Los Angeles ◈ San Francisco 

 San Diego ◈ Washington D.C.

The Future is Now –Preparing for the New World of 

Medicaid Managed Care, 

Contracting with Private Health Plans and

Development of Community Care Networks

Center for Disability and Aging Policy

Administration for Community Living

Webinar Series

March 11, 2014

Presenters:

W. June Simmons, MSW, jsimmons@picf.org

Mark E. Reagan, Esq., mreagan@health-law.com

Todd E. Swanson, Esq., tswanson@health-law.com

Editor:

David A. Hatch, Esq., dhatch@health-law.com 
Overview & Outline

Topical Introduction and Current Operational Framework

Dual Demonstrations, Dual Eligible Health Plans, Medicaid 

Managed Care, and Community Care and Long-Term Services 

and Supports (LTSS)

Preparing for Medicaid Managed Care and Contracting with 

Health Plans

Strategies for Contracting with Health Plans (Appendix A)

Potential for Establishment of Networks of Community Care 

Providers, Including Overview of Antitrust Risks, Risk Bearing 

Model, Clinical Integration Model, and Super Messenger Model 

(See also Appendix B)

Case Study of Hypothetical Community Care Network 

Super Messenger Model

Other Legal and Business Issues Associated with Community 

Care Networks

2 Hooper, Lundy & Bookman, P.C.
Duals Demonstration Update

Variety of Issues re Structures/Populations of 

“dual eligibles”

Rates – Medicare & Medicaid “rate floors”

Any Willing Provider, Credentialing & Network 

Adequacy

Enrollment

Rights to “Opt Out” of Medicare Portion

3 Hooper, Lundy & Bookman, P.C.
Movement to Managed Care

 Transfer of

 Responsibility 

 and Risk

 Cost Certainty 

 and Cost 

 Containment

4 Hooper, Lundy & Bookman, P.C.
Why Managed Care?

Less Transparency

Benefit Flexibility

5 Hooper, Lundy & Bookman, P.C.
Provider Credentials & 

Network Adequacy

Any Willing Provider (“AWP”)

Requires Plan Acceptance

Does Not Guarantee Referrals

6 Hooper, Lundy & Bookman, P.C.
Provider Credentials & 

Network Adequacy (1)

If no AWP

Network Adequacy

Medicare

3-prong analysis:

1) Minimum provider to enrollee ratio

2) Max travel distance to providers

3) Max travel time to providers

Medicaid

State dependent

7 Hooper, Lundy & Bookman, P.C.
Provider Credentials & 

Network Adequacy (2)

United Healthcare Example

Terminations of 2000 physicians in Connecticut

Complaint filed and TRO issued

CMS determines that Medicare network adequacy 

requirements met despite terminations

Case pending before 2nd Circuit Court of Appeal

8 Hooper, Lundy & Bookman, P.C.
What Can Network Accomplish?

For the health of the communities served there are 

three key issues a network may address:

1. Improving the patient experience of care (including 

quality and satisfaction);

2. Improving the health of populations; and

3. Reducing the per capita cost of health care.

9 Hooper, Lundy & Bookman, P.C.
Benefits of a Network Model (1)

Single contracting entity - ease of administration to 

payers

Integration - simpler to connect to one main entity 

rather than multiple

Uniform policies and procedures

Uniform reporting

Ability to vertically integrate “best practice” models

10Hooper, Lundy & Bookman, P.C.
Benefits of a Network Model (2)

Efficiencies-what are the redundant administrative 

business functions the network office could 

perform? 

Contracting

Billing 

Credentialing

Ability for participating agencies to focus on core 

business delivery

11Hooper, Lundy & Bookman, P.C.
Considerations in Developing a 

Community Care Network

Outline of Topics To Be Covered

Antitrust Law and Related Risks

Primary Provider Model

Financially Integrated Risk Bearing Model

Clinical Integration Model

Super Messenger Model

Other Legal Considerations

12Hooper, Lundy & Bookman, P.C.
Applicable Antitrust Restrictions:

Horizontal and Vertical Restraints

Horizontal Restraints

Agreement between actual/potential competitors to 

restrain competition in some way

E.g., network providers agree to jointly negotiate with 

payers

Vertical Restraints

Agreements between suppliers and customers that 

restrain competition in some way

E.g., Most-Favored Nation clauses in managed care 

agreements (network being required by Plan to give it 

better pricing than Plan’s competitors) 13Hooper, Lundy & Bookman, P.C.
Per Se Violations

