By Guglielmo, Wayne J.
Medical Economics , Vol. 79, No. 12
A Denver IPA gets a go-ahead from the government to contract on behalf of members. Is this good news for physicians?
One of the Federal Trade Commission's jobs is to worry about anticompetitive behavior. So it's been no friend of physician collective bargaining. That's why health plan executives and physicians were surprised to learn that, in the middle of February, the FTC seemingly reversed course, albeit cautiously.
The reversal came in the form of a staff opinion letter issued in response to a request from a 432-member IPA in Denver. MedSouth wanted to develop a clinically integrated physician network to improve patient care and lower costs. Key to the plan: The ability to negotiate fee-for-service contracts with local health plans on behalf of members.
FTC staff agreed not to challenge the MedSouth program on antitrust grounds. Certainly, the agency will watch out for anticompetitive behavior. But for now at least, it's willing to let doctors experiment.
That's a new direction, so the decision has stirred reactions from other doctors and the HMO industry. What should you make of it?
Integration: Better cape and lower costs?
MedSouth's decision to integrate clinically is linked to its past financial difficulties with health plans.
Like other Denver physicians in the late 1990s, MedSouth members initially formed their IPA to establish risk-sharing contracts with local health plans. But for MedSouth, those contracts proved financially draining, so the IPA terminated them at renewal time. Some MedSouth members continued to contract individually with local plans at prevailing market rates. But others envisioned a different arrangement-practicing on a partially integrated basis with no risk sharing.
MedSouth officials put together a plan with three key mandates. First, deliver primary and specialty services in a coordinated fashion. Second, share clinical information, practice guidelines, and performance benchmarks. And third, develop a physician network to negotiate collectively with third-party payers. To help it integrate clinically, MedSouth struck a deal with a software developer interested in beta testing a new Web-based data system. If MedSouth would serve as guinea pig, the company would foot the bill for most of the development costs.
But MedSouth's Washington, DCbased attorney, Jeff Miles, was troubled by the government's relative silence on the subject of clinical integration as the basis for joint contracting. The last thing he wanted to do was run afoul of the FTC, which had already investigated other Denver physician networks for alleged antitrust violations.
Deciding to err on the side of caution, Miles and MedSouth officials solicited FTC staff input. On June 1, 2001, Miles sent out an advisory request.
Caution: The Feds will be watching
FTC staff responded in a letter addressed to Miles on Feb. 19 of this year.
As expected, the agency concluded that MedSouth's proposal to create a clinically integrated network could indeed. enhance quality and reduce costs. Given those potential benefits, the FTC said, it would not automatically reject the second part of MedSouth's proposal-joint negotiation of contracts-as per se illegal price-fixing.
But for the Denver doctors to get the green light, the FTC still had to conclude that MedSouth couldn't achieve its goals of better quality and lower costs without joint negotiation of contracts. …