M.D. Physicians of Southwest Louisiana, Inc

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IN THE MA TTER OF D. PHYSICIANS OF SOUTHWEST LOUISIANA, INC. CONSENT ORDER, ETC. , IN REGARD TO ALLEGED VIOLATION OF SEC. 5 OF THE FEDERAL TRADE COMMISSION ACT Docket 3824. Complaint, Aug. 1998-Decision, Aug. , 1998 This consent order prohibits, among other things, a group of Louisiana physicians nom engaging in collective negotiations on behalf of its members or fixing prices in the future.

Participants For the Commission: Rendell Davis, David Pender, Robert Leibenluft, Willam Baer, Seth Sacher and Jonathan Baker. For the respondent: Frank Massengale, Massengale DeBruhe New Orleans, LA.

COMPLAINT Pursuant to the provisions of the Federal Trade Commission Act and by virtue of the authority vested in it by said Act, the Federal Trade Commission ("Commission ), having reason to believe that D. Physicians of Southwest Louisiana, Inc. ("respondent MDP" has violated the provisions of said Act, and it appearing to the Commission that a proceeding by it in respect thereofwouJd be in the public interest, hereby issues its complaint, stating its charges as fonows:

PARAGRAPH 1. Respondent MDP is a business corporation organized, existing, and doing business under and by virtue of the laws of the State of Louisiana, with its principal place of business in Lake Charles, Louisiana, the parish seat of Ca1casieu Parish Louisiana. Respondent MDP's address is P.O. Box 1832 , Lake Charles, Louisiana.

PAR. 2. All of the members of respondent MDP are physicians practicing in and around Ca1casieu Parish, Louisiana. Much of the population of Ca1casieu Parish resides in Lake Charles, Louisiana and surrounding communities, which include Sulphur, Moss Bluff and Westlake, Louisiana ("Lake Charles area ). The population of the Lake Charles area is approximately 150 000. Most of the members of Complaint 126 F. respondent MDP, as well as most of the physicians practicing in Calcasieu Parish, practice in the Lake Charles area. PAR. 3. During most of the time period during which the acts and practices described in paragraphs ten through fifteen below took place the relevant time period"), the members of respondent MDP constituted a majority of all physicians practicing in Calcasieu Parish Louisiana. In certain physician specialties, the members of respondent MDP constituted all or most of the physician specialists practicing in Calcasieu Parish. More than 200 physicians have been members of respondent MDP since it was formed in 1987. During the relevant time period, respondent MDP has had as many as 165 members at one time.

PAR. 4. Respondent MDP exists in substantial part for the pecuniary benefit of its members. By virte of its purposes and activities, respondent MDP is a "corporation" within the meaning of Section 4 of the Federal Trade Commission Act, as amended, 15 e. 44.

PAR. 5. The acts and practices of respondent MDP, including those herein alleged, are in or affect commerce within the meaning of Section 5 of the Federal Trade Commission Act, as amended, 15 e. 45.

PAR. 6. Except to the extent that competition has been restrained as alleged herein, some or all of the members of respondent MDP have been, and are now, in competition among themselves and with other providers of physician services in Calcasieu Parish, Louisiana. PAR. 7. Physicians often contract with health insurance firms and other third-party payers. Such contracts typically establish the terms and conditions under which the physicians wil render services to the subscribers of the third-party payers, including terms and conditions of physician compensation and of cost containment. In many cases physicians entering into such contracts agree to reductions in their compensation and to various cost containment procedures, including procedures for reviewing the utilization of medical resources by physicians and for dealing with physicians who have overutilized such resources. By lowering their costs in this manner, third-party payers are able to reduce the cost of medical care for their subscribers. The extensive use of such methods oflowering costs can be described as "managed care.

D. PHYSICIANS OF SOUTHWEST LOUISIANA, INC. 221 219 Complaint PAR. 8. Absent agreements among competing physicians on the terms upon which they wi1 deal with third-part payers, competing physicians each decide individually whether to enter into contracts with third-party payers, and on the terms and conditions under which they are willing to enter into such contracts. PAR. 9. In engaging in the acts and practices described in paragraphs ten through fifteen below, respondent MDP has acted as a combination of its members and has conspired with at least some of its members.