Types of activities that constitute per se violations:

Price Fixing (agreement among competitors that raises, 

lowers, or stabilizes prices or competitive terms)

Market Allocations (agreement among competitors to 

assign sales territories or customers)

Certain Group Boycotts (agreement among competitors 

not to do business with targeted individuals or businesses)

Certain Tying Arrangements (agreement to sell product 

on condition that the buyer also purchase a tied product)

14Hooper, Lundy & Bookman, P.C.
Escaping the Per Se Rule: 

Integration

True JVs may avoid per se treatment

Sham JVs are just cartels (per se rule applies)

Rationale: Procompetitive ends may require the 

use of anticompetitive means

A JV may produce significant efficiencies or a 

new/improved product (pro-competitive effects) 

through suspect conduct (e.g., price fixing)

Thus, restraints are subordinate and collateral to a 

separate, legitimate transaction (ancillary restraints)

Healthcare JVs: Look for substantial financial risk 

sharing (and/or, perhaps, clinical integration) 15Hooper, Lundy & Bookman, P.C.
Joint Ventures

Cooperative or concerted action among two or 

more otherwise independent competitors.

Key to a legitimate joint venture, as opposed to 

illegal agreement among competitors, is economic 

integration

Integration can be in the form of capital 

contributions, shared risk of loss, or consolidating 

business functions.

16Hooper, Lundy & Bookman, P.C.
Network Joint Ventures - 1

Over the past 20 years, many physician organization 

joint ventures – such as IPAs and PPOs – have been 

challenged by antitrust authorities.

Primary claim is generally that they are insufficiently 

integrated, so joint payer negotiations constitute 

price fixing and per se illegal.

Not protected by negotiating through agent (i.e., 

improperly structured messenger model): seen as 

indirect price-fixing.

17Hooper, Lundy & Bookman, P.C.
Network Joint Ventures - 2

In statements of Antitrust Enforcement Policy in Healthcare, DOJ/FTC 

established a “safety zone” for certain physician network joint ventures.

If requirements are met, joint price negotiations will not be challenged.

One of the requirements is that physicians/providers “share substantial 

risk,” as this demonstrates financial integration.

Shared financial risk

Network accepts capitation.

Accept percentage of premium.

Withhold percentage owed to participants unless meet cost containment or 

other legitimate goals.

Agree to provide cluster of services (i.e., bone marrow transplant) for fixed 

all-inclusive case rate.

18Hooper, Lundy & Bookman, P.C.
Network Joint Ventures - 3

Statements of Enforcement Policy introduced 

concept of clinical integration.

FTC since has issued opinions outside of safety zone. 

Finding clinical integration can be sufficient to 

permit joint activities among competitors.

Features approved included shared access to 

electronic clinical information, enforced clinical 

practice protocols, quality goals and benchmarks 

together with sanctions for non-compliance.

Statement of Enforcement Policy regarding ACOs 

presumes ACOs are clinically integrated if meet CMS 

requirements.

19Hooper, Lundy & Bookman, P.C.
Continuum of Models

More Integrated

Primary Provider 

Model

Financial 

Integration 

Model

Clinical 

Integration 

Model

Super 

Messenger 

Model

MSO Model

Less Integrated

20Hooper, Lundy & Bookman, P.C.
Primary Provider Model

Reduced antitrust risks

Depending on structure, may require primary provider to 

obtain managed care license (in California limited KnoxKeene License possibly needed)

Simplified option

May be more appealing to plans

Does not involve as much collaboration or coordination 

and opportunity for synergies between providers

May be more difficult to obtain buy-in from 

subcontractors (Less independence and flexibility)

Not really a network 21Hooper, Lundy & Bookman, P.C.
PRIMARY PROVIDER MODEL

Dual

Eligible

Plans

$ 

Primary Contracting Provider

- Directly takes on obligations to provide services

- Subcontracts with subcontractors to provide certain services

- May be pure fee-for-service or capitation with possible sub-capitation

- Managed care license may be required if taking on capitation

$

Subcontractor

Service

Provider

Subcontractor

Service

Provider

Subcontractor

Service

Provider 22Hooper, Lundy & Bookman, P.C.
Financially Integrated Networks

(Risk Bearing Model)

Typically established for sole purpose of contracting 

with Plans on a risk basis.

