Minnesota Rural Health Cooperative; Analysis of the Agreement Containing Consent Order to Aid Public Comment, 37438-37442 [2010-15745]

Agencies

• FEDERAL TRADE COMMISSION

[Federal Register Volume 75, Number 124 (Tuesday, June 29, 2010)]
[Notices]
[Pages 37438-37442]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-15745]


-----------------------------------------------------------------------

FEDERAL TRADE COMMISSION

[File No. 051 0199]


Minnesota Rural Health Cooperative; Analysis of the Agreement 
Containing Consent Order to Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed Consent Agreement.

-----------------------------------------------------------------------

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 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 July 19, 2010.

ADDRESSES: Interested parties are invited to submit written comments 
electronically or in paper form. Comments should refer to``Minnesota 
Health, File No. 051 0199'' to facilitate the organization of comments. 
Please note that your comment -- including your name and your state -- 
will be placed on the public record of this proceeding, including on 
the publicly accessible FTC website, at (https://www.ftc.gov/os/publiccomments.shtm).
    Because comments will be made public, they should not include any 
sensitive personal information, such as an individual's Social Security 
Number; date of birth; driver's license number or other state 
identification number, or foreign country equivalent; passport number; 
financial account number; or credit or debit card number. Comments also 
should not include any sensitive health information, such as medical 
records or other individually identifiable health information. In 
addition, comments should not include any ``[t]rade secret or any 
commercial or financial information which is obtained from any person 
and which is privileged or confidential. . . .,'' as provided in 
Section 6(f) of the FTC Act, 15 U.S.C. 46(f), and Commission Rule 
4.10(a)(2), 16 CFR 4.10(a)(2). Comments containing material for which 
confidential treatment is requested must be filed in paper form, must 
be clearly labeled ``Confidential,'' and must comply with FTC Rule 
4.9(c), 16 CFR 4.9(c).\1\
---------------------------------------------------------------------------

    \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 FTC Rule 4.9(c), 16 CFR 
4.9(c).
---------------------------------------------------------------------------

    Because paper mail addressed to the FTC is subject to delay due to 
heightened security screening, please consider submitting your comments 
in electronic form. Comments filed in electronic form should be 
submitted by using the following weblink: (https://public.commentworks.com/ftc/mnhealth) and following the instructions on 
the web-based form. To ensure that the Commission considers an 
electronic comment, you must file it on the web-based form at the 
weblink: (https://public.commentworks.com/ftc/mnhealth). If this Notice 
appears at (https://www.regulations.gov/search/index.jsp), you may also 
file an electronic comment through that website. The Commission will 
consider all comments that regulations.gov forwards to it. You may also 
visit the FTC website at (https://www.ftc.gov/) to read the Notice and 
the news release describing it.
    A comment filed in paper form should include the ``Minnesota 
Health, File No. 051 0199'' 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 H-135 (Annex 
D), 600 Pennsylvania Avenue, NW, Washington, DC 20580. 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.
    The Federal Trade Commission Act (``FTC Act'') and other laws the 
Commission administers permit the collection of public comments to 
consider and use in this proceeding as appropriate. The Commission will 
consider all timely and responsive public comments that it receives, 
whether filed in paper or electronic form. Comments received will be 
available to the public on the FTC website, to the extent practicable, 
at (https://www.ftc.gov/os/publiccomments.shtm). As a matter of 
discretion, the Commission makes every effort to remove home contact 
information for individuals from the public comments it receives before

[[Page 37439]]

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.shtm).

FOR FURTHER INFORMATION CONTACT: Bradley Albert (202-326-3670), Bureau 
of Competition, 600 Pennsylvania Avenue, NW, Washington, D.C. 20580.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Sec.  2.34 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 June 18, 2010), on the World Wide Web, at (https://www.ftc.gov/os/actions.shtm). A paper copy can be obtained from the FTC Public 
Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW, Washington, 
D.C. 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 the 
Minnesota Rural Health Cooperative (MRHC). 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 to 
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 order has been entered into for 
the settlement purposes only and does not constitute an admission by 
MRHC that it violated the law or that the facts alleged in the 
complaint (other than jurisdictional facts) are true.

