[Federal Register Volume 74, Number 2 (Monday, January 5, 2009)]
[Notices]
[Pages 291-293]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-31385]


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FEDERAL TRADE COMMISSION

[File No. 061 0258]


Independent Practice Associates Medical Group, Inc.; 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 22, 2009.

ADDRESSES: Interested parties are invited to submit written comments. 
Comments should refer to ``AllCareIPA, File No. 061 0258,'' 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, N.W., Washington, D.C. 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 by following the instructions on the web-based form at (http://secure.commentworks.com/ftc-AllCareIPA). To ensure that the Commission 
considers an electronic comment, you must file it on that web-based 
form.
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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, including routine uses permitted by the 
Privacy Act, may be found in the FTC's privacy policy, at (http://www.ftc.gov/ftc/privacy.shtm).

[[Page 292]]


FOR FURTHER INFORMATION CONTACT: John P. Wiegand, FTC Western Region, 
San Francisco, 600 Pennsylvania Avenue, NW, Washington, D.C. 20580, 
(415) 848-5174.

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 24, 2008), on the World Wide Web, at (http://www.ftc.gov/os/2008/12/index.htm). A paper copy can be obtained from the FTC Public 
Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW, Washington, 
D.C. 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 
Independent Practice Associates Medical Group, Inc., dba AllCare IPA 
(``AllCare'' or ``Respondent''). The agreement settles charges that 
AllCare violated Section 5 of the Federal Trade Commission Act, 15 
U.S.C. Sec.  45, by fixing prices charged to those offering coverage 
for health care services (``payors'') in the Modesto, California, area 
and refusing to deal with payors. 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 Consent Order 
final.
    The purpose of this analysis is to facilitate public comment on the 
proposed Consent Order. The analysis is not intended to constitute an 
official interpretation of the agreement and proposed Consent 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 Respondent that it violated the law or that 
the facts alleged in the Complaint (other than jurisdictional facts) 
are true.

The Complaint's Allegations

    AllCare is a multi-specialty independent practice association 
consisting of multiple, independent medical practices with a total of 
approximately 500 physician members, of which approximately 200 are 
devoted to primary care, in the Modesto, California, area. Since its 
formation, AllCare has negotiated contracts with payors under which it 
has received capitated (per member per month) payments. These contracts 
shift the risk of patient illness to the IPA by specifying that the 
health plan will pay the IPA a flat monthly fee for each enrollee, with 
almost no regard for patient utilization. This type of contracting is a 
form of financial integration. The Complaint does not challenge 
AllCare's activities concerning these contracts.
    AllCare and its physicians also contract with Preferred Provider 
Organizations (``PPOs'') to provide fee-for-service medical care. In 
PPO arrangements, the payor compensates physicians or group practices 
for services actually rendered pursuant to agreed-upon fee schedules. 
PPO contracts may or may not entail financial risk-sharing or clinical 
integration on the part of providers. It is AllCare's negotiation of 
certain PPO contracts that is the subject of the Commission's 
Complaint.
    The Complaint alleges that AllCare, since at least 2005, has acted 
to restrain competition on fee-for-service contracts by facilitating, 
entering into, and implementing agreements to fix the prices and other 
terms in contracts with PPO payors; to engage in collective 
negotiations over terms and conditions of dealing with such payors; and 
to have AllCare members refrain from negotiating individually with such 
payors or contracting on terms other than those approved by AllCare. 
The Complaint further alleges that AllCare, to enforce the joint 
negotiation efforts, caused a significant number of AllCare physicians 
to sent to at least one payor the same form termination letter. These 
letters terminated the physicians' individual agreements with the payor 
and affirmed that the physicians would contract with the payor only 
through an agreement with AllCare.
    AllCare did not engage in any activity that might justify 
collective agreements on the prices its members would accept for their 
services. The physicians in AllCare, with respect to PPO contracts, do 
not share any financial risk in providing medical services, do not 
collaborate in programs to monitor and modify clinical practice 
patterns to control members' costs and ensure quality, or otherwise 
integrate their delivery of health care services. The Respondent's 
actions have restrained price and other forms of competition among 
physicians in the Modesto, California, area and thereby harmed 
consumers (including health plans, employers, and individual consumers) 
by increasing the prices for physician services.

