[Federal Register Volume 63, Number 121 (Wednesday, June 24, 1998)]
[Notices]
[Pages 34423-34424]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-16821]


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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 ``<a href="http://www.ftc.gov/os/
actions97.htm">http://www.ftc.gov/os/
actions97.htm</a>.'' 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,

[[Page 34424]]

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