I. The Complaint

    The MRHC is a for-profit corporation of physicians and hospitals 
located in southwestern Minnesota. In addition, between early 2005 and 
late 2007, the MRHC also had pharmacy members. The complaint charges 
that the MRHC has violated Section 5 of the Federal Trade Commission 
Act, 15 U.S.C. Sec.  45, by, among other things, orchestrating and 
implementing agreements among competing MRHC members to fix the price 
at which they contract with health plans and to refuse to deal except 
on collectively-determined price terms. The allegations of the 
complaint are summarized below.

A. Price fixing for hospital and physician services

    The MRHC has approximately 25 hospital members, which constitute 
the vast majority of hospitals in the area of southwestern Minnesota in 
which the MRHC operates. The organization has approximately 70 
physician members practicing in 41 clinics, who represent roughly half 
of the primary care physicians in southwestern Minnesota. The MRHC is 
controlled by a Board of Directors composed of physicians and hospitals 
elected by the members.
    When providers join MRHC, they agree that MRHC will negotiate and 
contract with health plans on their behalf and agree to participate in 
all MRHC contracts. The Board oversees contract negotiations undertaken 
by a contracting committee of physician and hospital representatives 
and approves all contracts between MRHC and health plans.
    The MRHC has negotiated prices and other competitively significant 
terms, on behalf of MRHC physician and hospital members, with numerous 
payers in Minnesota, including Blue Cross Blue Shield of Minnesota, 
HealthPartners, Medica Health Plans, MultiPlan, Inc., Preferred One, 
and America's PPO. After its Board of Directors approved, the MRHC 
entered into and administered each contract.
    The MRHC has threatened to terminate these group contracts with 
payers to pressure them to increase prices for physician and hospital 
services. For example, during 2003 contract renewal negotiations with 
HealthPartners, the MRHC notified HealthPartners that it would 
terminate the contract unless HealthPartners agreed to higher 
reimbursement rates. HealthPartners acceded to the MRHC's demands, 
eventually agreeing to pay MRHC physician members 27 percent more than 
comparable non-MRHC physicians and to pay MRHC hospital members ten 
percent more than comparable non-MRHC hospitals. A similar tactic 
forced Preferred One to pay MRHC members higher rates than it paid 
comparable non-MRHC providers.
    The MRHC informed payers that the MRHC ``expect[s] our group to be 
accepted or rejected as a group.'' It told payers that resisted the 
MRHC's price demands that they would be unable to negotiate 
individually with MRHC members. When these payers attempted to contract 
directly with individual MRHC hospitals or physicians, the members 
referred the payers back to MRHC.
    Through its collective negotiations and coercive tactics, the MRHC 
succeeded in obtaining higher payments to MRHC members by obtaining 
higher reimbursement rates than comparable providers, more favorable 
payment methods, and increased reimbursements for new MRHC members.
    (1) Higher Rates: Five payers -- HealthPartners, Medica, MultiPlan, 
Preferred One, and America's PPO -- paid MRHC members more than they 
paid comparable rural hospitals and physicians elsewhere in Minnesota. 
Indeed, the MRHC told its members at the 2005 annual member meeting 
that improvements in its contract with Preferred One would be ``worth 
$100,000s annually for MRHC members.''
    (2) Favorable Payment Methods: Two payers -- Medica and Preferred 
One -- pay MRHC hospital and physician members based on a percentage of 
billed charges, rather than a fixed fee for each service. This 
mechanism allows MRHC members to increase unilaterally their 
reimbursement, by increasing their billed charges up to the maximum 
specified in the contract.
    (3) Increased New Member Reimbursements: The MRHC has forced payers 
to reimburse new MRHC members at the higher MRHC rates, even though 
these new members had existing contracts with the payer at lower rates. 
For example, Medica told the MRHC that ``because of the Co-op 
relationship all of the clinics and hospitals, except Rice, are being 
paid higher reimbursement then they were prior to our Medica agreement 
with the Co-op.''

