FTC Announces Complaint/Settlement Related to Price Fixing

In late December 2006, the Federal Trade Commission (FTC) announced that it had filed a complaint charging Advocate Health Partners (Advocate) and other related parties with agreeing to fix prices and refusing to deal with certain health plans except on collectively determined terms. The organizations represent more than 2,900 Chicago-area physicians. At the same time that it filed its complaint, the FTC also filed a consent order that would prevent respondents from engaging in such conduct in the future.

The complaint describes Advocate as a “super physician-hospital organization” because its members consist of multiple physician-hospital organizations (PHOs). The complaint alleges that, from 1995 to 2004, Advocate and other respondents collectively negotiated the prices and other contract terms at which otherwise competing member physicians would provide services to the subscribers of health plans. It further states that this collective negotiation was done without any efficiency-enhancing integration of the physician practices sufficient to justify the conduct.

The complaint also alleges that, in 2001, Advocate terminated members’ contracts with a health plan that rejected Advocate’s proposal for higher fees. In addition, the complaint notes, Advocate threatened that it would not contract with the health plan for hospital services unless the plan ceased attempting to contract individually with Advocate members and agreed to a higher-fee group physician contract. The resulting contract included fees that were twenty to thirty percent higher than the health plan’s individual physician contracts in the area.

The FTC’s consent order would prohibit 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 the respondents.