[Federal Register Volume 60, Number 91 (Thursday, May 11, 1995)]
[Notices]
[Pages 25223-25226]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-11553]



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FEDERAL TRADE COMMISSION
[File No. 931-0083]


Physicians Group, Inc., et al.; Proposed Consent Agreement With 
Analysis To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: In settlement of alleged violations of federal law prohibiting 
unfair acts and practices and unfair methods of competition, this 
consent agreement, accepted subject to final Commission approval, would 
prohibit, among other things, the respondent, a Danville physicians' 
group, and its seven board members from attempting to engage in an 
agreement or agreeing with other physicians to negotiate or refuse to 
negotiate with a third party payor. In addition, it would require 
dissolution of the respondent within 120 days.

DATES: Comments must be received on or before July 10, 1995.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary, 
Room 159, 6th St. and Pa. Ave., NW., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT:
Mark Horoschak or Rendell Davis, FTC/S-3115, Washington, DC 20580. 
(202) 326-2756 or (202) 326-2894.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Sec. 2.34 of the 
Commission's rules of practice (16 CFR 2.34, notice is hereby given 
that the following 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. 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 
Sec. 4.9(b)(6)(ii) of the Commission's rules of practice (16 CFR 
4.9(b)(6)(ii)).

Before Federal Trade Commission

    In the matter of Physicians Group, Inc., a corporation, Edwin J. 
Harvie, Jr., M.D., Eric N. Davidson, M.D., Milton Greenberg, M.D., 
Noah F. Gibson, IV, M.D., William W. Henderson, IV, M.D., Douglas W. 
Shiflett, M.D., and Lawrence G. Fehrenbaker, M.D., individually. 
File No. 931 0083.

Agreement Containing Consent Order To Cease and Desist

    The Federal Trade Commission having initiated an investigation of 
certain acts and practices of the respondents named in the caption 
hereof, hereinafter sometimes referred to as proposed respondents, and 
it now appearing that the proposed respondents are willing to enter 
into an agreement containing an order to cease and desist from the use 
of the acts and practices being investigated,
    It is hereby agreed by and between the proposed respondents and 
counsel for respondent Physicians Group, Inc., and counsel for the 
Federal Trade Commission that:
    1. Proposed Respondent Physicians Group, Inc. is a nonstock 
corporation organized, existing, and doing business under and by virtue 
of the laws of the Commonwealth of Virginia, with its principal place 
of business in Danville, Virginia. For purposes of this agreement and 
order, its address is Physicians Group, Inc., c/o Dr. Edwin J. Harvie, 
Jr., 101 Holbrook Street, Danville, Virginia 24541.
    2. The individual respondents named in the caption above are the 
members of the board of directors of proposed respondent Physicians 
Group, Inc., are physicians licensed to practice medicine in the 
Commonwealth of Virginia, and are engaged in the business of providing 
physician services to patients for a fee in Pittsylvania County and 
Danville, Virginia. Their respective business addresses are as follows:
Edwin J. Harvie, Jr., M.D., Internal Medicine Associates, Ltd., 101 
Holbrook Street, Danville, Virginia 24541;
Eric N. Davidson, M.D., Piedmont Internal Medicine, Inc., 125 Executive 
Drive, Suite H, Danville, Virginia 24541;
Milton Greenberg, M.D., 171 South Main Street, Danville, Virginia 
24541;
Noah F. Gibson, IV, M.D., 181 North Main Street, Danville, Virginia 
24541;
William W. Henderson, IV, M.D., Danville Pulmonary Clinic, Inc., 110 
Exchange Street, Suite G, Danville, Virginia 24541;
Douglas W. Shiflett, M.D., Internal Medicine Associates, Ltd., 101 
Holbrook Street, Danville, Virginia 24541; and
Lawrence G. Fehrenbaker, M.D., Danville Urologic Clinic, P.O. Box 1360, 
Danville, Virginia 24543.