B. Price fixing for pharmacy services

    In 2004, after being approached by pharmacies, MRHC expanded its

[[Page 37440]]

membership to include pharmacies and began recruiting pharmacists for 
the purpose of collectively negotiating agreements with pharmacy 
benefit managers (PBMs). The MRHC encouraged pharmacies to join to 
increase the reimbursement levels they would receive under the new 
Medicare Part D prescription drug program. Between early 2005 and late 
2007, the MRHC had approximately 70 pharmacist members.
    The MRHC urged pharmacies not to deal individually with PBMs and 
instead to act together through MRHC. The MRHC repeatedly reminded 
pharmacies of the benefits of acting collectively, advising them to 
``stand together and speak with ONE voice to the PBMs.'' For example, 
in letters to members and prospective members, MRHC stated:
     ``We have to stand together in this effort or once again 
the PBMs will intimidate us and pick us off one by one with contracts 
we don't want.''
     ``Do NOT sign and return your Medicare Part D PBM 
contracts. MRHC will review and negotiate these for you during the next 
few weeks. The contracting deadline is not until later this summer and 
our best leverage is to take our time to negotiate as a block. The 
bigger block the better [sic].''
     ``We are asking all MRHC members NOT to sign and return 
their Medicare Part D PBM contracts. MRHC will review and negotiate 
these for them during the next couple of weeks. Our best leverage is to 
take our time to negotiate as a block, and the bigger block the better 
[sic]. . . . Don't sign contracts but notify the PBMs who will act as 
your agent - the MRHC!''
    To ``speed up'' the PBMs' acceptance of the MRHC as the pharmacies' 
bargaining agent, the MRHC provided each pharmacy member with pre-
printed labels stating that MRHC would act as the pharmacy's 
contracting agent. Many member pharmacies followed the MRHC's 
instructions to return contract offers from PBMs with these labels 
attached.
    The MRHC negotiated with at least eight PBMs over Medicare Part D 
reimbursement levels and reached agreements on behalf of the MRHC 
establishing prices and other competitively significant terms with six 
of them. The MRHC terminated the pharmacist memberships in November 
2007 and transferred management of these agreements to a pharmacy 
services administration organization in early 2008.

C. Lack of justification

    Price agreements among competing sellers, as a general rule, are 
price fixing and are summarily condemned by the antitrust laws as per 
se illegal. But joint price setting by provider networks is not per se 
illegal if: (1) the participants have integrated their activities 
through the network (whether financially, clinically, or otherwise) in 
a way that is likely to produce significant efficiencies that benefit 
consumers; and (2) the price agreements are reasonably necessary to 
realize those efficiencies. The MRHC's price fixing for hospital, 
physician, and pharmacy services, however, was unrelated to any 
efficiency-enhancing integration of its members' clinical services.
1. Hospital and physician services
    One form of efficiency-enhancing integration among otherwise 
competing health care providers involves arrangements in which the 
participants share with one another substantial financial risk for the 
services provided through the network. Such risk sharing occurs when 
mechanisms are in place that make the network providers as a group 
accountable for the total cost of defined services delivered to a group 
of covered individuals, so that the providers have incentives to 
cooperate in controlling costs and improving quality by managing the 
provision of services. The Statements of Antitrust Enforcement Policy 
in Health Care issued by the FTC and the Department of Justice provide 
several examples of types of arrangements through which participants 
can potentially share substantial financial risk.
    MRHC's hospital and physician members have not shared, and do not 
share, substantial financial risk in the provision of patient care. 
MRHC considers only three of its contracts with payers to be ``risk'' 
contracts, and these contracts pertain only to physician services. 
Moreover, these contracts do not provide significant financial 
incentives for members to collaborate to improve the performance of the 
group as a whole.\2\ For example, under two of the three ``risk'' 
contracts, the payers withheld a relatively modest portion of the 
payments owed to participating physicians (typically no more than 10 
percent), and return of these sums did not depend on the group meeting 
cost containment or quality improvement performance targets. Instead, 
physicians merely had to participate in a quality improvement project 
in which they reported their compliance with clinical practice 
guidelines for treatment of a few specific conditions. These 
arrangements, while perhaps benefitting some physicians' individual 
delivery of health care, would thus be unlikely to create incentives to 
motivate MRHC physicians to work together to improve significantly 
group-wide care to patients. Health Care Statements at 68.
---------------------------------------------------------------------------

