North Texas Specialty Physicians

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IN THE MATTER OF NORTH TEXAS SPECIALTY PHYSICIANS OPINION OF THE COMMISSION AND FINAL ORDER IN REGARD TO ALLEGED VIOLATIONS OF SEC. 5 OF THE FEDERAL TRADE COMMISSION ACT Docket 9312; File No. 0210075 Complaint, September 16, 2003--Opinion and Final Order, November 29, 2005 In a unanimous Opinion, the Commission addressed practices engaged in by Respondent North Texas Specialty Physicians, an association of approximately 480 physician members in the Fort Worth, Texas area. The Commission concluded that certain of the respondent’s contracting activities with payors violated Section 5 of the Federal Trade Commission Act. The Final Order, among other things, prohibits the respondent from entering into, adhering to, participating in, maintaining, organizing, implementing, enforcing, or otherwise facilitating any combination, conspiracy, agreement, or understanding between physicians with respect to their provision of physician services: (1) to negotiate on behalf of any physician with any payor; (2) to deal, refuse to deal, or threaten to refuse to deal with any payor; (3) regarding any term, condition, or requirement upon which any physician deals, or is willing to deal, with any payor, including, but not limited to price terms; or (4) not to deal individually with any payor, or not to deal with any payor through any arrangement other than the respondent. The Order also prohibits the respondent from exchanging or facilitating the exchange or transfer of information among physicians concerning any physician’s willingness to deal with a payor, or the terms or conditions, including price terms, on which the physician is willing to deal. Participants For the Commission: Michael J. Bloom, Susan Raitt, Theodore Zang, Jonathan W. Platt, Elvia P. Gastelo, Mazor H. Matzkevich, Alan B. Loughnan, Matthew J. Reilly, Asheesh Agarwal, John P. Wiegand, Nancy Caban, Barbara Anthony, Thomas R. Iosso, and Louis Silvia.

For the Respondent: Gregory S. C. Huffman, William M. Katz, Gregory D. Binns, and Nicole Rittenhouse, Thompson & Knight LLP.

VOLUME 140 Commission Opinion OPINION OF THE COMMISSION By LEARY, Commissioner, For A Unanimous Commission: I. Introduction This case involves the question of whether an independent physician association’s contracting activities with payors amounts to unlawful horizontal price fixing, or is competitively benign activity that may enhance efficiency and innovation in the delivery of health care. The Commission has accepted numerous consent orders over the last ten years involving conduct similar to that at issue in the case at hand.1 The common theme of these cases has been coordinated bargaining by groups of competing physicians, in order to increase their reimbursement rates. In these cases, competing physicians have often joined together in independent practice associations (IPAs, or networks) and agreed to boycott or refuse to deal with particular payors during contract negotiations. 1 See, e.g., In the Matter of San Juan IPA, Inc., Docket No. C- 4142 (consent order issued June 30, 2005), http://www.ftc.gov/opa/2005/07/fyi0548.htm; In the Matter of New Millennium Orthopaedics, LLC, Docket No. C-4140 (consent order issued June 13, 2005), http://www.ftc.gov/opa/2005/06/fyi0543.htm; In the Matter of White Sands Health Care System, L.L.C, Docket No. C-4130 (consent order issued Jan. 11, 2005), http://www.ftc.gov/opa/2005/01/fyi0504.htm; In the Matter of Piedmont Health Alliance, Inc., Docket No. 9314 (consent order issued Oct. 1, 2004), http://www.ftc.gov/opa/2004/10/fyi0457.htm; In the Matter of Southeastern New Mexico Physicians IPA, Inc., Docket No. C- 4113 (consent order issued Aug. 5, 2004), http://www.ftc.gov/opa/2004/08/fyi0445.htm; In the Matter of California Pacific Medical Group, Inc., Docket No. 9306 (consent order issued May 10, 2004), http://www.ftc.gov/opa/2004/05/fyi0431.htm. VOLUME 140 Commission Opinion When the competing physicians are not financially or clinically integrated in a manner that is likely to produce efficiencies, the Commission has consistently maintained that this type of conduct amounts to illegal price fixing.

We recognize that physicians can join together and negotiate fees in ways that do not harm competition. Health care providers (including physicians) and those who pay for their services (i.e., payors) are increasingly developing new and innovative approaches to health care delivery in order to increase quality and contain costs. It is important not only to protect health care consumers from anticompetitive activity, but also to avoid interference with this procompetitive activity. We therefore approach this case with full recognition that innovative approaches to health care should be encouraged. We also recognize the frustration of many physicians over their perceived lack of bargaining power in negotiations with large health care payors. The Commission has already provided extensive guidance on the ways to accommodate both of these concerns, consistent with the antitrust laws.2 2 The Commission, along with the Department of Justice, recently issued a report on competition policy and health care, which was based on 27 days of public hearings covering a broad range of health care topics, all focused on ways to promote innovative, cost effective and high quality health care services. The Fed. Trade Commu and the U.S. Dept of Justice, Improving Health Care: A Dose of Competition (July 2004), http://www.ftc.gov/reports/healthcare/040723healthcarerpt.pdf [hereinafter Health Care Hearings and Report]. In addition, Commission staff regularly issue advisory letters to physician IPAs seeking advice on proposals for financial and clinical integration. A good example is the Commission staff’s advisory letter to MedSouth, Inc., where staff did not object to a clinical integration proposal by an IPA that involved joint setting of fees. Advisory Opinion Letter from Jeffrey W. Brennan, Esq., FTC, to VOLUME 140 Commission Opinion This is the first physician network case in over 20 years where the Commission has the benefit of a full administrative trial and record. This case thus presents an opportunity not only to resolve a specific controversy but also to provide some guidance to the health care community on the appropriate boundary between procompetitive and anti-competitive activities. The Administrative Law Judge (ALJ) concluded that Respondent North Texas Specialty Physicians’ (NTSP) activities constitute unlawful horizontal price fixing, and that Respondent’s collective price setting was not ancillary to any procompetitive activity. After our own de novo review of the facts, we agree with the ALJ’s conclusions and affirm his decision.3 We adopt the John J. Miles, Esq., Ober, Kaler, Grimes and Shriver 4 (Feb. 19, 2002), http://www.ftc.gov/bc/adops/medsouth.htm [hereinafter MedSouth]. The Commission and the Department of Justice have also issued extensive guidelines for antitrust enforcement policy in health care. See U.S. Dept of Justice & Fed. Trade Commu, Statements of Antitrust Enforcement Policy in Health Care (1996) reprinted in 4 Trade Reg. Rep. (CCH) ¶ 13,153 [hereinafter Health Care Statements]; see also Thomas B. Leary, Special Challenges for Antitrust in Health Care, 18 No. 2 A.B.A. SEC. ANTITRUST 23 (Spring 2004).

3 This opinion uses the following abbreviations for citations: ID - Initial Decision IDF - Numbered Findings of Fact in the Initial Decision CX - Complaint Counsel Exhibit RX - Respondent Exhibit Tr. - Transcript of Testimony before the Administrative Law Judge IH - Transcript of Investigational Hearing Dep. - Transcript of Deposition O.A. - Transcript of Oral Argument on Appeal CCAB - Complaint Counsel’s Appeal Brief RAB - Respondent’s Appeal Brief VOLUME 140 Commission Opinion findings of fact of the Initial Decision to the extent those findings are not inconsistent with this opinion. We find that the activities of Respondent, taken as a whole, amount to horizontal price fixing which is unrelated to any procompetitive efficiencies. Respondent’s conduct could be characterized as per se unlawful under the antitrust laws, and thus subject to summary condemnation. For the reasons explained below, however, it is more appropriate to apply the “inherently suspect” analysis of our recent decision, Polygram Holding, Inc.,4 as affirmed by the D.C. Circuit, Polygram Holding, Inc. v. FTC, 416 F.3d 29 (D.C. Cir. 2005). But, we also emphasize that a per se analysis and an inherently suspect analysis are close neighbors, and that the determination of illegality here does not require an elaborate inquiry into effects in the market. II. Background A. Respondent’s Activities NTSP is an organization of independent physicians and physician groups that was formed, and is managed and operated by, physicians. Although its size has varied, NTSP had approximately 575 members in 2003 and 480 members at the time of trial in April 2004. IDF 32. As of 2003, NTSP was comprised of practitioners in 26 medical specialties as well as some primary RR - Respondent’s Reply Brief References to investigational hearing or deposition transcripts included in the trial record as exhibits are made using the exhibit number with the witness’ name and type of interview provided in parentheses: CX__ (Van Wagner Dep. at __). 4 5 Trade Reg. Rep. (CCH) ¶ 15,453 (FTC 2003), available at http://www.ftc.gov/os/2003/07/polygramopinion.pdf [hereinafter Polygram, or Polygram Commu Op.].

VOLUME 140 Commission Opinion care physicians. Id. These doctors are located principally in the Tarrant County, Texas area, which includes the city of Fort Worth. IDF 31. The participant physicians have distinct economic interests reflecting their separate clinical practices. IDF 35. Many members compete with one another. IDF 36. NTSP’s main functions are to negotiate and review contract proposals for member services that are submitted by payors, including insurance companies and health plans; to review payment issues; and to act as a lobbyist for its members’ interests. IDF 39. NTSP negotiates both risk-sharing contracts (risk contracts)5 and non-risk-sharing contracts (non-risk contracts). IDF 46. The former typically reimburse doctors on a dollar amount per patient basis, whereas the latter provide “fee-forservice” payment. IDF 13-15. The challenged conduct in this case involves solely the negotiation of non-risk contracts, which are far more common for NTSP.6 IDF 46, 48-50. NTSP’s original focus was on risk contracting when it was founded in 1995. IDF 19, 46. The initial interest of payors in NTSP’s risk contract declined, however, and by 2001 NTSP’s Board decided to center its focus on how to benefit its members for fee-forservice contracts in addition to risk contracts. IDF 46-50; CX 83 at 3. NTSP’s Board has acknowledged that risk contracting “is a small part of the business.” CX 83 at 3; IDF 46-50. In fact, at the time of oral argument, NTSP had only one risk contract (albeit a substantial one). IDF 49. Only about half of NTSP’s physicians participate in its one risk contract. IDF 51; Van Wagner Tr. 1830; Frech Tr. 1353-54.

5 Risk-sharing contracts are also known as capitation contracts.

6 NTSP has 20 non-risk contracts. IDF 50; CX 1196 (Van Wagner IH at 14). It does not receive revenues from these contracts; it does, however, receive revenues from its one risk contract. IDF 21.

VOLUME 140 Commission Opinion NTSP’s physicians enter into a Physician Participation Agreement (PPA) with NTSP that grants NTSP the right to receive all payor offers and imposes on the physicians a duty to forward payor offers to NTSP promptly. CX 0276; CX 275 at 24. The physicians agree that they will not individually pursue a payor offer unless and until they are notified by NTSP that it has permanently discontinued negotiations with the payor. CX 0311 at 10; CX 0276; CX 1178 (Hollander Dep. at 68). Each NTSP member’s PPA provides that NTSP must promptly forward (messenger) the fee reimbursement and other economic provisions of any non-risk offer to the member physicians. CX 275 at 24. If more than 50 percent of the members accept those provisions, NTSP will then proceed to negotiate the contract. IDF 67; CX 275 at 25-26. At times NTSP has gathered powers of attorney from its physicians, which give NTSP the legal authority to negotiate non-risk contracts on behalf of those physicians. CX 1173 (Deas IH at 56-57); Palmisano Tr. 1250-51. NTSP conducts annual polls of its physicians to determine minimum reimbursement rates for use in negotiation of health maintenance organization (HMO) and preferred provider organization (PPO) product contracts with payors. CX 1195 (Van Wagner Dep. at 66-67). NTSP’s polling form asks physicians individually for the minimum payments that they would accept for the provision of medical services pursuant to a fee-for-service HMO or PPO agreement. CX 0565; CX 1196 (Van Wagner IH at 26-29, 43-44, 62). NTSP uses the poll responses to calculate the mean, median, and mode (averages) of the minimum acceptable fees identified by its physicians, and then uses these measures to establish its minimum contract prices. IDF 93. NTSP then reports these measures back to its participating physicians. CX 0103 at 4-5; CX 1196 (Van Wagner IH at 26-29, 43-44, 62); CX 1042. NTSP’s polling form explains to the participating physicians that “NTSP polls its affiliates and membership to establish Contracted Minimums. NTSP then utilizes these minimums when negotiating managed care contracts on behalf of its participants.” CX 0387 at 1; CX 0633. VOLUME 140 Commission Opinion B. History of the Case and Summary of Initial Decision The Commission’s complaint, issued on September 16, 2003, charges NTSP with the unlawful negotiation of agreements among its physicians on price and other terms, refusal to deal with payors except on collectively agreed-upon terms, and refusal to submit payor offers to its physicians unless the terms complied with NTSP’s minimum-fee standards. Administrative Law Judge D. Michael Chappell filed an Initial Decision upholding the complaint on November 8, 2004.

In the Initial Decision the ALJ found that NTSP is controlled by its participant physicians and had taken collective action to establish and extract fee concessions from payors. ID at 52-56, 64-66, 70-83. The ALJ rejected the claim that NTSP was a single entity incapable of conspiring with its members. Id. at 70-71. He concluded that NTSP’s conduct amounted to “a horizontal price fixing agreement.” Id. at 86. He recognized that courts have applied per se analysis to horizontal price fixing, and made a number of specific findings that would support this characterization. IDF 364-80. However, he did not ultimately conclude that NTSP’s conduct was per se unlawful. Instead, he followed the Supreme Court’s analysis in California Dental Assn v. FTC, 526 U.S. 756 (1999), and distinguished NTSP’s conduct from the conduct of the dentists’ group in that case. ID at 85-88. The ALJ found that the PPA gives NTSP the exclusive right initially to negotiate with payors and requires physicians to submit to NTSP offers that they may individually receive. IDF 65. Physicians may negotiate individually only after NTSP discontinues its efforts. IDF 66. The ALJ also found that NTSP reinforces this negotiation exclusivity by powers of attorney or agency authorizations it receives from its members, and that it urges its members to tell payors to communicate their offers directly to NTSP. IDF 70, 76-82.

The ALJ found that, despite the requirements in the PPA, NTSP actually messengers to its members only those non-risk VOLUME 140 Commission Opinion contract proposals in which reimbursement fees exceed NTSP’s minimum reimbursement schedule developed from the annual poll of members. IDF 68, 85, 87. This rate is expressed as some percentage of Medicare’s Resource Based Relative Value System, a fee schedule used to set the reimbursement amounts Medicare will pay for thousands of different services. IDF 10-12, 89-90. Although doctors do not consult with each other about their responses to the poll, NTSP computes the responses and informs its members of the averages. IDF 92-94. The ALJ found that this information enables members to assess the benefits of collective contracts though NTSP and reduces their uncertainty about other members’ price-setting intentions. IDF 99-100. The Initial Decision described NTSP’s negotiations with three health plans – United, Cigna and Aetna, in which NTSP exercised its negotiating authority through its PPA and/or agency agreements or powers of attorney, and utilized its minimum reimbursement schedule. ID at 74-82. In several instances in these negotiations NTSP terminated, or threatened to terminate, its contract with a health plan. Id.