PAR. 10. Respondent MDP was formed in March 1987 as a vehicle for its members to deal concertedly with the impending entry, into Calcasieu Parish, Louisiana, of managed care. The members of respondent MDP agreed that respondent MDP would represent them in negotiations with third-part payers.

PAR. 11. Beginning in 1987, and continuing until at least 1994 respondent MDP conspired to fix the terms and conditions, including terms of financial compensation, under which its members deal with third-party payers and conspired to prevent or delay the entry into Calcasieu Parish, Louisiana, of managed care. PAR. 12. Beginning in 1988, respondent MDP negotiated on behalf of its members with Blue Cross and Blue Shield of Louisiana Blue Cross ) the terms and conditions of member participation in Blue Cross health insurance plans. In 1989, respondent MDP terminated those negotiations, when it failed to reach agreement with Blue Cross on the terms of physician compensation. Unti11994, when respondent MDP first learned that it was under investigation by the staff of the Commission, the members of respondent MDP uniformly refused to participate in any Blue Cross plan. PAR. 13. Beginning in 1991 , respondent MDP negotiated on behalf of its members with the Louisiana State Employees Group Benefits Program ("State Employees Program ), the health insurance plan for employees ofthe State of Louisiana, the terms and conditions of member participation in the State Employees Program. In 1993 those negotiations ended when respondent MDP and the State Employees Program failed to reach agreement on the terms of physician compensation. In 1994, the president of respondent MDP exhorted the members of respondent MDP not to deal with the State Employees Program, and none of the members did until 1995. Complaint 126 FT. PAR. 14. Beginning in 1987 and continuing until at least 1994 respondent MDP conspired to refuse to deal with, and to fix the terms and conditions of dealing with, other third-party payers attempting to do business in Calcasieu Parish, Louisiana, including, but not limited , Aetna Insurance Company and Healthcare Advantage, Inc. PAR. 15. Respondent MDP functioned de facto as the exclusive representative of its members. Although respondent MDP did not contractually prevent its members from dealing with third-party payers directly, and although it issued statements that its members were free to deal with third-party payers directly, the members allowed MDP to function as their exclusive representative. Until 1994, when respondent MDP first learned that it was under investigation by the staff of the Commission, the members of respondent MDP dealt with third-party payers only through respondent MDP. Furthermore, the members of respondent MDP all refused to meet individually with, and listen to presentations by, representatives of some third-party payers. Respondent MDP facilitated the col1active refusal of its members to deal directly with third-party payers when it repeatedly collected from, and disseminated to, its members information concerning the members refusal to deal with third-party payers directly. PAR. 16. The members of respondent MDP have not integrated their medical practices in any economically significant way, nor have they created any efficiencies that might justify the acts and practices described in paragraphs ten through fifteen. PAR. 17. The purpose, tendency, effects, or capacity of respondent MDP' s acts and practices as described in paragraphs ten through fifteen are and have been to restrain trade unreasonably and hinder competition in the provision of physician services in Calcasieu Parish, Louisiana, in the following ways, among others: A. To restrain competition among physicians; B. To deprive consumers of the benefits of competition among physicians;

e. To fix or increase the prices that consumers pay for physician services;

D. To fix the terms and conditions upon which physicians would deal with third-party payers, including terms of physician compensation, and thereby raising the price to consumers of medical insurance coverage issued by third-party payers; and D. PHYSICIANS OF SOUTHWEST LOUISIANA, INC. 223 219 Decision and Order E. To deprive consumers of the benefits of managed care. PAR. 18. The combination or conspiracy and the acts and practices of respondent MDP, as herein alleged, constitute unfair methods of competition in violation of Section 5 of the Federal Trade Commission Act, 15 U. e. 45. The violation or the effects thereof as herein alleged, will continue or recur in the absence of the relief herein requested.