The Proposed Consent Order

    The proposed Consent Order is designed to prevent the continuance 
and recurrence of the unlawful conduct alleged in the Complaint while 
allowing AllCare to engage in legitimate, joint conduct. The proposed 
Consent Order does not affect AllCare's activities in contracting with 
the payors on a capitated basis.
    Paragraph II.A prohibits Respondent from entering into or 
facilitating agreements between or among any health care providers (1) 
to negotiate on behalf of any physician with any payor, (2) to refuse 
to deal, or threaten to refuse to deal with any payor, (3) regarding 
any term, condition, or requirement upon which any physician deals, or 
is willing to deal, with any payor, including, but not limited to price 
terms or (4) not to deal individually with any payor, or not to deal 
with any payor except through AllCare.
    The other parts of Paragraph II reinforce these general 
prohibitions. Paragraph II.B prohibits the Respondent from facilitating 
exchanges of information between health care providers 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 encouraging, suggesting, advising, 
pressuring, inducing, or attempting to induce any person to engage in 
any action that would be prohibited by Paragraphs II.A through II.C.
    As in other Commission orders addressing health care providers' 
collective bargaining with health care purchasers, certain kinds of 
agreements are excluded from the general bar on joint negotiations. 
Paragraph II does not preclude AllCare from engaging in

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conduct that is reasonably necessary to form or participate in 
legitimate ``qualified risk-sharing'' or ``qualified clinically-
integrated'' joint arrangements, as defined in the proposed Consent 
Order. Also, Paragraph II would not bar agreements that only involve 
physicians who are part of the same medical group practice, defined in 
Paragraph I.B, because it is intended to reach agreements between and 
among independent competitors.
    Paragraphs III and IV require AllCare to notify the Commission 
before it initiates any arrangement to act as an agent or messenger 
with respect to physician contracting with payors. The Order also would 
require AllCare to provide to the Commission key details of the 
arrangement and to delay the implementation of that arrangement to 
permit further factual discovery by the Commission at its option. 
Paragraph III applies such requirements to arrangements under which 
AllCare would be acting as a messenger, and Paragraph IV applies them 
to arrangements under which AllCare plans to achieve financial or 
clinical integration.
    Paragraph V.A requires AllCare to send a copy of the Complaint and 
Consent Order to its physician members, its management and staff, and 
any payors who communicated with AllCare, or with whom AllCare 
communicated, with regard to any interest in contracting for physician 
services.
    Part V.B. of the Order requires AllCare to terminate preexisting 
payor contracts held by physicians who were AllCare participants since 
January 1, 2005, upon (1) receipt by AllCare of a written request for 
termination by relevant payors, or (2) the termination date, renewal 
date, or anniversary date of the contract, whichever is earlier. This 
termination can be delayed for up to one year after the effective date 
of the Order, upon the written request of the payor. This provision is 
intended to eliminate the effects of AllCare's joint price setting 
behavior.
    Paragraph V.C requires that AllCare send a copy of any payor's 
request for termination to every physician who participates in each 
group. Paragraph V.D contains further notification provisions relating 
to future contact with physicians, payors, management, and staff. This 
provision requires AllCare to distribute a copy of the Complaint and 
Consent Order to each physician who begins participating in each group; 
each payor who contacts each group regarding the provision of physician 
services; and each person who becomes an officer, director, manager, or 
employee for three years after the date on which the Consent Order 
becomes final. In addition, Paragraph V.D requires AllCare to publish a 
copy of the Complaint and Consent Order, for three years, in any 
official publication that it sends to its participating physicians.
    Paragraphs V.E and VI-VII impose various obligations on AllCare to 
provide to the Commission information that would assist in the 
monitoring of Respondent's compliance with the Consent Order.
    Pursuant to Paragraph VIII, the proposed Consent Order will expire 
in 20 years from the date it is issued.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. E8-31385 Filed 1-2-09: 8:45 am]
BILLING CODE 6750-01-S