Centralized billing/processing of capitation 

payments, quality assurance, utilization review and 

limited other administrative functions.

If percentage thresholds in “safety zone” satisfied, 

federal agencies won’t challenge absent 

extraordinary circumstances.

If not in “safety zone”, apply rule of reason analysis 

described in Policy Statements to assess antitrust 

compliance. 23Hooper, Lundy & Bookman, P.C.
RISK BEARING MODEL

Dual

Eligible

Plans

$ Capitation or

At Risk Payment

Primary Contracting Provider

- Bears Financial Risk

- Credentials Network Providers

- Oversees Quality and Cost Efficiency of Providers

- Negotiates Rates with Providers

- Pays Providers

Sub-capitation 

or Negotiated 

FFS Payment

Other

Service

Provider

Other

Service

Provider

Other

Service

Provider 24Hooper, Lundy & Bookman, P.C.
Clinically Integrated Networks 

Members typically would not share substantial 

financial risk.

No safety zone, but rule of reason analysis if 

substantial clinical integration exists.

Key: arrangement offers the potential for 

creating significant efficiencies, and the 

agreement on pricing is reasonably necessary to 

realize those efficiencies.

25Hooper, Lundy & Bookman, P.C.
CLINICAL INTEGRATION MODEL

Dual 

Eligible

Plans

Costs Plus Performance Fee

/Shared Savings (i.e., ACO Model) $ 

Primary Contracting Provider

- Credentials Network Providers

-Negotiates Contracts with Providers

- Pays Providers 

-Establishes Quality/Efficiency Standards

-Establishes Service Delivery Protocols

-Integrates Evidence Based Programs

-Integrates HIT with Network Providers

Costs Plus

Performance Fee

/Shared Savings $ 

Other

Service

Provider

$ 

Costs Plus

Performance Fee

/Shared Savings

Other

Service

Provider

26 Hooper, Lundy & Bookman, P.C.
Super Messenger Model Overview

The Network will act as agent for providers in negotiation of contracts 

with Plans, other than price and price terms. In the future, other types 

of providers may be added.

Each provider would individually set the range of pricing and price terms 

(such as time for payment etc.) it is willing to accept from the Plans.

The providers would not be permitted to share pricing information. The 

Network staff would be ethically walled off from Partners staff to ensure 

confidentiality of pricing information.

Network would communicate price and price terms to plans, but would 

not negotiate prices collectively.

If contracts meet the price and other terms acceptable to providers, the 

Network would execute a contract as agent for providers and notify 

provider.

Plans would pay provider directly for services provided by such provider. 27 Hooper, Lundy & Bookman, P.C.
SUPER MESSENGER MODEL

Dual 

Eligible

Plans

Network

Maintenance Fee

Primary Contracting Provider

-Acts as Agent for Providers

-Negotiations of Non-Price Terms of Contract

-No Group Negotiations of Price Terms

-Bears No Financial Risk

-No Geographic Division of Markets

-Credentials Providers

-Communicates Pricing Requirements of Each Provider

-Oversees Quality/Efficiency

$ 

Other Service Provider

Independent

Pricing Decision

$ $ 

Exclusive or

Non-Exclusive

Membership

Other Service Provider

Independent

Pricing Decision

Other Service Provider 

Independent 

Pricing Decision 

28 Hooper, Lundy & Bookman, P.C.
Other Considerations:

Super Messenger Model

Coordinate care and best practices amongst participants

No pricing or rate sharing to avoid legal risks

No geographic division of markets (Community Providers

should have ability to compete in markets)

29 Hooper, Lundy & Bookman, P.C.
Hypothetical Home & 

Community Services Network Plan

(Super Messenger Model –A Prospective Case Study)

Home & Community Services Network

Collaboration: A collaborative effort to bring 

efficiencies and value to participating network 

Community Care Providers (Community Providers) and 

the dual eligible health plans (Plans) that contract with 

the Community Providers

Administration: The Network will act as network 

administrator for participating Community Providers 

sites 

30Hooper, Lundy & Bookman, P.C.
Strategies for Funding the 

Cost of the Network Resources

Capital contributions at founding

Negotiation of network maintenance fees 

from Plans (particularly for delegated Plan 

administrative responsibility)

Fees from members/contractors offset by 

administrative savings

31Hooper, Lundy & Bookman, P.C.
Network Administrator Entity

Separate Entity: The network administrator entity could 

be a separate entity (Newco) from the Community 

Providers’ participants.