DECISION AND ORDER The Federal Trade Commission having initiated an investigation of certain acts and practices of the respondent named in the caption hereof, and the respondent having been furnished thereafter with a copy of a draft of complaint which the Bureau of Competition proposed to present to the Commission for its consideration and which, if issued by the Commission would charge respondent with violation of the Federal Trade Commission Act; and The respondent and counsel for the Commission having thereafter executed an agreement containing a consent order, an admission by the respondent of all the jurisdictional facts set forth in the aforesaid draft of complaint, a statement that the signing of said agreement is for settlement purposes only and does not constitute an admission by respondent that the law has been violated as alleged in such complaint, or that the facts as alleged in such complaint, other than jurisdictional facts, are true and waivers and other provisions as required by the Commission s Rules; and The Commission having thereafter considered the matter and having determined that it had reason to believe that the respondent has violated the said Act, and that complaint should issue stating its charges in that respect, and having thereupon accepted the executed consent agreement and placed such agreement on the public record for a period of sixty (60) days, now in further conformity with the procedure prescribed in Section 2.34 of its Rules, the Commission hereby issues its complaint, makes the following jurisdictional findings and enters the following order:

1. Respondent M.D. Physicians of Southwest Louisiana, Inc. is a business corporation organized, existing, and doing business under Dccision and Order 126F.TC. and by virtue ofthe laws of the State of Louisiana, with its principal place of business located at P.O. Box 1832, Lake Charles, Louisiana. 2. The Federal Trade Commission has jurisdiction of the subject matter ofthis proceeding and of respondent, and the proceeding is in the public interest.

ORDER It is ordered That, for the purposes of this order, the following definitions shall apply:

A. MDP" means M.D. Physicians of Southwest Louisiana, Inc. its directors, offcers, employees, agents and representatives predecessors, successors, and assigns; its subsidiaries, divisions groups, and affliates, controlled by MDP, and the respective directors, offcers, employees, agents and representatives, successors and assigns of each.

B. Person means both natural persons and artificial persons including, but not limited to, corporations, unincorporated entities and governments.

e. Payer means any person that purchases, reimburses for, or otherwise pays for all or part of any health care services for itself or for any other person. Payer includes, but is not limited to, any health insurance company; preferred provider organization; prepaid hospital medical, or other health service plan; health maintenance organization; government health benefits program; employer or other person providing or administering self-insured health benefits programs; and patients who purchase health care for themselves. D. Provider means any person that supplies health care services to any other person, including, but not limited to, physicians hospitals, and clinics.

E. Reimbursement means any payment, whether cash or non-cash, or other benefit received for the provision of physician services.

F. Physician means a doctor of allopathic medicine (" D. ") or a doctor of osteopathic medicine ("

G. Participating physician means any physician (1) who is a stockholder, owner, or member of MDP; (2) who has agreed to D. PHYSICIANS OF SOUTHWEST LOUISIANA, INC. 225 219 Decision and Order provide services through MDP; or (3) whose services have been offered to any payer through MDP.

H. Qualifed risk-sharingjoint arrangement means an arrangement to provide physician services in which (1) the arrangement does not restrict the ability, or facilitate the refusal, of physicians participating in the arrangement to deal with payers individually or through any other arrangement, and (2) all physicians participating in the arrangement share substantial financial risk from their participation in the arrangement through: (a) the provision of physician services to payers at a capitated rate; (b) the provision of physician services for a predetermined percentage of premium or revenue from payers; (c) the use of significant financial incentives (e. substantial withholds) for its participating physicians, as a group, to achieve specified cost-containment goals; or (d) the provision ofa complex or extended course of treatment that requires the substantial coordination of care by physicians in different specialties offering a complementary mix of services, for a fixed, predetermined payment where the costs ofthat course of treatment for any individual patient can vary greatly due to the individual patient's condition, the choice complexity, or length of treatment, or other factors. I. means an Qualifed clinically-integratedjoint arrangement arrangement to provide physician services in which (1) the arrangement does not restrict the ability, or facilitate the refusal, of physicians participating in the arrangement to deal with payers individually or through any other arrangement, and (2) all physicians participating in the arrangement participate in active and ongoing programs of the arrangement to evaluate and modify the practice patterns of, and create a high degree of interdependence and cooperation among, the physicians participating in the arrangement in order to control costs and ensure quality of the services provided through the arrangement.

II.