The ALJ rejected Respondent’s claim that it was a single entity incapable of conspiring with its members, ID at 70-71, and held that evidence of direct agreements among physicians was not needed to demonstrate the conspiracy. Id. at 68-69. The ALJ relied on Arizona v. Maricopa County Medical Society, 457 U.S. 332, 356 (1982), where the Court found concerted action without finding that the competing physicians agreed directly with each other to set prices. The ALJ also found that NTSP had offered no plausible claim that its collective price setting was ancillary to any procompetitive activity. ID at 87. He therefore concluded that “the actions taken by NTSP to coerce health insurance payors to increase their offers of rate reimbursement or to offer more favorable economic terms to NTSP’s physicians constitute an unreasonable restraint of trade.” ID at 88. He also found that NTSP’s actions had caused payors to increase their offers, and concluded that this fact provided sufficient evidence of anticompetitive effects, to the extent an examination of effects is VOLUME 140 Commission Opinion required. Id. at 87. The ALJ issued an order that requires NTSP to cease and desist from collective price fixing in its negotiation of non-risk contracts and to terminate any existing non-risk contracts. Id. at 92-97.

C. Questions Raised by the Appeal 1. Respondent’s Appeal Respondent appeals from the ALJ’s determination that its conduct violated Section 5 of the FTC Act, and also maintains that the ALJ’s cease and desist order is not appropriate. Respondent’s supporting arguments sometimes overlap, but may be sorted out as follows:

First, Respondent argues that the Commission lacks jurisdiction over NTSP because it is a memberless non-profit organization, which is not engaged in interstate commerce. Second, Respondent argues that the ALJ erred in finding that Complaint Counsel had shown concerted action when there was no evidence of direct collusion among NTSP’s physicians. Respondent asserts that NTSP cannot and does not bind any participating physicians to its non-risk contracts, and that any nonrisk contracts to which NTSP decides to become a party must be messengered to the physicians for their individual decisions on whether to join.

Third, Respondent contends that even if Complaint Counsel had shown there was concerted action, the conduct must be analyzed under the rule of reason. Respondent argues that the ALJ therefore erred when he found a violation, because Complaint Counsel did not meet their burden to show anticompetitive effects in a properly defined relevant market. Fourth, Respondent argues that the ALJ erred when he found that NTSP had insufficient evidence of procompetitive justifications. Respondent asserts that all the evidence available VOLUME 140 Commission Opinion shows that NTSP had legal and business justifications for its actions. Respondent argues that the ALJ compounded this error when he denied NTSP discovery needed to further establish its procompetitive justifications.

Fifth, Respondent argues that it was error for the ALJ to find that NTSP’s conduct had a net anticompetitive effect in the absence of any showing by Complaint Counsel that there was a less restrictive alternative or that NTSP’s justifications for its conduct were pretextual.

Sixth, Respondent argues that it was error for the ALJ to enter an order that was not narrowly tailored to any antitrust violation properly found.

2. Complaint Counsel’s Appeal Complaint Counsel appeal two aspects of the ALJ’s decision, but otherwise ask that the Commission affirm the finding of liability. First, Complaint Counsel argue that it was error for the ALJ to hold it was necessary to prove a relevant market in the case of a per se unlawful price-fixing agreement. Complaint Counsel argue that no proof of market definition or market power is required to establish a per se violation, and that any naked price agreement among competitors (actual or potential) is conclusively presumed unlawful.

Second, Complaint Counsel argue that the ALJ’s order is too narrow and fails to provide essential relief. Complaint Counsel argue that the core prohibitions fail to provide adequate protection against further violation. Complaint Counsel also argue that the ALJ added two unwarranted provisos that are likely to enable NTSP to continue certain conduct that the ALJ found was used to accomplish the unlawful price-fixing scheme. VOLUME 140 Commission Opinion III. Jurisdictional Issues We consider this issue first, although Respondent does not give it prominence. The Commission has jurisdiction over NTSP as a corporation only if NTSP is organized to carry on business for the pecuniary benefit of its members and NTSP’s conduct at issue is “in or affecting commerce.” 15 U.S.C. §§ 44, 45 (1994). Respondent contends that it was error for the ALJ to find that the FTC has jurisdiction over NTSP because NTSP is incorporated under Texas law as a “memberless” non-profit organization (and therefore its physicians are not “members” of NTSP), and none of NTSP’s actions were in interstate commerce. RAB at 58-59. We find that NTSP clearly is a “corporation” within the meaning of Section 4 of the FTC Act because NTSP is “organized to carry on business for its own profit or that of its members.” 15 U.S.C. § 44. In the words of NTSP official Dr. John Johnson, “NTSP was going to be a group of physicians that would bring a voice to organizing physicians who often practiced in individual groups to hopefully be able to secure contracts, improve patient care, and provide a voice at the table for physicians. . . . [It was] to represent physicians . . . in obtaining contracts from businesses or insurance companies or in dealing with hospitals.” CX 1182 (Johnson Dep. at 10-11).7 NTSP’s primary function – marketing its physicians to payors – satisfies the pecuniary benefit test of FTC jurisdiction. Indeed, we find that NTSP does not appear to have any purpose other than to carry on business for the profit of its members. It is not necessary for the challenged conduct to increase NTSP’s members’ profits, as NTSP intimates. In California Dental, 526 U.S. at 767 n.6, the Supreme Court stated, 7 See also CX 350 (“NTSP was started in an attempt to provide a seat at the table of medical business for the individual specialty physicians . . . . NTSP through, [sic] PPO and risk contracts, has provided a consistent premium fee-for-service reimbursement to the members when compared with any other contracting source.”); CX 550.

VOLUME 140 Commission Opinion “[i]t should go without saying that the FTC Act does not require for Commission jurisdiction that members of an entity turn a profit on their membership, but only that the entity be organized to carry on business for members’ profit.” NTSP’s argument that its physicians are not “members” because of the way it is incorporated elevates form over substance.8 NTSP’s physicians possess sufficient indicia of membership to qualify as members within the meaning of Section 4:

- They come together with other members of their profession to promote their common business interests. - They elect representatives to its governing board. - They contribute funds to finance NTSP’s activities. - NTSP internal documents refer to its physicians as “members.”

IDF 20, 21, 24, 33, 42, 44, 48, 160, 282, 326. We further find that NTSP satisfies the interstate commerce jurisdictional requirement because NTSP’s actions to maintain physician fee levels, if successful, could be expected to affect the flow of interstate payments from out-of-state payors to NTSP physicians. There is no need to prove actual effects on interstate commerce, or to quantify the effect. The Supreme Court on numerous occasions has emphasized the breadth of federal antitrust jurisdiction, even when wholly intrastate conduct of local actors is challenged.9 8 The mere form of incorporation is not controlling in matters of FTC jurisdiction. See Cmty. Blood Bank of the Kansas City Area, Inc. v. FTC, 405 F.2d 1011, 1018-19 (8th Cir. 1969). 9 See, e.g., Summit Health, Ltd. v. Pinhas, 500 U.S. 322, 328- 31 (1991); McLain v. Real Estate Bd. of New Orleans, Inc., 444 U.S. 232, 241 (1980); Hosp. Bldg. Co. v. Trs. of Rex Hosp., 425 VOLUME 140 Commission Opinion IV. Legal Framework In order to find liability under Section 5 of the FTC Act, we will examine first, whether there was an “agreement” between independent actors and, second, whether this agreement unreasonably restrained trade.10 Our overall evaluation of NTSP’s conduct is guided by a rich jurisprudence that extends over almost 100 years,11 and particularly by the very recent decision of the Supreme Court in California Dental – a case that was in turn followed by the Commission in its own opinion in the Polygram case and by the D.C. Circuit Court’s affirming opinion, Polygram Holding, 416 F.3d 29. We will occasionally refer to the Department of Justice and FTC Health Care Statements, but it should be understood that we do not consider the Health Care Statements as substantive authority in their own right but rather as concise summaries of what we believe the law to be. We are also informed by our own enforcement experience with combinations similar to NTSP and by the Commission’s Health Care Hearings and Report. In this section we will explain why we have chosen to apply the flexible tools of Polygram rather than a simple per se analysis in this case, and we will then describe Polygram’s methodology in more detail.

U.S. 738, 743-45 (1976); Goldfarb v. Virginia State Bar, 421 U.S. 773, 784-85 (1975).

10 For purposes of this case, we can assume that the definition of “unfair methods of competition” under the FTC Act, 15 U.S.C. § 45, is the same as the definition of a “contract combination . . . or conspiracy, in restraint of trade . . . .” under Section 1 of the Sherman Act, 15 U.S.C. § 1.

11 The requirement that the restraint be unreasonable – coupled with recognition that some restraints can conclusively be presumed so – dates from 1911 in Standard Oil Co. v. United States, 221 U.S. 1, 58 (1911).

VOLUME 140 Commission Opinion A. Choice of Standard The Commission’s unanimous Polygram opinion was its first attempt to respond to the approach of the Supreme Court’s California Dental decision. These opinions describe how the analysis of horizontal restraints has evolved over the last 100 years, and establish a flexible methodology for courts to determine whether a challenged restraint is illegal. They go beyond the simple dichotomy between categories like “per se” or “rule of reason,” and establish a continuum within which behavior can be analyzed.

At one polar extreme, there still is a category of offenses that are considered per se illegal, for which liability depends solely on whether defendants did or did not do certain things. These offenses include, most prominently, so-called “naked” price fixing or market allocation agreements. Longstanding precedent holds that the courts will not entertain any arguments that these restraints will yield beneficial, or even benign, results. Parties cannot defend, for example, on the ground that prices have been set at “reasonable” levels12 or that coordination is necessary for survival in times of distress.13 We do not believe that the per se condemnation of naked restraints has been affected by anything said either in California Dental or Polygram. There is precedent for outright per se condemnation of conduct that parallels the conduct in issue here. The Supreme Court held in Maricopa, 457 U.S. at 356-57, that traditional antitrust laws apply to price fixing in the context of physician fee negotiation, and held that it was per se unlawful horizontal price fixing for a 12 See United States v. Trenton Potteries Co., 273 U.S. 392, 398-99 (1927); United States v. Addyston Pipe Steel Co., 85 F. 271, 288-91 (6th Cir. 1898), aff’d 175 U.S. 211 (1899). 13 See United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 218-21, 229 (1940).

VOLUME 140 Commission Opinion group of competing physicians to agree to set a maximum fee to offer health insurers for providing medical services to patients. The means used to implement a price fixing agreement in Maricopa are similar to those used by NTSP. In Maricopa, the medical societies: (a) set a maximum price for health services that could be charged to policyholders of approved health insurance plans;14 (b) used polling as a device for determining the price; (c) did not necessarily have agreement directly between physicians in the price-setting process; and (d) allowed the physicians the freedom to set their own prices.15 We also are familiar with these practices and this industry.16 The Commission has issued complaints in numerous cases, which challenge conduct by physician IPAs similar to that in Maricopa and that in the case at hand. See, e.g., supra note 1. The FTC and 14 Note that in one respect the conduct here is even worse than that condemned in Maricopa because NTSP has set minimum prices. See Section V.B.1.a.

15 Arizona v. Maricopa County Med. Soc’y, 1979 WL 1638 at *1 (D. Az. June 5, 1979), aff’d, 643 F.2d 553 (9th Cir. 1980), rev’d on other grounds, 457 U.S. 332 (1982). 16 A per se characterization would not necessarily be foreclosed, even if we did not have this industry-specific experience. Maricopa stated that the per se rule does not need to “be rejustified for every industry that has not been subject to significant antitrust litigation.” 457 U.S. at 350-51. On the other hand, Broadcast Music, Inc. v. Columbia Broadcasting System, Inc., 441 U.S. 1, 9 (1979), emphasized that a per se label is appropriate only when courts “have had considerable experience with certain business relationships.” We do not need to parse these statements closely, in light of our experience with both the industry and the practices.

VOLUME 140 Commission Opinion Department of Justice Health Care Statements provide specific warning about the illegality of this type of conduct. See Health Care Statements, supra note 2, Statement 8. Although NTSP’s activities could be characterized as per se illegal because they are closely analogous to conduct condemned per se in this and other industries, we will not apply that label here and now in this particular case. There are two reasons. First, in the years since Maricopa was decided, the Supreme Court has urged caution in the application of the per se label to conduct in a professional setting where “the economic impact . . . is not immediately obvious.” FTC v. Indiana Federation of Dentists, 476 U.S. 447, 459 (1986); see also California Dental, 526 U.S. at 770-71. Some might claim that the likely economic impact of the restraints in issue here is “immediately obvious” enough to satisfy this standard, but we do not need to reach that question because we have available in this case an extensive record on which to buttress our conclusions about the likely effects of Respondent’s conduct.

Second, since Maricopa, we have a better understanding of the potential integration efficiencies of physician IPAs. We would view NTSP’s activities very differently if NTSP were able to demonstrate that the participating physicians were financially or clinically integrated in performing its numerous non-risk contracts, and thus driven by incentives similar to those present in its single remaining risk contract. Under the well-established law of ancillary restraints, recent precedents like Polygram, and the principles described in our Health Care Statements and Competitor Collaboration Guidelines,17 Respondent could have prevailed if the integrated venture were likely to enhance 17 Fed. Trade Commu and U.S. Dept of Justice, Antitrust Guidelines for Collaborations Among Competitors (2000), reprinted in 4 Trade Reg. Rep. (CCH) ¶ 13,161 [hereinafter Competitor Collaboration Guidelines].

VOLUME 140 Commission Opinion efficiencies and NTSP’s conduct were reasonably related to the overall agreement and reasonably necessary for achieving those efficiencies. See discussion in Section V.C.1., infra. This means that some initial inquiries about whether there is integration, the likely effects of integration, and the reasonableness of the specific restraint are necessary in order to decide whether to apply a rule of reason. It is of course possible to conclude we then have a per se case based on a per se illegal restraint if these initial inquiries are decided adversely to a respondent. But, it is semantically awkward to use a per se label once a number of “reasonableness” issues have been addressed, sometimes at length. What does it really mean to say we have a per se case, once we have considered and rejected justifications for a restraint? What it means, as a practical matter, is that no further proof of market effects is required; the case is over. As will be made clear in the discussion below, however, we arrive at exactly the same result when we follow the “inherently suspect” analysis outlined in Polygram – and the Polygram framework more accurately describes the actual analysis of the case.

These considerations might not deter us when we are persuaded by experience and economic logic that the potential for harm is overwhelming and the possible justifications are attenuated and uniformly rejected by courts. We would simply apply the per se label. In the health care sector, however, the Commission wants to encourage providers to engage in efficiency-enhancing collaborative activity.18 We do not want to chill consideration of this activity by use of terminology that could 18 See generally MedSouth, supra note 2, where Commission staff did not recommend the Commission take enforcement action against a physician IPA proposal whereby the IPA physicians would collaborate on information sharing, treatment coordination, practice protocols, and enforcement standards. See also Thomas B. Leary, The Antitrust Implications of “Clinical Integration”: An Analysis of FTC Staff’s Advisory Opinion to MedSouth, 47 ST. LOUIS U. L. J. 223 (Spring 2003).