Type of Entity: Newco could be a limited liability 

company (LLC), due to flexibility in management 

structure and reduced governance obligations.

Purpose: Newco’s purpose could be limited to acting as 

a network administrator for provider related activities 

and contracting for Community Providers’ participants 

located in a certain region

32Hooper, Lundy & Bookman, P.C.
Ownership

Each participant could be a Member of 

Newco and could be provided with equal 

ownership (but typically tied to amount of 

capital contribution)

Each participant could be expected to make 

an equal capital contribution to Newco to 

cover costs with establishing and staffing 

Newco

33Hooper, Lundy & Bookman, P.C.
Governance

Newco could be a manager managed LLC, but 

with membership participation in governance.

Manager or managing board would be 

responsible for day-to-day management of 

Newco, with certain approval rights reserved to 

the Members.

34Hooper, Lundy & Bookman, P.C.
Governance

Approval rights of Members could include, among 

others, the following (with some requiring majority and 

some requiring super-majority approval):

Sale of substantially all the assets of or merger of Newco

Encumbering assets of Newco

Hiring or firing the CEO of Newco

Approving admission of new Members or to allow transfer of a 

Member’s interests, other than transfers to affiliates

Requiring or permitting additional capital contributions

Amending organizational document

Annual budget

35Hooper, Lundy & Bookman, P.C.
Meetings of Members

Operating Agreement could provide for periodic 

and special Member meetings and provide for:

No sharing of pricing information in such meetings 

or otherwise

No division of markets

Coordination of care and best practices amongst 

participants

Consideration of Member suggestions regarding 

operational issues

36Hooper, Lundy & Bookman, P.C.
Participating Provider or 

Membership Agreement

Each participant could enter into a Participating Provider or 

Membership Agreement with Network/Newco.

Agreement will address, among other things:

Term of Agreement and Termination Rights

Agreement to comply with Programs, Policies and Procedures of 

Network/Newco (including utilization review, quality management and 

reporting)

The Pricing requirement and terms for the specific contracting Community 

Provider (rates and terms that Community Provider is willing to accept)

Service obligations of Network/Newco

The scope of agency of the Network/Newco to act on behalf of Community 

Provider and enter into contracts

Insurance obligations of parties

Billing, reconciliation and audit rights of parties

Staffing and administrative services provided by Network/Newco

37Hooper, Lundy & Bookman, P.C.
Who can networks be marketed to other than 

plans?

Accountable Care Organizations 

(Commercial/Medicare)

Health Systems

Medical Homes

Large Employers

38Hooper, Lundy & Bookman, P.C.

Other Business & Legal Issues Associated with 

Establishment of Community Care Networks
Other Business & Legal Issues Associated with 

Establishment of Community Care Networks

Fraud and abuse risks

Federal and state anti-kickback statutes

State self-referral laws, and Federal Stark law 

issue possible if there is physician involvement

Gainsharing opportunities with plans 

and other providers

Federal civil monetary penalty statute

39Hooper, Lundy & Bookman, P.C.
Wrap-Up & Questions?

 Any views or opinions expressed in this presentation are solely those of the author(s) and do not necessarily represent those of Hooper, Lundy & Bookman. 

You should not assume or construe that this presentation represents the opinion of Hooper, Lundy & Bookman.

 Although this presentation provides information concerning potential legal issues, it is not a substitute for specific legal advice from qualified counsel. You

should not and are not authorized to rely on this presentation as a source of legal advice. This presentation is solely for general educational and informational

purposes. Your attendance at this presentation does not create any attorney-client relationship between you and Hooper, Lundy & Bookman. You should not act

upon this information without seeking your own independent professional advice.

40Hooper, Lundy & Bookman, P.C.
APPENDIX A

41Hooper, Lundy & Bookman, P.C.
Contracting Issues

42Hooper, Lundy & Bookman, P.C.
Plan Set Up – Global Issues

These issues may be considered 

at the initial set up or global 

level (affecting all providers 

without negotiation) –

Rate Setting – How? Who? 

Payment – How? Who? When? How Fast?

Eligibility – Who? How? What Process? 

Covered Services – Who Decides? Appeals?

