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That’s what happened to James Laurenza, a Kentucky-based health care consultant who was managing a New Mexico IPA when he ran headlong into the system in 2004. When Laurenza met with an executive from Cimarron to insist that the HMO honor its existing contract before entering into new agreements with the association’s members, “counsel and myself were shocked that the managed care executive threatened twice to bring the wrath of the FTC upon our small network management company,” he later wrote on his personal website. Cimarron followed through on its threat, and the FTC forced Laurenza and the IPA to repent for their “refusal to deal” with the HMO on its terms.
So far congressional efforts to stop FTC bullying have been unsuccessful. In June 2000 the House passed a bipartisan bill, introduced by then-Rep. Tom Campbell (R-Calif.), that would have afforded IPAs the same antitrust exemption as labor unions when they negotiate joint contracts with payers. The measure died in the Senate.
The bill has been reintroduced in the House in every succeeding Congress by Rep. Ron Paul (R-Texas), himself a physician. In a 2003 letter to then-FTC Chairman Timothy Muris, Paul criticized the agency’s prosecution of Southwest Physicians Associates, a Texas IPA, based on its refusal to continue following a commission-approved contracting model that resulted in substantial losses. “Am I to conclude the FTC expects doctors to adhere to money-losing business models rather than exercise their protected right to free association,” Paul wrote, “and that this is somehow in the public’s interest?”
As Paul noted, the problem isn’t price-fixing doctors but “government policies [that] have enforced over-reliance on third party payers.…To suggest that when groups of physicians combine to negotiate contracts with HMOs, they distort an otherwise free market, betrays a misunderstanding about the current health care industry.”
The FTC has opposed any congressional effort to end its physician prosecution racket. At a 1998 hearing on the exemption bill before the House Judiciary Committee, Campbell, himself a former FTC official, said it was ridiculous that “three eye doctors in Elgin, Illinois,” could have lunch together to discuss an HMO contract and get a letter from the FTC claiming they violated the Sherman Act, while every steelworker in Gary, Indiana, could go on strike without penalty. Then-FTC Chairman Robert Pitofsky responded with his own horror scenario: “All of the doctors in Elgin, Illinois, get together over lunch and say, ‘We are not making enough money, our kids are going to expensive colleges, and we are not driving the luxury car we prefer. Let’s go to this one HMO that is committed to cost containment, and we’ll say we are going on strike. Unless you pay us twice as much money, we are going on strike. We are not going to take care of people in your organization.’ ”
Such scaremongering is especially comic given that the FTC’s own intervention in health care markets raises costs—by forcing physicians to retain antitrust counsel—without any evidence of consumer benefits. The commission can’t point to any data or independent studies that show its IPA prosecutions reduce prices or improve the quality of patient care. Nor does the agency ever consider the costs of complying with its investigations and orders. Ultimately, there’s no demonstrable link between prosecuting IPAs and controlling health care costs. If anything, by making it more difficult for physicians to contract with insurers, the FTC may actually be driving physicians out of the marketplace altogether, which is certainly bad for consumers.
The Feds Reach Further
The FTC’s health care appetite isn’t restricted to a diet of IPAs. In 2008, after a two-year investigation, the agency challenged a proposed partnership between Prince William Hospital in Manassas, Virginia, and the larger Inova Health System. Although these were nonprofit hospital groups, the FTC had no qualms about subjecting them to one of the longest merger reviews in commission history, ultimately costing Prince William Hospital nearly $250 million in proposed capital investment from Inova, forcing both hospital groups to rack up legal bills of more than $15 million, and damaging Prince William Hospital’s credit rating.
In this case, Commissioner Rosch proved to be the villain, not the civil liberties champion he played in the Cathy Higgins case. Rosch personally oversaw the staff investigation of the hospital merger. The commission’s administrative law judges had recently exhibited a streak of independent thought in rejecting some key antitrust complaints, so he arranged to have himself appointed to sit as trial judge. Rosch insisted that he was the most qualified arbiter (in fact, he had never been a judge of any type) while laughably maintaining that he would be impartial. In fact, Rosch himself had personally supervised the staff’s investigation of the merger, which led to the decision to issue a complaint in the first place. The hospitals saw right through this, decided the process was rigged, and dropped their two-year-old merger plans. (Prince William Hospital later found another merger partner that met with the FTC’s approval.)
The worst is probably yet to come. While efforts to protect physicians have languished in Congress, the House recently passed legislation that would revoke the insurance industry’s limited antitrust exemption, in effect rewarding the FTC with expanded jurisdiction. This will add an additional layer of antitrust review—state antitrust laws already apply to insurers—that, according to the Congressional Budget Office, could lead to an increase in insurance premiums.
And the new Patient Protection and Affordable Care Act only puts more pressure on physicians to accept across-the-board price controls. If they refuse, they won’t just have to worry about the FTC. In May, the Justice Department’s Antitrust Division entered the physician-prosecution racket, joining the Idaho attorney general against a group of Boise orthopedists. The physicians were charged not just with illegally rejecting an insurance company’s contract offer but also refusing to accept patients under Idaho’s worker’s compensation system. That system, however, requires all participating doctors to accept a uniform fee schedule adopted by the state’s commissioners—in other words, government price controls. Still, the DOJ insists it was the physicians, not the state, who suppressed competition.
Although the Idaho case resulted in a civil settlement, physician groups must now be on alert for possible criminal liability. There’s no statutory distinction between civil and criminal price fixing, and the DOJ can easily convert a civil settlement into a criminal plea bargain—complete with multimillion-dollar fines and jail time for individual physicians and cartel “ringleaders” like Cathy Higgins and Marcia Brauchler.
Criminalizing physician-insurer contract negotiations would be unjust, ineffective, and disastrous for patient care. The Justice Department now also has the authority to seek wiretaps in antitrust cases, meaning the FBI could listen in even on privileged doctor-patient calls. Cracking down on the collective bargaining of self-employed doctors will do nothing to reduce rising health care prices, while serving to dampen the competition the government claims to defend. Such are the perils of letting routine contract negotiations become subject to the whims of federal lawyers.
S.M. Oliva (email@example.com) is a writer and paralegal living in Charlottesville, Virginia.