VOLUME 140 Commission Opinion be misunderstood. This is not a factor that was considered in Maricopa over twenty years ago, but we do think it is a factor that needs to be considered after a decision like California Dental. So, at least this time, after the first full administrative trial in a generation, we will instead follow the methodology of Polygram, and consider each of Respondent’s justifications in some detail. We want to emphasize again, however, that this is not the same thing as a full blown rule of reason inquiry. If we find that Respondent’s proffered justifications for NTSP’s inherently suspect conduct are not legitimate – after the examination that follows – it is not necessary to go on and find actual adverse market effects. See Section V.E. infra. B. The Polygram Analysis In the words of the D.C. Circuit, an offense can be described as “inherently suspect” when there is a “close family resemblance between the suspect practice and another practice that already stands convicted in the court of consumer welfare.” Polygram, 416 F.3d at 37. The determination is based on the conduct’s “likely tendency to suppress competition.” Polygram Commu Op. supra note 4, at 29. As the Commission described, “[s]uch conduct ordinarily encompasses behavior that past judicial experience and current economic learning have shown to warrant summary condemnation.” Id. At this stage, the focus of the inquiry is on the nature on the restraint rather than on the market effects in a particular case.19 If a plaintiff is able to make an initial 19 As the D.C. Circuit pointed out in Polygram, this is not a fixed category. It must evolve “as economic learning and market experience evolve.” 416 F.3d at 37; see also Thomas B. Leary, A Structured Outline for the Analysis of Horizontal Agreements, http://www.ftc.gov/speeches/leary/chairsshowcase.talk.pdf at 7- 10, (describing distinction between cases “that focus on the nature of the restraint” and those “that focus on the nature of the market”) (emphasis in original).

VOLUME 140 Commission Opinion showing that particular conduct meets these strictures, and the defendant makes no effort to advance any procompetitive justification for the conduct, then the case is concluded and the practices are condemned. Polygram Commu Op. supra note 4, at 29.

A defendant can avoid summary condemnation, however, if it can advance a legitimate justification for the practice. As we explained in Polygram, “[s]uch justifications may consist of plausible reasons why practices that are competitively suspect as a general matter may not be expected to have adverse consequences in the context of the particular market in question; or they may consist of reasons why the practices are likely to have beneficial effects for consumers.” Id. The defendant need only articulate a legitimate justification, and is not obliged to prove the competitive benefits. (Remember that the issue at this initial stage is simply whether the practice should be condemned summarily.) The proffered justifications, however, must be both cognizable under the antitrust laws and at least facially plausible. Id. at 30-33. The cognizable justification requirement allows a tribunal to reject as a matter of law proffered justifications that are incompatible with the goal of antitrust law to protect competition. We described cognizable justifications in our Polygram opinion, id. at 31: Cognizable justifications ordinarily explain how specific restrictions enable the defendants to increase output or improve product quality, service, or innovation. By contrast, courts since the earliest decades of the Sherman Act have identified classes of justifications that, because they contradict the procompetition aims of the antitrust laws will not save restraints from condemnation. For example, a defendant cannot defend restraints of trade on the ground that the prices the conspirators set were reasonable, that competition itself is unreasonable or leads to socially undesirable results, or that price increases resulting from a trade restraint would attract new entry.

VOLUME 140 Commission Opinion The D.C. Circuit expressly approved the requirement that a proposed justification be both cognizable and plausible. Even though the justification offered by Polygram seemed plausible “[a]t first glance,” the court rejected it as “nothing less than a frontal assault on the basic policy of the Sherman Act.” Polygram, 416 U.S. at 37-38 (quoting Natl Soc’y of Prof’l Eng’rs, 435 U.S. 679, 695 (1978)).

If the justification for a suspect restraint is cognizable – which is to say, admissible in the first place – a defendant must also show that it would plausibly create or improve competition. Again, to quote Polygram:

A justification is plausible if it cannot be rejected without extensive factual inquiry. The defendant, however, must do more than merely assert that its purported justification benefits consumers. Although the defendant need not produce detailed evidence at this stage, it must articulate the specific link between the challenged restraint and the purported justification to merit a more searching inquiry into whether the restraint may advance procompetitive goals, even though it facially appears of the type likely to suppress competition. Id. at 31-32.20 20 The concept of ancillary restraints, which allows an agreement that would otherwise be viewed as a naked restraint of trade to be evaluated in light of the procompetitive effects of an efficiency-enhancing integration of economic activity to which it is reasonably related, is subsumed in the Commission’s Polygram analysis. See Polygram Commu Op., supra note 4, at n.42 (“[t]he ancillary restraints doctrine retains its vitality in evaluating efficiency claims. . . . [w]whether or not expressed in terms of ancillarity, the link between defendant’s “plausible” justification and a cognizable benefit must be clear.”). As will become clear after the discussion of specific facts, NTSP’s conduct is not justified under either a pre-Polygram ancillarity analysis, or VOLUME 140 Commission Opinion If a defendant is able to advance a justification that meets both of these requirements – cognizable and plausible – the plaintiff must then make a more detailed showing that the restraints at issue are likely to harm competition. Id. at 32. The degree of proof required depends on the circumstances of the case and the degree to which antitrust tribunals have experience with the restraint in question. Id. The Supreme Court stated succinctly that the inquiry must be “meet for the case.” California Dental, 526 U.S. at 781. In Polygram, the Circuit Court used similar language, stating that, “the extent of the inquiry is tailored to the suspect conduct in each particular case,” 416 F.3d at 34. We interpret this precedent as endorsement of a “spectrum” or “sliding scale” analysis, which more accurately describes the way cases are actually decided today.21 C. The Health Care Statements The FTC and Department of Justice Health Care Statements provide guidance about the agencies’ enforcement intentions on issues which are likely to arise in the health care industry. They lay out principles that we believed to be consistent with the state of the law when they were issued in 1993 and revised in 1994 and 1996. Even though the Health Care Statements were issued before the California Dental or Polygram opinions were written, and also before the Competitor Collaboration Guidelines were issued, we believe that their analysis of horizontal restraints among competing physicians is still viable and also uniquely valuable because of their specificity. The Health Care Statements Polygram’s more inclusive analysis.

21 We believe that this analytical framework may also help to resolve the apparent inconsistency between those decisions that use per se terminology and those that use rule of reason terminology in facially similar situations. See cases cited in ABA SECTION OF ANTITRUST LAW, ANTITRUST LAW DEVELOPMENTS, 53-58 (5th ed. 2002).

VOLUME 140 Commission Opinion lay out the circumstances when a rule of reason analysis is appropriate for price-setting conduct between competing physicians and — like the analysis in Polygram — they allow for procompetitive justifications in certain circumstances. See Health Care Statements, supra note 2, Statement 8. Price-setting conduct of physician networks qualifies for rule of reason treatment where the “physician’s integration through a network is likely to produce significant efficiencies” and the agreement on price is “reasonably necessary to realize those efficiencies.” Health Care Statements, supra note 2, Statement 8B1.” The Health Care Statements describe two different types of integration that can qualify a physician network for rule of reason treatment — financial and clinical. Jd. The Commission has applied this analysis in numerous enforcement actions. Although our analysis of NTSP’s conduct generally follows the legal framework outlined in Polygram, we also refer to the industry specific concepts identified in the Health Care Statements to the extent appropriate.

V. Analysis of the Challenged Restraints A. Existence of an Agreement In order to decide whether there is a violation of Section 5 of the FTC Act in this case, we will first look to see if there is an agreement. There 1s a fundamental distinction between unilateral and multilateral action. The matter is easy to decide when two or more separate legal entities overtly agree on a restraint that each will adopt. However, an action nominally taken by a single entity is also construed as the product of agreement for purposes of the antitrust laws when the entity is controlled by a group of competitors and is serving as the agent of the group. There are The Competitor Collaboration Guidelines, supra note 17, refer to “cognizable efficiencies” for which the restraint in issue is “reasonably necessary.” §§ 3.36(a), 3.36(b). VOLUME 140 Commission Opinion many ways that association/agents can legally act for the collective benefit of the group. Associations can, for example, negotiate prices for office facilities or wages for employees; agents can establish prices for services that the association itself provides for members or non-members. These are matters of no antitrust significance, because there is no conceivable anticompetitive impact. However, if the association negotiates prices for services that the members will provide, the organization’s conduct is considered to be that of a combination or conspiracy of its members, not unilateral action.” The Commission has also held that when an organization is controlled by a group of competitors, the organization is viewed as a combination of its members, and their concerted actions will violate the antitrust laws if an unreasonable restraint of trade. In the Matter of Michigan State Med. Soc’y, 101 F.T.C. 191, 286 (1983). The Commission’s long list of consent agreements in this industry are all based on this uncontroversial legal premise. See, é.g., supra note 1.

The basis for this jurisprudence is sound. Without it, any group of competitors could avoid antitrust liability for collective price fixing simply by acting through single organizations that they control (as many have attempted).™ Thus, in order to 3 See, e.g., Natl Soc'y of Prof’! Eng’rs, 435 U.S. at 694-96; United States v. Sealy, Inc., 388 U.S. 350, 352-54 (1967). Cf: Allied Tube & Conduit Corp. v. Indian Head, Inc., 486 U.S. 492, 509 (1988); Natl Collegiate Athletic Assn v. Bd. of Regents of the Univ. of Oklahoma, 468 U.S. 85, 99 n.18 (1984). “See supra note 23. They could, for example, coordinate their activities through a single “trust.” It would seem rather odd to immunize this kind of activity, given the popular name of the basic legal regime we apply here: “The Antitrust Laws.” VOLUME 140 Commission Opinion determine if there is an agreement in this case, we must first determine whether NTSP is controlled by competing physicians. Respondent states that NTSP is a 5.0l(a) memberless nonprofit corporation under Texas law.25 RAB at 14. Respondent argues that because of this “memberless” status, NTSP should be viewed as a sole actor, both in management of its affairs, and in its refusal to deal with payors on non-risk contracts, and that therefore NTSP cannot be found to conspire under Federal competition law. Id. at 14-15. At the outset, we reject this argument. Substance prevails over form in antitrust law, and the technical manner in which an organization is incorporated does not control.26 We have to look beneath the surface. We find that NTSP is controlled by competing physicians, and therefore is not a sole actor for purposes of the antitrust laws. We agree with the ALJ’s conclusion that NTSP’s participating physicians have taken collective action to obtain higher fees from payors. ID at 53-55. The fact that NTSP physicians elect representatives from their ranks to serve on the eight-member Board of Directors of NTSP and set NTSP policy supports this conclusion. IDF 23, 24, 33, 38.

Respondent’s briefs rely heavily on Viazis v. American Assn of Orthodontists, 314 F.3d 758 (5th Cir. 2002), to assert that NTSP’s mere existence does not satisfy the concerted action requirement 25 Section 5.01(a) of the Texas Medical Practice Act allows non-profit entities to engage in the practice of medicine for the purposes of research, medical education, or the delivery of health care to the public. TEX. OCC. CODE. ANN. § 162.001 (Vernon 2004).

26 In Community Blood Bank, 405 F.2d at 1018-19, the circuit court determined that jurisdiction was to be determined “on an ad hoc basis” and that the mere form of incorporation was not controlling.

VOLUME 140 Commission Opinion of Sherman Act Section 1. RAB at 12. Respondent’s discussion of Viazis has confused the requirement of “collective action” with the separate requirement of an “unreasonable restraint of trade.” Viazis merely states that a trade association is not by its nature a “walking conspiracy” even though it inherently involves collective action by competitors – there must also be an unreasonable restraint of trade. Viazis, 314 F.3d at 764. We do not disagree. Respondent also argues that because NTSP cannot and does not bind any of its physicians to non-risk contracts, there cannot be any collusion among physicians (and therefore no agreement). RAB at 8. Respondent cites ALJ findings that the doctors did not discuss among themselves or directly enter into price agreements with one another, and points out that the ALJ’s finding that there was no collusion among NTSP’s physicians was based on this evidence. RAB at 11. This argument, as presented, conflates what really are two separate issues.

The first issue raised by this particular argument is whether parties can enter into an agreement absent direct communication with each other. It has long been settled that they can. In Maricopa, the Supreme Court found an agreement among physicians without finding that the competing physicians agreed directly with each other. 457 U.S. at 356; see also ID at 68. Similarly, in Virginia Academy of Clinical Psychologists v. Blue Shield of Virginia 624 F.2d 476, 479-81 (4th Cir. 1980), the court found collective action by a group that was controlled by its physician members without finding that the plan’s individual physicians had met and agreed directly with each other. The Health Care Statements also explain that physicians do not have to directly agree with one another to engage in price fixing, and that a common agent can be used to exert the bargaining leverage of a group of physicians. Health Care Statements, supra note 2, Statement 9Dl and 9D4 n.66. In this case, it is enough that participating physicians individually authorized NTSP to take certain actions on their behalf, knowing that others were doing the VOLUME 140 Commission Opinion same thing.27 Indirect communications of this kind are sometimes referred to as “hub-and-spoke” conspiracies.28 The second issue is whether it is possible to find that there was an agreement on price even though individual physicians were not bound to adhere to contract terms negotiated by NTSP. We address this issue in the discussion of NTSP’s restraints in Section V.B.1. immediately below (analysis of whether NTSP’s conduct amounts to price fixing). It is enough to say here that the opt-out right does not negate the existence of an agreement. B. Restraint of Trade – Prima Facie Case We next examine whether NTSP’s conduct amounts to a restraint of trade, specifically, price fixing. First we look at the factual evidence to determine whether the conduct amounts to price fixing, and is thus illegal absent a cognizable and plausible justification. We discuss different kinds of activity separately for convenience and to provide guidance about what we regard as highly suspect behavior. We want to make clear, however, that 27 For example, NTSP would inform physicians who had not yet granted it contract negotiation authority but were considering it, the number of other member physicians who had already given NTSP that authority. CX 1066 at 1; CX 0548 at 1. 28 See, e.g., Toys “R” Us, Inc. v. FTC, 221 F. 3d 928, 934-36 (7th Cir. 2000) (finding evidence of horizontal agreement where petitioner served as “ringmaster”); United States v. Masonite Corp., 316 U.S. 265, 276 (1972) (fixing of prices by one member of group pursuant to express delegation, acquiescence, or understanding just as illegal as fixing of prices by direct, joint action); Interstate Circuit, Inc. v. United States, 306 U.S. 208, 227 (1939) (“unlawful conspiracy may be and often is formed without simultaneous action or agreement”).

VOLUME 140 Commission Opinion our ultimate conclusions in this case do not stand or fall on our assessment of separate actions; the ultimate conclusions are rather predicated on the likely effects of the actions taken together.29 After discussion of the restraints separately, we then address in Section V.C. below the justifications advanced for each of them. We also describe the conduct that the Commission does not find to be price fixing in Section V.D., in order to give guidance to the health care community.

1. Challenged Restraints a. NTSP’s Use of a Poll NTSP conducts annual polls of its physicians to determine minimum reimbursement rates for use in negotiation of HMO and PPO product contracts with payors. CX 1195 (Van Wagner Dep. at 66-67). NTSP’s polling form asks the physicians individually for the minimum price that they would accept for the provision of medical services pursuant to a fee-for-service HMO or PPO agreement. CX 0565; CX 1196 (Van Wagner IH at 26-29, 43-44, 62). NTSP uses these poll responses to calculate the mean, median, and mode of the minimum acceptable fees identified by its physicians, and then uses these averages to establish its minimum contract prices. NTSP then reports these measures back to its participating physicians. CX 0103 at 4-5; CX 1196 (Van Wagner IH at 26-29, 43-44, 62); CX 1042. NTSP’s polling form explains to the participating physicians that “NTSP polls its affiliates and membership to establish Contracted Minimums. NTSP then utilizes these minimums when negotiating managed care contracts on behalf of its participants.” CX 0387 at 1; CX 0633. 29 The decision to view the conduct as a whole in this case should not be understood to mean that any one of the actions is necessarily benign standing alone.

