Colorado IPA, FTC settle over allegations of price-fixing

The agreement highlights the dangers of negotiating jointly with payers without showing evidence of clinical integration, experts said.

By Amy Lynn Sorrel — Posted March 1, 2010

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A recent settlement between a Colorado independent practice association and the Federal Trade Commission over price-fixing allegations is a reminder of the government's continued scrutiny of collective negotiations with health insurers.

The FTC accused Roaring Fork Valley Physicians IPA of threatening not to deal with various insurers unless they agreed to doctors' demands for higher insurance pay rates on individual fee-for-service contracts.

The government alleged that between 2003 and 2006, the physicians illegally coordinated agreements among the IPA's 85 members to demand contracts that included annual rate increases to compensate doctors for cost-of-living adjustments. The Garfield County IPA also banned Medicare-based payment rates and generally refused health insurers' contract offers unless a majority of the IPA's members accepted the terms, according to the complaint.

"The agreements raised the cost of physician services in Garfield County, without making the doctors' practices more efficient in any way or improving the quality of care patients received," an FTC statement said.

Under a Feb. 3 proposed settlement, which awaits final approval, Roaring Fork agreed to terminate the contracts in question and notify the FTC before facilitating other offers on members' behalf. Roaring Fork admitted no wrongdoing.

In a statement, the IPA said it cooperated with the investigation and settled to avoid ongoing legal costs. Roaring Fork, the statement reads, was formed in 1996 in collaboration with a local health plan "so that more people could get access to health care at a reasonable cost. ... The physicians of the IPA believe that we have fulfilled the IPA's mission by offering significant payment discounts to consumers and health plans, and by creating and adopting care guidelines to increase the quality and effectiveness of the health care purchased in the valley."

The action reflects no change in the FTC's long-standing position that antitrust laws generally prohibit joint contracting by physicians, said Craig L. Caesar, a health care and antitrust lawyer with McGlinchey Stafford PLLC in Dallas. That is, unless they can show a substantial degree of clinical integration -- by investing in cooperative quality and cost-control programs -- or risk-sharing through financial integration.

"You need to have those factors to try to ensure you have what is truly a joint collaboration, as opposed to price-fixing," Caesar said.

The right to negotiate

Physicians as individuals have the right to reject Medicare rates or other contract offers, said attorney James A. Farrell, who specializes in physician joint ventures and managed care negotiations. They also may save money by using a so-called messenger model on behalf of a group, simply to relay contract information between individual physicians and payers.

In Roaring Fork's case, "how they did it was the problem," said Farrell, a partner at Florida-based Shutts & Bowen LLP. "The way the FTC sees it, you can't have a bunch of competitors coming together to do business on a concerted basis."

For example, the IPA allegedly refused to take contracts to its members unless certain conditions were met first. The group automatically turned down any offers unless 80% of its total membership and 50% of its specialty physicians agreed to the terms.

The fact that the practice association dominated the area market also caught the commission's attention, Caesar noted.

"FTC guidelines are rather low in terms of [allowable] market share, so when it's large, you know it's going to be questioned," he said. "What's difficult to predict is the middle ranges where the safe harbors don't clearly apply."

FTC attorney Constance M. Salemi said the settlement does not prevent Roaring Fork from streamlining contract negotiations in the future through clinical integration or other legal arrangements. But if physicians are banding together for the sole purpose of improving their rates, "that is suspect," she said.

Roaring Fork said its members were never prevented from contracting independently with insurers, and many did. But to promote efficiency, the IPA said, it decided not to administer Medicare-based contracts, and it required a certain percentage of members to accept other contracts before it would serve as a facilitator.

Raises sought in contracts

The organization also advised members that it would be a "best practice" for payment contracts to include a cost-of-living adjustment.

"Unlike the FTC, we believe that a [cost-of-living adjustment] is simply an efficient business practice," the statement said. "It means contracts can be stable from year to year, so that consumers can count on their doctors' participation without worrying that annual contract negotiations will disrupt the continuity of their care."

Physicians contend that the FTC has set the bar too high, making it difficult for smaller practices to afford or achieve the kind of large-scale quality and cost-saving measures the government has approved in past opinions.

The American Medical Association continues to press the commission for a more flexible enforcement policy, letting doctors negotiate fairly with large health plans without hitting antitrust barriers.

"The government does seem to be bipolar on this in that it won't allow physicians to do business like this on an IPA basis, but clearly everything we are hearing through health care reform and other initiatives under way is pushing us toward large group integration," Farrell said.

The commission has brought antitrust actions against roughly two dozen physician entities over alleged price-fixing but has approved only a handful of joint ventures, according to AMA research.

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Staying in the safety zone

The Federal Trade Commission has outlined several factors it considers in determining if a physician network is eligible for federal safe harbors on collective negotiations with health insurers. Among them:

  • The degree to which physicians are clinically or financially integrated to achieve cost and/or quality improvements.
  • Whether joint contracting is reasonably necessary to achieve cost and quality efficiencies.
  • The size of the physician group and its relative market power in the community.
  • Whether the network is exclusive in restricting individual physicians' ability to contract with various insurers.

Source: Federal Trade Commission Statements on Health Care Antitrust Enforcement Policy, Physician Network Joint Ventures

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External links

In the Matter of Roaring Fork Valley Physicians IPA, Federal Trade Commission, Feb. 3 (link)

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