Physician-controlled Network Joint Ventures: Antitrust Considerations
| Jurisdiction | United States,Federal |
| Citation | Vol. 24 No. 7 Pg. 1551 |
| Pages | 1551 |
| Publication year | 1995 |
1995, July, Pg. 1551. Physician-Controlled Network Joint Ventures: Antitrust Considerations
If there is one thing in the United States that seems as certain as death and taxes, it is that legislatively mandated health care "reform" is an idea whose time never arrived. Aside from political realities, rapidly evolving developments in the marketplace, occurring at an increasingly dizzying pace, appear to have rendered the concept moot. Not only patients, but doctors too, are affected by these revolutionary changes.
Today, independently practicing physicians are increasingly pressured to come together in some fashion to contract with third-party health care managers to provide medical services to businesses, families and individuals. However, such joint action is fraught with antitrust peril for the unwary. The greatest risk is that independent, otherwise-competing physicians acting collectively to negotiate fee schedules with third parties may be viewed as engaging in per se illegal price fixing.(fn1) Other significant antitrust issues that may arise include unlawful group boycotts and concerted refusals to deal, also often relating to fees.(fn2)
Lending credence to such concerns is the fact that the federal, and certain state, antitrust enforcement agencies have been extremely active in recent years with respect to joint physician arrangements. There have been a number of civil penalty and injunctive actions,(fn3) and the Antitrust Division of the U.S. Department of Justice also has conducted several grand jury investigations and the first criminal prosecution in the health care area in fifty years.(fn4) In view of the serious antitrust pitfalls, this article suggests a method for qualifying for antitrust "safety zones" or achieving certain minimal antitrust "comfort zones" with respect to joint conduct by physicians.
The joint action in which physicians are most likely to become involved is participation in physician-controlled network joint ventures within a particular medical specialty or across multiple specialties. Such networks generally contract to provide health care services to subscribers at reduced rates and commit to avoid providing unnecessary medical care. By their very nature, these ventures involve collective agreement by participating physicians on fees and other significant terms of competition, as well as joint marketing of the physicians' services through the network. The ventures also tend to involve medical practices that are not completely integrated---that is, the physicians continue to compete with one another for patients outside the health plans served by the network.
A venture often takes the form of an independent practice association ("IPA") or a preferred provider organization ("PPO"). In either event, participating physicians are health care providers in the IPA or PPO. Regardless of form, the network ordinarily markets itself to and solicits contracts from insurance companies, health maintenance organizations and other third-party payors.
Such a venture endeavors to provide medical services locally, regionally or statewide. Numerous physicians may become involved, constituting a significant percentage of all doctors in the included specialties within the locality, region or state served. Where the network is unable to obtain desired geographic coverage through a participating physician in a particular specialty in one or more locales, it may seek to contract there with an allied health care professional (such as physician's assistant, nurse anesthetist, optometrist).
If the venture is member-owned, it is likely to require an initial capitalization fee of several thousand dollars per physician and additional periodic financial assessments. Operating costs may be paid out of a percentage "withhold," which also may be utilized to pay for administrative and management services and to establish an incentive bonus pool. Often, bonuses are paid to participating physicians for compliance with utilization, quality, referral and other criteria.
Economic risks associated with membership in the network include the possibilities that: (1) the entire capital and other investment made by members could be lost; (2) the venture could underestimate its operating costs, reducing the economic benefits of participation;
Certain contracts obtained by the network are likely to involve fee-for-service arrangements providing for discounted fee schedules, and others will provide for reimbursement on a capitated basis. In either or both cases, the venture will perform utilization review, quality assurance, peer review and other similar functions, and may seek to develop data demonstrating its efficiency and cost effectiveness. It ordinarily also will provide billing and other services in connection with joint contracts.
The venture will negotiate uniform fees to be charged by network members to third-party payors for specified services provided under contracts with the venture. Participation in the venture may be exclusive or nonexclusive---that is, either prohibiting members from individually entering into agreements with other networks, IPAs or PPOs, or from contracting directly with third-party payors; or not restricting their ability to do so. If participation is nonexclusive, the network would not limit its members' ability to set their own fees or other terms of competition for medical services provided outside the venture contracts.
In the fall of 1994, the Federal Trade Commission ("FTC") and the Antitrust Division (together, "Federal Agencies") jointly promulgated revised federal antitrust enforcement guidelines for the health care area ("Guidelines"),(fn5) including physician-controlled network joint ventures.(fn6) Consequently, physicians seeking to establish or considering participation in such networks, and their advisors, must be familiar with both the Guidelines and evolving antitrust precedents. Because the two are not congruent in all respects, legal and business analysts and advisors must consider not only possible review and...
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