    3. Proposed respondents admit all the jurisdictional facts set 
forth in the draft of complaint.
    4. Proposed respondents waive:
    (a) Any further procedural steps;
    (b) The requirement that the Commission's decision contain a 
statement of findings of fact and conclusions of law;
    (c) All rights to seek judicial review or otherwise to challenge or 
contest the validity of the order entered pursuant to this agreement; 
and
    (d) Any claim under the Equal Access to Justice Act.
    5. This agreement shall not become part of the public record of the 
proceeding unless and until it is accepted by the Commission. If this 
agreement is accepted by the Commission it, together with the draft of 
complaint contemplated thereby, will be placed on the public record for 
a period of sixty (60) days and information with respect thereto will 
be publicly released. The Commission thereafter may either withdraw its 
acceptance of this agreement and so notify the proposed respondents, in 
which event it will take such action as it may consider appropriate, or 
issue and serve its complaint (in such form as the circumstances may 
require) and decision, in disposition of the proceeding.
    6. This agreement is for settlement purposes only and does not 
constitute [[Page 25224]] an admission by proposed respondents that the 
law has been violated as alleged in the draft of complaint here 
attached, or that the facts as alleged in the draft complaint, other 
than jurisdictional facts, are true.
    7. This agreement contemplates that, if it is accepted by the 
Commission, and if such acceptance is not subsequently withdrawn by the 
Commission pursuant to the provisions of Sec. 2.34 of the Commission's 
rules, the Commission may, without further notice to proposed 
respondents, (1) issue its complaint corresponding in form and 
substance with the draft of complaint here attached and its decision 
containing the following order to cease and desist in disposition of 
the proceeding and (2) make information public in respect thereto. When 
so entered, the order shall have the same force and effect and may be 
altered, modified, or set aside in the same manner and within the same 
time provided by statute for other order. The order shall become final 
upon service. Delivery by the U.S. Postal Service of the complaint and 
decision containing the agreed-to order to proposed respondents' 
addresses as stated in this agreement shall constitute service. 
Proposed respondents waive any right they may have to any other manner 
of service. The complaint may be used in construing the terms of the 
order, and no agreement, understanding, representation, or 
interpretation not contained in the order or the agreement may be used 
to vary or contradict the terms of the order.
    8. Proposed respondents have read the proposed complaint and order 
contemplated hereby. Proposed respondents understand that once the 
order has been issued, they will be required to file one or more 
compliance reports showing that they have fully complied with the 
order. Proposed respondents further understand that they may be liable 
for civil penalties in the amount provided by law for each violation of 
the order after the order becomes final.

Order

I

    It is ordered that, for purposes of this order, the following 
definitions shall apply:
    A. ``PGI'' means Physicians Group, Inc., its subsidiaries, 
divisions, committees, and groups and affiliates controlled by PGI; 
their directors, officers, representatives, agents, and employees; and 
their successors and assigns.
    B. ``Physician respondents'' means Edwin J. Harvie, Jr., M.D., Eric 
N. Davidson, M.D., Milton Greenberg, M.D., Noah F. Gibson, IV, M.D., 
William W. Henderson, IV, M.D., Douglas W. Shiftlett, M.D., and 
Lawrence G. Fehrenbaker, M.D.
    C. ``Person'' refers to both natural persons and artificial 
persons, including, but not limited to, corporations, unincorporated 
entities, and governments.
    D. ``Payor'' means any person that purchases, reimburses for, or 
otherwise pays for all or part of the health care services for itself 
or for any other person--including, but not limited to, health 
insurance companies; preferred provider organizations; prepaid 
hospital, medical, or other health service plans; health maintenance 
organizations; government health benefits programs; employers or other 
persons providing or administering self-insured health benefits 
programs; and patients who purchase health care for themselves.
    E. ``Reimbursement'' means any and all cash or non-cash 
compensation or other benefits received for the rendering of physician 
services.
    F. ``Cost containment'' means methods used by payors to lower 
health care costs, including, but not limited to, procedures under 
which payors review utilization by participating physicians to 
determine whether a physician service is covered by insurance and 
whether such service is appropriate, and procedures under which payors 
deal with physicians who provide services that are determined not to be 
appropriate.
    G. ``Integrated joint venture'' means a joint arrangement to 
provide health care services in which all physicians participating in 
the venture who would otherwise be competitors (1) pool their capital 
to finance the venture, by themselves or together with others, and (2) 
share a substantial risk of loss from their participation in the 
venture.
    H. ``Professional business entity'' means professional corporation, 
professional partnership, and professional limited liability company.

