FTC opinion expands guidance on joint contracting

A Federal Trade Commission advisory opinion may offer a clearer road map for doctors looking to team up on quality and cost improvements and negotiate jointly with payers without violating antitrust laws.

But the American Medical Association said approval of a physician-hospital organization's clinical integration plan does little to lower existing antitrust barriers facing smaller physician practices that want to collaborate independently of hospitals.

In only the third opinion of its kind, the FTC found that the TriState Health Partners' proposal, which centered largely on sharing an electronic health records system, had the potential to lower health care costs and improve quality of care. The commission found no evidence that the proposed joint contracting would allow the Maryland-based organization -- which included the only major hospital in the area -- to exercise undue market power, such as through illegal price-fixing. Instead, the collective contracting "appears reasonably necessary to achieve the potential efficiencies of that program," the April 13 letter states.

Antitrust laws generally prohibit individual doctors from joining to negotiate with health plans. Although federal guidelines say clinical integration -- in which doctors streamline practice standards to lower costs -- is a legitimate joint venture, the AMA and other health care organizations have pressed the FTC for better instruction on how to reach that goal legally. The recent 37-page letter was an attempt at an answer, said Christi J. Braun, former FTC staff attorney and associate with Ober, Kaler, Grimes & Shriver in Washington, D.C.

"I definitely see this as providing more guidance, and the FTC gave certain indications of the components it wants to see," said Braun, who represented TriState as well as the two other organizations that won favorable opinions. The TriState letter "is also more positive and gives the organization more of a benefit of the doubt than in past letters."

For example, the FTC saw TriState's EHR system as key to allowing physicians to share and review patient outcomes and to set clinical guidelines. But many of those quality metrics were in early stages and were less developed than those analyzed in prior opinions, Braun said.

The commission also cited a high degree of commitment from TriState's 212 physician members, who are required to sit on committees that develop quality measures and track physician performance.

Such collaboration, along with the shared EHR, helps enhance communication among doctors while promoting a team-based approach, said Robert J. Cirincione, MD, TriState's chief medical officer. "It's physician-driven at the core, and it's about quality improvement. That's the goal."

Braun said the FTC appeared to give more weight to doctors' nonfinancial investment in the program, such as time and expertise. "Many physicians focus on what [such a plan] is going to cost, so if they know they will be given significant credit for putting in sweat equity, that makes a big difference in whether they will pursue a program."

Hospital a major player

The FTC also noted that Washington County Hospital in Hagerstown, Md., a program participant, contributed "considerable resources" -- including financial support, infrastructure and technical expertise -- that "may even have been essential for the program's development." The facility's lab and pharmacy services also helped make the program more robust and effective, the commission said.

AMA Board of Trustees member Cecil B. Wilson, MD, said the opinion sets a high bar and may pressure doctors to turn to hospitals to reach the FTC's standards, which poses concerns. "Replicating [TriState's] clinical integration program is beyond the resources of many potential physician networks."

The AMA continues to push the FTC for a more flexible enforcement policy, particularly as health system reform efforts drive doctors to collaborate on improving cost and quality through health information technology or other means.

Dr. Wilson also said hospitals generally have financial objectives that may conflict with physicians' quality goals of reducing costly hospital stays. He said physician-hospital clinical integration partnerships also may enable monopoly hospitals to undermine local competition.

The FTC acknowledged those tensions but found no evidence that such potential conflicts would affect TriState's ability to achieve cost and quality efficiencies. Nor did the FTC see any clear potential for anticompetitive effects because TriState's hospital and physician services were not bundled as a precondition of payer negotiations. Insurers could contract with doctors individually.

The opinion is no indication that doctors must collaborate with hospitals to achieve clinical integration, said Ashley M. Fischer, a partner and antitrust lawyer in McDermott Will & Emery's Chicago office. "There's just no set formula, and that's good for physicians. They should be able to sit and figure out how they want to manage care and be novel in approaches to offer a better product."

Such programs do require a substantial level of time, money and infrastructure, Fischer said. "But it's an investment, and you should be able to reap the reward of that."

Braun acknowledged that one of the biggest costs involved is in implementing health information technology, noting that all three FTC-approved programs included EHR systems. But now doctors can tap into federal funds for that purpose under the most recent stimulus bill.

TriState's Dr. Cirincione said clinical integration was a natural progression from the doctor-hospital organization's 10-year partnership. "We are a PHO, but the important part is, this is big 'p,' little 'h,' " he said. "The hospital has been a great support ... but we are only as successful as our ability to improve quality."