. impose various obligations on the 
respondents to report or provide access to information to the 
Commission to facilitate the monitoring of compliance with the order. 
Because Paragraphs V. and VI. impose on AHP, in the first instance, 
obligations to provide notice and reporting on behalf of all 
respondents, Paragraph VII. requires that any respondents for which AHP 
has not acted fulfill those obligations.
    Finally, Paragraph X. provides that the order will expire in 20 
years.

    By direction of the Commission.
Donald S. Clark,
Secretary.
 [FR Doc. E7-27 Filed 1-5-07; 8:45 am]
BILLING CODE 6750-01-P