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Eight independent nephrologists in Puerto Rico have settled Federal Trade Commission charges that they illegally collectively bargained with insurers and refused to treat health plan patients when their price demands were rebuffed. Under a proposed order settling the FTC’s charges, the doctors are barred from jointly negotiating prices, jointly refusing to deal with any insurer, and jointly refusing to treat patients.  The case is the latest example of the FTC’s work to protect U.S. consumers from higher health care costs.

The eight doctors named in the FTC’s complaint practice independently in Puerto Rico and represent 90 percent of the nephrologists in the island’s southwest region.  They provide services for commercial, Medicare, and Medicaid patients.  The Medicaid program – which is called Mi Salud – is administered by the Administracion de Seguros de Salud (ASES).  ASES is a public corporation charged with ensuring that the more than 1.5 million indigent residents of Puerto Rico have access to a full complement of medical services, including kidney treatment. 

ASES in turn contracts with two health plans, including Humana Health Plans of Puerto Rico (Humana), to provide services to Mi Salud members in the commonwealth.  Humana administers the Mi Salud program and insures consumers under Mi Salud in three regions of the island – the east, southeast, and southwest.

According to the FTC’s complaint, the eight doctors have violated federal antitrust laws since late 2011 by 1) collectively negotiating and fixing the prices upon which they would contract with Humana to extract higher reimbursement rates, and 2) collectively terminating their contracts with Humana and refusing to treat Humana patients enrolled in the Mi Salud program when Humana would not meet their price demands.

Specifically, the FTC alleges that the doctors jointly presented Humana with a proposal for higher reimbursement rates and other payment increases, and gave Humana a deadline to respond to the proposal.  When Humana did not respond by the deadline, the doctors all terminated their Mi Salud service arrangements with Humana, issuing virtually the same termination letter.  They then immediately stopped providing nephrology services to Humana’s Mi Salud patients, despite having a legal obligation to provide such services for 120 days after terminating service.

According to the FTC’s complaint, terminating service had a significant negative impact on patients.  In one instance, a patient with critical renal failure arrived at a local hospital in need of  urgent care, likely requiring long-term dialysis.  However, all of the nephrologists at the hospital allegedly refused to care for the patient, whose condition worsened.  The patient was transferred to a hospital 74 miles away in San Juan. 

ASES ultimately gave in to the doctors’ demand for higher reimbursement rates.

The proposed order settling the FTC’s charges is designed to prevent  the physicians from engaging in such alleged anticompetitive conduct in the future, while allowing them to engage in legitimate joint conduct.  It prevents them from entering into or participating in agreements:

• regarding any term, condition, or requirement upon which any physician deals, or is willing to deal, with any insurer, including, but not limited to, price terms;
• to negotiate on behalf of another physician with any insurer; or
• to refuse to deal, or threaten to refuse to deal, with any insurer.

The order bars the doctors from collectively refusing to treat patients.  It also requires the doctors to notify the FTC before entering into certain joint arrangements, and to distribute the order to certain people so they are aware of its terms.

The proposed order announced today settles the FTC’s complaint against the following:  Práxedes E. Alvarez Santiago, M.D., Daniel Pérez Brisebois, M.D., Jorge Grillasca Palou, M.D., Rafael García Nieves, M.D., Francis M. Vázquez Roura, M.D., Angel B. Rivera Santos, M.D., Cosme D. Santos Torres, M.D., and Juan L. Vilaró Chardón, M.D.

The Commission vote to accept the consent agreement package containing the proposed consent order for public comment was 4-0-1, with Chairman Jon Leibowitz not participating.  The FTC will publish a description of the consent agreement package in the Federal Register shortly.  The agreement will be subject to public comment for 30 days, beginning today and continuing through April 2, 2013, after which the Commission will decide whether to make the proposed consent order final.         

Interested parties can submit comments electronically or in paper form by following the instructions in the “Invitation To Comment” part of the “Supplementary Information” section.  Comments can be submitted electronically.  Comments in paper form should be mailed or delivered to:  Federal Trade Commission, Office of the Secretary, Room H-113, 600 Pennsylvania Avenue, N.W., Washington, DC 20580.  The FTC is requesting that any comment filed in paper form near the end of the public comment period 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.

NOTE:  The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest.  The complaint is not a finding or ruling that the respondent has actually violated the law.  A consent order is for settlement purposes only and does not constitute an admission by the respondent that the law has been violated.  When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions.  Each violation of such an order may result in a civil penalty of up to $16,000.

The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action.  To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to antitrust{at}ftc{dot}gov, or write to the Office of Policy and Coordination, Bureau of Competition, Federal Trade Commission, 601 New Jersey Ave., Room 7117, Washington, DC 20001.  To learn more about the Bureau of Competition, read Competition Counts.  Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

(FTC File No. 121-0098)