II

    It is further ordered that PGI and each physician respondent, 
directly or indirectly, or through any corporate or other device, in 
connection with the provision of physician services in or affecting 
commerce, as ``commerce'' is defined in the Federal Trade Commission 
Act, forthwith shall cease and desist from:
    A. Entering into, attempting to enter into, organizing, attempting 
to organize, implementing, attempting to implement, continuing, 
attempting to continue, facilitating, attempting to facilitate, 
ratifying, or attempting to ratify any combination, conspiracy, 
agreement, or understanding, with or among any physician(s) to:
    1. Negotiate, deal, or refuse to deal with a payor, or
    2. Determine any terms, conditions, or requirements upon which 
physicians deal with a payor, including, but not limited to, terms of 
reimbursement or of cost containment; and
    B. Encouraging, advising, pressuring, inducing, or attempting to 
induce any physician to:
    1. Refuse to deal with a payor, or
    2. Deal with a payor on terms collectively determined by 
physicians, including such terms as terms of reimbursement or terms of 
cost containment.
    Provided that, nothing in this order shall prevent physicians who 
practice together as partners or employees in the same professional 
business entity from collectively determining the fees to be charged 
for services rendered by that professional business entity or from 
collectively determining other terms on which that professional 
business entity deals with payors.
    Further provided that, nothing in this order shall prevent 
physicians who participate in the same integrated joint venture from 
collectively determining the fees to be charged for services rendered 
by that integrated joint venture or from collectively determining other 
terms on which that integrated joint venture deals with payors.
    Further provided that, nothing in this order shall prevent the 
exercise of rights permitted under the First Amendment to the United 
States Constitution to petition any federal or state government 
executive agency or legislative body concerning legislation, rules, or 
procedures, or to participate in any federal or state administrative or 
judicial proceeding.
    Further provided that, nothing in this order shall prevent 
physicians from participating at the request of a payor in utilization 
review activities organized and controlled by the payor insofar as such 
participation continues only at the sufferance of the payor.

III

    It is further ordered that PGI shall:
    A. Within ten (10) days after the date on which this order becomes 
final, cease and desist all business and all other activities of any 
nature whatsoever, except those activities that are required in order 
to comply with the terms of this order or that are necessary to effect 
a winding up of PGI's affairs and its dissolution; [[Page 25225]] 
    B. Within sixty (60) days after the date on which this order 
becomes final, and prior to the dissolution provided for in Paragraph 
III.C. below, distribute by first-class mail a copy of this order and 
the accompanying complaint to each past and present member of PGI and 
to each payor who, at any time since February 18, 1986, has 
communicated any desire, willingness, or interest in contracting for 
physician services with PGI or with any of the physician respondents; 
and
    C. Dissolve itself within one hundred twenty (120) days after the 
date on which this order becomes final.

IV

    It is further ordered that each physician respondent shall:
    A. Within thirty (30) days after the date this order becomes final, 
prepare a list of the names, addresses, and telephone numbers of all 
payors who, at any time since February 18, 1986, have communicated any 
desire, willingness, or interest in contracting with him for physician 
services, and deliver a copy of that list to PGI; and
    B. Take all action necessary to effect dissolution of PGI as 
required by this order.

V

    It is further ordered that PGI shall:
    A. Within ninety (90) days after the date on which this order 
becomes final, and prior to the dissolution provided for in Paragraph 
III.C. above, file with the Commission a verified written report 
demonstrating how it has complied and is complying with this order; and
    B. Notify the Commission at least thirty (30) days prior to any 
proposed change in PGI, such as change of address, assignment, sale 
resulting in the emergence of a successor, or any other change in PGI 
that may affect compliance obligations arising out of this order.

