Does Your Physician Network Violate Antitrust Law?

By Pretzer, Michael | Medical Economics, October 14, 1996 | Go to article overview

Does Your Physician Network Violate Antitrust Law?


Pretzer, Michael, Medical Economics


Who knows better than the head of the Federal Trade Commission? He answers your questions, and explains the agency's new liberalized rules.

Robert Pitofsky, the Federal Trade Commission chairman, isn't careful, he's going to give govemment a good name.

On the morning of August 28, he, along with Anne Bingaman, the assistant attorney general in the Justice Department's antitrust division, stood before a large gathering in the FTC's conference room to announce revisions to the guidelines that since 1994 have interpreted how physicians and others in medicine may do business without running afoul of antitrust law.

From all quarters of the medical community, the revisions have drawn praise for being balanced and fair. Even before Pitofsky had finished answering questions at the conference, the AMA invaded the conference room's foyer to pass out copies of its statement that called the new interpretation "a step forward" and "a milepost." Later, the American Medical Group Association said the revisions "insightfully address current market developments, which make it increasingly important for physicians to form clinically integrated groups. " And the American Association of Health Plans declared, "The new guidelines preserve the agencies' historically strong enforcement of federal antitrust laws. "

The FTC's announcement didn't change the antitrust laws, of course. That's not within the agency's purview. Nor did it change policy, really. Instead, to use Pitofsky's words, the statements "clarify that a wide range of provider networks are permissible under the antitrust laws. "

In unveiling the clarification, the FTC chairman explained, "When doctors or other health-care professionals form a network to offer their services to an insurance company, an employer, or other purchaser, they agree on the price that the network will charge. Conventionally, under the antitrust laws that equals price-fixing, which we call illegal per se. It's a violation of the law, regardless of its purpose or the market power of the network participants.

"Under conventional antitrust, however, the network would get a more extensive rule-of-reason treatment if it could demonstrate that it has pro-competitive features. The problem with the previous guidelines was that they were interpreted-I think misinterpreted-to say that the only way a physician network could get out of the illegal-per-se zone and into the rule-of-reason zone was to integrate financially or to offer a so-called new product.

"The new guidelines have been issued to clarify the point that there are many forms of efficiency other than financial integration that justify the broader rule-of-reason treatment. "

In the post-announcement afternoon, Pitofsky, a former dean of Georgetown University Law Center and a former professor at New York University School of Law and Harvard Law School, met me in his office to discuss further the FTC, its role in the health-care industry, and the new antitrust guidelines. Using a baseball analogy, he emphasized that the changes "haven't moved the foul line. "

Maybe not. But now they at least encourage physicians to take a turn at bat. Our Washington Editor, Michael Pretzer, recently questioned Pitofsky about the new guidelines. Here's what he had to say.

This morning, you and Anne Bingaman cited rapid chances in the marketplace as one of the reasons the FTC and the Justice Department issued the clarification of the antitrust guidelines. What changes are you seeing? What direction is the market headed?

I'm not sure I'm the hi-qt nt-yqtn t p-rrihe the market. People have called to our attention several sorts of changes. Years ago, you had HMOs on the one hand with their managed-care approach, and on the other you had individual doctors with their fee-for-service predilection. Now a lot of hybrid arrangements are developing. They're part managed care, part fee-for-service. …

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