San Juan IPA, Inc.; Analysis of Agreement Containing Consent Order To Aid Public Comment, 30949-30951 [05-10682]

Agencies

• FEDERAL TRADE COMMISSION

[Federal Register Volume 70, Number 103 (Tuesday, May 31, 2005)]
[Notices]
[Pages 30949-30951]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-10682]


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FEDERAL TRADE COMMISSION

[File No. 031 0181]


San Juan IPA, Inc.; Analysis of Agreement Containing Consent 
Order To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair or deceptive acts or 
practices or unfair methods of competition. The attached Analysis to 
Aid Public Comment describes both the allegations in the

[[Page 30950]]

draft complaint and the terms of the consent order--embodied in the 
consent agreement--that would settle these allegations.

DATES: Comments must be received on or before June 17, 2005.

ADDRESSES: Interested parties are invited to submit written comments. 
Comments should refer to ``San Juan IPA, Inc., File No. 031 0181,'' to 
facilitate the organization of comments. A comment filed in paper form 
should include this reference both in the text and on the envelope, and 
should be mailed or delivered to the following address: Federal Trade 
Commission/Office of the Secretary, Room 159-H, 600 Pennsylvania 
Avenue, NW., Washington, DC 20580. Comments containing confidential 
material must be filed in paper form, must be clearly labeled 
``Confidential,'' and must comply with Commission Rule 4.9(c). 16 CFR 
4.9(c) (2005). \1\ The FTC is requesting that any comment filed in 
paper form be sent by courier or overnight service, if possible, 
because U.S. postal mail in the Washington area and at the Commission 
is subject to delay due to heightened security precautions. Comments 
that do not contain any nonpublic information may instead be filed in 
electronic form as part of or as an attachment to e-mail messages 
directed to the following e-mail box: consentagreement@ftc.gov.
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    \1\ The comment must be accompanied by an explicit request for 
confidential treatment, including the factual and legal basis for 
the request, and must identify the specific portions of the comment 
to be withheld from the public record. The request will be granted 
or denied by the Commission's General Counsel, consistent with 
applicable law and the public interest. See Commission Rule 4.9(c), 
16 CFR 4.9(c).
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    The FTC Act and other laws the Commission administers permit the 
collection of public comments to consider and use in this proceeding as 
appropriate. All timely and responsive public comments, whether filed 
in paper or electronic form, will be considered by the Commission, and 
will be available to the public on the FTC Web site, to the extent 
practicable, at https://www.ftc.gov. As a matter of discretion, the FTC 
makes every effort to remove home contact information for individuals 
from the public comments it receives before placing those comments on 
the FTC website. More information, including routine uses permitted by 
the Privacy Act, may be found in the FTC's privacy policy, at https://
www.ftc.gov/ftc/privacy.htm.

FOR FURTHER INFORMATION CONTACT: Steve Vieux, Bureau of Competition, 
600 Pennsylvania Avenue, NW., Washington, DC 20580; (202) 326-2306.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Sections 2.34 
of the Commission Rules of Practice, 16 CFR 2.34, notice is hereby 
given that the above-captioned 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 thirty (30) days. The following Analysis to Aid 
Public Comment describes the terms of the consent agreement, and the 
allegations in the complaint. An electronic copy of the full text of 
the consent agreement package can be obtained from the FTC Home Page 
(for May 19, 2005), on the World Wide Web, at https://www.ftc.gov/os/
2005/05/index.htm. A paper copy can be obtained from the FTC Public 
Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW., Washington, 
DC 20580, either in person or by calling (202) 326-2222.
    Public comments are invited, and may be filed with the Commission 
in either paper or electronic form. All comments should be filed as 
prescribed in the ADDRESSES section above, and must be received on or 
before the date specified in the DATES section.