VOLUME 140 Commission Opinion We find that NTSP’s use of a poll facilitated a price-fixing agreement among its competing physician members. Frech Tr. 1316-24; 1326. NTSP physicians were aware that NTSP would use individual member’s poll responses to create group “averages” that would be used by their organization in the coming year’s negotiations with payors. IDF 88-90, 93-94. It was a way to communicate to their competitors what they would like to get in the future – not what they had gotten in the past, or, indeed, what they might settle for individually. When they cast a vote on the desired minimum price for the group, they were not simply reporting past or current prices, they were telegraphing their intentions about future prices. Thus, NTSP physicians anticipated that any individual response would help to raise or lower the average fee for the group – an average that NTSP would then use in negotiating with payors. See IDF 88, 96-100. NTSP physician responses to the polls were interdependent and not independent. Respondent argues that NTSP’s use of its poll and its minimum reimbursement schedule are not concerted action and have legitimate business purposes.30 RAB at 21-22. Respondent states that NTSP does not divulge to any physician or board member whether or how any other individual physician responds to the confidential poll conducted by NTSP’s staff. Id. at 23-24. Respondent also claims that NTSP does not use the averages derived from the polls to negotiate for higher rates, and NTSP’s actions related the establishment and use of the threshold rate are purely internal to NTSP. Id. at 21-22. Even if NTSP’s becomes a party to the contract, Respondent states that each physician still has an individual right to decide whether to become a party; physicians are not bound to their poll responses, and the poll does not require or induce a physician to contract in a particular manner or even at all. Id. at 22. Respondent points out that less than 34 percent of the physicians responded to the poll. Id. at 23. Furthermore, Respondent states that when NTSP’s board makes a 30 We address Respondent’s efficiency arguments associated with NTSP’s poll in Section V.C. below. VOLUME 140 Commission Opinion decision on a payor’s offer, it is not binding on the physicians. Id. at 22-23.

Respondent further argues that Complaint Counsel’s expert (Dr. Frech) was unable to find any evidence of collusion among physicians, and admitted that physicians chose not to contract through NTSP on more than two-thirds of the contract offers NTSP messengered. RAB at 8-10. According to Respondent, Dr. Frech also determined that physicians frequently enter individually into payor contracts at rates both above and below the threshold rate levels. RAB at 10-11, 23. Respondent’s argument that NTSP does not divulge to any physician or board member whether or how any particular physician responds to the poll is of no consequence because liability in this case is not predicated on individual discussions among physicians themselves. It is predicated on an improper delegation of individual pricing authority to a common agent. The fact that NTSP’s decisions on payor offers were not binding, and often ignored, does not absolve NTSP from liability because the law is clear that agreements can be illegal even though all the price terms are not specified or adhered to. Catalano, Inc. v. Target Sales, Inc., 446 U.S. 643, 647-48 (1980); Socony-Vacuum Oil, 310 U.S. at 218-24; and Plymouth Dealers’ Assn of Northern California v. United States, 279 F.2d 128, 130-33 (9th Cir. 1960), all stand for the proposition that price fixing encompasses a broad range of actions that affect, but do not necessarily determine, the final price. Socony-Vacuum Oil, 310 U.S. at 223, made clear that “a combination formed for the purpose and with the effect of raising, depressing, fixing, pegging, or stabilizing the price of a commodity” is price fixing. In High Fructose Corn Syrup Antitrust Litigation, 295 F.3d 651, 656 (7th Cir. 2002), Judge Posner stated that “[a]n agreement to fix list prices is . . . a per se violation of the Sherman Act, even if most or for that matter all transactions occur at lower prices.” Judge Posner explained that “the list price is usually the starting point for the bargaining and the higher it is (within reason) the higher the ultimately bargained price is likely to be.” Id. Even if there is variability, NTSP’s use VOLUME 140 Commission Opinion of a minimum schedule (obtained from polling results) affects the level at which variability occurs. NTSP’s conduct thus has the same effect on price as the conduct identified in Plymouth Dealers and High Fructose Corn Syrup.

Complaint Counsel’s expert, Professor Frech, explained that NTSP’s minimum-fee schedule coupled with its right of first negotiation (via the PPA) hinders payors’ ability to contract directly with physicians. Frech Tr. at 1315-17; 1326-27. This was confirmed by payor testimony. See, e.g., Quirk Tr. at 316-17. Professor Frech also explained that the NTSP minimum reimbursement rates were higher than what some physicians were actually willing to accept, and that negotiation of a minimum price offer has the effect of raising the prices that “low end” physicians would otherwise earn, without reducing the price that “high end” physicians would receive (they can opt out). Frech Tr. 1321-24. Thus, the minimum NTSP price schedule does have a tendency to increase prices overall, and can be characterized as horizontal price fixing.31 The fact that only 34 percent of NTSP physicians responded to the polls does not alter this conclusion. A low response rate could, of course, further reduce the utility of the poll as a prediction of what individual physicians would be willing to accept – and this fact therefore actually weakens any argument that a poll would help payors to avoid wasted efforts. See discussion in Section V.C.2.b. Moreover, the fact that the poll results – whether actual predictors or not – were disclosed to all NTSP physicians encouraged them to reject price offers below the minimum fees indicated, Frech Tr. 1326-27, and NTSP actively 31 See Natl Elec. Contractors Assn, Inc. v. Natl Constructors Assn, 678 F.2d 492, 500 (4th Cir. 1982) (citing Yarn Processing Patent Validity Litig., 541 F.2d 1127, 1137 (5th Cir. 1977), cert. denied, 435 U.S. 910 (1977) (interference with the market forces freely setting prices sufficient to constitute price fixing)).

VOLUME 140 Commission Opinion encouraged them to reject the offers. See CX 1097 at 2; Vance Tr. 1215-18; Frech Tr. 1326-27. Finally, this disclosure of the poll results could also cause NTSP physicians to inflate their poll responses in subsequent years. See CX 430 (2002 annual policy form reminded physicians of prior year’s averages); IDF 99-100. Thus, the poll results influenced the decisions of all NTSP physicians, regardless of whether they responded. The manner in which NTSP utilized the minimum reimbursement schedule in its communications with payors also shows that it was using the poll for much more than just an administrative or efficiency-enhancing tool. For example, NTSP regularly informed payors that its physicians had established minimum fees for NTSP-payor agreements, identified the fee minimums, and stated that NTSP would not enter into or forward to any of its physicians payor offers that were below the minimums. CX 1196 (Van Wagner IH at 62-63, 153-54); CX 1173 (Deas IH at 26-29). This evidence is in stark contrast to the picture painted by Respondent about NTSP’s activities associated with the poll, and illustrates the need for a multi-faceted definition of price fixing called for in Socony-Vacuum Oil. b. NTSP’s Physician Participation Agreement NTSP’s physicians enter into a membership agreement (the PPA) with NTSP that grants NTSP the right to receive all payor offers and imposes on the physicians a duty to promptly forward payor offers to NTSP. CX 0276; CX 275 at 24. Essentially the PPA grants NTSP a right of first negotiation with payors. The physicians agree that they will refrain from pursuing offers from a payor until notified by NTSP that it is permanently discontinuing negotiations with the payor. CX 0276; CX 0311 at 10; CX 1178 (Hollander Dep. at 68). Under the PPA, NTSP is supposed to deliver payor price proposals (and other economic provisions of offers) for fee-for-service contracts to its physicians. CX 0275 at 25-26.

VOLUME 140 Commission Opinion We find that the PPA in effect renders NTSP as the sole bargaining agent of NTSP competing physicians and thus facilitates price fixing among NTSP physicians. The terms of the PPA and the manner in which NTSP has utilized them hinder the ability of payors to assemble a marketable physician network in the Fort Worth area without submitting to the collective bargaining of NTSP. Frech Tr. 1313-16.

Respondent argues that NTSP’s PPA gives NTSP no authority to bind physicians, and that any non-risk contracts in which NTSP decides to join as a party must be messengered to the physicians for their own individual decisions on whether to join. RAB at 8, 19. In addition, Respondent argues that the PPA’s terms do not prevent a physician from negotiating with a payor directly or through another entity. Id. at 19.

We find that although the PPA requires NTSP to deliver contracts to its physicians, the evidence shows that NTSP rejects and does not deliver any contract that falls below its minimum reimbursement schedule. CX 1196 (Van Wagner IH at 68-69). Other terms of the PPA are inconsistent with Respondent’s assertion that any non-risk contracts must be messengered. For example, the PPA contains provisions whereby 50 percent of NTSP’s membership must approve the reimbursement proposal of a payor before an offer is “messengered” by NTSP to the physicians for actual opt-in/out of the proposed contracts.32 CX 0276 at 1-2. This conduct has the potential to raise the level at which variability occurs, just as the use of polling data does. We also find that each NTSP physician’s ability to opt in or out of a contract – NTSP’s inability to “bind” its members to a contract – does not eliminate the existence of a price-fixing agreement when providers collectively negotiate with payors over 32 The PPA contains another provision allowing for NTSP counter offers to payor rate proposals based on direction from at least 50 percent of NTSP’s physicians. CX 0275 at 26. VOLUME 140 Commission Opinion what contract terms will be offered. It is not necessary that there be uniform adherence to specific prices by individual members. In Maricopa, the Supreme Court found a price-fixing agreement even though the participating physicians were free to set their own prices. 457 U.S. at 356. The Commission reached a similar result in Motor Transport Assn of Connecticut, Inc., 112 F.T.C. 309, 336 (1989), stating that association members “need not agree to a single price level in order to fix prices.”33 In this case, NTSP is able to exert collective bargaining power and hence fix prices because NTSP does not messenger contracts below its minimum reimbursement schedule. Instead it rejects the contracts outright on behalf of its physicians and NTSP’s collective bargaining leverage is thus exerted before its physicians even have a chance to opt in or out of a contract. c. Powers of Attorney In several instances, NTSP gathered powers of attorney from members whereby NTSP was appointed as their sole bargaining agent. CX 1173 (Deas IH at 56-57); CX 1065; CX 1061. We find that NTSP used its powers of attorney in a manner similar to the way it used the PPA, and the effect is the same – namely, to solidify its power as a bargaining agent and thus facilitate its price fixing. Jagmin Tr. 1058-60; Beaty Tr. 459-60; Frech Tr. 1327-30. Respondent argues that this conduct is not evidence of concerted action, that the forms were limited in their application to “any lawful manner,” and that NTSP used them only in 33 See also In the Matter of Kentucky Household Goods Carriers Assoc., Inc., Docket No. 9309, 2005 WL 1541548 at *11 (FTC June 21, 2005), review pending, No. 05-4042 (6th Cir. Aug. 18, 2005); cf. In re Petroleum Prods. Antitrust Litig., 906 F.2d 432, 445-50 (9th Cir.1990) (circulation of current price lists sufficient for liability, even without evidence of agreement to adhere to them), cert denied, 500 U.S. 959 (1991). VOLUME 140 Commission Opinion conjunction with a messenger model.34 RAB at 20. Respondent emphasizes that the powers of attorney did not commit a physician to accept or reject an offer, nor did they give NTSP any power to bind any physician on a non-risk contract. Id. We find however, that the terms of the powers of attorney were clear on their face and improperly granted NTSP “authority to negotiate the terms of, enter into, execute, amend, modify, extend, or terminate” the relevant contracts. CX 347. To induce physicians to grant it powers of attorney, NTSP would include in its solicitations information about the number of physicians who already had executed the powers of attorney. CX 1066; CX 0548 at 1. NTSP physicians referred payors that were attempting to contract directly with them back to NTSP, often noting the deferral was based on agency or powers of attorney held by NTSP. Beaty Tr. 454-60, Grizzle Tr. 696-98, 724; CX 0760. Furthermore, NTSP advised payors in negotiations that it represented NTSP member physicians though powers of attorney or agency. Roberts Tr. 540-41. In one instance, NTSP sent Aetna a list of 180 physicians who had executed powers of attorney appointing NTSP as their bargaining agent for any direct contracting with Aetna. IDF 304. Unrebutted testimony from Aetna officials shows that Aetna understood this as a clear message that these physicians would not negotiate directly with Aetna and therefore concluded that there was no practical alternative to dealing with NTSP. IDF 305-06. d. NTSP’s Concerted Withdrawals and Refusals to Deal Except on Collective Terms In several instances NTSP used its agency powers to terminate its members’ participation in a health plan or refused to deal with a payor because NTSP determined that the fee-for-service price paid by the payor was inadequate. CX 0546; CX 0802; CX 1054. 34 We discuss the “messenger model” arguments separately in Section V.B.1.e. below.

VOLUME 140 Commission Opinion For example, when NTSP was dissatisfied at one point during negotiations with United Healthcare Services, Inc., it terminated the United contracts of 101 physicians. IDF 147-54. On another occasion, after CIGNA sent contract assignment letters to Fort Worth physicians, in an attempt to contract with them independent of NTSP, NTSP provided its members with a sample letter refusing the contract assignment and directing CIGNA to negotiate with NTSP as their agent. IDF 205. NTSP advised its physicians not to consent to the assignment, and also sent them an agency agreement authorizing NTSP to negotiate on their behalf. IDF 205. Thereafter CIGNA received 40 letters on behalf of 52 physicians that were virtually identical to the sample letter provided by NTSP. IDF 206. On two other occasions, NTSP threatened to terminate its contract with CIGNA and then later actually terminated its contract, when terms were not satisfactory to NTSP. CIGNA was then forced to capitulate to NTSP’s demands. See IDF 221-48. We find that NTSP illegally utilized refusals to deal and termination of contracts to enhance the bargaining power of the participating physicians and command higher prices. Frech Tr. 1309-12; 1325. Respondent argues, first, that NTSP’s refusals to deal with payors are protected by the Colgate doctrine. RAB at 14-15, citing United States v. Colgate & Co., 250 U.S. 300 (1919). This doctrine holds that a firm, acting unilaterally, may lawfully decide with whom it will, or will not, deal. Colgate, 250 U.S. at 307. Respondent views NTSP’s refusals of payor offers as the lawful unilateral act of NTSP, and not the act of a group of horizontal competitors acting collectively through its agent, NTSP. RAB at 14-17. It reiterates for this purpose the familiar refrain that (1) NTSP does not have the ability to bind physicians, and (2) that each physician decides individually whether to accept a payor’s offer. Id. Respondent also cites Verizon Communications, Inc. v. Law Offices of Curtis v. Trinko, LLP, 540 U.S. 398, 407-08 (2004), where the Supreme Court reaffirmed the Colgate doctrine, and warned that overly zealous enforcement of the antitrust laws VOLUME 140 Commission Opinion can injure competition and innovation. Respondent argues that this admonition should apply to NTSP’s refusals to deal. RAB at 15.

Second, Respondent argues as a policy matter that NTSP needs the ability to refuse contracts because it faces potential liability when it becomes a party to a payor contract. RAB at 16. Respondent explains that failure to perform obligations under a contract, involvement in illegal payor conduct, and involvement in deficient medical care can all subject NTSP to liability. Id. Further, Respondent states that NTSP has a reputation to protect and involvement in a contract with poor performance can damage NTSP’s reputation. Id. at 16-17.

We hold that Colgate is inapplicable in this case because NTSP’s refusals to deal are not the unilateral acts of a single entity but rather are the collective action of all its independent physician members. NTSP’s inability to bind members, and the ability of NTSP physicians to reject payor offers does not preclude the conclusion that NTSP has agreed to fix prices. There is a distinction between NTSP’s simple refusal to provide services itself and NTSP’s refusal to provide services on behalf of the physicians it represents.35 NTSP was not acting unilaterally but in concert with its physician members. NTSP’s conduct therefore does not fall within the bounds of Colgate, and the Trinko case is similarly not relevant.36 35 See Indiana Fed’n of Dentists, 476 U.S. at 465 (“That a particular practice may be unlawful is not, in itself, sufficient justification for collusion among competitors to prevent it . . . .”) (citing Fashion Originators’ Guild of Am., Inc. v. FTC, 312 U.S. 457, 468 (1941)).

