Antitrust Law Made Dangerously Simple

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Antitrust Law Made Dangerously Simple

• GSRMC MEDICAL STAFF
• QUARTERLY MEETING
• April 8, 1999
• Robert J. Milligan
• GallagherKennedy

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People of the same trade seldom meet
together, even for merriment and diversion, but
the conversation ends in a conspiracy against the
public or some contrivance to raise
prices. Adam Smith
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The Basic Rules

• The Antitrust Laws Prohibit
• Conspiracies in restraint of trade
• Price fixing
• Group Boycotts
• Market Division
• Monopolization

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The Sherman Act

• Section One
• Every contract, combination ... or conspiracy in
  restraint of trade is hereby declared to be
  illegal.
• It takes two to conspire
• Unreasonable restraint of trade

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The Sherman Act Humbug based on economic
ignorance and incompetence.

• Justice O.W. Holmes, The Holmes-Pollock
  letters, page 163(Howe, ed. 1941)

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Antitrust Law in a Nutshell
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Three Tucson Dentists Guilty in Price Case

• Physicians convicted for conspiring to fix
  co-payment fees paid by patients who were members
  of prepaid dental plans
• Potential penalties
• Up to three years imprisonment
• Fines up to 250,000/Double damages

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Collective Bargaining and Section One of the
Sherman Act

• Group Practice (Subject to monopoly constraints)
• Physician Networks Under the DOJ/FTC Policy
  Statements
• State Action Immunity
• National Labor Relations Act

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The DOJ/FTC Policy Statements

• Size limitations
• Exclusive 20
• Non-exclusive 30
• Operational Requirements
• Substantial Financial Risk
• Clinical Integration
• Messenger Model
• Some or All of the Above

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Policy Statements

• Substantial Financial Risk
• Capitation Contracts
• Withhold Arrangements

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Policy Statements

• Do Withhold Arrangements cause physicians in a
  network to share substantial financial risk?
• Who holds the withhold?
• How much is withheld?
• How are goals set?
• How/When are funds distributed?
• To whom are funds distributed?

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Policy Statements

• Messenger Model
• In the absence of sufficient risk sharing or
  clinical integration
• Physician networks can employ a messenger to
  facilitate communication with payors

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Messenger Model

• Role of the Messenger
• Third party
• Obtains acceptable contract terms from providers
  on an individual basis
• Communicates information to payors
• Communicates offers to providers on an individual
  basis
• Providers accept or reject on an individual basis

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Messenger Model The Governments View

• If the messenger coordinates individual
  providers responses to a particular
  proposal,disseminates to members other providers
  views or intentions, acts as an agent for
  collective negotiation and agreement by the
  providers or otherwise
• serves to facilitate collusive behavior among
  network participants,network participants will
  run a serious antitrust risk
• FTC Advisory Opinion
  NNOSA, July 11,1995

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Messenger Model The FPD View

• The union would negotiate contracts for all
  members using the messenger model. The idea is
  that an organization representing all orthopaedic
  surgeons would have bargaining leverage. Dr.
  Connair
• Remember that the Third Party Messenger Model
  is only effective if everyone participates.
  Dr. Newcomb
• United States v. Federation of Physicians and
  Dentists

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United States vs.Federation of Physicians and
Dentists

• Alleges a violation of the Sherman Act
• Seeks injunction against FPD or its
  representatives acting as messenger
• No damages claimed, so no treble damage potential
  (Good news/Bad News)

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Who is right?

• My opinion If it is effective to negotiate
  better contracts, it is illegal
• Practical Consideration
• If the Department of Justice says it is illegal,
  do you want to lead the charge?
• If so, at least get indemnification

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State Action Immunity

• Texas House Bill 3039An Act Relating to the
  Regulation of Physician Collective Negotiation
• Where a payor has substantial market power
  (gt15) physicians may collectively negotiate
• Fees Conversion Factors Discounts
  Capitation Amounts and Other Terms

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So where does that leave us...