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Staff of the Federal Trade Commission have advised the Greater Rochester Independent Practice Association, Inc. (GRIPA), a multi-specialty physician practice association that includes competing primary care and specialist physicians that practice in the three-county greater Rochester, New York, area, that it has no present intention to recommend a challenge to the organization’s proposed operation as a non-exclusive physician network joint venture. GRIPA requested a staff advisory opinion concerning its proposal to integrate and coordinate the provision of medical services to patients by about 575 physicians in 41 medical specialties through a program of “clinical-improvement services” through which the physicians would work together to improve quality and control costs.

GRIPA’s proposed program seeks to coordinate the care provided to patients by its physicians. Physicians generally will be required to refer patients to physicians within the network, in order to better assure that care is subject to GRIPA’s treatment standards at all times, and to better monitor treatment and outcomes. The program includes several components intended to assure that its physicians use “best practices” and “evidence-based” medicine in treating patients. Patients’ treatment and the physicians’ individual and aggregate performance will be carefully monitored and measured against benchmarks for improved patient outcomes, and reduced costs and resource use. Disease management and case management programs will help patients comply with necessary self-care and behavioral recommendations from their doctors.

The program will have an extensive Web-based electronic clinical information system allowing physicians to share information regarding their common patients, access patient information from hospitals and ancillary providers throughout the community, and order prescriptions and lab tests. In addition to agreeing to adhere to all of GRIPA’s practice requirements under the program, the physicians, who have a history of working together under GRIPA’s HMO risk contracts, will invest significant time and effort in collaboratively developing and overseeing implementation of the program’s practice guidelines and protocols. They also will participate in monitoring and evaluating their peers’ performance and addressing any performance deficiencies, including disciplining and, if necessary, even expelling from the organization physicians who continue to fail to comply with the program’s requirements and adhere to its standards.

GRIPA will contract jointly for the sale of its participating physicians’ services to health plans on a fee-for-service basis. GRIPA believes that joint contracting with payers is necessary in order to assure that all its physicians participate in the program for all patients and under all contracts, and thereby better achieve its quality and efficiency goals. Having all network physicians participate in all contracts also will permit GRIPA to obtain more complete information in monitoring patients’ treatment, outcomes, and quality of care, and for evaluating physicians’ adherence to program standards and the achievement of the program’s cost savings targets and other efficiency measures.

GRIPA will operate as a non-exclusive network, which means that its individual physician members will be available to negotiate and contract separately with health plans and other customers not wishing to purchase the network services. While the staff letter could not prospectively determine what, in fact, the competitive effects of the proposed program’s operation would be, and raised some concerns about the percentages of GRIPA physicians in certain specialties in some areas, it nevertheless concluded that GRIPA appeared unlikely to be able to exercise market power or have anticompetitive effects in the market for provision of physician services in the greater Rochester area for several reasons. In addition to its commitment to operate non-exclusively, and apparent past record of doing so, other physician networks appeared to be available in the area, and health plans operating in the area appeared likely to be able to maintain adequate physician networks for their programs.

The staff opinion letter, dated September 17, 2007, was signed by Markus H. Meier, Assistant Director of the Health Care Services and Products Division of the Federal Trade Commission’s Bureau of Competition. It concluded that the proposed program appeared to “involve substantial integration by its physician participants that has the potential to result in the achievement of significant efficiencies that may benefit consumers.” The letter also concluded that joint contracting by GRIPA appeared to be subordinate to the program’s primary purpose of interdependently improving the quality and efficiency of the member physicians’ services, and appeared to be “subordinate to, reasonably related to, and may be reasonably necessary for, or to further, GRIPA’s ability to achieve the potential efficiencies” from the program. The program’s joint contracting therefore would be subject to analysis under the antitrust rule of reason, rather than being considered per se illegal price fixing.

Because of the program’s procompetitive potential, the ancillarity of the joint contracting to furthering achievement of its potential efficiencies, and the indications that GRIPA would be unlikely to be able to exercise market power, staff concluded that they would not recommend that the Commission challenge the program “unless it became apparent that GRIPA in fact was able to exercise market power or otherwise have an anticompetitive effect in a relevant market.”

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.”

Copies of the staff advisory opinion letter are available from the FTC’s Web site at http://www.ftc.gov/bc/adops/gripa.pdf.

Copies of the documents mentioned in this release are available from the FTC’s Web site at http://www.ftc.gov and from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. Call toll-free: 1-877-FTC-HELP.