Analysis of Agreement Containing Consent Order To Aid Public Comment

    The Federal Trade Commission has accepted, subject to final 
approval, an agreement containing a proposed consent order with San 
Juan IPA, Inc. (San Juan IPA). The agreement settles charges that San 
Juan IPA violated Section 5 of the Federal Trade Commission Act, 15 
U.S.C. 45, by orchestrating and implementing agreements among physician 
members of San Juan IPA to fix prices and other terms on which they 
would deal with health plans, and to refuse to deal with such 
purchasers except on collectively-determined terms. The proposed 
consent order has been placed on the public record for 30 days to 
receive comments from interested persons. Comments received during this 
period will become part of the public record. After 30 days, the 
Commission will review the agreement and the comments received, and 
decide whether it should withdraw from the agreement or make the 
proposed order final.
    The purpose of this analysis is to facilitate public comment on the 
proposed order. The analysis is not intended to constitute an official 
interpretation of the agreement and proposed order, or to modify their 
terms in any way. Further, the proposed consent order has been entered 
into for settlement purposes only and does not constitute an admission 
by San Juan IPA that it violated the law or that the facts alleged in 
the complaint (other than jurisdictional facts) are true.

The Complaint

    The allegations of the complaint are summarized below.
    San Juan IPA is an independent physician association (IPA) with 
approximately 120 physician members. San Juan IPA does business in the 
Farmington, New Mexico, area, which is located in the northwestern 
corner of New Mexico.
    San Juan IPA's physician members account for approximately 80% of 
the physicians independently practicing (that is, those not employed by 
area hospitals) in and around the Farmington area. To be marketable in 
the Farmington area, a payor's health insurance plan must have access 
to a large number of physicians who are members of San Juan IPA.
    Although San Juan IPA purported to operate as a ``messenger model'' 
\2\--that is, an arrangement that does not facilitate horizontal 
agreements on price--it engaged in various actions that demonstrated or 
orchestrated such agreements. San Juan IPA coordinated joint pricing 
among its physician members in three ways. First, San Juan IPA was a 
party to contracts that a joint venture, in which San Juan IPA 
participated, collectively negotiated on behalf of San Juan IPA's 
members. Second, San Juan IPA, on behalf of its physician members, 
collectively negotiated contracts for payment of physician services at 
full billed charges less a 10% discount, made collective demands, and 
refused to deal with payors. Finally, San Juan IPA coordinated its 
members' responses to payor offers for fixed-price contracts, by not 
transmitting certain offers to its physician members and collectively 
demanding prices, on behalf of its physician members, from these 
payors.
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    \2\ Some arrangements can facilitate contracting between health 
care providers and payors without fostering an illegal agreement 
among competing physicians on fees or fee-related terms. One such 
approach, sometimes referred to as a ``messenger model'' 
arrangement, is described in the 1996 Statements of Antitrust 
Enforcement Policy in Health Care jointly issued by the Federal 
Trade Commission and U.S. Department of Justice, at 125. See https://
www.ftc.gov/reports/hlth3s.htm#9.
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    San Juan IPA succeeded in forcing numerous health plans to raise 
the fees paid to its physician members, and thereby raised the cost of 
medical care in the Farmington area. San Juan IPA engaged in no 
efficiency-enhancing integration sufficient to justify joint

[[Page 30951]]

negotiation of fees. By orchestrating agreements among its members to 
deal only on collectively-determined terms, and actual or threatened 
refusals to deal with health plans that would not agree to those terms, 
San Juan IPA violated Section 5 of the FTC Act.

