FTC investigating Nevada ob-gyns for price collusion

The commission also continues to scrutinize how physicians use the third-party messenger model.

By Tanya Albert, amednews staff. Sept. 9, 2002.

Obstetrician-gynecologists in Clark County, Nev., struggling to pay medical liability insurance bills, now have been hit with a Federal Trade Commission investigation.

In July, the FTC sent a letter to the president of the Clark County OB-GYN Society telling him that the 100-member group was under investigation to see if it violated antitrust laws by collectively negotiating health insurance contract prices or by collectively refusing to deal with plans.

This has been an active year for the FTC in regard to physicians. Besides the Nevada investigation, it has announced four settlements with physicians so far in 2002. Those cases revolved around the "third-party messenger model," in which independent doctors can designate a messenger to negotiate a contract with a health plan if certain guidelines are followed.

In the Clark County case, the FTC said its letter and the nonpublic investigation "should not be viewed as an accusation by the Federal Trade Commission or its staff of any wrongdoing." The FTC goes on to ask for a long list of information, including the society's written and recorded materials such as letters, minutes, pamphlets and telephone conversations.

"To me, the experience is like you are drowning in quicksand and the federal government comes along and throws you a brick," said Las Vegas ob-gyn John Nowins, MD, the society's president.

The probe comes at a time when obstetricians are retiring early because they can't afford their medical liability insurance, leaving Las Vegas entirely or cutting back deliveries so they can keep their insurance.

More than 75 private-practice OBs have left or plan to leave the Las Vegas area.

Dr. Nowins said more than 30 private practice obstetricians had left Las Vegas and Clark County since late 2001. About 90 private practice obstetricians are left to deliver about 23,000 babies annually.

"Of the remaining doctors, about half of those are planning to leave," Dr. Nowins said. "They have their homes up for sale, and they are trying to get licenses in other states. ... This is the worst place in the U.S.A. to practice ob-gyn right now."

He said he had not seen an increase in obstetrics reimbursements from health plans since moving to Las Vegas more than a decade ago. When his liability insurance rates went up earlier this year, he called health plans to ask for a pay increase. Other physicians independently came to the same conclusion, he said. It was simple economics of keeping a business going.

The average reimbursement for a normal vaginal delivery in Clark County is $1,200 to $1,300, Dr. Nowins said. Medical liability insurance is more than $100,000 annually. Forty years ago doctors in the area received about $600 for a normal delivery, and liability insurance was $132 annually.

"We're not colluding. We're calling individually," Dr. Nowins said. "This isn't antitrust. We haven't done anything wrong."

The FTC did not return AMNews phone calls.

Messenger model under fire

The FTC settlements this year revolve around issues separate from those in the Clark County probe.

In the four cases resolved by settlement, the commission scrutinized how physicians carried out the third-party messenger model. In May, the FTC settled charges with two Denver-area groups on allegations that they had misused the system when negotiating contracts with insurers.

Vaginal delivery reimbursement doubled in 40 years; liability premiums are 757 times higher.

And in August, the FTC announced that it reached separate settlements with more physicians in Denver and with doctors in the Dallas-Fort Worth area whom the government accused of misusing the model.

The cases were "the latest part of our continuing law enforcement efforts directed at anti-competitive conduct involving health care," Joe Simons, the FTC's Bureau of Competition director, said in a statement.

Federal labor laws prohibit independent, self-employed physicians from jointly negotiating health plan contracts. But under the messenger model, independent physicians are allowed to appoint the same person to be their representative.

The messenger is allowed to make "objective comparisons" of terms offered to the physicians by health plans. He or she is also permitted to analyze contracts that different physicians are offered and publish results, as long as competitively sensitive information isn't divulged and no recommendations on whether to reject or accept a term are made.

In the recent Denver and Dallas cases, the FTC accused doctors of not adhering to those guidelines and, as a result, hurting competition in those markets and driving up prices.

The physicians' settlement is not an admission of guilt. Physicians settled the cases to avoid a long, drawn-out legal process, their attorneys said.

In Denver, the FTC said the messenger organized eight competing obstetrics and gynecology groups -- about 80 physicians total -- so it could negotiate collectively for them. The collection of physicians was called the "Professionals in Women's Care." But the FTC claimed that the messenger, Denver-based R.T. Welter & Associates, and the eight physician groups didn't follow messenger guidelines.

"They exploited this strength by demanding higher fees and more favorable price-related terms from payers," the FTC alleged. "Welter advised the PIWC physicians to terminate, or threaten to terminate, their preexisting individual contracts with payers. Many [doctors] complied, pressuring payers to offer new contracts with higher fees."

The proposed settlement includes an agreement that the Welter firm cannot negotiate on behalf of any of the physicians for three years. The doctors would, if the plan requested, terminate current contracts.

In Dallas-Fort Worth, the FTC said the third-party messenger, System Health Providers, a Dallas-based management firm, actively bargained with health plans for contracts on behalf of physicians in the Genesis Physicians Group. Genesis is the parent company of System Health Providers and has about 1,250 practicing physicians.

The FTC accused System Health Providers of proposing and counter-proposing fee schedules and other terms. The complaint also alleged that the organization discouraged group members from entering into unilateral agreements with health plans, telling doctors that they would enhance their bargaining advantage by negotiating through System Health Providers.

The proposed settlement would prohibit System Health Providers from entering into or facilitating agreements among physicians and negotiating on behalf of any physician. The proposed agreement would allow the organization to do what is reasonably necessary to operate a "qualified risk-sharing joint arrangement" or a "qualified clinically integrated joint arrangement."

ADDITIONAL INFORMATION:

Model mishaps

In four separate cases this year, the Federal Trade Commission settled charges with physician groups accused of misusing the third-party messenger model.

Physician Integrated Services of Denver Inc., Michael J. Guese, MD, and Marcia L. Brauchler, Denver-area physician group, May 9
Aurora Associated Primary Care Physicians, LLC, Richard A. Patt, MD, Gary L. Gaede, MD, and Marcia L. Brauchler, Denver-area physician group, May 9
Professionals in Women's Care, Denver-area physician group, Aug. 20
System Health Providers, Dallas-Fort Worth-area physician group, Aug. 20

Individual agreements and analysis of the cases are available on FTC's Web site (http://www.ftc.gov/bc/caselist/).