36 Trinko involved conduct by a single firm charged with monopolization under Section 2 of the Sherman Act, not with “contract, combination or conspiracy” under Section 1 of the Sherman Act. Trinko, 540 U.S. at 407. Unlike this case, there VOLUME 140 Commission Opinion NTSP’s further claim that its conduct is a necessary protection against liability and loss of reputation is reminiscent of the agreement that was rejected out of hand in National Society of Professional Engineers, 435 U.S. 679, and is entirely without factual support. NTSP itself does not need to engage in price fixing to protect itself from liability and loss of reputation.37 The conduct challenged in this matter does not have anything to do with this type of potential liability, and the evidence shows that NTSP’s refusals to deal were motivated by concerns about price and not liability and reputation. For example, NTSP’s former president Dr. Vance summarized NTSP’s success in its negotiations with United in a letter to his medical group, writing “United Health Care came to town six months ago and offered a straight, 110% of Medicare contract. . . . Through the efforts of NTSP lobbying the City [of Fort Worth] and terming [terminating] a group contract with Health Texas, United blinked. . . . This United negotiation is a template for other efforts that will need to occur in the near future and would best be coordinated by NTSP.” CX 0256; see also CX 1199 (Vance Dep. at 316-17). Equally compelling is the fact that once payors have capitulated to NTSP’s price demands, NTSP’s objections disappeared. See, e.g., IDF 242-48. NTSP’s statements and its conduct show an overarching concern over price and not other contractual terms.

e. NTSP’s Deviations from the “Messenger Model” Respondent argues that once it decided to become a party to payor contracts it followed the so-called “messenger model” specifically described in Health Care Statement 9C, and hence was no allegation that the defendant in Trinko had agreed with others to fix prices or refuse to deal. 37 NTSP can communicate with its physicians on noneconomic terms of a contract without price fixing. Frech Tr. 1450.

VOLUME 140 Commission Opinion that its actions were lawful. RR at 16; see CX 387 at 1; CX 393 at 1; CX 186; CX 1075 at 2; CX 1122. After review of the evidence as a whole, we find that Respondent has deviated from the accepted parameters of a lawful messenger model in a manner that amounts to horizontal price fixing.

There is a wealth of guidance available on this subject. In addition to the discussion in the Health Care Statements, at least ten past Commission consents describe conduct that deviated from a lawful messenger model.38 Properly used, a messenger model is an arrangement designed to reduce transaction costs associated with negotiation of contracts between providers and payors; it is not a device for facilitating horizontal agreements among providers on prices or price-related terms. In a messenger model, a physician network uses the agent to convey to payors information obtained individually from the providers about the prices or price-related terms that the providers are willing to accept, but the agent does not negotiate on behalf of 38 See, e.g., In the Matter of Partners Health Network, Inc., Docket No. C-4149 (Analysis of Agreement Containing Consent Order, issued Aug. 5, 2005), http://www.ftc.gov/os/caselist/0410100/0410100.htm; In the Matter of San Juan IPA, Inc., Docket No. C-4142 (Analysis of Agreement Containing Consent Order, issued May 19, 2005), http://www.ftc.gov/opa/2005/05/sanjuan.htm; In the Matter of Preferred Health Servs., Inc., Docket No. C-4134 (Analysis of Agreement Containing Consent Order, issued Mar. 2, 2005), http://www.ftc.gov/opa/2005/03/scdoctors.htm; In the Matter of White Sands Health Care System, L.L.C., Docket No. C-4130 (Analysis of Agreement Containing Consent Order, issued Sep. 28, 2004), http://www.ftc.gov/os/caselist/0310135/0310135.htm; In the Matter of Southeastern New Mexico Physicians IPA, Inc., Docket No. C-4113 (Analysis of Agreement Containing Consent Order, issued June 7, 2004), http://www.ftc.gov/os/caselist/0310134/0310134.htm. VOLUME 140 Commission Opinion the providers. The agent may convey to the providers all contract offers made by purchasers, and each provider then makes an independent, unilateral decision to accept or reject the contract offers. Alternatively, the agent may receive authority from individual providers to accept contract offers that meet certain criteria as long as the agent does not negotiate on their behalf. The agent can also assist providers to understand the contracts offered, by supplying objective or empirical information about the terms of an offer. For example, the agent may provide a comparison of the offered terms with other contracts agreed to by network participants. On the other hand, it would be dangerous for the agent to express an opinion on the terms offered. See Health Care Statements, supra note 2, Statement 9C. If a messenger model is used improperly, it can facilitate an unlawful price-fixing agreement. In a legal messenger model, the agent only facilitates independent, unilateral decisions of the network providers. Id. It is illegal to use the messenger model in a way that creates or facilitates collective decisions on prices or price-related terms.

It is necessary to look at specific facts on a case-by-case basis, because there is not necessarily any single feature that determines the outcome. Some examples of activities that can tip the balance toward illegality are: agent coordination of provider responses to a particular proposal, dissemination to network providers of the views or intentions of other network providers about the proposal, expression of an opinion on the adequacy of price terms offered, collective negotiation of price terms for the providers, or decisions not to convey an offer if the agent believes the price terms are inadequate. Id. A fundamental question is whether the actions of the messenger are designed to facilitate communications or, instead, to enhance the bargaining power of the providers.39 39 There are other widely available materials describing the proper use of a messenger model. For example, in 1997, the American Medical Association’s Associate General Counsel VOLUME 140 Commission Opinion It is important to remember that any time an agent for a group of competitors engages in any discussions that tinge on the prices they will charge, the parties are in an antitrust danger zone. The so-called messenger model, described in the Health Care Statements, provides what the agencies believe is a legal path though this danger zone, but it is dangerous to stray off the route. It is not enough for a physician association simply to claim that it has intended to follow the indicated path; it must show that it actually has done so.

NTSP's refusal to messenger contracts where it determined, based on the results of its prospective price poll, that less than 50 percent of NTSP physicians would join, eliminates the ability of NTSP physicians to decide unilaterally whether to accept the unmessengered contracts and hinders the ability of payors to contract individually with NTSP physicians.” We also find that NTSP’s PPA, use of powers of attorney and activities associated with its poll, discussed above, are inconsistent with an acceptable use of the model. The PPA and powers of attorney allowed NTSP to negotiate on behalf of its physicians, something expressly forbidden in a proper messenger model. The poll and minimumfee schedule enabled NTSP to coordinate physician responses to payor proposals. NTSP also went beyond the bounds of advised that a messenger “may develop a schedule showing what percentage of physicians in the network would accept offers at various fee levels” but that “the messenger may not share this information with physicians,” may not negotiate with a payor over fees to be offered to network participants, and “may not decide to forgo an offer because it is too low.” Edward Hirshfeld, Interpreting the 1996 Federal Antitrust Guidelines for Physician Joint Venture Networks, 6 ANNALS HEALTH L. 1, 29 (1997). Cf. Section V.C., which discusses the ability of an agent to charge a reasonable fee for these offers that are unlikely to be accepted.

VOLUME 140 Commission Opinion legitimate messenger activities when it expressed its opinion both to its physician and to the payors themselves on the adequacy of price terms in contract proposals. See Health Care Statements, supra note 2, Statement 9C.

2. The Inherently Suspect Legal Analysis The restraints described above, as a whole, are what we describe as inherently suspect under Polygram. The conduct itself can be said to have a likely tendency to suppress competition because the likelihood of anticompetitive effects from NTSP’s restraints is sufficiently grounded in economic theory and supported in case law. Complaint Counsel’s expert, Professor Frech, explained the economic rationale for the legal concerns about NTSP’s conduct. Frech Tr. 1315-24. Through the mechanisms described above, NTSP was able to collectively set prices and present its physicians as a unified and strong force within Fort Worth. These practices reduce the risk that payors would be able to contract around NTSP, and thereby enhance NTSP’s bargaining power over price. Frech Tr. 1325-27; Grizzle Tr. 730, 746-47, 750-51. Because NTSP physicians comprise a large percentage of physicians in Fort Worth, their threat to withhold services severely damages the perceived adequacy of a payor’s physician network, and makes it more difficult for a payor to obtain or maintain business. Grizzle Tr. 730-31; Jagmin Tr. 1091-92; Mosely Tr. 139-40. Payors are therefore more willing to pay the NTSP physicians’ consensus price because of the threat to their physician networks. Grizzle Tr. 730, 746-47, 750-51; Frech Tr. 1325. NTSP itself summarized the concern succinctly: “NTSP has become a ‘gorilla network’ with 124 PCP’s . . . and 528 specialists.” CX 0209 at 2; CX 0310. Conduct that confers on competitors a collective power over price falls within the classic definition of price fixing.

Respondent argues that the Supreme Court’s California Dental opinion prevents the Commission from condemning NTSP’s conduct without a full rule of reason analysis. Respondent’s first point in this argument is simply a reiteration of a claim already VOLUME 140 Commission Opinion considered in another context. Respondent says that because there was no direct collusion among physicians,41 NTSP’s conduct meets California Dental’s threshold test for determining that a “quick look” rule of reason analysis is not appropriate.42 RAB at 28-29. Respondent adds that a quick look rule of reason analysis is appropriate only in limited circumstances, when it can be shown that “the great likelihood of anticompetitive effects can be easily ascertained.” Id. at 29 (citing California Dental, 526 U.S. at 771). Because there was no direct collusion among NTSP physicians, Respondent states that the only possible candidates for a quick look under California Dental are the PPA provision requiring physicians to notify NTSP of payor offers that they receive directly, and the powers of attorney. Id. Respondent further argues that because both of these have plausible procompetitive effects, NTSP’s conduct must be judged under a full rule of reason. Id.

The first problem with Respondent’s argument is that it depends on the faulty conclusion that there was no collusion among NTSP’s physicians, simply because they did not directly communicate with each other. As discussed above in Section V.A., the physicians combined in other ways and their conduct can be characterized as price fixing. Moreover, California Dental essentially involved collective restrictions on advertising, not on the prices charged. The Court observed that the advertising restrictions in question were “very far from a total ban on price or 41 As pointed out in Section V.A. above, the fact that the doctors did not communicate among themselves, but rather acted through a common agent, does not affect liability. 42 We have used “inherently suspect” in Polygram and in this opinion to refer to conduct that may be justified in some circumstances but, absent these circumstances, can be condemned without an extensive demonstration of adverse market effects in the case at hand. We believe this level of inquiry is what the Supreme Court means by a “quick look.”

VOLUME 140 Commission Opinion discount advertising.” California Dental, 526 U.S. at 773. The threshold question in California Dental was whether the likelihood of anticompetitive effects from restrictions on professional price and quality advertising was sufficiently verifiable in theory and in fact to fall within a general rule of illegality. Id. at 771. The Court determined that the restrictions were, at least on their face, designed to avoid false or deceptive advertising in a market characterized by striking disparities between the information available to the professional and the patient. Id. Indeed, the Court expressed concern that “the particular restrictions on professional advertising could have different effects from those ‘normally’ found in the commercial world,” id. at 773, and that “[t]he obvious anticompetitive effect that triggers abbreviated analysis has not been shown.” Id. at 778. Unlike California Dental, this case involves prices, not advertising; the challenged conduct therefore has the necessary “obvious anticompetitive effect,” and not something “very far” removed from it.

C. Respondent’s Justifications Respondent’s justifications in this case are intermingled with its arguments about the existence of an agreement. See generally RAB at 14-18, 28-34, 45-57. We have attempted to sort them out into separate categories, for clarity.43 43 Our analysis here deviates somewhat from Complaint Counsel’s proffered analysis. Complaint Counsel’s arguments against Respondent’s proffered justifications are couched in terms of whether NTSP’s price fixing was ancillary to any significant productive collaboration among its participating physicians. As we mentioned above in Section IV.A., the doctrine of ancillary restraints is subsumed in the Polygram analysis. (The Polygram methodology can also be used more broadly to deal with justifications of a different kind. It could be applied, for example, in a case like Broadcast Music, 441 U.S. at 20-25, where the argument was that the system could not function at all without VOLUME 140 Commission Opinion 1. Teamwork and Spillover Efficiencies Respondent argues that its risk panel physicians “use financial and clinical integration techniques to develop team-oriented improvements in cost and quality.” RAB at 49. Respondent further argues that NTSP has a right to “limit” its involvement to non-risk contracts that will be of interest to most of its risk panel physicians, so that their participation will ensure the spillover of the efficient treatment patterns established in the risk contract. Id. We interpret Respondent’s use of the word “limit” as intended to explain and justify its particular activities associated with its PPA, powers of attorney, refusals to deal and deviations from the messenger model. Respondent also argues that NTSP’s poll and board minimums are tools that allow NTSP to identify when a non-risk offer will be of interest to most of its physicians, and therefore help it to enhance the spillover effects. Id. at 50. We first do not accept Respondent’s premise that NTSP’s poll and efforts to “limit” NTSP’s involvement to certain non-risk contracts are justified because they will help NTSP to determine when spillover efficiencies are likely to occur. Id. at 48-50. The prices NTSP sets through the minimum reimbursement schedule were not prices sought by risk panel doctors, but instead were averages of the members who responded, which includes non-risk doctors. IDF 51, 87, 89-90, 93. NTSP’s Board members and senior management were never informed of individual poll responses; they received only aggregated, average results, which did not reveal to what extent risk panel physicians were likely to collective agreement on price terms, or United States v. Brown University, 5 F.3d 658, 677 (3d Cir. 1993), where agreements on student aid could be characterized as pro-competitive overall.) When we use the terminology of Polygram rather than the terminology of ancillary restraints, it does not mean that we disagree with Complaint Counsel’s alternative analysis. VOLUME 140 Commission Opinion participate in non-risk contracts.44 IDF 94-95. Although these limitations may be prudent, they undercut an argument that the minimum reimbursement schedule could help NTSP determine when spillover efficiencies would occur. As discussed above, it is evident that the poll and limitations were designed for another purpose. See discussion in Section V.B.1.a. Respondent has thus failed to articulate a logical nexus between these activities that facilitate price fixing and the claimed efficiencies. As we stated in Polygram, a defendant must do more than merely assert that its purported justification benefits consumers. Although the defendant need not produce detailed evidence at this stage, it must articulate the specific link between the challenged restraint and the purported justification to merit more searching inquiry into whether the restraint may advance procompetitive goals, even though it facially appears of the type likely to suppress competition. Polygram Commu Op., supra note 4, at 31-32. This conclusion is reinforced by the statement of NTSP’s executive director, Karen Van Wagner. During an investigational hearing when she was asked the question whether reimbursement rates at or above NTSP’s contracting minimums were necessary in order for NTSP to achieve clinical integration, she testified: I think it’s the other way around. We’ve achieved a certain degree of clinical integration. We’ve achieved a certain level of medical management. We’ve achieved a certain amount of cost savings, satisfaction, quality of care for the members. That basically is reflected in the rates that we ask the payors to 44 Respondent even emphasized in its appeal brief that “it is impossible for [anyone] to determine the response of any specific physician or speciality, or even to determine whether they responded.” RAB at 24.

VOLUME 140 Commission Opinion give us because that’s the value we provide them, so I view it the other way around. Clinical integration is necessary to justify the minimums that the members authorize us to go and try and find.