The Proposed Consent Order

    The proposed order is designed to remedy the illegal conduct 
charged in the complaint and prevent its recurrence. It is similar to 
recent consent orders that the Commission has issued to settle charges 
that physician groups engaged in unlawful agreements to raise fees they 
receive from health plans.
    The proposed order's specific provisions are as follows:
    Paragraph II.A prohibits San Juan IPA from entering into or 
facilitating any agreement between or among any physicians: (1) To 
negotiate with payors on any physician's behalf; (2) to deal, not to 
deal, or threaten not to deal with payors; (3) on what terms to deal 
with any payor; or (4) not to deal individually with any payor, or to 
deal with any payor only through an arrangement involving San Juan IPA.
    Other parts of Paragraph II reinforce these general prohibitions. 
Paragraph II.B prohibits San Juan IPA from facilitating exchanges of 
information between physicians concerning whether, or on what terms, to 
contract with a payor. Paragraph II.C bars attempts to engage in any 
action prohibited by Paragraph II.A or II.B, and Paragraph II.D 
proscribes inducing anyone to engage in any action prohibited by 
Paragraphs II.A through II.C.
    As in other Commission orders addressing providers' collective 
bargaining with health care purchasers, certain kinds of agreements are 
excluded from the general bar on joint negotiations. San Juan IPA would 
not be precluded from engaging in conduct that is reasonably necessary 
to form or participate in legitimate joint contracting arrangements 
among competing physicians in a ``qualified risk-sharing joint 
arrangement'' or a ``qualified clinically-integrated joint 
arrangement.'' The arrangement, however, must not facilitate the 
refusal of, or restrict, physicians in contracting with payors outside 
of the arrangement.
    As defined in the proposed order, a ``qualified risk-sharing joint 
arrangement'' possesses two key characteristics. First, all physician 
participants must share substantial financial risk through the 
arrangement, such that the arrangement creates incentives for the 
physician participants jointly to control costs and improve quality by 
managing the provision of services. Second, any agreement concerning 
reimbursement or other terms or conditions of dealing must be 
reasonably necessary to obtain significant efficiencies through the 
joint arrangement.
    A ``qualified clinically-integrated joint arrangement,'' on the 
other hand, need not involve any sharing of financial risk. Instead, as 
defined in the proposed order, physician participants must participate 
in active and ongoing programs to evaluate and modify their clinical 
practice patterns in order to control costs and ensure the quality of 
services provided, and the arrangement must create a high degree of 
interdependence and cooperation among physicians. As with qualified 
risk-sharing arrangements, any agreement concerning price or other 
terms of dealing must be reasonably necessary to achieve the efficiency 
goals of the joint arrangement.
    Paragraph III, for three years, requires San Juan IPA to notify the 
Commission before participating in contracting with health plans on 
behalf of a qualified risk-sharing joint arrangement or a qualified 
clinically-integrated joint arrangement. Paragraph III also sets out 
the information necessary to make the notification complete.
    Paragraph IV, for three years, requires San Juan IPA to notify the 
Commission before entering into any arrangement to act as a messenger, 
or as an agent on behalf of any physicians, with payors regarding 
contracts. Paragraph IV also sets out the information necessary to make 
the notification complete.
    Paragraph V.A requires San Juan IPA to distribute the complaint and 
order to all physicians who have participated in San Juan IPA, and to 
payors that negotiated contracts with San Juan IPA or indicated an 
interest in contracting with San Juan IPA. Paragraph V.B requires San 
Juan IPA, at any payor's request and without penalty, or, at the 
latest, within one year after the order is made final, to terminate its 
current contracts. Paragraph V.C requires San Juan IPA to distribute 
payor requests for contract termination to all physicians who 
participate in San Juan IPA. Paragraph V.D.1.b requires San Juan IPA to 
distribute the complaint and order to any payors that negotiate 
contracts with San Juan IPA in the next three years.
    Paragraphs VI and VII of the proposed order impose various 
obligations on San Juan IPA to report or provide access to information 
to the Commission to facilitate monitoring San Juan IPA's compliance 
with the order.
    The proposed order will expire in 20 years.

    By direction of the Commission, Chairman Majoras not 
participating.
Donald S. Clark,
Secretary.
[FR Doc. 05-10682 Filed 5-27-05; 8:45 am]
BILLING CODE 6750-01-P