The Federal Trade Commission's (FTC's) determination that a physician group's activities with respect to its fee-for-service, or nonrisk, arrangements with payors constituted horizontal price-fixing unrelated to any procompetitive efficiencies was supported by substantial evidence, according to the Fifth Circuit Court of Appeals. The FTC correctly found that the physician group, North Texas Specialty Physicians (NTSP), violated the antitrust laws by collectively negotiating with health plans on behalf of its member physicians in an attempt to obtain higher fees.
The FTC's remedial order, however, was overly broad because it could have the effect of compelling NTSP to negotiate or enter into contracts with payors, regardless of the potential risks to NTSP, its physicians, or its patients, the court concluded. Therefore, NTSP's request for review of the FTC's order was granted, and the case was remanded to the FTC for modification of the remedial order only.
FTC decision. The FTC issued an administrative complaint charging NTSP with unlawfully restraining competition through horizontal price-fixing in violation of §5 of the FTC Act. An FTC administrative law judge upheld the complaint and entered a cease and desist order that, among other provisions, required termination of existing nonrisk contracts at the payor's request or at the earliest termination or renewal date.
Appeal. NTSP made several arguments on appeal, which the Fifth Circuit addressed in turn. First, the court concluded, the FTC had jurisdiction because, if NTSP's attempts to maintain physicians' fees were successful, competition would be adversely affected. Second, NTSP's activity with respect to its nonrisk contracts constituted concerted action because NTSP was controlled by competing physicians and, therefore, was not a sole actor for purposes of the antitrust laws.
Third, an abbreviated “inherently suspect,” or “quick-look,” analysis, rather than a full rule-of-reason analysis, was appropriate because the anticompetitive effects of NTSP's activities were obvious and the procompetitive justifications did not plausibly result in a net procompetitive or neutral effect on competition, the court found.
Finally, as to the merits of the alleged violation, the court determined that substantial evidence supported the FTC's findings that NTSP's activities constituted horizontal price-fixing and, accordingly, affirmed the FTC's determination. The court stated that NTSP: (1) actively encouraged physicians to reject offers from that fell below the fees indicated in the polls; (2) delayed or blocked direct negotiations between payors and physicians in an attempt to increase its collective bargaining power; and (3) engaged in contract negotiating practices that resulted in contracts that contained fees higher than many participating physicians otherwise would have been willing to accept.
North Texas Specialty Physicians v. FTC, 5th Cir., May 14, 2008, Health Care Compliance Reporter ¶800,510.
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