    \2\ Even if MRHC were financially integrated for some contracts, 
that fact alone would not justify their jointly negotiating on 
behalf of their physicians for contracts where there was no 
financial integration. See, e.g., North Texas Specialty Physicians 
v. FTC, 528 F.3d 346, 368-70 (5th Cir. 2008) (existence of risk 
contract did not justify physician group's joint price setting for 
non-risk contracts).
---------------------------------------------------------------------------

    Arrangements among competing health care providers that do not 
involve the sharing of financial risk may also involve integration that 
has the potential to create significant efficiencies in the provision 
of health care services. The Health Care Statements discuss an example 
of such integration: a ``clinically integrated'' program, which 
involves ``an active and ongoing program to evaluate and modify 
practice patterns by the network's physician participants and create a 
high degree of interdependence and cooperation among the physicians to 
control costs and ensure quality.'' Health Care Statements at 72-73.
    The MRHC has not undertaken any integration regarding its members' 
provision of services, clinical or otherwise, that might justify its 
members' jointly negotiated fees with health plans. It verifies the 
qualifications of its members, conducts patient satisfaction surveys, 
collects patient complaints, and organizes meetings to discuss quality 
of care issues. In addition, it has a few programs that relate solely 
to physicians: quality improvement projects involving diabetes and 
preventative services and inspections of physician clinics. Although 
these activities may be beneficial, they do not involve any integration 
among MRHC members that could significantly improve the quality and 
efficiency of the services MRHC members provide.
    First, the scope of these activities is very limited. The clinical 
programs most likely to improve the quality of patient care do not 
involve the hospital members at all, and the activities involving 
physicians are limited to just a few of the many medical conditions the 
physicians treat. Moreover, even in these limited areas, the programs 
do not create any collaborative activity or interdependence among the 
physician members. Although the activities may lead individual 
physicians to modify their behavior, none of the programs creates 
enforceable obligations for physicians to improve their clinical

[[Page 37441]]

operations or provides members with a shared stake in the performance 
of the group as a whole. Indeed, all of these activities are 
essentially informational and each physician clinic could engage in 
them on its own without any involvement from the other clinics. 
Finally, the challenged conduct -- jointly negotiating with payors and 
agreeing on prices and other competitively sensitive terms -- is 
unnecessary for members to engage in any of these activities.
2. Pharmacy services
    Similarly, the MRHC's joint price setting for pharmacy services was 
not related to any integration among its members. The MRHC recruited 
pharmacies for the purpose of increasing the pharmacies' bargaining 
leverage in negotiations with PBMs. Aside from inviting pharmacists to 
attend continuing education programs that it was already providing for 
its non-pharmacist members, the MRHC's sole activity relating to its 
pharmacy members was negotiating and administering contracts.
    In sum, MRHC's horizontal price fixing does not plausibly promote 
any efficiency-enhancing integration of its members services and so 
violates Section 5 of the FTC Act.

D. Lack of protection from the state action doctrine

    The MRHC's anticompetitive conduct is not shielded by the state 
action doctrine because there was no active supervision of MRHC's 
conduct and Minnesota does not appear to have articulated a policy to 
immunize concerted refusals to deal or other forms of coercive conduct.
    Since 1999,\3\ Minnesota law has authorized health care provider 
cooperatives to contract with purchasers on a fee-for-service basis and 
specified that, with certain limitations, such contracts ``are not 
contracts that unreasonably restrain trade.''\4\ Although state 
economic regulation can immunize private parties from federal antitrust 
liability, states may not simply authorize private parties to violate 
the antitrust laws.\5\ Instead, a state must substitute its own control 
for that of the market. Thus, as the Supreme Court explained in 
California Retail Liquor Dealers Assen v. Midcal Aluminum, Inc., 
private parties claiming the protection of the state action doctrine 
must demonstrate that their challenged conduct was both (1) undertaken 
pursuant to a clearly articulated state policy to displace competition 
with regulation and (2) actively supervised by state officials.\6\
---------------------------------------------------------------------------

