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The Federal Trade Commission’s Bureau of Competition has advised TriState Health Partners, Inc. (TriState), a physician-hospital organization based in Hagerstown, Maryland, that staff has no present intention to recommend that the Commission challenge the organization’s proposed clinical integration program, which would include joint contracting by its members with health plans and self-insured employers. The staff concluded that the proposed cooperation among doctors and a hospital has the potential to lower health care costs and improve quality of care.

TriState requested the advisory opinion concerning its proposal to integrate and coordinate the provision of medical care services to patients by TriState’s more than 200 physician members, as well as with the Washington County Hospital, also a participant in the proposed program. Under the advisory opinion process, FTC staff reviews proposed business conduct. Staff explains how it would analyze the legality of the conduct and whether it would recommend challenging the conduct.

As TriState describes its program, it will attempt to coordinate care provided to patients under the program, and seek to both improve quality and reduce the costs of care. Under the program, physicians will be subject to a variety of requirements regarding their performance, including adherence to clinical practice guidelines being developed by TriState’s participants. Physicians also must make certain financial and personal contributions of time and effort toward the success of the program, such as working on various committees, or helping to monitor their peers’ performance and working with them to modify any performance deficiencies.

Physicians generally will be required to use other providers within the network when making needed referrals, and the program will monitor and oversee physicians’ performance in following best practice standards and in meeting both individual and group performance goals and benchmarks. The proposed program will make extensive use of a Web-based health information technology system, including electronic health records, to help identify patients and providers where various interventions would be most productive in improving care and patient outcomes, and to facilitate those interventions.

TriState’s program will be non-exclusive, so that purchasers and payers who do not wish to buy it will be free to contract directly with TriState’s individual participants, should they choose to do so. Likewise, access to the services of Washington County Hospital will not be tied to the TriState program, but will be separately available to purchasers and payers. TriState also will implement various information protections in its program’s operation to minimize the possibility of any anticompetitive effects in the market outside the program.

The staff opinion letter, dated April 13, 2009, was signed by Markus H. Meier, Assistant Director of the Health Care Division of the FTC’s Bureau of Competition. It concludes that the “integration among the participating physicians in the program . . . appears to have the potential to result in significant efficiencies, both in terms of cost and quality, in the delivery of medical services to patients covered under payer contracts for the program.”

The letter also states that “TriState’s joint negotiation of contracts, including price terms, with payers on behalf of its physician members” appears to be “subordinate and reasonably related to Tristate’s members’ . . . integration through the proposed program, and appears reasonably necessary to achieve the potential efficiencies of that program.” Thus, the price agreements and joint contracting would be evaluated under the antitrust rule of reason, rather than being summarily condemned as per se illegal price fixing.

Finally, the letter concludes that, if the program is operated as proposed, TriState “is unlikely to be able to attain, increase, or exercise market power for itself or its participants as a result of implementing the proposed program.” The staff therefore stated that they had no present intention to recommend that the Commission pursue any law enforcement action against TriState if it proceeded to implement the proposed program. However, the letter also cautions that any evidence of exercise of market power or other anticompetitive activities by TriState would raise antitrust concerns and could result in the revocation of the opinion.

Copies of the opinion letter are available on the FTC’s Web site at http://www.ftc.gov/os/closings/staff/090413tristateaoletter.pdf.

NOTE: This letter sets out the views of the staff of the FTC’s Bureau of Competition, as authorized by §§ 1.1-1.4 of the Commission’s Rules of Practice. It has not been reviewed or approved by the Commission. As the Commission’s Rules explain, the staff’s advice is rendered “without prejudice to the right of the Commission later to rescind the advice and, where appropriate, to commence an enforcement proceeding.”

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 of Policy 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.

(TriState.final.wpd)