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A group of doctors and hospitals in southwestern Minnesota has agreed to a settlement with the Federal Trade Commission that prohibits anticompetitive tactics the group allegedly used to increase health insurance reimbursement rates.

Under a proposed settlement order, the Minnesota Rural Health Cooperative, or MRHC, will be prohibited from using coercion in its negotiations with health insurers.

The MRHC is made up of approximately 25 hospitals and 70 doctors, representing most of the hospitals and half of the primary care physicians in southwestern Minnesota. According to the FTC’s complaint, when members join the MRHC, they agree that the group’s board of directors will negotiate and contract with health insurers on their behalf and that they will abide by the MRHC contracts.

The FTC’s complaint charges that the MRHC eliminated competition between its individual doctors and hospitals by orchestrating illegal agreements to fix the prices at which they contract with health insurance plans. The complaint also alleges that the MRHC refused to deal with health plans that did not go along with its inflated reimbursement rates. Price-fixing agreements among competing sellers are illegal under U.S. antitrust laws.

The FTC complaint also alleges that the MRHC used coercive tactics during negotiations. In particular, the complaint alleges that the MRHC threatened to terminate contracts with health insurance plans in order to pressure them into increasing payments for physician and hospital services. In one case, for example, MRHC allegedly coerced a health plan into paying MRHC members 27 percent more than it was paying non-MRHC providers. The complaint states that the group told health plans that it “expected our group to be accepted or rejected as a group,” and informed plans that they could not negotiate individual deals with members of the group.

The proposed settlement order bars the MRHC from using coercive tactics to extract favorable contract terms from health plans. In addition, the order requires the MRHC to offer to renegotiate all current contracts with health plans and to submit any revised contracts for state approval.

During the FTC’s investigation, the Minnesota legislature enacted legislation under which state officials review and approve contracts negotiated by health care provider cooperatives. If approved, jointly negotiated contracts may be beyond the reach of the antitrust laws. The FTC settlement does not prohibit the MRHC from negotiating contracts on behalf of its members.

The FTC vote approving the complaint and proposed settlement order was 5-0. The order will be subject to public comment for 30 days, until July 19, 2010, after which the Commission will decide whether to make it final. Comments should be sent to: FTC, Office of the Secretary, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. To submit a comment electronically, please click on: https://public.commentworks.com/ftc/mnhealth.

NOTE: The Commission issues a 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 issuance of a complaint is not a finding or ruling that the respondent has violated the law. 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 up to $16,000.

Copies of the complaint, consent order, and an analysis to aid in public comment can be found on the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. 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.

(FTC File No. 051-0199)
(MN Rural Health.final.wpd)