    \3\ Minnesota's original 1994 statute authorized contracting 
only ``on a substantially capitated or similar risk-sharing basis.'' 
Minn. Laws 1994, c.625, art. 11, Sec.  6, available at (https://www.revisor.mn.gov/laws/?doctype=Chapter&year=1994&type=0&id=625). A 
1999 amendment permitted fee-for-service or other financial 
arrangements. Minn. Laws 1999, c. 245, art. 2, Sec.  14, available 
at (https://www.revisor.mn.gov/laws/?doctype=Chapter&year=1997&type=0&id=245).
    \4\ Minn. Stat. Sec.  62R.06, subd. 3 (2009) (``Subject to 
section 62R.08, a health care provider cooperative is not a 
combination in restraint of trade, and any contracts or agreements 
between a health care provider cooperative and its members regarding 
the price the cooperative will charge to purchasers of its services, 
or regarding the prices the members will charge to the cooperative, 
or regarding the allocation of gains or losses among the members, or 
regarding the delivery, quality, allocation, or location of services 
to be provided, are not contracts that unreasonably restrain 
trade.'').
    \5\ Federal Trade Commission v. Ticor Title Ins. Co., 504 U.S. 
621, 633 (1992) (``a State may not confer antitrust immunity on 
private persons by fiat''); Parker v. Brown, 341 U.S. 351 (1943) 
(``a state does not give immunity to those who violate the Sherman 
Act by authorizing them to violate it, or declaring that their 
action is lawful'').
    \6\ 445 U.S. 97, 105 (1980).
---------------------------------------------------------------------------

    First, it is undisputed that state officials did not supervise the 
MRHC's anticompetitive conduct. Active state supervision requires that 
state officials ``exercise ultimate control over the challenged 
anticompetitive conduct.''\7\ A private party must therefore 
demonstrate that state officials have ``exercised sufficient 
independent judgment and control so that the details of the rates or 
prices have been established as a product of deliberate state 
intervention, not simply by agreement among private parties.''\8\ But, 
until recently, Minnesota law did not provide for state review and 
approval of health care provider cooperative contracting.\9\ No review 
or approval of MRHC's anticompetitive conduct, or the prices that 
resulted from that conduct, took place during the relevant time period.
---------------------------------------------------------------------------

    \7\ Patrick v. Burget, 486 U.S. 94, 100 (1988).
    \8\ Ticor, 504 U.S. at 634-35.
    \9\ From its inception, the Health Care Cooperative Act has 
required provider network cooperatives to file contracts with the 
state health department (see Minn. Stat.Sec.  62R.06),but until the 
2009 amendments, the law did not require state officials to review 
and approve the contracts.
---------------------------------------------------------------------------

    In 2009, Minnesota enacted a law establishing a process by which 
the state Department of Health is to review and approve or disapprove 
health care provider contracts with third-party payers.\10\ The 
prospect of state review of MRHC's contracts in the future does not 
provide antitrust immunity for MRHC's prior unsupervised conduct, and 
the absence of state supervision by itself establishes that the conduct 
challenged in the complaint is not protected by the state action 
doctrine.\11\
---------------------------------------------------------------------------

    \10\ Minn. Laws 2009, c. 97 Sec.  2 (codified at Minn. Stat. 
Sec.  62R.09), available at (https://www.revisor.mn.gov/laws/?doctype=Chapter&year=2009&type=0&id=97).
    \11\ But, as discussed below, the Commission has considered this 
legislative change in framing prospective relief in this case.
---------------------------------------------------------------------------

    Second, the Minnesota statute does not appear to articulate a 
policy to protect MRHC's activities insofar as they involved concerted 
refusals to deal or other forms of coercive conduct. The statutory 
provision declaring that health care provider cooperative contracts are 
not unreasonable restraints of trade is expressly limited, for it is 
made ``[s]ubject to Section 62R.08,'' a provision entitled ``Prohibited 
Practices'' that bars certain types of conduct by provider 
cooperatives.\12\ That provision, among other things, states:
---------------------------------------------------------------------------

    \12\ See note 2, supra.

