[Federal Register Volume 74, Number 113 (Monday, June 15, 2009)]
[Pages 28246-28248]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-13956]



[File No. 051 0260]

Alta Bates Medical Group; Analysis of Proposed Consent Order to 
Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed Consent Agreement.


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 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 July 6, 2009.

ADDRESSES: Interested parties are invited to submit written comments 
electronically or in paper form. Comments should refer to``Alta Bates, 
File No. 051 0260'' to facilitate the organization of comments. Please 
note that your comment--including your name and your state--will be 
placed on the public record of this proceeding, including on the 
publicly accessible FTC website, at (http://www.ftc.gov/os/publiccomments.shtm).
    Because comments will be made public, they should not include any 
sensitive personal information, such as an individual's Social Security 
Number; date of birth; driver's license number or other state 
identification number, or foreign country equivalent; passport number; 
financial account number; or credit or debit card number. Comments also 
should not include any sensitive health information, such as medical 
records or other individually identifiable health information. In 
addition, comments should not include any ``[t]rade secret or any 
commercial or financial information which is obtained from any person 
and which is privileged or confidential. . . .,'' as provided in 
Section 6(f) of the FTC Act, 15 U.S.C. 46(f), and Commission Rule 
4.10(a)(2), 16 CFR 4.10(a)(2). Comments containing material for which 
confidential treatment is requested must be filed in paper form, must 
be clearly labeled ``Confidential,'' and must comply with FTC Rule 
4.9(c), 16 CFR 4.9(c).\1\

    \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 FTC Rule 4.9(c), 16 CFR 

    Because paper mail addressed to the FTC is subject to delay due to 
heightened security screening, please consider submitting your comments 
in electronic form. Comments filed in electronic form should be 
submitted by using the following weblink: (https://secure.commentworks.com/ftc-altabates) (and following the instructions 
on the web-based form). To ensure that the Commission considers an 
electronic comment, you must file it on the web-based form at the 
weblink: (https://secure.commentworks.com/ftc-altabates). If this 
Notice appears at (http://www.regulations.gov/search/index.jsp), you 
may also file an electronic comment through that website. The 
Commission will consider all comments that regulations.gov forwards to 
it. You may also visit the FTC website at http://www.ftc.gov/ to read 
the Notice and the news release describing it.
    A comment filed in paper form should include the ``Alta Bates, File 
No. 051 0260`` 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 H-135 (Annex D), 600 
Pennsylvania Avenue, NW, Washington, DC 20580. 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 
    The Federal Trade Commission Act (``FTC Act'') and other laws the 
Commission administers permit the collection of public comments to 
consider and use in this proceeding as appropriate. The Commission will 
consider all timely and responsive public comments that it receives, 
whether filed in paper or electronic form. Comments received will be 
available to the public on the FTC website, to the extent practicable, 
at (http://www.ftc.gov/os/publiccomments.shtm). As a matter of 
discretion, the Commission 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).

Western Region, San Francisco, 600 Pennsylvania Avenue, NW, Washington, 
D.C. 20580, (415) 848-5100.

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 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 June 4, 2009), on the World Wide Web, at (http://www.ftc.gov/os/actions.shtm). 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

[[Page 28247]]

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 Alta 
Bates Medical Group, Inc., (``ABMG'' or ``Respondent''). The agreement 
settles charges that ABMG 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 Berkeley 
and Oakland, California, area and refusing to deal with payors except 
on a collectively determined basis. 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 
    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.

Alta Bates Medical Group, Inc.

    ABMG is a multi-specialty independent practice association 
(``IPA'') comprised of multiple, independent medical practices serving 
the Berkeley and Oakland, California area. It has a total of 
approximately 600 physician members, of which approximately 200 are 
devoted to primary care. Since its formation, ABMG has negotiated group 
contracts with payors under which it receives 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, so for anititrust purposes, the IPA is treated as a single 
entity for purposes of these contract negotiations, and not as a group 
of competing physicians. The complaint does not challenge ABMG's 
activities concerning these contracts.
    ABMG, however, also contracts on behalf of its member physicians 
with health plans to provide fee-for-service medical care. Under these 
arrangements, the payor compensates physicians or group practices for 
services actually rendered pursuant to agreed-upon fee schedules. In 
the absence of financial risk-sharing or clinical integration on the 
part of providers, the IPA members are competitors for purposes of 
antitrust analysis. It is ABMG's negotiation of fee-for-service 
contracts that is the subject of the allegations in the Commission's 

