How to Qualify for a Safety Zone

Medical Economics, October 14, 1996 | Go to article overview

How to Qualify for a Safety Zone


Statement Eight of the 1996 Statements of Antitrust Enforcement Policy in Health Care, issued by the Federal Trade Commission and the U.S. Department of Justice, attempts to explain how the two federal agencies apply antitrust laws to physician networks.

The statement begins by establishing what's called a safety zone. A safety zone is a set of criteria that, if satisfied, proves compliance with antitrust law. The FTC and Justice "will not challenge, absent extraordinary circumstances" a network that qualifies for the safety zone.

Both exclusive and non-exclusive networks may qualify for a safety zone. For an exclusive network (one in which the doctors work solely for the network) to qualify, its participants must share substantial financial risk and constitute no more than 20 percent of the physicians in any given specialty who practice in the network's geographic area. A non-exclusive network's participants also must share financial risk-and constitute no more than 30 percent of a specialty in the geographic area.

To determine whether a network is exclusive or non-exclusive, the agencies will look at:

*The market's viable competing networks or managed-care plans.

*The mix of contracts with individual physicians.

*Individual physicians' variety of revenue sources.

*The tendency of physicians to "de-participate" in other networks or plans.

Attempts by network physicians to coordinate prices or other terms in other competing plans.

Among the arrangements that indicate the sharing of "substantial financial risk" are:

*Capitation.

*Any capitationlike, predetermined percentage of an insurance plan's premium revenue.

*Withholds or bonuses. …

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