FTC lets group continue clinical integration plan

In what is believed to be the first decision of its kind, the Federal Trade Commission has given the go-ahead for a physician organization investigated for price-fixing to continue joint contracting with insurers on the basis of its clinical integration program.

The move came as a December 2006 consent decree that culminated a four-year government inquiry into the group's practices.

FTC guidelines outline two ways that doctors are permitted to negotiate collectively with insurers: through financial integration with risk-sharing contracts or through clinical integration, aimed at setting uniform quality measures to which doctors must adhere to streamline practices and save money.

Previous FTC settlements essentially required physician networks to shut down all their operations and cease contracting altogether. Among roughly 30 actions brought against physician entities for alleged anticompetitive behavior since 2002, one group was permitted to go back and re-do its clinical integration program so that it could continue joint negotiations with insurers on that basis.

Although the FTC's move is not a major departure from its standards, some legal experts say it opens another window into what the government views as acceptable.

The FTC accused Chicago-area Advocate Health Partners of illegal price-fixing in its negotiations with insurers. The group admits no wrongdoing.

The consent decree prohibits AHP from using the messenger model to facilitate any contract agreements on behalf of its 2,900 physician members. But the significance of the order is that it allows the network to continue its clinical integration program, under which it has been contracting since 2003, according to John P. Marren, an attorney for AHP.

The program consists of 20 initiatives, including care management, screening and prevention efforts, generic prescribing and computerized physician order entry. It also has a pay-for-performance component.

"This validates [AHP's] clinical integration model and gives us insight into what the federal government has done so far," Marren said. "This is the first time the FTC has given this kind of permission to an organization already jointly contracting with health plans."

Under the agreement, for three years AHP must notify the FTC when it enters into any clinical integration contracts so that the commission can continue to monitor the program.

AHP President Lee B. Sacks, MD, said the restrictions are manageable and less burdensome compared with prior consent decrees.

"We are excited to finally get this behind us after four years and achieve our objective, which is for the FTC to acknowledge that our program is creating value," Dr. Sacks said.

Still, some experts say it is too early to tell what the broader impact will be. John J. Miles, an antitrust expert with Ober Kaler in Washington, D.C., warns that the agreement does not necessarily signal that the FTC is going to ease up its antitrust scrutiny of physician joint ventures.

"I assume AHP has a bona fide clinical integration program, but others looking at this and jumping up and down may not," he said.

If AHP isn't subject to any FTC action down the road, then doctors can look at this as a model, Miles said. "But I'm not sure the book is closed on this yet."

The government insists it is not.

Garth Huston, an attorney in the FTC's Bureau of Competition, said the commission had made no determination with respect to the legality of AHP's clinical integration program and would continue to monitor it.

Problems spurred by messenger model

According to the commission's complaint, between 1995 and 2004 AHP inappropriately had used the messenger model to submit "agency agreements" to insurers. This allegedly gave AHP the ability to terminate doctors' existing contracts and collectively negotiate new ones on their behalf if the payer didn't agree to higher rates.

Under FTC standards, the messenger model allows physician networks to use a single agent to relay contract information between a payer and the group to save money. It does not permit the group to set contract terms or negotiate on behalf of doctors.

Marren said that AHP, at the request of insurers, used the model to negotiate risk-sharing contracts. When payers began moving to fee-for-service and preferred-provider agreements around 2000, and AHP continued to apply this model, it raised red flags at the FTC, he said.

The government concluded that the doctors were not integrated in any economically significant way to justify their joint contracting.

But in a separate case, an arbitration panel in 2005 denied United Healthcare's claims that AHP had engaged in illegal price-fixing and boycotting between 1999 and 2004. Arbitrators found that the group's joint contract provided United and other payers with "substantial administrative efficiencies" and "competitive benefit sufficient to offset any potential harm to consumers."

The panel also ruled that AHP's attempt in August 2003 to enter into a clinically integrated contract with United was not an antitrust violation. United declined to comment.

Dr. Sacks said AHP abandoned the messenger model in 2003 and has been working only on clinical integration. Since then, the group has seen significant quality improvements and savings as a result. The generic prescribing initiative, for example, generated $13 million in savings to patients and health plans in 2005, and $21 million since 2003. But he noted that the four-year investigation made the program a costly endeavor.

Given the heavily regulated health care environment, the price might be too high for the average physician practice to afford, Miles said. He recommends that doctors first seek legal counsel. He also suggested requesting an FTC antitrust advisory opinion

Dr. Sacks said, "If you put patients first and design things to improve their care, ultimately that is what it's all about."