Contract Terms – Take It or Leave It Contract? 43Hooper, Lundy & Bookman, P.C.
(Where) Is There Any 

Negotiation?

Many provider contract provisions 

may be “set in stone” by flow-

down provisions

Sources of flow-down provisions

Federal statutes CMS regulations on managed care Federal provider regulations Contract Risk Agreement

Negotiation of and Provisions in 

the Contract Risk Agreement or 

Similar document becomes 

extremely important in the 

development of Medicaid MC plan 44Hooper, Lundy & Bookman, P.C.
The “Balance” of Power

Health Plan gets leverage if it can selectively contract

A Provider draws its strength from the maximum 

value it can deliver to the MC system and its 

ability to deliver solutions to problems efficiently

Health Plan network access may be helpful if there is 

a geographic “hole” or hurtful if there is a “glut”

Health Plans have strong incentive to contract with 

LTSS providers because such providers can reduce 

cost by replacing hospitalization, long term care and 

other forms of expensive care

For Medicaid, the state’s interests is less involvement 

and predictable costs without loss of quality

45Hooper, Lundy & Bookman, P.C.
Contracting Basis

Contracting Basics 

Facilities should try to enter into a specially negotiated 

contract rather than relying on the form contract 

provided by the Medicaid Managed Care 

Organization(“MCO”).

Clarity is important:

Make sure the contractual language is clear. 

Define important terms.

Facilities should make sure they have the complete 

contract, including all documents to which the contract 

makes references.

READ AND UNDERSTAND.

46Hooper, Lundy & Bookman, P.C.
Negotiating 

Managed Care Contracts

LTSS’s provider must educate itself about managed 

care contracts and utilize strategies to maximize its 

effectiveness when negotiating with MCOs

Consider the use of outside financial, legal and 

other professionals if that expertise does not exist 

in-house

47Hooper, Lundy & Bookman, P.C.
Homework 

– Before You Start !!

1. Before contracting, run at least a 12 month 

analysis on existing client and cost data

2. Costs (how does it affect costs and what are 

internal “soft” costs to participate?)

3. Cash flow 

4. Census (how do clients move in/out?)

5. Compliance (Regulatory requirements, 

liability)

6. Care (how does the program help to 

deliver care?)

7. Satisfaction – clients/staff/other 

providers/families

8. QUALITY DATA TO SHOW VALUE!!!! 48Hooper, Lundy & Bookman, P.C.
Pre-Contract Diligence

Objectives: Be sure to outline objectives when 

entering into particular contractual arrangement

Leverage: Objectively evaluate your facility’s 

negotiating strength in each set of contract 

negotiations

Remember that though an MCO draws leverage 

from its ability to selectively contract, there are 

several ways providers can maintain negotiating 

power

49Hooper, Lundy & Bookman, P.C.
Pre-Contract Diligence

Providers should investigate a payor’s history, 

creditworthiness, financial resources, and reputation

Issues to look for:

Failure to pay claims in a timely manner

Failure to produce accurate financial statements in a 

timely manner

Loss of personnel/high employee turnover

Unjustified claim denials

High complaint volume

50Hooper, Lundy & Bookman, P.C.
Negotiating Strategy - Leverage

If there are few LTSS providers in your area, the 

Health Plan will have a much greater need to 

contract with you

Health Plans have strong incentive to contract with 

LTSS providers because such providers can reduce 

cost by replacing hospitalization and other forms of 

expensive care

How can your organization affect a Health Plan’s 

overall costs and efficiencies?

Sell! Sell! Sell!

51Hooper, Lundy & Bookman, P.C.
Clarity & Completeness

Providers should try to enter into a specially 

negotiated contract rather than relying on the form 

contract provided by the MCO

Make sure the contractual language is easy to 

understand and is not subject to ambiguity, unless in 

your favor 

Define important terms

Providers should make sure it has the complete 

contract, including all documents to which the 

contract makes reference

52Hooper, Lundy & Bookman, P.C.
Important Contract Terms

53Hooper, Lundy & Bookman, P.C.
Billing/Payment

Billing Format and Claims Submission - The contract 

should specify a billing format to be used by both 

parties, or at least state that the parties will 

mutually agree upon a billing format

Denial of Payment – Try to limit retroactive denials 

based on lack of authorization or utilization review

Prompt Pay – How fast does the MCO pay and what 

happens when they do not comply? Late fee, 

interest, etc.

