From international law firm Arnold & Porter Kaye Scholer LLP comes a timely column that provides views on current regulatory and legislative topics that weigh on the minds of today’s physicians and health care executives.
As we wrote last month, the antitrust laws are an often overlooked area of risk for physicians, especially when those physicians consider working together or coordinating on competitively sensitive aspects of their practice — particularly pricing. As noted in our recent article, competitors cannot coordinate on price unless those competitors meet the standards of financial or clinical integration under the antitrust laws. A recent action by the Federal Trade Commission (FTC) is another reminder that competing physicians must be aware that the antitrust laws limit the extent to which competitors may act jointly and that a failure to consider these limits may expose physicians to the cost, risks and burden of a government enforcement action.
On Jan. 19, 2017, the FTC sued OFTACOOP (Cooperativa de Médico Oftalmólogos de Puerto Rico), a group of Puerto Rico ophthalmologists acting as a health care cooperative for certain purposes but offering competing ophthalmology services to patients in Puerto Rico. They were charged with organizing a boycott of a health plan, and the FTC alleged that OFTACOOP’s conduct was not reasonably related to any efficiency-enhancing integration (ie, financial or clinical integration), thus making the conduct illegal under the antitrust laws.
According to the FTC complaint, OFTACOOP acted illegally to avoid the cost-reduction efforts of MCS Advantage Inc. (MCS), a local health plan. MCS engaged Eye Management of Puerto Rico (Eye Management), a network administrator, to enter into contracts directly with the ophthalmologists, and as part of this effort, Eye Management sent draft contracts to OFTACOOP members with rates approximately 10% lower than those ophthalmologists received under their prior MCS contracts.
After receiving the draft contracts, OFTACOOP members met and agreed as a group not to sign the new contracts. Following that meeting, one attendee, the former secretary of OFTACOOP’s board of directors, emailed more than 100 OFTACOOP members stating that an agreement among the members had been reached and no OFTACOOP members should sign the new Eye Management contract. Even after being notified by Eye Management that such a collective refusal to deal violated the antitrust laws, OFTACOOP’s leadership continued to direct the OFTACOOP members to resist the new contracts. Almost all of the members agreed and refused the new contract. MCS abandoned the arrangement with Eye Management and, instead, itself offered a similar contract directly to the ophthalmologists, but the OFTACOOP members again rejected the offer. MCS could not obtain sufficient coverage for a viable ophthalmology network and was thus forced to retain its existing, higher-priced contracts in effect.
The FTC alleged that the group boycott harmed consumers by causing the 1) loss of potential reductions in out-of-pocket medical expenses and 2) risk of decreased ophthalmology insurance coverage options.
To settle these charges, OFTACOOP agreed to a consent order with the FTC, which bars OFTACOOP from organizing or implementing agreements to refuse to deal, or threaten to refuse to deal, with a health plan over contract terms. The consent order, which lasts 20 years, also prohibits the exchange of information, as well as other activities that could lead to coordinated activities among competing physicians. OFTACOOP is also under an obligation to provide notice of the consent order and complaint to its members, officers, directors, managers and employees.
Physicians who operate in separate practices but offer the same services in the same local market are competitors, and competitors may not agree on pricing or service or similar issues except under very limited circumstances, as noted previously. Efforts by competing physicians to extract higher rates or better terms from health plans will often invite enforcement scrutiny — especially as the government continues to focus on reducing the cost of medical care to consumers. The antitrust laws acknowledge that there are benefits from physician collaboration, but before engaging in joint activities with respect to pricing or negotiations with health plans, physicians should carefully plan to ensure they are meeting requirements under antitrust laws.
For more information:
Peter J. Levitas, JD, a partner at Arnold & Porter Kaye Scholer LLP, can be reached at email@example.com.
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