M.D. Physicians of Southwest Louisiana, Inc.; Analysis To Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. 941-0095]

M.D. Physicians of Southwest Louisiana, Inc.; Analysis To Aid

Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: The consent agreement in this matter settles alleged

violations of federal law prohibiting unfair or deceptive acts or

practices or unfair methods of competition. The attached Analysis to

Aid Public Comment describes both the allegations in the draft

complaint that accompanies the consent agreement and the terms of the

consent order--embodied in the consent agreement--that would settle

these allegations.

DATES: Comments must be received on or before August 24, 1998.

ADDRESSES: Comment should be directed to: FTC/Office of the Secretary,

Room 159, 6th St. and Pa. Ave., N.W., Washington, D.C. 20580.

FOR FURTHER INFORMATION CONTACT: William Baer, FTC/H-374., Washington,

D.C. 20580. (202) 326-2932.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal

Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Section 2.34 of

the commission's Rules of Practice (16 CFR 2.34), notice is hereby

given that the above-captioned consent agreement containing a consent

order to cease and desist, having been filed with and accepted, subject

to final approval, by the Commission, has been placed on the public

record for a period of sixty (60) days. The following Analysis to Aid

Public Comment describes the terms of the consent agreement, and the

allegations in the complaint. An electronic copy of the full text of

the consent agreement package can be obtained from the FTC Home Page

(for June 19, 1998), on the World Wide Web, at ``http://www.ftc.gov/os/

actions97.htm.'' A paper copy can be obtained from the FTC Public

Reference Room, Room H-130, Sixth Street and Pennsylvania Avenue, N.W.,

Washington, D.C. 20580, either in person or calling (202) 326-3627.

Public comment is invited. Such comments or views will be considered by

the Commission and will be available for inspection and copying at its

principal office in accordance with Section 4.9(b)(6)(ii) of the

Commission's Rules of Practice (16 CFR 4.9(b)(6)(ii)).

Analysis of Proposed Consent Order to Aid Public Comment

The Federal Trade Commission has accepted, subject to final

approval, an agreement to a proposed consent order from M.D. Physicians

of Southwest Louisiana (``MDP''). The agreement settles charges by the

Federal Trade Commission (``Commission'') that MDP has violated Section

5 of the Federal Trade Commission Act by: (1) Fixing the prices and

other terms on which its members would deal with third-party payers;

(2) collectively refusing to deal with third-party payers; and (3)

conspiring to obstruct the entry of managed care into Calcasieu Parish,

Louisiana.

The proposed consent order has been placed on the public record for

sixty (60) days for reception of comments by interested persons.

Comments received during this period will become part of the public

record. After sixty (60) days, the Commission will review the agreement

and the comments received, and will decide whether it should withdraw

from the agreement or make final the agreement's proposed order.

The purpose of this analysis is to facilitate public comment on the

proposed order. The analysis is not intended to constitute an official

interpretation of the agreement and proposed order or to modify in any

way their terms. Further, the proposed consent order has been entered

into for settlement purposes only and does not constitute an admission

by MDP that the law has been violated as alleged in the complaint.

The Complaint

Under the terms of the agreement, a proposed complaint would be

issued by the Commission along with the proposed consent order. The

allegations in the Commission's complaint are summarized below.

MDP is a physician organization based in Lake Charles, Louisiana.

All of the members of MDP are physicians practicing in and around

Calcasieu Parish, Louisiana, the parish in which Lake Charles is

located. During the time period addressed by the allegations of the

complaint, MDP members constituted a majority of all physicians

practicing in Calcasieu Parish, Louisiana. In certain physician

specialties, MDP members constituted all or most of the physician

specialists practicing in Calcasieu Parish.

MDP was formed in 1987 as a vehicle for its members to deal

concertedly with the impending entry into Calcasieu Parish of managed

care. Beginning in 1987, and continuing until at least 1994, when MDP

first learned that it was under investigation by the staff of the

Commission, MDP conspired to fix the prices and other terms under which

its members dealt with third-party payers. MDP also conspired to

prevent or delay the entry into Calcasieu Parish of managed care.

Until 1994, MDP members refused to participate, either individually

or collectively, in health care plans offered by Blue Cross and Blue

Shield of Louisiana, the Louisiana State Employees Group Benefits

Program, Aetna Insurance Company, Healthcare Advantage, Inc., and other

third-party payers attempting to do business in Calcasieu Parish.

The members of MDP agreed that MDP would represent them in

negotiations with third-party payers. MDP functioned as the exclusive

representative of its members. Until 1994, the members of MDP dealt

with third-party payers only though MDP.

