FTC OKs exception to physician collective bargaining rules

A Denver-area IPA hopes to use joint negotiation to improve patient care at a competitive cost; physicians are warned to scrutinize the system before participating.

By Tanya Albert, amednews staff. March 18, 2002.

The Federal Trade Commission has opened the door for physicians in partially integrated groups to bargain collectively with insurers, lowering the threshold that doctors must meet to negotiate together.

The FTC traditionally required that a group be fully integrated. But last month, in a seven-page letter, the commission told MedSouth Inc., a Colorado-based independent practice association, that it could collectively bargain for a partially integrated group of physicians because the business arrangement doesn't appear as if it would lead to price fixing.

How it will work
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Although the FTC's move isn't a major overhaul of the criteria used to determine which doctors can collectively bargain, it could build into a significant development if MedSouth's system succeeds and the commission grants other partially integrated groups the same freedom.

"This is not a signal that physicians can collectively negotiate," said Jeff Miles, MedSouth's attorney. "This isn't any type of signal that the FTC is letting down its guard of going after groups that have [broken the law]."

MedSouth has more than 400 physicians in 216 practices in the Denver area.

But union organizers say it is a positive sign that the commission's stance regarding when it is legal to bargain collectively is still in flux.

"It shows that the way physicians can negotiate isn't written in stone," said Robert L. Weinmann, MD, Union of American Physician and Dentists president.

IPA with bargaining power

The revamped MedSouth is a unique combination of features. The IPA will negotiate contracts with insurers for its member physicians, but it also will implement a number of quality initiatives.

By combining those tasks, MedSouth told the FTC, it expects to reduce medical costs and increase the quality of care its physicians are able to provide patients.

"The goal of the program is to sell an integrated product that will have a competitive edge," Miles said.

As part of its program to improve quality, MedSouth plans to implement an electronic clinical data record system that will let physicians share information about patients. It also will establish clinical practice guidelines and measurable performance goals about the quality and appropriate use of services that physicians provide patients.

MedSouth will analyze the information collected and will discipline or fire any physician who does not fully participate in the program and adhere to its standards, according to FTC documents.

Under the new system, physicians could contract with insurance companies other than the ones with which the IPA signs contracts.

The FTC said that although it does not appear that allowing MedSouth to negotiate collectively will create an anticompetitive environment, it is impossible to predict what the exact effects could be because the number of physicians who will participate in the proposed program is not set yet.

MedSouth currently includes more than 400 physicians in 216 practices in the area in and around the southern part of Denver. They each have privileges with at least one of three hospitals in the area. For example, the IPA's physicians account for about 51% of the internists and 33% of family physicians at one of the hospitals, according to FTC documents.

But the IPA expects some physicians will stop participating before the new program is established and it starts negotiating contracts.

Some doctors might not like the time investment involved in being a member of the overhauled IPA and will opt out, Miles said. Other physicians may drop out after they realize it's not a way to gang up on insurers, he said.

Because it's difficult to predict how MedSouth will impact competition in the Denver market, the FTC will scrutinize how the IPA performs.

"As long as MedSouth's physician members actually are available and willing to contract individually with payers who prefer not to contract with the network, at prices that do not reflect the aggregate power of the group, or its membership is at a level where the network physicians are unable to exercise significant market power, implementation of the arrangement is not likely to endanger competition unreasonably," FTC Assistant Director Jeffrey W. Brennan wrote.

"We will, however, closely monitor MedSouth's activities and will recommend that the commission take appropriate action if the proposed conduct appears to result in actual anticompetitive effects," Brennan wrote.

Proceed with caution

The physician and dentist union's Dr. Weinmann said the proposed MedSouth system is one that physicians should examine carefully before making a decision on whether to participate.

He said physicians may lose more control over their practices than they bargained for if they sign up to be part of the IPA.

For example, if physicians believe they have been unfairly disciplined, they will have to take up their complaints with MedSouth -- the group that disciplined them in the first place.

"This is a playing field 90% tipped against the doctors," Dr. Weinmann said. "Here these doctors are going to be subject to MedSouth data analysis, and those who don't add up will be disciplined or terminated."

ADDITIONAL INFORMATION:

How it will work

MedSouth proposes to negotiate and execute contracts for its physicians this way:

A consultant will develop fee proposals and, if necessary, gather information from MedSouth physicians. Competitive information from a physician will not be disclosed to another physician.
Physician services will be paid on a fee-for-service basis.
Physicians will submit their claims directly to the health plans and the health plans will pay physicians directly.
Physicians will be free to contract independently with other health plans.

Source: Federal Trade Commission