CX 1196 (Van Wagner IH at 145-46). We explained in Polygram that “a defendant cannot defend restraints of trade on the ground that the prices the conspirators set were reasonable, that competition itself is unreasonable or leads to socially undesirable results.” Polygram Commu Op., supra note 4, at 30-31. There is no antitrust exception for particularly efficient, higher quality market participants; NTSP is not entitled to “pre-empt the working of the market” to produce the result that it believes payors should choose. Indiana Fed’n of Dentists, 476 U.S. at 462. Individual non-risk physicians might well be able to command higher fees from payors if they can promise superior outcomes, but this superior efficiency alone would not justify the exercise of collective bargaining power.

There are additional flaws in the spillover efficiency claim. Respondent does not explain how the NTSP physicians who only enter into non-risk contracts could achieve spillover efficiencies from NTSP’s single risk contract. This is a non-trivial point, because non-risk physicians make up half of NTSP’s members. Van Wagner Tr. 1830; Frech Tr. 1349. Furthermore, NTSP does not even explain why its risk panel physicians will have the incentive to apply the quality and cost control techniques they utilize on risk patients to any non-risk patients they may have. NTSP has not provided any financial incentive for them to do so, and it does nothing to promote compliance with whatever techniques have been learned under risk contracts. IDF 364-80; Deas Tr. 2553-54. NTSP does not employ the processes it uses to monitor and control the quality and utilization of services provided under its risk contracts to patient care provided under non-risk contracts. IDF 364-80; Deas Tr. 2550-54. We also note that Respondent’s counsel admitted that risk contracts are out of favor in Fort Worth, Texas. O.A. at 23; see VOLUME 140 Commission Opinion also Wilensky Tr. 2192; IDF 46, 48. NTSP’s actions, purportedly justified as efforts to enhance spillover efficiencies from its one risk contract, seem to be perceived by customers merely as an attempt to regulate the terms of access to the more-desired nonrisk product. See generally Frech Tr. 1349. This justification is inconsistent with the procompetitive aims of the antitrust laws and is not cognizable.

It is worth noting that we are not challenging NTSP’s sole risk contract, which involves financial integration, but which NTSP’s Board has acknowledged “is a small part of the business.” CX 83 at 3. Moreover, Respondent does not make the argument that NTSP’s non-risk contracts are sufficiently clinically integrated, as described in Health Care Statement 8B, to justify an in-depth rule of reason inquiry. In fact, Respondent all but admits that its administration of these contracts does not constitute clinical integration as commonly understood – e.g., exchange of clinical information, coordination of treatment, development of protocols and monitored compliance. See, e.g., MedSouth, supra note 2, at 4-6. Indeed, NTSP’s president, Ms. Van Wagner, stated that “NTSP isn’t ‘there yet’ in terms of clinical integration for the care of nonrisk patients.”45 Van Wagner Tr. 1877. 45 Respondent argues instead that the concept of clinical integration does not encompass the full scope of conduct that is justifiable under the rule of reason, and that NTSP’s “teamwork” yields sufficient cost and quality benefits. RAB at 51. We do not decide here whether there are potential justifications beyond what the Commission has accepted as “clinical” integration in the past. But Respondent’s claim that NTSP’s “teamwork” yields cognizable cost and quality benefits simply is not supported by significant evidence. Moreover, Respondent does not address how these nebulous “teamwork” efficiencies are dependent on its price-fixing activities.

VOLUME 140 Commission Opinion 2. The PPA, Powers of Attorney, Refusals to Deal and Refusals to Messenger Contracts Respondent also argues that NTSP’s PPA notice provision, its use of powers of attorney, its communications with physicians and payors, and its refusal to messenger contracts have plausible procompetitive effects on their own. RAB at 45-57. The PPA ostensibly increases NTSP’s contracting opportunities in the marketplace by informing NTSP of new contract opportunities. Id. at 30. The powers of attorney ostensibly were gathered by NTSP to inform it of which and how many physicians were willing to be messengered an offer through NTSP. RAB at 31. Respondent also argues that disclosure to physicians that NTSP will not be involved in a particular payor offer will alert physicians that they need to look to other contracting avenues with payors in those situations. RAB at 33.

In addition, Respondent claims that when it informs physicians about a payor’s conduct or the status of a payor offer, it is merely collecting and disseminating market information.46 Id. at 34, 53. Respondent states that the procompetitive effects of information sharing in the health care industry, even among competing physicians, is recognized by Complaint Counsel’s economic expert and the Commission’s advisory opinions. Id. Respondent also states that its refusal to convey payor contract offers with prices that NTSP believes are not sufficiently high to attract a majority of its participating physicians is efficient because a physician network has a plausibly valid concern about resources wasted if it were to transmit a payor’s offer that is of interest to less than 50 percent of the physicians. Id. at 32. 46 Respondent also states that NTSP’s comments to a payor about the terms that physicians might find attractive or reasonable can help to educate the payor and expedite contract negotiations. RAB at 34. For reasons discussed in Section V.D. infra, this kind of activity is not necessarily suspect. VOLUME 140 Commission Opinion The problem with these arguments is that most efforts by competitors to collectively agree on prices could be said to save costs in negotiations with customers. (Similarly, an agreement to allocate markets is likely to reduce selling expenses.) Arguments of this kind ultimately are based on the idea that competition itself is inefficient, and are thus not cognizable under the antitrust laws.47 We explained in Polygram that “[c]ognizable justifications ordinarily explain how specific restrictions enable the defendants to increase output or improve product quality, service, or innovation.” Polygram at 30. A justification will fail, however, if it contradicts the procompetitive aim of the antitrust laws. Id.

These purported justifications are also inconsistent with the evidence. As discussed above in Section V.B.1., the evidence shows that NTSP’s overriding purpose in each of these activities was to exploit its collective bargaining leverage over payors, not to achieve efficiencies. For example, Respondent’s assertion that NTSP helps physicians to determine when they will need to communicate with payors in other ways (because of NTSP’s refusal to deal) is absurd in light of the fact that NTSP routinely cautioned its physicians not to undermine NTSP solidarity and its pricing consensus. In an “Open Letter to the Membership,” NTSP’s Dr. Vance stated, “[w]e must continue to move forward as a group or we will surely falter as individuals.” CX 0550. In another letter, NTSP warned its physicians that fees will decline unless “NTSP or someone can provide a unifying voice for physicians.”48 CX 0380 at 3. NTSP also implicitly urged its 47 See, e.g., Maricopa, 457 U.S. at 346; Natl Soc’y of Prof’l Eng’rs, 435 U.S. at 689-90; Goldfarb, 421 U.S. at 786-87. 48 See also CX 0380 at 2 (informing its members that through “direct” negotiation or affiliation with other IPAs, NTSP obtained prices “5 to 15% over Tarrant County rates”); CX 0550 (stating to members that it “has provided a consistent premium fee-forservice reimbursement to the members when compared with any VOLUME 140 Commission Opinion physicians to delay or forgo direct contracting during NTSP’s negotiations with payors.49 These actions are designed to enhance bargaining clout, not to increase efficiency from spillover effects, or to conserve resources, or to spread procompetitive benefits of information sharing.

3. Denial of Discovery Request in Support of Purported Justification Respondent argues that the ALJ erroneously denied NTSP’s discovery request for the payors’ “flat file” data that would show how NTSP and other physicians performed on non-risk contracts. RAB at 45-46. Respondent claims that, without these files, it has limited capability to show how NTSP’s performance compares to other physician providers. Id. Respondent also states that PacifiCare and Cigna had provided NTSP with some information in the normal course of business which showed that NTSP is the best performing group in the Dallas/Fort Wort Metroplex and that spillover from care under capitated contracts occurs. Id. at 46 n.190.

We find that the ALJ’s denial of the discovery request was not detrimental to Respondent. In the absence of a specific link other contracting source”).

49 See, e.g., CX 0310 (Dr. Deas advising NTSP physicians that “discussions are ongoing with Aetna U.S. Healthcare, Cigna, and other major players which should lead to contracts that are more favorable than we would be able to achieve individually or though other contracting entities”); NTSP regularly sent “fax alerts” to its members and held “General Membership Meetings” to continually provide contracting updates for specific payor negotiations and share NTSP’s poll results with the membership. CX 1178 at 21- 23 (Hollander Dep. at 21-23); CX 0173 – CX 0180; CX 0182 – CX 0188; CX 0615; CX 0945; CX 0903; CX 0617; CX 0628; see also Frech Tr. 1326-27.

VOLUME 140 Commission Opinion between the challenged restraints and the purported justification, it would not have mattered if Respondent had been able to obtain further discovery and demonstrate that its physicians performed well. There is no antitrust exemption for more efficient, higher quality market participants, absent a demonstration that the challenged practices made an essential contribution to these efficiencies.50 Evidence on the performance of NTSP physicians, standing alone, would not prove that nexus. D. Potentially Permissible Conduct Although we have rejected the proffered justifications for NTSP’s particular activities, we do not want this opinion to be read so broadly that it would chill potentially efficient practices. We do not question that NTSP’s risk contract and its physicians who participate in it achieve efficiencies, and it could even be possible for these efficiencies to spillover to its non-risk contract in certain circumstances. As we discussed above in Section IV, if an IPA can establish that its joint negotiation of price is reasonably related to an efficiency-enhancing integration of the participants’ economic activity and is reasonably necessary to achieve the procompetitive benefits of that integration, the pricerelated activities may be lawful. A good example of this is described in the Commission staff’s advisory opinion letter to MedSouth, Inc., a multi-specialty physician practice association in Denver, Colorado.51 50 See, e.g., Broad. Music, 441 U.S. at 23-24 (declining to find blanket license fee plan per se illegal where plan contributed to integration of sales, monitoring, and enforcement against unauthorized copyright use); Natl Soc’y of Prof’l Eng’rs, 435 U.S. at 693-95 (rejecting petitioners argument that preventing inferior work justified anti-competitive agreement). 51 Another example is In the Matter of California Pacific Medical Group, Inc., Docket No. 9306 (consent order issued May 11, 2004), http://www.ftc.gov/os/adjpro/d9306/index.htm, where VOLUME 140 Commission Opinion Commission staff did not object to MedSouth’s partial integration proposal that included joint negotiation for the sale of its participating physicians’ services to payors on a fee-for-service basis. MedSouth, supra note 2, at 1, 8-9. Commission staff concluded that MedSouth could plausibly produce sufficient procompetitive effects to justify joint negotiations of fees. Id. at 1, 8. This conclusion was based on the extensive clinical resource management program that MedSouth developed for its participating physicians, and that was described in detail in the advisory opinion letter. Id. at 2-4, 8. It is also noteworthy that MedSouth did not plan to negotiate contracts on behalf of its physicians until after the operational plan was fully functioning.52 Commission staff advised California Pacific Medical Group, Inc., d/b/a Brown & Toland Medical Group, that as of that time they would not recommend action against a clinically- integrated PPO product that Brown & Toland Medical Group created after entering into a consent order with the Commission. See Advisory Opinion Letter from Daniel P. Ducore, Esq. and David R. Pender, Esq., FTC, to Richard A. Feinstein, Esq., Boies, Schiller & Flexner, LLP (Apr. 5, 2005), http://www.ftc.gov/os/adjpro/d9306/050405cpbresponsetbtnotice. pdf.

52 For example, MedSouth developed a web-based electronic clinical data record system that allows MedSouth physicians to access and share medical information relating to their patients, including transcribed patient records, office visit notes, lab reports, radiographic reports, treatment plans, and prescription information. MedSouth, supra note 2, at 3. This system could be expected to increase efficiencies by reducing duplicative testing and procedures, expediting treatment, and decreasing medical errors and adverse drug interactions. Id. Also important was MedSouth’s plan to adopt and implement clinical practice guidelines and performance goals relating to the quality and appropriate use of services provided by its physicians. Id. MedSouth had in place a plan to monitor and enforce physician VOLUME 140 Commission Opinion Id. at 4.

NTSP admittedly is not even close to having the efficiencyenhancing processes that MedSouth had committed to have before it began to negotiate for its physicians collectively. For example, NTSP has no disease management program or patient register that would improve health care quality for patients with specific, longterm conditions. Casalino Tr. 2812-14, 2839; Van Wagner Tr. 1834-36. NTSP has no data for patients under its fee-for-service contracts, and NTSP’s hospital utilization management program does not apply to patients under its non-risk contracts. Casalino Tr. 2868-69; Frech Tr. 1352-53; Van Wagner Tr. 1837-38. Furthermore, NTSP does not require adherence to its clinical guidelines and protocols. Wan Wagner Tr. 1843- 44; see also Casalino Tr. 2837-39, 2840.

There could also be lawful ways for an association like NTSP to utilize some of the mechanisms discussed above, even without clinical or financial integration. NTSP could, for example, have lawfully polled its members on future fees in order to give payors a sense of the fee levels that would be acceptable to a majority of NTSP physicians, provided that (1) the results of the poll were not communicated back to the physicians in any manner, to avoid influencing their behavior; (2) NTSP did not use the polling results as a basis for determining which payor offers it would elect to messenger to the physicians; and (3) NTSP did not use the polling results to negotiate price with payors. See Health Care Statements, supra note 2, Statement 5B. NTSP could also lawfully charge an administrative fee to payors to compensate for the burden of messengering contracts that were unlikely to be accepted. For example, if a contract contained rates that were below the rate a threshold percentage of physicians were likely to consider acceptable based on the polling data, NTSP could impose a reasonable transmittal fee (to reimburse the association for an incremental burden, not to signal disapproval). If a payor refused compliance with the guidelines. Jd. at 3-4. VOLUME 140 Commission Opinion to pay the fee in these situations NTSP could legally refuse to messenger the contract.™ Note that these modified practices would not be justified on the ground that they contribute to efficiency of medical practice in the same way that integration does. They rather contribute to the efficiency of the contract negotiation process itself. Because they are not designed to enhance the bargaining power of the physicians, they are not suspect in the first place. They are benign even in the absence of integration. NTSP can also act as a messenger so long as it adheres to legal standards, which the antitrust agencies have attempted to summarize in the Health Care Statements. As discussed above, a key to a lawful messenger model is that the IPA must refrain from using prospective polling results in determining which payor offers it would elect to messenger, and refrain from any activity that amounts to influence over physicians, negotiations on their behalf and coercion of payors. NTSP can also review and comment on non-economic terms of a contract. Furthermore, NTSP can utilize powers of attorney or agency agreements in a manner that does not facilitate a price-fixing agreement. For example, a power of attorney could legally authorize NTSP to enter a contract on behalf of a physician when a physician’s stated See Advisory Opinion Letter from Jeffrey W. Brennan, Esq., FTC, to Martin J. Thompson, Esq., Manatt, Phelps & Phillips, L.L.P. (Sept. 23, 2003), hitp://www.ftc.gov/bc/adops/bapp030923 htm, (Commission staff did not object to a physician IPA proposal to refuse to administer contracts where fewer than 50 percent of the physicians accept, unless the payors agree to bear the group’s contract administration costs).

VOLUME 140 Commission Opinion price minimum and other terms are met, so long as NTSP does not attempt to influence those key terms, or use powers of attorney to negotiate with a payor.54 There is also nothing inherently objectionable about physicians providing current price information to NTSP for a purpose that is unrelated to the actual establishment of prices. For example, NTSP physicians could agree collectively through NTSP to jointly adopt an electronic billing system that would permit them to run their offices more efficiently. If there are sufficient safeguards to shield the billing rates of individual physicians, the practice would not be suspect.