It is further ordered That MDP, directly or indirectly, or through any corporate or other device, in connection with the provision of physician services in or affecting commerce, as "commerce " is defined in Section 4 of the Federal Trade Commission Act, 15 U. , cease and desist from:

Decision and Order 126 FTC. maintaining, A. Entering into, adhering to, participating in, organizing, implementing, enforcing, or otherwise facilitating any combination, conspiracy, agreement, or understanding to: 1. Negotiate on behalf of any participating physicians with any payer or provider;

2. Deal, or refuse to deal, with any payer or provider; or 3. Determine any terms, conditions, orrequirements upon which physicians deal with any payer or provider, including, but not limited to, terms ofreimbursement.

B. Encouraging, advising, pressuring, inducing, or attempting to induce any person to engage in any action that would be prohibited if the person were subject to this order.

Provided that nothing in this order shall be construed to prohibit any agreement or conduct by MDP that is reasonably necessary to form, facilitate, manage, operate, or participate in: (a) A qualified risk-sharing joint arrangement; or (b) A qualified clinically integrated joint arrangement, ifMDP has provided the prior notitication(s) as required by this paragraph (b). Secretary of theSuch prior notification must be fied with the Commission at least thirty (30) days prior to forming, facilitating, managing, operating, participating in, or taking any action, other than planning, in furtherance of any joint arrangement requiring such notice ("first waiting period"), and shall include for such arrangement the identity of each participant; the location or area of operation; a copy of the agreement and any supporting organizational documents; a description of its purpose or function; a description of the nature and theand extent of the integration expected to be achieved, anticipated resulting effciencies; an explanation of the relationship of any agreement on reimbursement to furthering the integration and achieving the expected effciencies; and a description of any procedures proposed to be implemented to limit possible within anti competitive effects resulting from such agreement(s). If, the first waiting period, a representative of the Commission makes a written request for additional information, MDP shall not form; facilitate, manage, operate, participate in, or take any action, other than planning, in furtherance of such joint arrangement until thirty (30) days after substantially complying with such request for D. PHYSICIANS OF SOUTHWEST LOUISIANA, INC. 227 219 Decision and Order additional information ("second waiting period") or such shorter waiting period as may be granted by letter from the Bureau of Competition.

It is further ordered That MDP shall:

A. Within thirty (30) days after the date on which this order becomes final, distribute by first-class mail a copy of this order and the accompanying complaint to:

1. Each person who, at any time since January 1 , 1993 , has been an officer, director, manager, employee, or participating physician in MDP, and 2. Each payer or provider who, at any time since January 1 , 1993 has communicated any desire, willingness, or interest in contracting for physician services with MDP.

B. For a period of five (5) years after the date this order becomes final:

1. Distribute by first-class mail a copy of this order and the accompanying complaint to each new MDP stockholder, manager employee, and participating physician within thirty (30) days of his or her initial stock purchase, appointment, employment, or participation, and 2. Annual1ypublish in any offcial annual report ornewsletter sent to al1 participating physicians, a copy ofthis order and the complaint with such prominence as is given to regularly featured articles. IV.

It is further ordered That:

A. Within sixty (60) days after the date this order becomes final MDP shall submit to the Commission a verified written report setting forth in detail the manner and form in which it intends to comply, is complying, and has complied with paragraphs 11 and II ofthis order. B. One (1) year from the date this order becomes final, annually for the next five (5) years on the anniversary of the date this order becomes final, and at other times as the Commission may require MDP shall file a verified written report with the Commission setting Decision and Order 126 F . forth in detail the manner and form in which it has complied and is complying with paragraphs II and II of this order. It is further ordered That MDP shall notify the Commission at least thirt (30) days prior to any proposed change in MDP, such as dissolution, assignment, sale resulting in the emergence of a successor corporation, or the creation or dissolution of subsidiaries or any other change in MDP that may affect compliance obligations arising out of this order.

VI.

It is further ordered That, for the purpose of determining or securing compliance with this order, and subject to any recognizable any dulyprivilege, MDP shall permit, upon written request, authorized representative of the Commission: A. Access, during offce hours and in the presence of counsel, to inspect and copy all books, ledgers, accounts, correspondence memoranda, calendars, and other records and documents in the possession or under the control of MDP relating to any matter contained in this order; and B. Upon five (5) business days' notice to MDP and without restraint or interference from it, to interview offcers, directors, or employees ofMDP.

VII.

It is further ordered That this order shall terminate on August 31 2018.

AUTOMOTIVE BREAKTHROUGH SCIENCES, INC., ET AL. 229 229 Complaint