Overpayment – What is facility required to do? 54Hooper, Lundy & Bookman, P.C.
Medicaid MC Payment Method

Medicaid Managed LTC

Often a statutory rate framework and/or 

rates set by State not Plans

Legislation may limit plan negotiation 

Medicaid Rates 

Often a less robust payment bundle 

Harder to vary costs / rates within per diem

Risk sharing can be more difficult in some cases

55Hooper, Lundy & Bookman, P.C.
Pre-Authorization

Contract should state what approvals and 

authorizations are needed prior to admission

Providers should only be required to use “best 

efforts” to obtain authorization

56Hooper, Lundy & Bookman, P.C.
Reimbursement and Payment - 1

Payment Methodology and Source

There are various payment methods and structures 

Negotiates for payment methods that are reasonable 

and consistent

If fixed, there should be an affirmative statement that 

payment is according to the agreed upon rate schedule

If risk sharing, what are the terms and conditions of 

bonuses and incentives?

57Hooper, Lundy & Bookman, P.C.
Reimbursement and Payment - 2

Billing and Prompt Payment

The contract should specify a billing format to be used 

by both parties, or at least state that the parties will 

mutually agree upon a billing format

Denial of Payment

A facility should avoid or limit provisions that allow 

the MCO to retroactively deny payment based on lack 

of authorization or utilization review

58Hooper, Lundy & Bookman, P.C.
Term and Termination

59Hooper, Lundy & Bookman, P.C.
Term and Termination

Review the term and termination section closely

Mutuality for each side’s needs is the key

What triggers involuntary termination

Breach for non-payment, slow payment

Regulatory or quality considerations

Consider the length of term and choose what makes 

sense for the providers’ needs, but understand the 

needs of the MCO to have and keep a viable network

Ideally, the provider should try to negotiate for its 

right to terminate for any reason 60Hooper, Lundy & Bookman, P.C.
Amendment/Modification

Avoid provisions which 

allow the MCO to 

unilaterally modify the 

contract

Provider Manuals !!!

Be wary of “re-opener” 

clauses which allow a 

facility to reject MCO 

proposed changes but 

then trigger termination 

of contract 61Hooper, Lundy & Bookman, P.C.
Other Important Items

Notification

Plan Changes

Provider Changes (enforcement, CHOW, etc.)

Provider and Enrollee Grievances

Insurance and Indemnification

Hold-Harmless Clauses (Enrollee)

Provisions required by Federal law or regulations 

(Flow-down)

Resolution of Contract Disputes/Arbitration

62Hooper, Lundy & Bookman, P.C.
Notification

The contract likely will incorporate various 

appendices and exhibits

Ensure there is a provision so that provider gets these 

new versions

The MCO will want to be apprised of any changes in 

conditions or situations, especially any legal 

problems that may arise

The provider should negotiate for a notification 

limitation that only requires notification based on 

statutory requirements or documents as a matter of 

public law 63Hooper, Lundy & Bookman, P.C.
Other Provisions

Hold-Harmless Clauses

Most contracts have clauses which prevent the provider from 

charging the enrollee for services not covered under the 

enrollee’s plan

Maintenance and Release of Records; Confidentiality

Do you need a provision relative to HIPAA rules?

Data collection and transfer

Amendments and Modifications

Avoid provisions which allow the MCO to unilaterally modify the 

contract

Be wary of “re-opener” clauses which allow a facility to reject 

MCO proposed changes but then trigger termination of contract

64Hooper, Lundy & Bookman, P.C.
APPENDIX B

Further Materials Regarding

Developing Networks

65Hooper, Lundy & Bookman, P.C.
Antitrust Law Issues Regarding 

Network Formation

Restraints on Trade (Sherman Act § 1)

“Every contract, combination ... or conspiracy in 

restraint of trade”

Monopolization (Sherman Act § 2)

“Monopoliza[tion], or attempt[s at] monopoliz[ation], 

or combin[ations] or conspir[acies] with any other 

person or persons, to monopolize” trade or commerce

Unfair Methods of Competition & Unfair or 

Deceptive Acts or Practices (FTC Act § 5)

Encompasses Sherman Act and Clayton Act violations

66Hooper, Lundy & Bookman, P.C.
Sherman Act § 1

Prohibits “every contract, 

combination ... or conspiracy

in restraint of trade”