E. Necessity of Market Definition and Market Power The ALJ held that it was necessary to define a relevant market, even when analyzing a per se unlawful price-fixing agreement. ID 61.55 Complaint Counsel appeal the Initial Decision in part based on this conclusion, and argue that no proof of market definition or market power is required to establish a per se violation, citing Socony-Vacuum Oil, 310 U.S. at 221-22. CCAB at 35-36. Respondent argues that the rule of reason requires that the market must be defined in this case and that Complaint Counsel would have had this burden even in a per se case, citing California Dental and the Initial Decision. RAB at 36. 54 We warn, however, that the distinction between lawful and unlawful use of powers of attorney or agency arrangements and the messenger model may require careful counseling. As evidenced by NTSP’s conduct in this case, there are many different ways that a power of attorney or agency arrangement and the messenger model can be abused in a manner that facilitates price fixing.

55 Although Complaint Counsel did not define the market, the ALJ found sufficient evidence to do so on his own. ID at 61-64. VOLUME 140 Commission Opinion As made clear in the discussion above, we find that proof of market definition and market power is not required in this case because Respondent did not meet its burden of establishing a legitimate justification for NTSP’s inherently suspect practices. The ALJ may have confused identification of a market in which anticompetitive effects are presumed to occur with definition of a relevant market in order to measure market share and draw inferences about market power. As we stated in Kentucky Household Goods Carriers, “[i]t is obviously necessary to identify the goods or services that are subject to the price-fixing or other anticompetitive restraint . . . [i]t is not necessary, however to show that these goods or services constitute a relevant antitrust product market, as described, for example, in the Horizontal Merger Guidelines.” Kentucky Household Goods Carriers, Docket No. 9309, 2005 WL 1541547 at *11.56 The restraints in Kentucky Household Goods Carriers were found to be illegal per se, but this distinction does not matter. As we have explained above in Sec. III.A., if a practice is either per se illegal or inherently suspect, the focus is on the nature of the conduct, not the nature of the market. If there is no legitimate justification for the practice, there is no need for a burdensome inquiry into market conditions. See FTC v. Superior Court Trial Lawyers Assn, 493 U.S. 411, 433-36 (1990). Simply put, it makes no sense to undertake the exercise of market definition if it will not affect the outcome in any way.

Respondent also argues that Complaint Counsel submitted no empirical evidence in this case to prove NTSP’s market power, or 56 In fact, even in a full blown rule of reason case, it may not be necessary to calculate shares in a relevant market if more direct evidence of market effects is available. See Indiana Fed’n of Dentists, 476 U.S. at 460-61; In the Matter of Schering-Plough Corp., Docket No. 9297, 2003 WL 22989651, at *9,11,13 (F.T.C. Dec. 8, 2003) (citations omitted), rev’d on other grounds, Schering-Plough Corp. v. F.T.C., 402 F.3d 1056 (11th Cir. 2005), petition for cert. filed (U.S. Aug. 29, 2005) (No. 05-273). VOLUME 140 Commission Opinion to prove that NTSP’s conduct caused an anticompetitive effect in any market. RAB at 35- 44. Respondent asserts that NTSP does not have market power and that the numerous avenues through which physicians could and did contract undermine the possibility that any market power existed. Id. at 40-41. The ALJ found that NTSP did not receive higher rates than those that other physicians and physician groups were already receiving. ID at 82. The ALJ found only that NTSP obtained higher rates or more beneficial economic terms than the health care payors initially offered to NTSP. Id. at 82-83. Respondent states that this has no antitrust significance in the absence of a showing that physicians entered into a boycott conspiracy, because NTSP as an entity can choose to participate or not in a payor offer. RAB at 42-43. Furthermore, Respondent argues that Complaint Counsel’s focus on physician rates totally ignores the cost and quality effects of patient care, which are more accurate measures of competitive performance. Id. at 43- 44.

We agree that higher physician rates, by themselves, are of no antitrust significance. They may indeed be associated with higher quality of care or with different competitive conditions in various localities. Evidence that payors increased their initial offers similarly is ambiguous, standing alone. Those matters are not what this case is all about; this case is about a concerted effort by NTSP’s participating physicians to increase their bargaining power. As discussed above, because Respondent did not meet its burden to establish a legitimate justification for this inherently suspect conduct, NTSP’s conduct can be condemned with no further analysis under Polygram and other authorities. VI. Remedy The Commission has wide discretion in its choice of a remedy for violations of Section 5 of the FTC Act. FTC v. Natl Lead Co., 352 U.S. 419, 428 (1957); Jacob Siegel Co. v. FTC, 327 U.S. 608, 611 (1946). This discretion includes not just the prohibition of the illegal practice in the manner exercised in the past, but also so-called “fencing-in” relief, which refers to provisions in an order VOLUME 140 Commission Opinion that are broader in scope than the conduct that is declared unlawful. Fencing-in relief is deemed necessary in some cases in order to prevent future unlawful conduct.57 The Commission’s remedy, however, must be reasonably related to the violation. FTC v. Ruberoid Co., 343 U.S. 470, 473 (1952); Jacob Siegel, 327 U.S. at 613.

In this case, we have the benefit of the Commission’s extensive experience in crafting appropriate remedies for physician IPAs that have engaged in conduct similar to that of NTSP. Over the years the Commission has fine tuned the relief necessary to prevent future illegal conduct in these cases. To the extent order provisions in these cases have proved ineffective or unnecessary, the Commission has appropriately modified them. The order we impose in this case – which was proposed by Complaint Counsel and is somewhat different than the ALJ’s order – is consistent with recent past relief accepted in settlement in similar cases, and is based on the Commission’s extensive experience. We are therefore confident that the relief will effectively remedy NTSP’s illegal conduct and is neither too narrow nor too broad. Our order is designed to protect the public against any further violations by NTSP, but also to allow NTSP to pursue arrangements that may produce efficiencies without significant risk of anticompetitive consequences.

As usual, Paragraph I of the order defines terms that will be used, and Paragraph II contains general prohibitions against participation in or facilitation of a conspiracy among any physicians. It specifically prohibits agreements to “negotiate”58 57 See, e.g., FTC v. Colgate-Palmolive Co., 380 U.S. 374, 395 (1965); Kraft, Inc. v. FTC, 970 F.2d 311, 326-27 (7th Cir. 1992). 58 Although our order does not define the term “negotiate,” we intend it to incorporate the distinctions described in Health Care Statements 4 and 5 between the lawful provision of factual information and views to payors (as in a true messenger model) VOLUME 140 Commission Opinion with any payor on behalf of physicians or to refuse to deal on their behalf. A proviso to Paragraph II, however, allows NTSP to engage in “qualified” risk-sharing or clinically-integrated arrangements, and even to set prices for its physicians’ services when doing so is reasonably necessary to the joint arrangement. In a “qualified clinically-integrated joint arrangement,” as defined by the order in Paragraph I.I., physician participants must participate in active and ongoing programs to evaluate and modify their clinical practice patterns in order to control costs and ensure the quality of services provided, and the arrangement must create a high degree of interdependence and cooperation among physicians. Any agreement concerning price or other terms of dealing must be reasonably necessary to achieve the efficiency goals of the joint arrangement. In a “qualified risk-sharing joint arrangement,” also defined by the order (Paragraph I.J.), all physician participants must share substantial financial risk in order to create incentives for the physician participants jointly to control costs and improve quality. In both cases, any agreements on price or other terms must be reasonably necessary to obtain significant efficiencies through the joint arrangement. Paragraph III of the order allows NTSP to act as a messenger or an agent on behalf of physicians for contracts with payors, but for three years NTSP is required to notify the Commission in advance before it does so. This prior notice provision is necessary because of NTSP’s past deviations from the messenger model. We have accepted this type of prior notice provision in the past. Our order also requires NTSP to terminate any non-risk contracts it negotiated on behalf of its physicians, so NTSP does not continue to benefit from its unlawfully negotiated contracts. Paragraphs IV.B. and C. set forth the terms by which NTSP is required to terminate the contracts, and additional related requirements. The remaining provisions of our order are either administrative in and efforts to enhance the collective bargaining power of the participating physicians.

VOLUME 140 Commission Opinion nature, or relate to NTSP’s requirement to notify affected persons of the existence of the order. They impose little burden on NTSP. The order terminates after twenty years. Respondent argues that the ALJ’s order is not narrowly tailored to any antitrust violation properly found. Respondent first asserts that because there was no collusion among physicians, the ALJ’s order is not supported in the record. It claims, for example, that because NTSP has the right to negotiate its own contracts, the remedy cannot prohibit NTSP from negotiating contracts. And because there was no collusion among the physicians, it says termination of NTSP’s existing physician contracts is not warranted. RAB at 60-62. Respondent also argues that, as worded, prohibitions on NTSP’s role in payor negotiations with physicians (particularly on information exchanges among physicians) would apply to non-price as well as price terms and thus conflict with Health Care Statements and applicable law. Id. at 62.

Respondent’s arguments essentially restate their rejected claim that there have been no violations. We find that the prohibitions on collective negotiation and the need to terminate existing contracts are both “reasonably related” to NTSP’s unlawful conduct. We also find that the ban on collective bargaining through the use of non-price terms as well as price terms is necessary to ensure that NTSP does not seek to perpetuate its unlawful conduct by orchestrating agreements through non-price or non-economic terms. We also find that it is necessary to terminate NTSP’s contracts, so that NTSP’s physicians do not continue to reap the benefits of their unlawful price fixing. Even though the contracts are already terminable at will, mandatory termination is necessary to avoid the risk that payors might fear retaliation or suffer short-term competitive disadvantage if they VOLUME 140 Commission Opinion voluntarily terminate a contract with NTSP. The Commission has used similar or broader fencing-in relief in other physician pricefixing cases.59 We find that the ALJ’s order is inappropriately narrow in some of its core provisions and therefore fails to provide adequate protection against further violations. Paragraph II of the ALJ’s order omitted provisions proposed by Complaint Counsel that would have prohibited agreements on terms of dealing with payors (i.e., without regard to whether there is any agreement to “negotiate”) and collective refusals to deal with payors. These limitations were based on the ALJ’s view that a prohibition of agreements to refuse to deal would impose on NTSP a broad duty to contract with all payors. ID at 89. The language in our order does not mandate that result. The provisions in question have never been interpreted in that manner in numerous other orders that contain them. These provisions only prohibit conduct by NTSP “in connection with the provision of physician services.” Any services provided by NTSP itself that are not directly related to the provision of physician services would not be covered and NTSP would not be forced to contract. As long as NTSP’s conduct does not amount to an agreement among physicians to refuse to deal, NTSP will have the ability to refuse certain 59 See, e.g., In the Matter of Partners Health Network, Inc., Docket No. C-4149 (consent order, issued Aug. 5, 2005), http://www.ftc.gov/os/caselist/0410100/0410100.htm, (order requires prior notice for three years before Partners Health Network, Inc. can participate in a qualified risk-sharing joint arrangement or a qualified clinically-integrated joint arrangement); In the Matter of New Millennium Orthopaedics, LLC, Docket No. C-4140 (consent order, issued May 2, 2005), http://www.ftc.gov/opa/2005/06/fyi0543.htm, (order requires dissolution of IPA).

VOLUME 140 Commission Opinion contracts.60 Complaint Counsel have proposed the addition of the phrase “with respect to their provision of physician services” and a new definition of “physician services” in order to further clarify ths point. CCAB at 64-65. We have incorporated Complaint Counsel’s proposed clarification.

Paragraph II of the ALJ’s order failed to include language proposed by Complaint Counsel that would have prohibited agreements that physicians not deal individually with payors or through entities other than NTSP. We find that this is an important provision to include in this case because NTSP facilitated a price-fixing agreement through its physicians’ agreement not to deal individually with payors while NTSP was conducting its own negotiations on their behalf See Section V.B.1.b. above.

The ALJ’s order also contains two unwarranted provisos to Paragraph II of the order that could enable NTSP to continue its illegal conduct: (1) a statement that nothing in the order bars NTSP from “communicating purely factual information” about a payor offer or “expressing views relevant to various health plans,”61 and (2) a provision stating that nothing in the order 60 As noted above, NTSP even has the ability to act as a “messenger” under the order. If Respondent complies with the standards for this activity, described in Section V.B.1.e. above, there would not be an order violation.

61 The ALJ also limited the scope of a provision barring information exchanges. Paragraph II.B. of the ALJ’s order prohibits the exchange of information about the terms on which physicians are willing to deal with a payor, but does not include a prohibition on exchange of information about a physician’s willingness to deal with a payor. We have included this prohibition in past physician price-fixing Commission orders and believe it should be included in this order. NTSP was able to orchestrate its unlawful price-fixing scheme in part by VOLUME 140 Commission Opinion would “require respondent to violate state or federal law.” ID at 94. We find that neither of the provisos is necessary to protect legitimate conduct by NTSP.62 The communication of “purely factual information” is already covered by Paragraph III, which allows NTSP to act as a messenger and, given Respondent’s history, we believe that advance notification is necessary for a period of time. In addition, because we have found that there is no basis for a claim that NTSP’s refusals to deal were prompted by concerns over violations of law, we do not believe it is prudent to leave the door open for similar unfounded claims in the future. There is nothing in the order we enter that will require Respondent to engage in illegal activity.

Respondent finally argues that Complaint Counsel’s proposed changes to the ALJ’s order raise serious policy questions about the Commission’s agenda on physician teamwork efforts. RR at 24. Respondent states that Complaint Counsel’s order will chill legitimate conduct on NTSP’s part in response to illegal conduct and breaches of contract by insurance companies, and will discourage teamwork efforts among physicians which do not fit the currently narrow definitions of risk-sharing or clinical integration. Id. at 31. Respondent also points out that it is difficult to find any economic evidence that the Commission’s enforcement agenda has had any positive economic effect, in the effort to control total medical expenses. Respondent states that any Commission policy to arbitrarily limit innovation is questionable. Id. at 36-37.

communicating that its physicians were unwilling to deal with payors in certain situations.

62 Nearly anything could be termed providing “information” and “views.” For example, NTSP’s announcement that its physicians will not contract with payors at prices below a certain level could be characterized as conveying factual “information” or as an “expression of views.”

VOLUME 140 Commission Opinion Respondent’s arguments here misunderstand the Commission’s role in this industry. We have a responsibility to prosecute antitrust offenses, but, as stated at the outset, we also should foster pro-competitive, innovative delivery mechanisms for health care in this country. NTSP’s illegal conduct has not helped it achieve any efficiencies. Our order, which proscribes only conduct used to carry out NTSP’s unlawful price-fixing activities, will not inhibit any efforts to achieve efficiency and innovation though the teamwork or other integration of physicians. We describe in Section V.D. above the many constructive activities that an IPA can undertake, consist with the antitrust laws. And as noted above, Paragraph II of our order allows NTSP to engage in legitimate joint arrangements and even set prices for its physicians’ services, but only when doing so is reasonably necessary to achieve the efficiencies of the joint arrangement. VII. Conclusion For all of the reasons outlined above, we conclude that NTSP’s contracting activities with payors amount to unlawful horizontal price fixing. Through the various mechanisms described above, NTSP was able to orchestrate price agreements among its physicians. In physician IPA cases like this one, the focus is not necessarily on any single price-fixing mechanism, but rather on the conduct as a whole. Here the evidence shows not only negotiation activity in aid of a collective agreement on a minium fee schedule, but also specific enforcement mechanisms – such as the powers of attorney and collective withdrawal from payor networks – in order to coerce agreement from payors. These actions viewed as a whole leave no doubt that the overriding purpose behind NTSP’s conduct was to fix prices. This is not really a close case. NTSP’s conduct is similar to conduct that has been held per se unlawful and summarily condemned in other contexts. For the reasons stated, we have analyzed the conduct under our more flexible Polygram framework, and considered each of Respondent’s defenses in depth. Our ultimate conclusion is the same. VOLUME 140 Final Order FINAL ORDER This matter having been heard by the Commission upon the appeal of Respondent and the cross-appeal of Complaint Counsel, and upon briefs and oral argument in support thereof and opposition thereto, and the Commission, for the reasons stated in the accompanying Opinion, having determined to sustain the Initial Decision with certain modifications: IT IS ORDERED THAT the Initial Decision of the administrative law judge be, and it hereby is, adopted as the Findings of Fact and Conclusions of Law of the Commission, to the extent it is not inconsistent with the findings of fact and conclusions of law contained in the accompanying Opinion. Other findings of fact and conclusions of law of the Commission are contained in the accompanying Opinion. IT IS FURTHER ORDERED THAT the following Order to cease and desist be, and it hereby is, entered: ORDER I.