VI

    It is further ordered that each physician respondent shall:
    A. Within sixty (60) days after the date this order becomes final, 
every sixty (60) days thereafter in which PGI is not dissolved, and 
within the thirty (30) days following dissolution of PGI, file with the 
Commission a verified written report setting forth in detail the manner 
and form in which he intends to comply, is complying, and has complied 
with this order, including, but not limited to, a full description of 
his efforts to comply with Paragraph IV.B. above;
    B. Beginning on January 15, 1996, and continuing annually for three 
(3) years, on each succeeding January 15, through and including January 
15, 1999, and at such other times as the Commission or its staff may by 
written notice require, file with the Commission a verified written 
report setting forth in detail the manner and form in which he has 
complied with the order; and
    C. For ten (10) years, notify the Commission at least thirty (30) 
days prior to any proposed change in his address or in his medical 
practice, such as dissolution, assignment, sale resulting in the 
emergence of a successor, or any other change in his medical practice 
that may affect compliance obligations arising out of this order.

VII

    It is further ordered that, for the purpose of determining or 
securing compliance with this order and subject to any recognizable 
privilege, PGI and each physician respondent shall permit any duly 
authorized representative of the Commission:
    A. Access, during office hours and in the presence of counsel, to 
inspect and copy all books, ledgers, accounts, correspondence, 
memoranda, calendars, and other records and documents in the possession 
or under the control of PGI or a physician respondent relating to any 
matters contained in this order;
    B. Upon five business days' notice to PGI and without restraint or 
interference from it, to interview the officers, directors, or 
employees of PGI; and
    C. Upon five business days' notice to a physician respondent and 
without restraint or interference from him, to interview the physician 
respondent or the employees of the physician respondent.

VIII

    It is further ordered that this order shall terminate twenty (20) 
years from the date of issuance.

Physicians Group, Inc., Analysis of Proposed Consent Order to Aid 
Public Comment

    The Federal Trade Commission has accepted, subject to final 
approval, the agreement to a proposed consent order from Physicians 
Group, Inc. (``PGI'') and from the seven members of the board of 
directors of PGI (``PGI Directors''). The agreement settles charges by 
the Federal Trade Commission that PGI and the PGI Directors restrained 
competition among physicians practicing in the area of Danville, 
Virginia, by, among other things, combining or conspiring to fix the 
terms under which they would deal with third-party payors, including 
(1) terms of reimbursement and (2) the terms by which third-party 
payors attempt to contain health care costs.
    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 again 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 
agreement. The analysis is not intended to constitute an official 
interpretation of either the proposed complaint or the proposed consent 
order or to modify their terms in any way.

The Complaint

    Under the terms of the agreement, a proposed complaint would be 
issued by the Commission along with the proposed consent order. The 
proposed complaint alleges that PGI is a nonstock corporation with its 
principal place of business in Danville, Virginia, and that all the 
members of respondent PGI, including the PGI Directors, are physicians 
practicing in Pittsylvania County and Danville, Virginia.
    The proposed complaint further alleges that, beginning in 1986, PGI 
and the PGI Directors conspired with each other and with other PGI 
members to (1) prevent or delay the entry into Pittsylvania County and 
Danville, Virginia, of third-party payors, (2) deal concertedly with 
third-party payors, and (3) resist the cost containment measures of 
third-party payors. In 1988 and 1989, PGI Directors conspired to fix 
the rate of reimbursement they were willing to accept from the Virginia 
Health Network, a managed care organization. As a result, the Virginia 
Health Network was not able to establish a network of health care 
providers in Pittsylvania County and Danville, Virginia. In 1992 and 
1993, PGI and the PGI Directors conspired to fix the terms and 
conditions of cost containment they were willing to accept from the Key 
Advantage Plan, a managed care insurance plan for employees of the 
Commonwealth of Virginia. As a result, the Commonwealth of Virginia was 
not able until 1994 to fully implement the Key Advantage Plan in 
Pittsylvania County and Danville, Virginia. In addition, PGI and the 
PGI Directors conspired to refuse to deal with, and to fix the terms 
and conditions of dealing with, other third-party payors attempting to 
do business in Pittsylvania County and Danville, 
Virgina. [[Page 25226]] 
    The proposed complaint alleges that this conduct had the following 
purpose, tendency, and capacity to result in the following effects:
    A. Restraining competition among physicians in Pittsylvania County 
and Danville, Virginia;
    B. Depriving consumers in Pittsylvania County and Danville, 
Virginia, of the benefits of competition among physicians;
    C. Fixing or increasing the prices that are paid for physician 
services in Pittsylvania County and Danville, Virginia;
    D. Fixing the terms and conditions upon which physicians in 
Pittsylvania County and Danville, Virginia, would deal with third-party 
payors, including, but not limited to, terms and conditions of cost 
containment, and thereby raising the price to consumers of insurance 
coverage issued by third-party payors; and
    E. Depriving consumers in Pittsylvania County and Danville, 
Virginia, of the benefits of managed care.
    Finally, the proposed complaint alleges that the above actions of 
PGI and the PGI Directors constitute unfair methods of competition, in 
violation of section 5 of the Federal Trade Commission Act, 15 U.S.C. 
45.

