Look for signs of price-fixing potholes

A column examining the ins and outs of contract issues

By Steven M. Harrisis a partner at McDonald Hopkins in Chicago concentrating on health care law and co-author of Medical Practice Divorce. He writes the "Contract Language" column. Posted Jan. 5, 2004.

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The start of a new year often triggers a review of existing payer contracts and causes physicians to prepare and strategize for pending contract negotiations. As you negotiate your contracts with payers, you should be aware of a recent consent agreement that the Federal Trade Commission entered into with a Houston physician practice group accused of price-fixing.

The FTC charged the Texas-based independent physician practice group with violating federal antitrust laws by fixing prices during contract negotiations -- that the physician group regularly polled its members asking for the minimum fees they would accept and refused to consider any payer offer that did not meet the minimum fee requirement. In some cases, payers allegedly revised their proposed fee schedules, resulting in higher fees than those that would have been offered without negotiation.

The FTC's complaint also alleged that the group told payers that did not meet the minimum requirements to resubmit their proposals with the higher fees, and discouraged its members from directly contracting with payers. The agency further alleged that the group represented itself as a "messenger model" IPA and misused the messenger model by refusing to submit payer offers that did not meet the group's minimum fees to its members to permit them to decide unilaterally to accept or reject the offers.

As a result, the FTC charged that the group hindered competition by unreasonably restraining price and other forms of competition, increasing prices for physician services, and depriving health plans, employers and individual consumers of the benefit of competition among physicians.

The proposed consent agreement requires the IPA to cease and desist from:

  • Entering into any agreement between physicians to negotiate with a payer on behalf of any physician, to deal or refuse to deal with any payer based on price or other competitively significant terms, or not to deal individually with any payer.
  • Exchanging information among physicians about any physician's willingness to deal with a payer or the terms on which he or she is willing to deal with a payer.
  • Pressuring any person to engage in such action.

In order to avoid allegations of anticompetitive price-fixing and incurring significant civil penalties, during your contract negotiations make sure that you:

  • Do not deal or refuse to deal with a payer based upon previously agreed upon minimum fees that have been set and are used by your practice as a threshold for accepting or rejecting a payer's offer.
  • Do not communicate to payers that you refuse to negotiate except on collectively agreed upon terms.
  • Do not agree to any contract with a payer that prohibits the payer from entering into other contracts with individual physicians.
  • Do not refuse to consider a payer's offer that does not adhere to your practice's fee standards.

Steven M. Harris is a partner at McDonald Hopkins in Chicago concentrating on health care law and co-author of Medical Practice Divorce. He writes the "Contract Language" column.

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External links

Memorial Hermann Health Network Providers' settlement with the Federal Trade Commission (link)

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