 It shall be unlawful for any health care provider cooperative to 
engage in any acts of coercion, intimidation, or boycott of, or any 
concerted refusal to deal with, any health plan company seeking to 
contract with the cooperative on a competitive, reasonable, and 
nonexclusive basis.\13\
---------------------------------------------------------------------------

    \13\ Minn. Stat. Sec.  62R.08(d).

    Thus, to successfully assert a state action defense, MRHC would 
have to demonstrate not only active state supervision, but also that 
the Minnesota Legislature expressed a policy to supplant competition 
with regulation with respect to all of MRHC's challenged conduct, 
including acts of ``coercion.'' Given the express limitations placed on 
the state policy regarding health care provider contracting, the 
Minnesota legislature does not appear to have expressed such a broad 
policy.

II. The Proposed Order

    The proposed order takes into account the change in Minnesota law 
that occurred during the pendency of the investigation.

A. Impact of the new statute

    As noted above, the Minnesota Legislature in 2009 enacted 
legislation designed to provide state supervision of the contracts that 
health care provider cooperatives enter into with health plans. The 
Commission cannot, at this time, determine whether this new law will 
result in that state engaging in the detailed, substantive review that 
the Supreme Court has held is required for ``active supervision.'' 
Determining whether the active supervision prong of the state action 
doctrine has been met will require a factual inquiry into the 
Departments of Health's actual

[[Page 37442]]

implementation of its new authority in specific instances. Although 
there is no single prescribed method for a state to conduct an adequate 
review of private anticompetitive conduct, such as the price fixing by 
the MRHC, such review must include an assessment of the substantive 
merits of the pricing conduct, based on a factual record that enables 
the state to exercise ``sufficient independent judgment and control so 
that the details of the rates or prices have been established as a 
product of deliberate state intervention.''\14\
---------------------------------------------------------------------------

    \14\ Ticor, 504 U.S. at 634-35; see also Kentucky Household Good 
Carriers Assn, 139 F.T.C. 404, 426 (2005), aff'd per curiam, 2006 
U.S. App. LEXIS 21864 (2006) (unpublished) (noting the importance of 
procedural mechanisms to ensure that ``relevant facts -- especially 
those that might contradict the proponent's contentions -- are 
brought to the state decision-maker's attention'').
---------------------------------------------------------------------------

    Although it is too early to assess the state's implementation of 
the new statute, the Commission believes the circumstances here make it 
appropriate to defer to Minnesota's expressed intention to actively 
supervise the contracts that result from the MRHC's price fixing.\15\ 
The Commission has in the past taken a different remedial approach 
where state officials had authority to actively supervise private 
conduct but failed to exercise it.\16\ Here Minnesota officials have 
only been recently granted that authority, and it is appropriate to 
allow them an opportunity to utilize that authority.
---------------------------------------------------------------------------

    \15\ Engrossed version of SF 203, Section 2, Subdivision 1, 
(b)(1), available at (https://www.revisor.mn.gov/laws/?id=97&doctype=chapter&year=2009&type=0).
    \16\ See Kentucky Household Good Carriers Assn, at 26 (order 
prohibiting collective rate-making to remain in effect until the 
respondent demonstrates to the Commission that the state has 
implemented a program of active supervision).
---------------------------------------------------------------------------

    As a result, the proposed order does not bar collective price 
negotiations. At the same time, there is certain anticompetitive 
activity that the state will not supervise and would not be protected 
under the state action doctrine and the order prohibits such activity. 
The key prohibitions in the proposed order are aimed at preventing MRHC 
from using concerted refusals to deal or other coercive tactics to 
extract favorable contract terms from payers. This relief is 
appropriate because the new statute only authorizes the Department of 
Health to supervise the final contracts, not the negotiating process 
itself, which is where coercive tactics would occur. Further, the new 
statute does not authorize the Department of Health to reject a 
contract on the ground that it is the product of coercion. Thus the 
order is drafted to protect consumers from coercion by the MRHC. In 
addition, the proposed order provides a remedy for past conduct by 
requiring renegotiation of all existing contracts and their submission 
for state approval consistent with the recently enacted Minnesota 
statute.

