The Federal Trade Commission has initiated an investigation against South Georgia Health Partners, P.L.L.C., a physician-hospital organization known as the “Super PHO”. This entity is jointly owned by five other PHOs, with physician members who own three of the PHOs that are organized into independent practice associations, known as IPA. In total nine respondents have violated said Complaint. SGHP provides a collective representation of approximately 15 hospitals and 500 physicians to a large region of South Georgia. Hereafter, jointly owned PHOs and IPAs will be referred to as Respondents. FTC has reason to believe that SGHP, and all members associated, have allegedly organized and participated in what the FTC considers price-fixing agreements-the refusal to work with payors, not willing to meet respondent’s collective terms.1 It is with understanding, that the FTC has claimed all respondents are not within the jurisdiction to conduct business which impedes or is affecting, “commerce” as defined in the Federal Trade Commission Act, as amended, 15 U.S.C. § 44.2
On behalf of SGHP, payors must enter into a contractual agreement meeting terms outlined in physician and hospital contracting policies. Payors are required to meet a price list provided by SGHP in order to obtain physician services. This denies payors any price reductions causing payors to pay higher premiums than anywhere else. SGHP has expressed to physician members that it will not prohibit, work, or negotiate on behalf of members who choose to individually contract with payors outside of SGHP terms. It was also mentioned that its decisions are based on physician collective action in which contractual agreements are to be made in union causing insurers to provide competitive prices or force withdraw from providing services in that region.
As with physician contract practices, SGHP has defined similar policies in which payors must meet the contract requirements outlined with member hospitals. SGHP has required payors to meet strict guidelines in fixed discounts, such as, discounts are not to exceed 10% of suggested price list, nor will increased discounts be negotiated further. Contracts are also to be negotiated by member hospitals on a collective behalf explicitly stating hospitals will not contract independently from SGHP unless otherwise authorized. If independent contracting is permitted under the representation of SGHP, hospital members are forbidden from exceeding discounts from suggested list prices. If an increased discount is offered, it must offer suggested discount to all payors contracted through SGHP. This is known as the most-favored-nation clause.
According to the FTC, respondents have conducted and or impeded in business causing an effect of restraining trade unreasonably and hindering competition in the provision of physician and hospital services in South Georgia.3 Illegal conduct has caused hospitals and physician services to increase in price, as well as deprive competition amongst both physician and hospitals in providing benefits to individual consumers, employers, and health plans. Respondents have also been found to restrain prices and other forms of competition amongst physicians and hospitals. The FTC has considered respondents’ business practices as unlawful and unfair methods of competition in violation of Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C §45.4 Due to unfair practices, the FTC has ordered all respondents to cease and desist any illegal actions as outlined in said Compliant.
It is recommended respondents follow proposed order in which explicitly states, respondents will not enter or facilitate agreements or exchange information that obstructs a physician’s willingness to contract with a payor. With the exception of SGHP, Owner PHO and IPA can participate in agreements if such conduct is; first, notified by the FTC and such conduct is considered to be “qualified risk-sharing joint arrangement”, or a “qualified clinically-integrated joint arrangement.” 5 Physicians and hospital participants who agree to enter into a qualified risk-sharing arrangement must meet two conditions. Participants must share the financial risk to create incentives among participants in order manage cost and improve overall quality of services. Secondly, reimbursements and associated dealings must show necessity in order to obtain significant efficiencies through the joint arrangement.6
The second arrangement, “qualified clinically-integrated joint arrangement” must also abide by two conditions; one, it must require all participants to be enrolled in an ongoing program that measures clinical practice patterns, interdependence, and cooperation among physicians in order to maintain and manage cost, and quality of services rendered. Second, said arrangement must show reasonable cause concerning reimbursements and associated dealings that are necessary in order to obtain significant efficiencies through the joint arrangement.7 If either agreement is formed, respondents are required to notify FTC 60 days prior to negotiations and formed agreements.