FTC Charges Chicago-Area Doctor Groups with Price Fixing

On December 29, the Federal Trade Commission announced its decision to challenge the conduct of several organizations representing more than 2,900 independent Chicago-area physicians for agreeing to fix prices and for refusing to deal with certain health plans except on collectively determined terms. The FTC’s complaint charges that the actions of Advocate Health Partners (“AHP”) and other related parties unreasonably restrained competition in violation of Section 5 of the FTC Act. The consent order settling the FTC’s charges prohibit the respondents from engaging in such anticompetitive conduct in the future.
The FTC’s complaint challenges conduct during the period 1995 to 2004, during which the respondents collectively negotiated the prices and other contract terms at which their otherwise competing member physicians would provide services to the subscribers of health plans, without any efficiency-enhancing integration of their practices sufficient to justify their conduct. In particular, for a period of time AHP staff negotiated contracts on behalf of each PHO respondent, with each PHO respondent retaining authority to approve offers and counteroffers.

Subsequently, AHP was given the authority to approve offers and counteroffers and, ultimately, to approve negotiated contracts on behalf of the AHP physicians, who could then opt in or out of the negotiated contract.
The complaint also alleges that in 2001, AHP terminated its members’ contracts with a health plan that rejected contract proposals for higher fees, and threatened that it would not contract with the plan for hospital services unless it stopped contracting with individual physicians and agreed to a group contract. The resulting contract included fees 20 percent to 30 percent higher than the health plan’s individual physician contracts.

Named in the complaint are AHP, Advocate Bethany Health Partners, Advocate Christ Hospital Health Partners, Advocate Good Samaritan Health Partners, Ltd., Advocate Good Shepherd Health Partners, Ltd., Advocate Illinois Masonic Health Partners, Advocate LutheranGeneral Health Partners Inc., Advocate Trinity Health Partners, Advocate Bethany Health Partners, Advocate Bethany Health Partners, Advocate Health Centers Inc., and Dreyer Clinic Inc. The Commission’s consent order prohibits the respondents from entering into or facilitating agreements between or among physicians: (1) to negotiate with payors on any physician’s behalf; (2) to deal, refuse to deal, or threaten to refuse to deal with any payor; (3) to designate the terms upon which any physician deals or is willing to deal with any payors; or, (4) not to deal individually with any payor, or to deal with any payor only through any arrangement involving the respondents.

The consent order does not prohibit the respondents from continuing to engage in the execution of their Clinical Integration Program (“CIP”). The Commission made no determination with respect to the CIP’s legality. The order provides certain mechanisms to allow the Commission to monitor the further development, implementation, and results of the CIP. The FTC retains the ability to challenge conduct related to the CIP if it later determines that such a challenge is warranted and in the public interest.

Authored by

Camelia C. Mazard
202-589-1837
cmazard@dbmlawgroup.com