Thursday, April 25, 2013

Antitrust Agencies Continue Pursuit of
Improper Joint Contracting by Providers


The Federal Trade Commission ("FTC") and the Department of Justice’s Antitrust Division ("DOJ") continue to pursue competing providers that are not clinically or financially integrated but nevertheless attempt to jointly negotiate contracts with payors.

In January of this year, DOJ pursued price-fixing charges against an independent physicians association ("IPA") allegedly including 350 competing chiropractors in Oklahoma. DOJ alleged that the IPA comprised 45 percent of the chiropractors in Oklahoma. Allegedly, from 2004 to 2011, the IPA negotiated seven payor contracts that fixed prices for chiropractic services. DOJ found particularly troubling a mandatory membership agreement that, among other things, required members to suspend any existing contracts with payors upon joining the IPA and that required members not to accept a reimbursement rate below a stated rate. The IPA's website also supported DOJ's position that the IPA was not clinically or financially integrated as the website stated that members could continue as "an individual practice while associating with other chiropractors to increase contract-negotiating power." As a result, DOJ charged that the IPA was engaged in price-fixing in violation of Section 1 of the Sherman Act. The IPA entered into a settlement agreement prohibiting any future negotiations with payors on behalf of its members.

In February, eight independent nephrologists in Puerto Rico settled FTC charges that they illegally collectively bargained with insurers and refused to treat health plan patients when their price demands were rebuffed. The FTC's complaint alleged that the nephrologists practiced independently and represented 90 percent of the nephrologists in Puerto Rico's southwest region. According to the FTC's complaint, the eight doctors violated federal antitrust laws since late 2011 by (1) collectively negotiating and fixing the prices upon which they would contract to extract higher reimbursement rates, and (2) collectively terminating their contracts with and refusing to treat patients when the payor refused to meet their terms. Under a proposed order settling the FTC's charges, the doctors are barred from jointly negotiating prices, jointly refusing to deal with any insurer, and jointly refusing to treat patients.

This month, DOJ filed a complaint against an association of 300 chiropractors that allegedly comprised 80 percent of the chiropractors in South Dakota. The complaint alleged that the association negotiated at least seven payor contracts on behalf of its competing members who were not financially or clinically integrated. Accordingly, DOJ asserted that the joint negotiations illegally fixed prices in violation of Section 1 of the Sherman Act. DOJ cited the membership agreement that required members to allow the association to negotiate rates on behalf of its members and alleged that an explicit goal of the association was to leverage its contracts with the members in order to obtain higher fees from payors. A proposed settlement, among other things, prohibits the association from negotiating contracts on behalf of its members.

The Bottom Line
All three of these recent actions demonstrate the enforcement agencies' continued commitment to pursuing illegal agreements, such as price-fixing, that increase the cost of healthcare. The actions also reinforce the longstanding position of the agencies that competing providers may not jointly negotiate prices with payors unless they are sufficiently integrated – either financially or clinically.

E. Steele Clayton, IV
Bass, Berry & Sims PLC
Nashville, Tennessee
(615) 742-6205

R. Dale Grimes
Bass, Berry & Sims PLC
Nashville, Tennessee
(615) 742-6244







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