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FTC bars Texas physicians’ group from jointly negotiating prices charged to insurers

The Federal Trade Commission settled a claim against a provider organization representing 900 physicians in Amarillo, Texas, in a consent order barring the group from jointly negotiating the prices charged to insurance providers and jointly agreeing as to the prices to be charged. 

According to the FTC, Southwest Health Alliances, a provider network, was formed as a vehicle for the legitimate purpose of soliciting the unilateral consent of each of its members to the terms under which they would provide services to the insurers’ subscribers.  But then the organization began to engage in practices to signal its members to agree to suggested prices and to allow them to reach agreement as to the terms on which they would deal.

“According to the FTC’s complaint, since at least 2000, the network has restrained competition by entering into and implementing agreements to fix the prices and terms at which it would contract with health plans and has collectively negotiated the terms and conditions under which it would deal with health plans,” according to an FTC news release. These practices led to higher prices for consumers and businesses and the elimination of competition, the FTC said.

Southwest Health is an independent practice association consisting of multiple, independent medical practices. It is also settling similar charges brought by the Office of the Texas Attorney General, according to the FTC.

The American Dental Association wants dentists to be aware of the ruling because it reaffirms the federal government’s long-held position that joint negotiation of insurance reimbursement rates by health care providers is a violation of the antitrust laws.

“It reinforces the legal advice that we’ve given in the past, which is our members have to be very sensitive about agreeing among themselves to take action with regard to a particular insurer,” said Craig Busey, chief legal counsel for the ADA.

The FTC order is designed to stop the group’s alleged anticompetitive conduct while allowing it to continue in its legitimate activities. Specifically, the FTC order bars Southwest Health from acting collectively on behalf of or in concert with multiple physicians: to engage in reimbursement negotiations between any physician and an insurer; to deal, refuse to deal, or threaten to refuse to deal with any insurer; or to preclude the physicians from dealing, or refusing to deal, with any insurer. In addition, as in other cases, the proposed order prohibits Southwest Health from working with physicians to exchange of information concerning the terms on which they will contract with insurers.   
The proposed order does not, however, preclude Southwest Health from engaging in conduct that is reasonably necessary to form or participate in the kinds of “qualified risk-sharing” or “qualified clinically integrated” arrangements that are permitted under the law, nor does it prohibit agreements that only involve doctors who are part of the same medical practice.  Finally, the proposed order, with a term of 20 years, provides for the FTC to monitor Southwest Health’s compliance with its terms, and for insurers to terminate any contracts entered into with the network since its alleged restraint of trade began in 2000. 

The order is typical of orders by which the FTC has resolved cases in the past.

The possible illegality of collective action by competitors was established by The Sherman Antitrust Act of 1890, Mr. Busey said. Dentists and other health care providers are considered competitors because they compete for patients. Under the law, they can’t set prices, divide territories, or allocate customers, practices that affect competition and result in an increased cost to the consumer, he said.

“Ultimately, the antitrust laws protect competition but the protection of competition has the purpose of protecting consumers so the consumers and giving them the presumed benefit of lower rates and better services,” Mr. Busey said.

There’s a fine line between setting up an organization for legitimate purposes and violating antitrust laws, Mr. Busey said.

“Crossing over that line can occur pretty easily if you’re not very careful,” Mr. Busey said.