The Proposed Consent Order

    The proposed consent order would prohibit PGI and the PGI Directors 
from engaging in, or attempting to engage in, any combination, 
conspiracy, agreement, or understanding, with or among any physician(s) 
to negotiate, deal, or refuse to deal with a payor, or to determine any 
terms, conditions, or requirements upon which physicians deal with a 
payor, including, but not limited to, terms of reimbursement or of cost 
containment.
    The proposed consent order would also prohibit PGI and the PGI 
Directors from encouraging, advising, pressuring, inducing, or 
attempting to induce any physician to (1) refuse to deal with a payor, 
or (2) deal with a payor on terms collectively determined by 
physicians, including such terms as terms of reimbursement or terms of 
cost containment.
    The proposed consent order specifically permits the following:
    1. Physicians who practice together as partners or employees in the 
same professional business entity collectively determining the fees to 
be charged for services rendered by that professional business entity, 
or collectively determining other terms on which that professional 
business entity deals with payors. (For purposes of this consent order, 
``professional business entity'' means professional corporation, 
professional partnership, and professional limited liability company.)
    2. Physicians who participate in the same integrated joint venture 
collectively determining the fees to be charged for services rendered 
by that integrated joint venture or collectively determining other 
terms on which that integrated joint venture deals with payors. (For 
purposes of the proposed consent order, ``integrated joint venture'' 
means a joint arrangement to provide health care services in which all 
physicians participating in the venture who would otherwise be 
competitors (1) pool their capital to finance the venture, by 
themselves or together with others, and (2) share a substantial risk of 
loss from their participation in the venture.)
    3. The exercise of rights permitted under the First Amendment to 
the United States Constitution to petition any federal or state 
government executive agency or legislative body concerning legislation, 
rules, or procedures, or to participate in any federal or state 
administrative or judicial proceeding.
    4. Physicians participating at the request of a payor in 
utilization review activities organized and controlled by the payor 
insofar as such participation continues only at the sufferance of the 
payor.
    The proposed consent order would require PGI to dissolve itself 
within 120 days after the date on which the proposed order becomes 
final. PGI Directors are to take all actions necessary to effect 
dissolution of PGI as required by the proposed consent order.
    The proposed consent order would also require PGI to distribute 
copies of the proposed complaint and proposed order to past and present 
members of PGI and each payor who, at any time since February 18, 1986, 
has communicated any desire, willingness, or interest in contracting 
for physician services with PGI or with any of the PGI Directors. Each 
of the PGI Directors is to deliver to PGI a list of payors from whom he 
has received such a communication.
    The order would require PGI and the PGI Directors to (1) file 
compliance reports with the Commission, (2) notify the Commission of 
certain proposed changes in PGI or the PGI Directors that may affect 
their compliance with the order, and (3) permit representatives of the 
Commission to have access to documents in the possession or under the 
control of PGI or the PGI Directors relating to any matters contained 
in the order and to interview the officers, directors, or employees of 
PGI and the employees of the PGI Directors.
    The proposed consent order would terminate 20 years after the date 
it is issued.
    PGI and the PGI Directors agreed to the proposed consent order for 
settlement purposes only, and their agreement to the order does not 
constitute an admission by them that the law has been violated as 
alleged in the proposed complaint.
Donald S. Clark,
Secretary.
[FR Doc. 95-11553 Filed 5-10-95; 8:45 am]
BILLING CODE 6750-01-M