The Federal Trade Commission ended its year by prosecuting a 1,900-member physician group in Chicago for price-fixing. Since 2001, the FTC and DOJ have coerced 29 physician groups—some with as few as six members—into signing consent orders that restrict the right of doctors to negotiate contracts.
The FTC and DOJ apply a double standard to doctors and third-party payers. Payers may represent thousands of individual consumers and present doctors with a “take it or leave it” contract offer. But if even a handful of doctors get together to present a counter-offer, it’s a “per se” antitrust violation.
The FTC says they’re trying to protect competition:
The FTC’s complaint challenges conduct during the period 1995 to 2004, during which the respondents collectively negotiated the prices and other contract terms at which their otherwise competing member physicians would provide services to the subscribers of health plans, without any efficiency-enhancing integration of their practices sufficient to justify their conduct. In particular, for a period of time AHP staff negotiated contracts on behalf of each PHO respondent, with each PHO respondent retaining authority to approve offers and counteroffers. Subsequently, AHP was given the authority to approve offers and counteroffers and, ultimately, to approve negotiated contracts on behalf of the AHP physicians, who could then opt in or out of the negotiated contract.
The complaint also alleges that in 2001, AHP terminated its members’ contracts with a health plan that rejected contract proposals for higher fees, and threatened that it would not contract with the plan for hospital services unless it stopped contracting with individual physicians and agreed to a group contract. The resulting contract included fees 20 percent to 30 percent higher than the health plan’s individual physician contracts.
Curiously, the FTC considers the federal government’s price controls for Medicare and Medicaid as the de facto “market price,” and any private contract that pays physicians too much more than the Medicare rate runs the risk of violating the antitrust laws. The FTC also infers “price fixing” if a majority of doctors within a group reject a contract individually, thereby depriving payers the right to unilaterally set (or “fix”) prices.
What’s more telling is how the FTC and DOJ have set a price fixing trap with their regulations governing how physicians may speak to one another about contracts. In 1993, the two agencies adopted a series of policy statements that purport to guide physicians in avoiding antitrust prosecution. Many of the government lawyers who drafted these statements went on to represent physician groups that were later prosecuted by the FTC. In at least a half-dozen cases where I was able to speak with the defendants the same story emerged: Physician groups retained expensive antitrust counsel, the doctors followed the advice they were given, and the FTC later showed up saying they had still broken the law.
FTC staff lawyers have given themselves unilateral authority to decide whether a physician contract is legal or illegal; and more often than not, if doctors don’t accept the first offer made by the insurer, it’s illegal. Former FTC Chairman Timothy Muris spearheaded this policy, in part because he was on the payroll (as an antitrust “consultant”) of several insurance companies just before joining the FTC in 2001.
It’s certainly a huge coincidence than just within the past six years, nearly 30 groups with over 16,000 physician-members have been found to engage in “price fixing.” In contrast, the FTC has never prosecuted a single insurance company for similar behavior, which most non-antitrust lawyers would simply call “negotiating.”
And because the FTC treats physician price-fixing as an administrative matter, defendants must either capitulate to the Commission’s demands immediately or pursue rigged administrative litigation, where the Commission appoints the judge and prosecutors, and acts as the first court of appeal. (Not coincidentally, the FTC has almost never rejected an administrative case it initiated.)
Only one physician group of the 29 prosecuted by the FTC has fought back, North Texas Specialty Physicians. NTSP lost at every stage of the administrative litigation, and more than three years later, the group’s petition for review is now before the Fifth Circuit Court of Appeals. If the Fifth Circuit upholds the FTC’s actions, it would likely discourage any other physician group from even asserting its due process rights in the future.
It must be emphasized that the FTC’s objective is not, contrary to its statements, to protect competition. The FTC’s primary concern is preventing the third-party payer market from paying physicians substantially more than the Medicare price control levels. Free competition would destroy Medicare, and the FTC is part of the same government that administers that program.