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Physician groups in Modesto, California, and in Boulder County, Colorado, have agreed to settle separate Federal Trade Commission charges that they each violated federal laws. Both groups are charged with orchestrating and carrying out agreements among their members to refuse, and threaten to refuse, to deal with insurance providers, unless they raised the fees paid to the groups’ doctors. The proposed consent orders settling the FTC’s complaints bar each group from engaging in similar conduct in the future.

“When health care providers decide to pursue personal gain through unlawful price-fixing, consumers often are forced to either pay higher prices or forgo vital treatments they can no longer afford,” said David P. Wales, Acting Director of the Bureau of Competition. “The actions announced today against two separate physician groups should send a strong message that we will not let this conduct stand.”

Independent Practice Associates Medical Group, Inc., doing business as AllCare IPA (AllCare) is a multi-specialty IPA with approximately 500 physicians in the Modesto, California, area. Since its formation, AllCare and its physicians have contracted with Preferred Provider Organizations (PPOs) to provide fee-for service care. In PPO arrangements, the payer compensates the physicians for services provided under agreed-upon fee schedules. Such arrangements may or may not entail financial risk-sharing or clinical integration. According to the FTC, between 2005 and 2006, AllCare acted to restrain competition on fee-for-service contracts by facilitating, entering into, and implementing agreements to fix the prices and other contract terms with PPO payers; to engage in collective negotiations over the terms and conditions of dealing with such payers; and to have members refrain from negotiating with such payers on terms other than those approved by the group.

Boulder Valley Independent Practice Association (BVIPA) is a multi-specialty IPA with approximately 365 physicians in the Boulder County, Colorado, area. According to the Commission’s complaint, between 2001 and 2006, BVIPA, which is governed by a board of directors acting on behalf of its members, negotiated and signed agreements with approximately 17 payers and conducted periodic renegotiations of its contracts with large payers to increase rates. During this time, BVIPA threatened payers facing rate increases with contract termination if they refused to negotiate with the group or to otherwise respond to BVIPA’s demands. In addition, BVIPA actively discouraged members from contracting directly with payers; some payers that tried to contract with some of the group’s members were required to go through BVIPA. Finally, although BVIPA claimed to offer payers the choice of contracting methods, in reality it did not do so, and continued to negotiate with payers on behalf of its members. The complaint states that BVIPA’s conduct unreasonably restrained and hindered competition by unreasonably restraining price and other forms of competition among health care providers.

According to the FTC’s complaints, AllCare’s and BVIPA’s separate conduct in setting fees for payers and refusing to deal with payers constitutes illegal price-fixing, and violates federal law. In addition, the FTC contends that neither group engaged in any activity that might justify collective agreements on the prices its members would accept for their services. The groups’ physicians did not share financial risk in providing medical services, did not collaborate in any program to monitor and modify clinical practice patterns or otherwise integrate the delivery of their services. Through their actions, the complaints state, AllCare and BVIPA restrained prices and other forms of competition in Modesto and Boulder County, and harmed consumers by increasing prices for physician services.

The Commission’s proposed consent orders are designed to eliminate the illegal anticompetitive conduct alleged in the complaints. They would prohibit AllCare and BVIPA from entering into or facilitating agreements between or among physicians: 1) to negotiate on behalf of any physician with any payer; 2) to refuse to deal, or threaten to refuse to deal, with any payer; 3) to designate the terms, conditions, or requirements upon which any physician deals, or is willing to deal, with any payer, including, but not limited to price terms; 4) not to deal individually with any payer, or not to deal with any payer through any arrangement other than one involving AllCare or BVIPA, respectively.

Other parts of the orders reinforce these general prohibitions. The order prohibits AllCare and BVIPA from exchanging information among physicians concerning whether, or on what terms, to contract with a payer and from encouraging, suggesting, advising, pressuring, inducing, or attempting to induce anyone into any actions otherwise prohibited by the order.

As in other Commission orders addressing providers’ collective bargaining with payers, the AllCare and BVIPA orders exclude certain types of agreements from their provisions. For example, the orders allow the physicians to engage in conduct (including collectively determining reimbursement and other terms of contracts) deemed reasonably necessary to operate any “qualified risk-sharing joint arrangement” or “qualified clinically-integrated joint
arrangement.” As defined, the former term must satisfy two conditions: 1) all physician participants must share substantial financial risk through the arrangement; and 2) any agreement on fees or terms of reimbursement must be reasonably necessary to obtain significant efficiencies through the joint arrangement.

In a qualified clinically integrated joint arrangement, the physicians undertake cooperative activities to achieve efficiencies in the delivery of clinical services, without necessarily sharing substantial financial risk. Participating physicians must establish a high degree of interdependence and cooperation through their use of programs to evaluate and modify their clinical practice patterns. Any agreement on fees or terms of reimbursement must be reasonably necessary to obtain significant efficiencies through the joint arrangement.

Finally, the orders require that AllCare and BVIPA notify the FTC for specified time periods before contracting with health plans on behalf of physicians pursuant to either a qualified risk-sharing or qualified clinically-integrated joint arrangement, and that AllCare and BVIPA terminate certain contracts they entered into illegally. Both IPAs are required to distribute copies of the order to certain physicians and meet other reporting and monitoring terms. The orders will expire in 20 years.

The Commission vote to place the consent orders on the public record for comment and publish a copy in the Federal Register was 4-0. The Commission is accepting comments on the orders for 30 days, until January 22, 2008, after which it will decide whether to make them final. Comments should be sent to: FTC Office of the Secretary, 600 Pennsylvania Ave., N.W., Washington, DC 20580.

NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. 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 $11,000.

Copies of the consent orders are available now on the FTC’s Web site and as a link to this press release. 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@ftc.gov, or write to the Office ofPolicy and Coordination, Room 383, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, DC 20580. To learn more about the Bureau of Competition, read “Competition Counts” at http://www.ftc.gov/competitioncounts.

(FTC File Nos. 061-0258 and 051-0252)
(AllCare-Boulder IPA.final.wpd)