For Release: September 17,
2003
FTC Charges North Texas Specialty Physicians with
Price Fixing
Agency Alleges
Group Raised Cost of Health Care
for Consumers in Fort Worth Area
The Federal Trade Commission has issued an administrative
complaint against a group of Texas physicians,
charging that they unlawfully restrained competition, increasing
the cost of health care for consumers in the Fort Worth area.
The FTC alleges that North Texas Specialty Physicians (NTSP)
violated federal law by negotiating agreements among its participating
physicians on price and other terms, refusing to deal
with payors except on collectively agreed-upon terms, and
refusing to submit payor offers to participating physicians
unless the terms complied with NTSP's minimum-fee standards.
NTSP is a nonprofit corporation funded through fees paid
by participating physicians. Organized in 1995, NTSP presently
is composed of approximately 600 physicians, of whom approximately
130 are primary care physicians. Its board of directors consists
of participating physicians elected to three-year terms by
the members of each of NTSP's sections. A physician may participate
in NTSP-payor contracts by granting NTSP the authority to
arrange for his or her services to be provided to consumers
covered by the payors.
The Commission's complaint states that nearly all of NTSP's
participating physicians participate in some non-risk contracts.
The FTC alleges that, "With respect to these non-risk
contracts, NTSP often has sought to negotiate for, and often
has obtained, higher fees and other more advantageous terms
than its individual physicians could obtain by negotiating
individually with payors."
The FTC complaint charges that NTSP's polling practices
are illegal. NTSP polls its participating physicians to determine
the minimum fee that they would accept for medical services
provided pursuant to an NTSP-payor agreement. Once this information
is collected, NTSP then calculates the averages of the reported
minimum acceptable fees and reports these measures to its
participating physicians, confirming to the participating
physicians that these will be the minimum fees that NTSP collectively
will entertain when negotiating any contract with a payor.
The FTC alleges that the exchange of prospective price information
among otherwise competing physicians reduces price competition
and enables the participating physicians to achieve supra-competitive
prices.
The Commission's complaint further charges that NTSP sometimes
begins contract discussions with payors by identifying the
fee minimums determined by its participating physicians, and
states that NTSP will not enter into an agreement with any
payor unless the payor agrees to satisfy these fee minimums.
The FTC alleges that in other instances, payors have proposed
agreements to NTSP that did not satisfy the organization's
fee minimums. In those cases, NTSP allegedly required that
the payors resubmit their proposals, or otherwise actively
bargained to get the fees they wanted. As a result, the FTC
alleges, payors sometimes were forced to accept the higher
fees. Additionally, the Commission's complaint states that
in at least one instance, NTSP rejected a payor's offer after
finding that the offer approximated the agreed-to minimums
as to some of its insurance plans, but fell below the minimums
with respect to other plans. In that case, the FTC alleges,
NTSP entered into a contract with the payor only after the
payor increased its proposed fees.
The FTC also alleges that NTSP discouraged payors and participating
physicians from negotiating directly with one another. In
at least one instance, after fee negotiations with a particular
payor broke down, NTSP allegedly orchestrated the removal
of NTSP physicians from other arrangements with that payor.
The FTC alleges that the payor was forced to yield to NTSP's
pressure and contract with the participating physicians at
higher prices.
The Commission's complaint charges that none of NTSP's negotiating
practices significantly increase efficiency, because its participating
physicians are not integrated in ways that would increase
the quality and reduce the cost of health care in the Fort
Worth area. The Commission alleges that because of NTSP's
practices: price and other forms of competition among the
participating physicians were unreasonably restrained; prices
for physician services were increased; and health plans, employers,
and individual consumers were deprived of the benefits of
robust competition among physicians.
The Commission vote authorizing the staff to file the administrative
complaint was 5-0. In addition to filing the complaint, the
FTC filed a notice of contemplated relief in which it identifies
provisions that may be appropriate in a final order resolving
the charges. These include: 1) cease-and-desist provisions
related to the direct negotiation of contracts by NTSP on
behalf of member physicians without clinical or financial
integration; and 2) termination of contracts that NTSP has
negotiated with any payor.
NOTE: The Commission issues or files a complaint when it
has "reason to believe" that the law has been or
is being violated, and it appears to the Commission that a
proceeding is in the public interest. The complaint is not
a finding or ruling that the named parties have violated the
law. The administrative complaint marks the beginning of a
proceeding in which the allegations will be ruled upon after
a formal hearing by an administrative law judge.
Copies of the Commission's complaint are available from
the FTC's Web
site and also from the FTC's Consumer Response Center,
Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580.
The FTC's Bureau of Competition seeks to prevent business
practices that restrain competition. The Bureau carries out
its mission by investigating alleged law violations and, when
appropriate, recommending that the Commission take formal
enforcement action. To notify the Bureau concerning particular
business practices, call or write the Office of Policy and
Evaluation, Room 394, Bureau of Competition, Federal Trade
Commission, 600 Pennsylvania Ave, N.W.,
Washington, DC 20580, Electronic Mail: antitrust@ftc.gov;
Telephone (202) 326-3300. For more information on the laws
that the FTC enforces, the Commission has published "Promoting
Competition, Protecting Consumers: A Plain English Guide to
Antitrust Laws,".
Administrative
Complaint
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