Federal Trade Comission

Published: 2021-07-02 04:18:39
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Category: Trade, Competition

Type of paper: Essay

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In the given case, the Federal Trade Commission claimed that Texas Surgeons Independent Practice Association(IPA) of 26 general surgeons in the Austin, Texas and six competing medical practice groups who are the members of this association (the respondents), Texas Surgeons P. A. ("Texas Surgeons"), Austin Surgeons, P. L. L. C. ("AS"), Austin Surgical Clinic Association, P. A. ("ASCA"), Bruce McDonald & Associates, P. L. L. C. ("BM&A"), Capital Surgeons Group, P. L. L. C. ("CSG"), Central Texas Surgical Associates, P. A. ("CTSA"), and Surgical Associates of Austin, P.
A. ("SAA"), violated Section 5 of the Federal Trade Commission Act, 15 U. S. C. § 45 by engaging in unlawful act of price fixing. FTC alleged complaint that the IPA organized collective refused to deal with two health plans, Blue cross Blue Shield and United Health Care of Texas, terminated the contract with Blue Cross Blue Shield and threatened to terminate contracts with the United Health Care of Texas if the payer refuse to agree with their demand of raising reimbursement rate. As per demand, both plans increased their rates.
Blue Cross accepted a rate agreement with the respondents in early 1998 after facing problems getting an emergency room patient treated by a general surgeon. The respondents collectively secured rate agreement resulted nearly 30% above the April 1997 level. In this case, the practices of the respondents went against the welfare of the public, constitute unfair methods of competition and antitrust actions. This anti competitive action cost health plan, employers and patients, more than $1,000,000 for surgical services in 1998 and 1999 in the Austin, Texas area.



In the mid-1970, the FTC formed a section within the Bureau of Competition to investigate potential anti trust violations involving healthcare. In the health care area, as in the case of any other field, the antitrust laws are enforced so check not only possible competitive harm but also the potential for pro competitive increase in efficiency, lower health care cost, provide better quality care to the consumers, enhance innovative strategy to provide improved quality care at low cost. Federal antitrust guidelines allow independent physicians to appoint a representative messenger to communicate with payers about fees and contract terms, but annot represent the competing physicians collectively. However, in this case, the Texas Surgeons IPA served as a vehicle for the six respondent medical practice groups to engage in actual refusals to deal, and to negotiate collectively, in order to receive higher prices from Blue Cross Blue Shield of Texas and United Healthcare of Texas. The six respondent medical practice groups furthered the unlawful act through their collective control of the Texas Surgeons IPA board of directors, and through their direct participation in collective fee negotiations between United and the Texas Surgeons IPA.
The commission proposed a consent order as a remedy to prevent the respondent from getting indulge in future unlawful act that is alleged in the complaint while allowing respondents to engage in legitimate joint conduct. The proposed order prohibits the IPA from a) negotiating on behalf of any physician with health plans b) refusing to deal with health plan or threatening health plans to agree on their demand c) exchanging information among Austin area physicians regarding negotiations with any health plan regarding reimbursement terms d) determining the terms on which its members deal with health plans.
The order contains three provisos that permit the respondents to 1. Negotiate for physicians limited to the same medical practice group; 2. Engage in conduct approved and supervised by the state of Texas; and 3. Engage in conduct that is reasonably necessary to operate ‘qualified risk- sharing joint arrangements- so long as they give adequate pre- notification. The commission’s proposal allows the IPA to avoid such claims of price- fixing and antitrust if it acts in one of two ways: ) Financial Risk Sharing: As a qualified managed care plan which allows competing providers to negotiate prices jointly without being charged with price fixing act by the Federal antitrust agencies if they share substantial financial risk on contracts . It means that participating providers share responsibility for staying within a defined budget. The antitrust agencies believe that the competing providers should work together to achieve common, procompetitive goals of reducing cost and improving quality. Share incentives could also focus on “quality” or Health outcome” factors.
Both the way of risk sharing has potential of providing high quality care to the patient at low cost. 2) Messenger Model: The fifth provision (Section II. A. 5 of the proposed order) ensures that a neutral third party who is not a physician with an active practice in the Austin area, be the communicator between any respondent and any payer to deal with any terms. Under this arrangement, the network organization does not negotiate agreement with the payer about any term or price; it allows the individual providers to make an individual decision, based on proposal from payer.
Physician individually, through third party, conveys and receives information, offers, and responses from the payers or providers. However, the individual providers can give “sign off” authority to network organization within specified range. In addition, the commission order ensures that any respondent who are intending to use messenger model arrangement should provide prior notification to the commission. Price- fixing agreements among the competitors are not accepted by law. It is considered serious act because the consumers, plans and employers pay heavy price for it such as, • Consumers loss the benefits of competition Increases the health care cost; Blue Cross, United, their individual subscribers, and employers paid more than one million dollars were paid for the services of surgeons. Therefore, review of such cases is crucial to encourage the competitor to work together as a team to improve quality of services, while reducing cost. References http://www. crowell. com/documents/DOCASSOCFKTYPE_PRESENTATIONS_705. pdf http://www. accessmylibrary. com/article-1G1-77013366/texas-surgeons-settle-price. html http://www. ftc. gov/os/2000/05/texascmp. htm

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