MDP's members have not integrated their medical practices in any

economically significant way, nor have they created any efficiencies

that might justify this conduct.

MDP's actions have harmed consumers in Calcasieu Parish by, among

other things, restraining competition among physicians,

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depriving consumers of the benefits of competition among physicians,

increasing the prices that consumers pay for physician services and

medical insurance coverage, and depriving consumers of the benefits of

managed care.

The Proposed Consent Order

The proposed consent order is designed to prevent the illegal

concerted action alleged in the complaint, while allowing MDP to engage

in legitimate joint conduct. Section II of the proposed order contains

the core operative provisions. It prohibits MDP from: (1) Engaging in

collective negotiations on behalf of its members; (2) orchestrating

concerted refusals to deal; (3) fixing prices, or any other terms, on

which its members deal; and (4) encouraging or pressuring others to

engage in any activities prohibited by the order.

Section II includes a proviso allowing MDP to engage in conduct

(including collectively determining reimbursement and other terms of

contracts with payers) that is reasonably necessary to operate (a) any

``qualified risk-sharing joint arrangement,'' or (b) provided MDP

complies with the order's prior notification requirements, any

``qualified clinically integrated joint arrangement.'' The proviso

addresses the arrangements that MDP may enter into, rather than the

overall nature of the group, because a physician group may enter into

legitimate arrangements with some third-party payers but engage in

illegal conduct with respect to others. For the purposes of the order,

a ``qualified risk-sharing joint arrangement'' must satisfy two

conditions. First, it must be one in which participating physicians

share substantial financial risk. The order lists ways in which

physicians might share financial risk. These track the four types of

financial risk sharing set forth in the Statements of Antitrust

Enforcement Policy in Health Care, issued jointly by the FTC and the

Department of Justice.\1\

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\1\ Statements of Antitrust Enforcement Policy in Health Care,

issued August 28, 1996, 4 Trade Reg. Rep. (CCH) para. 13,153.

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Second, to be a ``qualified'' risk sharing arrangement, the

arrangement must also be non-exclusive, both in name and in fact. An

arrangement that either restricts the ability of participating

physicians to contract outside the arrangement (individually or through

other networks) with third-party payers, or facilitates refusals to

deal outside the arrangement by participating physicians, does not fall

within the proviso. Although exclusive physician joint arrangements are

not necessarily anticompetitive, they can impair competition,

particularly when they include a large portion of the physicians in a

market. In light of MDP's large share of the physician market, this

definition does not permit MDP to form exclusive arrangements.

A ``qualified clinically integrated joint arrangement'' includes

arrangements in which the physicians undertake cooperative activities

to achieve efficiencies in the delivery of clinical services, without

necessarily sharing substantial financial risk. For purposes of the

order, such arrangements are ones in which the participating physicians

have a high degree of interdependence and cooperation through their use

of programs to evaluate and modify their clinical practice patterns, in

order to control costs and assure the quality of physician services

provided through the arrangement. As with risk-sharing arrangements,

the definition of clinically integrated arrangement reflects the

analysis contained in the 1996 FTC/DOJ Statements of Antitrust

Enforcement Policy in Health Care. In addition, as with risk-sharing

arrangements, the arrangement must be non-exclusive in light of MDP's

large share of the market. In drafting the definition of clinically

integrated arrangements, the Agencies sought to be flexible due to the

wide range of providers who may participate, types of clinical

integration possible, and efficiencies available. Consequently, the

definition of a clinically integrated arrangements is by necessity less

precise than that of a risk sharing arrangement.

In order for a qualified clinically integrated joint arrangement to

fall within the proviso, MDP must comply with the order's requirements

for prior notification. The prior notification mechanism will allow the

Commission to evaluate a specific proposed arrangement and assess its

likely competitive impact, in order to help guard against the

recurrence of acts and practices that have restrained competition and

consumer choice.

Section III requires that MDP notify its members and certain third-

parties about the order. In addition, MDP must, for the next five

years, distribute copies of the complaint and order to new members and

annually publish the complaint and order in any annual report or

newsletter sent to MDP members.

Sections IV, V, and VI consist of various reporting procedures,

consistent with those found in other Commission consent orders, that

are designed to assist the Commission in monitoring compliance with the

order.

Finally, section VII terminates the order twenty years after the

date it is issued, in accordance with Commission policy.

By direction of the Commission.

Donald S. Clark,

Secretary.

[FR Doc. 98-16821 Filed 6-23-98; 8:45 am]

BILLING CODE 6750-01-M