B. Order provisions

    Paragraph II.A bars MRHC from organizing or implementing agreements 
to refuse to deal, or to threaten to refuse to deal, with a payer over 
contract terms, as well as agreements not to deal individually with 
payers, or to deal only through the MRHC. Paragraph II.B prohibits the 
MRHC from submitting for state approval any payer contract that it 
negotiated using acts of coercion, intimidation, or boycott, or any 
concerted refusal to deal. The prohibitions apply to agreements for 
hospital, physician, or pharmacy services.
    The remaining portions of Paragraph II prohibit conduct that would 
facilitate a violation of Paragraph II.A. Paragraph II.C bars 
information exchanges to further conduct that violates the core 
prohibitions of Paragraph II. Paragraphs II.D and II.E ban attempts and 
encouragement of such violations.
    The order also includes a proviso designed to clarify the scope of 
the prohibitions in Paragraph II. First, it provides that the 
provisions of Paragraph II do not prohibit the MRHC, in exercising its 
business judgment, from rejecting a contract on behalf of its members, 
so long as there is no agreement between the MRHC and any of its 
members that the member will refuse to deal individually (or will deal 
only though the MRHC), with a payer whose contract the MRHC rejects. 
Second, the order does not prevent the MRHC from exchanging information 
when necessary to conduct joint payer contract negotiations on behalf 
of its members. Such information would not, however, ordinarily include 
whether an individual member is participating in a particular contract 
or the terms on which it is negotiating with a payer independently of 
the MRHC.
    As this proviso reflects, nothing in the order prohibits the MRHC, 
in the exercise of its business judgment, from rejecting a contract on 
behalf of its members, so long as there is no agreement between the 
MRHC and any of its members that the members refuse to deal 
individually with the payor whose contract the MRHC rejected, or that 
the members will only deal with that payor through the MRHC. 
Additionally, the order does not address any actions taken by any 
individual MRHC member, acting alone in exercising its business 
judgment. Thus, for example, the order does not bar any member from 
unilaterally declining to contract with any payer.
    Paragraph III.A requires MRHC to send a copy of the complaint and 
consent order to its members, its management and staff, and any payers 
who communicated with MRHC, or with whom MRHC communicated, with regard 
to any interest in contracting for physician services, at any time 
since January 1, 2001.
    Paragraph III.B requires MRHC to terminate, without penalty, pre-
existing payer contracts that it had entered into since 2001, at the 
earlier of (1) receipt by MRHC of a written request for termination by 
the payer; or (2) the termination date, renewal date, or anniversary 
date of the contract. This provision is intended to eliminate the 
effects of MRHC's past alleged illegal collective behavior. The payer 
can delay the termination for up to one year by making a written 
request to MRHC.
    Paragraph III.D contains notification provisions relating to future 
contact with members, payers, management and staff. For three years 
after the date on which the consent order becomes final, MRHC is 
required to distribute a copy of the complaint and consent order to 
each member who begins participating in MRHC; each payer who contacts 
MRHC regarding the provision of member services; and each person who 
becomes an officer, director, manager, or employee. In addition, 
Paragraph III.D requires MRHC to publish a copy of the complaint and 
consent order, annually for three years, in any official publication 
that it sends to its participating members.
    Paragraphs IV, V, and VI impose various obligations on MRHC to 
report or provide access to information to the Commission to facilitate 
the monitoring of compliance with the order.
    Finally, Paragraph VII provides that the proposed order will expire 
in 20 years.
    By direction of the Commission.

Donald S. Clark
Secretary.
[FR Doc. 2010-15745 Filed 6-28-10: 7:22 am]
BILLING CODE 6750-01-S