The Complaint

    Since at least 2001, ABMG, acting as a combination of its physician 
members, and in conspiracy with its members, has acted to restrain 
competition with respect to fee-for-service contracts by, among other 
things, facilitating, entering into, and implementing agreements, 
express or implied, to fix the prices and other terms at which they 
would contract with payors; to engage in collective negotiations over 
terms and conditions of dealing with payors; and to have ABMG members 
refrain from negotiating individually with payors or contracting on 
terms other than those approved by ABMG. This type of collective 
conduct by competitors is inherently suspect under the antitrust laws.
    At times, however, IPAs will act as a conduit between physician 
members and health plans regarding fee-for-service contracts to 
facilitate the contracting process. Under this model, the IPA merely 
acts as a messenger and does not negotiate the terms of the contract.
    Although claiming to employ a lawful messenger arrangement, ABMG, 
on behalf of its physician members, instead orchestrated collective 
negotiations for fee-for-service contracts. Specific acts by ABMG that 
are alleged in the complaint are: making proposals and counter-
proposals, as well as accepting or rejecting offers, without consulting 
with its individual physician members regarding the prices they 
unilaterally would accept, and without transmitting the payors' offers 
to its individual physician members until ABMG had approved the 
negotiated prices.
    The complaint also alleged a concerted refusal to deal intended to 
impede competition by one of ABMG's major competitors, the Permanente 
Medical Group, which provides physician services exclusively to Kaiser 
Foundation Health Plan, Inc. In 2006, Kaiser\2\ was expanding a fee-
for-service product, under which covered individuals could access 
physician services through a national third-party network that included 
ABMG physicians. This expansion by Kaiser threatened ultimately to 
reduce ABMG's business under its capitated contracts, by giving Kaiser 
the ability to offer employers both a capitated and fee-for-service 
health plan option. To impede this expansion, ABMG attempted a 
concerted refusal to serve Kaiser fee-for-service enrollees. Although 
ABMG's refusal to deal was ultimately unsuccessful, the sole purpose of 
this action was to impede competition in the provision of physician 
services in and around Berkeley and Oakland, California.

    \2\ Kaiser is a trade name for an association of three entities: 
Kaiser Foundation Health Plan, Inc.; Kaiser Foundation Hospitals; 
and the Permanente Medical Groups.

    ABMG did not engage in any activity that might justify collective 
agreements on the prices its members would accept for their services. 
For example, the physicians in ABMG have not clinically or financially 
integrated their practices to create efficiencies sufficient to justify 
their acts and practices. As a consequence, the Respondent's actions 
have restrained price and other forms of competition among physicians 
in the Berkeley and Oakland, 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 illegal conduct alleged in the complaint while it 
allows ABMG to engage in legitimate, joint conduct. The proposed 
Consent Order does not affect ABMG's activities in contracting with the 
payors on a capitated basis.
    Paragraph II.A prohibits Respondent from entering into or 
facilitating any agreement 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 other than through ABMG.
    The other parts of Paragraph II reinforce these general 

[[Page 28248]]

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 payors, certain kinds of 
agreements are excluded from the general bar on joint negotiations. 
Paragraph II does not preclude ABMG from engaging in 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 
    Paragraphs III through VI require ABMG to notify the Commission 
before it initiates certain contacts regarding contracts with payors. 
Paragraphs III and IV apply to arrangements under which ABMG would be 
acting as a messenger on behalf of its member physicians. Paragraphs V 
and VI discuss arrangements under which ABMG plans to achieve financial 
or clinical integration.
    Paragraph VII.A requires ABMG to send a copy of the Complaint and 
Consent Order to its physician members, its management and staff, and 
any payors who communicated with ABMG, or with whom ABMG communicated, 
with regard to any interest in contracting for physician services, at 
any time since January 1, 2001.
    Paragraph VII.B requires ABMG to terminate, without penalty, pre-
existing payer contracts that it had entered into since 2001, at the 
earlier of (1) receipt by ABMG of a written request for termination by 
the payer; or (2) the termination date, renewal date, or anniversary 
date of the contract. This provision is intended to eliminate the 
effects of ABMG's illegal collective behavior. The payer can delay the 
termination for up to one year by making a written request to ABMG.
    Paragraph VII.D contains three-year notification provisions 
relating to future contact with physicians, payors, management and 
staff. This provision requires ABMG to distribute a copy of the 
Complaint and Consent Order to each physician who begins participating 
in ABMG; each payor who contacts ABMG regarding the provision of 
physician services; and each person who becomes an officer, director, 
manager, or employee for five years after the date on which the Consent 
Order becomes final. In addition, Paragraph VII.D requires ABMG to 
publish a copy of the Complaint and Consent Order, annually, in any 
official publication that it sends to its participating physicians.
    Paragraphs VII.E and VIII-IX impose various obligations on ABMG to 
report or to provide access to information to the Commission to 
facilitate monitoring its compliance with the Consent Order.
    Pursuant to Paragraph X, the proposed Consent Order will expire in 
20 years from the date it is issued.
    By direction of the Commission.

Donald S. Clark,
[FR Doc. E9-13956 Filed 6-12-09: 8:45 am]