(1) Agreement

(2) Unreasonable 

Restraint of Trade 67Hooper, Lundy & Bookman, P.C.
What Constitutes an Agreement 

for Antitrust Purposes

A restraint on trade without an agreement does not 

violate Sherman Act § 1

Solo Conduct is Permitted

Includes conduct of parent and its wholly owned 

subsidiary (constitute a “single enterprise”)

Parallel Conduct

Parallel conduct alone does not violate § 1

But, may reflect unwritten/implied agreement

Parallel conduct prompted by a unilateral offer suggests 

acceptance of the offer by performance

E.g., circulation of pricing information followed by 

parallel action

68Hooper, Lundy & Bookman, P.C.
Joint Ventures and Further

Antitrust Considerations

Integration is important because activities of joint 

ventures often would be per se illegal absent significant 

integration

Price fixing

Boycotts

Market division

Activities otherwise per se illegal is protected if 

ancillary to purposes of joint venture

Bigger risks often in operations of joint venture

Important to avoid “spillover collusion”: agreements, or 

information sharing, related to markets where continue 

to compete

69Hooper, Lundy & Bookman, P.C.
Examples of Clinical Integration

 Systems to establish goals relating to quality and appropriate utilization of 

services by participants;

 Regular evaluation of both individual participants’ and networks’ aggregate 

performance with respect to those goals;

 Modifying the participants actual practices where necessary based on those 

evaluations.

 Engaging in case management, preauthorization of some services, and 

concurrent and retrospective review;

 Development of practice standards and protocols to govern treatment and 

utilization of services, and actively review the care rendered by each 

participant in light of those standards and protocols;

 Significant investment of capital to purchase the information systems 

necessary to gather aggregate and individual data on the cost, quality and 

nature of services provided or ordered by the participants, in order to 

measure performance of the group and individual participants against cost 

and quality benchmarks and to monitor patient satisfaction.

70Hooper, Lundy & Bookman, P.C.
Messenger Model: Suspect Activities - 1

Messenger coordinates multiple provider responses 

to payer proposals.

Messenger shares intentions of providers with other 

providers.

Messenger expresses opinion on payer rates and 

terms.

The messenger collectively negotiates for providers.

The messenger is given the discretion to report 

payer proposals to the provider or reject without 

presenting to the provider. 71Hooper, Lundy & Bookman, P.C.
Messenger Model: Suspect Activities - 2

Meetings amongst groups of network providers and 

messenger to discuss rates.

Messenger encouraging providers to cancel 

contracts and enter into more favorable contracts 

negotiated by the messenger.

Messenger refusal to convey payer proposals to 

provider, or provider proposals to payer.

72Hooper, Lundy & Bookman, P.C.
Officers/Staff of Network Entity

Newco could have one or more staff that would be 

direct employees of Newco

Some staff may be employed part-time by both 

managing member and Newco, leased from 

managing member or may be former employees of 

managing member

To maintain confidentiality, Newco staff would not 

share participants’ independent pricing and pricing 

terms with participating Members, managing 

member staff that were employed by Newco would 

not be involved in any network provider’s programs 73Hooper, Lundy & Bookman, P.C.
Network Programs and Procedures

Referral Procedures – Network may establish procedures for appropriate 

referrals by Community Providers to other providers when appropriate.

Quality Assurance Standards – Network may establish quality metrics 

addressing eligibility determinations, care management determinations, 

operational protocols and procedures, record keeping requirements, 

appropriate staffing etc.

Utilization Review Program – Network may establish a utilization review 

program. 

Credentialing and Licensing – Network may establish credentialing and 

licensing standards.

Grievance Procedures

 Medical and Administrative Records and Health Information 

Interoperability

 Address authority to access medical records

 Build out of HIT infrastructure

74Hooper, Lundy & Bookman, P.C.
Governance/Other Owners’

Approval Rights

Entering into or approving contracts over certain amounts

Approving bankruptcy or similar actions regarding Newco

Amending the Operating Agreement or Articles of 

Organization

Approving commencement of or settlement of litigation

Approving a change in the nature or expansion of business 

to be operated by Newco

Approving material modifications to Network Policies and 

Procedures

Approving material modifications to the form Participating 

Provider Agreement

Approving Newco’s annual operating budget

75Hooper, Lundy & Bookman, P.C.