IT IS ORDERED that, as used in this Order, the following definitions shall apply.

A. “Respondent” means North Texas Specialty Physicians (“NTSP”), its officers, directors, employees, agents, attorneys, representatives, successors, and assigns; and the subsidiaries, divisions, groups, and affiliates controlled by North Texas Specialty Physicians, and the respective officers, directors, employees, agents, attorneys, representatives, successors, and assigns of each. B. “Participate” in an entity means: (1) to be a partner, shareholder, owner, member, or employee of such entity; or (2) VOLUME 140 Final Order to provide services, agree to provide services, or offer to provide services, to a payor through such entity. This definition also applies to all tenses and forms of the word “participate,” including, but not limited to, “participating,” “participated,” and “participation.”

C. “Payor” means any person that pays, or arranges for the payment, for all or any part of any physician services for itself or for any other person. Payor includes any person that develops, leases, or sells access to networks of physicians. D. “Person” means both natural persons and artificial persons, including, but not limited to, corporations, unincorporated entities, and governments.

E. “Physician” means a doctor of allopathic medicine (“M.D.”) or a doctor of osteopathic medicine (“D.O.”). F. “Physician services” means professional services provided to patients by physicians.

G. “Preexisting contract” means a contract for the provision of physician services, other than the contract identified in Appendix B to this Order, that was in effect on the date of receipt by a payor that is a party to such contract of notice sent by Respondent, pursuant to Paragraph V.A.3 of this Order, of such payor’s right to terminate such contract. H. “Principal address” means either (1) primary business address, if there is a business address, or (2) primary residential address, if there is no business address. I. “Qualified clinically-integrated joint arrangement” means an arrangement to provide physician services in which: 1. all physicians who participate in the arrangement participate in active and ongoing programs of the arrangement to evaluate and modify the practice patterns of, and create a VOLUME 140 Final Order high degree of interdependence and cooperation among, the physicians who participate in the arrangement, in order to control costs and ensure the quality of services provided through the arrangement; and 2. any agreement concerning price or other terms or conditions of dealing entered into by or within the arrangement is reasonably necessary to obtain significant efficiencies through the arrangement.

J. “Qualified risk-sharing joint arrangement” means an arrangement to provide physician services in which: 1. all physicians who participate in the arrangement share substantial financial risk through their participation in the arrangement and thereby create incentives for the physicians who participate jointly to control costs and improve quality by managing the provision of physician services, such as risk-sharing involving:

a. the provision of physician services for a capitated rate; b. the provision of physician services for a predetermined percentage of premium or revenue from payors; c. the use of significant financial incentives (e.g., substantial withholds) for physicians who participate to achieve, as a group, specified cost-containment goals; or d. the provision of a 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 price, where the costs of that 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; and VOLUME 140 Final Order 2. any agreement concerning price or other terms or conditions of dealing entered into by or within the arrangement is reasonably necessary to obtain significant efficiencies through the arrangement.

II.

IT IS FURTHER ORDERED that Respondent, 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.S.C. § 44, cease and desist from: A. Entering into, adhering to, participating in, maintaining, organizing, implementing, enforcing, or otherwise facilitating any combination, conspiracy, agreement, or understanding between or among any physicians with respect to their provision of physician services: 1. to negotiate on behalf of any physician with any payor; 2. to deal, refuse to deal, or threaten to refuse to deal with any payor;

3. regarding any term, condition, or requirement upon which any physician deals, or is willing to deal, with any payor, including, but not limited to, price terms; or 4. not to deal individually with any payor, or not to deal with any payor through any arrangement other than Respondent; B. Exchanging or facilitating in any manner the exchange or transfer of information among physicians concerning any physician’s willingness to deal with a payor, or the terms or conditions, including price terms, on which the physician is willing to deal;

VOLUME 140 Final Order C. Attempting to engage in any action prohibited by Paragraphs II.A or II.B above; and D. Encouraging, suggesting, advising, pressuring, inducing, or attempting to induce any person to engage in any action that would be prohibited by Paragraphs II.A through II.C above. PROVIDED HOWEVER, that nothing in this Paragraph II of this Order shall prohibit any agreement involving or conduct by Respondent that is reasonably necessary to form, participate in, or take any action in furtherance of a qualified risk-sharing joint arrangement or a qualified clinically-integrated joint arrangement; III.

IT IS FURTHER ORDERED that, for three (3) years after the date this Order becomes final, Respondent shall notify the Secretary of the Commission in writing (“Notification”) at least sixty (60) days prior to entering into any arrangement with any physicians under which Respondent would act as a messenger, or as an agent on behalf of those physicians, with payors regarding contracts. The Notification shall include the identity of each proposed physician participant; the proposed geographic area in which the proposed arrangement will operate; a copy of any proposed physician participation agreement; a description of the proposed arrangement’s purpose and function; a description of any resulting efficiencies expected to be obtained through the arrangement; and a description of procedures to be implemented to limit possible anticompetitive effects, such as those prohibited by this Order. Notification is not required for Respondent’s subsequent acts as a messenger pursuant to an arrangement for which this Notification has been given. Receipt by the Commission from Respondent of any Notification, pursuant to this Paragraph III of this Order, is not to be construed as a determination by the Commission that any action described in such Notification does or does not violate this Order or any law enforced by the Commission.

VOLUME 140 Final Order IV.

IT IS FURTHER ORDERED that Respondent shall: A. Within thirty (30) days after the date on which this Order becomes final, send by first-class mail, return receipt requested, a copy of this Order and the Complaint to: 1. each physician who participates, or has participated, in Respondent since January 1, 2000;

2. each officer, director, manager, and employee of Respondent; and 3. the chief executive officer of each payor with which Respondent has a record of having been in contact, since January 1, 2001, regarding contracting for the provision of physician services, and include in such mailing the notice specified in Appendix A to this Order;

B. Terminate, without penalty or charge, and in compliance with any applicable laws, any preexisting contract with any payor for the provision of physician services, other than the contract identified in Appendix B to this Order, at the earliest of: 1. receipt by Respondent of a written request from a payor to terminate such contract, or 2. the earliest termination or renewal date (including any automatic renewal date) of such contract; PROVIDED, HOWEVER, a preexisting contract may extend beyond any such termination or renewal date no later than one (1) year after the date on which the Order becomes final, if prior to such termination or renewal date, (a) the payor submits to Respondent a written request to extend such contract to a specific VOLUME 140 Final Order date no later than one (1) year after the date this Order becomes final, and (b) Respondent has determined not to exercise any right to terminate;

PROVIDED FURTHER, that any payor making such request to extend a contract retains the right, pursuant to part (1) of Paragraph IV.B of this Order, to terminate the contract at any time;

C. Within ten (10) days after receiving a written request from a payor, pursuant to Paragraph IV.B(1) of this Order, distribute, by first-class mail, return receipt requested, a copy of that request to each physician participating in Respondent as of the date Respondent receives such request.

D. For a period of three (3) years after the date this Order becomes final:

1. distribute by first-class mail, return receipt requested, a copy of this Order and the Complaint to:

a. each physician who begins participating in Respondent, and who did not previously receive a copy of this Order and the Complaint from Respondent, within thirty (30) days of the time that such participation begins; b. each payor who contracts with Respondent for the provision of physician services, and who did not previously receive a copy of this Order and the Complaint from Respondent, within thirty (30) days of the time that such payor enters into such contract; and c. each person who becomes an officer, director, manager, or employee of Respondent and who did not previously receive a copy of this Order and the Complaint from Respondent, within thirty (30) days of the time that he or she assumes such responsibility with Respondent; and VOLUME 140 Final Order 2. annually publish a copy of this Order and the Complaint in an official annual report or newsletter sent to all physicians who participate in Respondent, with such prominence as is given to regularly featured articles;

E. File a verified written report within sixty (60) days after the date this Order becomes final, and annually thereafter for three (3) years on the anniversary of the date this Order becomes final, and at such other times as the Commission may by written notice require. Each such report shall include: 1. a detailed description of the manner and form in which Respondent has complied and is complying with this Order; 2. copies of the return receipts required by Paragraphs IV.A, IV.C, and IV.D of this Order; and F. Notify the Commission at least thirty (30) days prior to any proposed change in Respondent, such as dissolution, assignment, sale resulting in the emergence of a successor company or corporation, the creation or dissolution of subsidiaries, or any other change in Respondent that may affect compliance obligations arising out of this Order. V.

IT IS FURTHER ORDERED that Respondent shall notify the Commission of any change in its principal address within twenty (20) days of such change in address. VI.

IT IS FURTHER ORDERED that, for the purpose of determining or securing compliance with this Order, Respondent shall permit any duly authorized representative of the Commission:

VOLUME 140 Final Order A. Access, during office hours and in the presence of counsel, to inspect and copy all books, ledgers, accounts, correspondence, memoranda, calendars, and other records and documents in its possession, or under its control, relating to any matter contained in this Order; and B. Upon five (5) days’ notice to Respondent, and in the presence of counsel, and without restraint or interference from it, to interview Respondent or employees of Respondent. VII.

IT IS FURTHER ORDERED that this Order shall terminate twenty (20) years from the date it is issued. VOLUME 140 Final Order APPENDIX A Letter to payors with whom NTSP has a contract at the time the Order becomes final, other than a contract listed in Appendix B to the Order – to be sent within thirty (30) days after the Order becomes final [letterhead of Respondent NTSP] [name of payor’s CEO] [address] Dear _________:

Enclosed is a copy of a complaint and a decision and order (“Order”) issued by the Federal Trade Commission against North Texas Specialty Physicians (“NTSP”).

Pursuant to Paragraph IV.B of the Order, NTSP must allow you to terminate, upon your written request, without any penalty or charge, any contracts with NTSP that are in effect at the time of your receipt of this letter.

Paragraph IV.B of the Order also provides that, if you do not terminate a contract currently in effect with NTSP, the contract will terminate on its termination or renewal date (including any automatic renewal date). However, if the contract terminates on a date prior to [appropriate date one (1) year after Order became final], the contract may be extended at your written request to a date no later than [appropriate date one (1) year after Order became final]. The Order became final on [appropriate date to be filled in]. If you choose to extend the term of the contract, you may later terminate the contract at any time prior to [appropriate date one (1) year after Order became final].

VOLUME 140 Final Order Any request either to terminate or to extend the contract should be made in writing, and sent to me at the following address: [NTSP’s address].

Sincerely, VOLUME 140 Final Order APPENDIX B Pacificare of Texas ANHC/IPA Services Agreement (Professional Capitation/Approved Nonprofit Heatlh (sic) Corporation (dated July 1, 2000), as amended September 1, 2001 and January 1, 2003 [identified as RX 18, including pages RX0018_001 through RX0018_087; also identified by Bates numbers PCT 000924 through PCT 000986 and PCT 000895 through PCT 000918; and Bates numbers FTC-NTSP-PCFC 000327 through FTC-NTSP- PCFC 000389 and FTC-NTSP-PCFC 000298 through FTC- NTSP-PCFC 000321].

VOLUME 140 Complaint COMPLAINT Pursuant to the provisions of the Federal Trade Commission Act, as amended, 15 U.S.C. § 41 et seq., and by virtue of the authority vested in it by said Act, the Federal Trade Commission, having reason to believe that North Texas Specialty Physicians has violated Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45, and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest, hereby issues this Complaint stating its charges in that respect as follows: RESPONDENT PARAGRAPH 1: Respondent North Texas Specialty Physicians (hereinafter “NTSP”) is a non-profit corporation, organized, existing, and doing business under and by virtue of the laws of Texas, with its office and principal place of business at 1701 River Run Road, Suite 210, Fort Worth, Texas 76107. JURISDICTION PARAGRAPH 2: NTSP was formed by physicians to facilitate the physicians’ contracting with health insurance firms and other third-party payors (collectively, “payors”) for the provision of medical services. At all times relevant to this Complaint, participating physicians of NTSP have been engaged in the business of providing medical care for a fee. Except to the extent that competition has been restrained as alleged herein, participating physicians of NTSP have been, and are now, in competition with each other for the provision of physician services.

PARAGRAPH 3: While NTSP is a memberless corporation under state law, it was founded by, is controlled by, and carries on business for the pecuniary benefit of its participating physicians. Accordingly, the participating physicians are “members” of NTSP, and NTSP therefore is a “corporation,” as those terms are VOLUME 140 Complaint used in Section 4 of the Federal Trade Commission Act, as amended, 15 U.S.C. § 44.

PARAGRAPH 4: The general business practices of NTSP, including the acts and practices herein alleged, are in or affecting “commerce” as defined in the Federal Trade Commission Act, as amended, 15 U.S.C. § 44.

OVERVIEW OF MARKET AND PHYSICIAN COMPETITION PARAGRAPH 5: NTSP has approximately 600 participating physicians licensed to practice medicine in the State of Texas who are engaged in the business of providing professional services to patients in the Dallas-Fort Worth metropolitan area, mostly in Fort Worth and the “Mid Cities” (collectively, the “Fort Worth area”). PARAGRAPH 6: Physicians often contract with payors to establish the terms and conditions, including price terms, under which such physicians will render services to the payors’ subscribers. Physicians entering into such contracts often agree to lower compensation to obtain access to additional patients made available by the payors’ relationship with insureds. These contracts may reduce payors’ costs, enable them to lower the price of insurance, and reduce out-of-pocket medical expenditures by subscribers to the payors’ health insurance plans. PARAGRAPH 7: Absent agreements among competing physicians on the terms, including price, on which they will provide services to subscribers or enrollees in health care plans offered or provided by payors, competing physicians decide individually whether to enter into contracts with payors to provide services to their subscribers or enrollees, and what prices they will accept pursuant to such contracts.

PARAGRAPH 8: Medicare’s Resource Based Relative Value Scale (“RBRVS”) is a system used by the United States Centers for Medicare and Medicaid Services to determine the amount to VOLUME 140 Complaint pay physicians for the services they render to Medicare patients. The RBRVS approach provides a method to determine fees for specific services. In general, it is the practice of payors in the Fort Worth area to make contract offers to individual physicians or groups at a fee level specified in the RBRVS, plus a markup based on some percentage of that fee (e.g., “110% of 2001 Tarrant County RBRVS”).

PARAGRAPH 9: To be competitively marketable in the Fort Worth area, a payor’s health insurance plan must include in its physician network a large number of primary care physicians and specialists who practice in the Fort Worth area. Many of the primary care physicians and specialists who practice in the Fort Worth area are participating physicians of NTSP. PARAGRAPH 10: Competing physicians sometimes use a “messenger” to facilitate the establishment of contracts between themselves and payors in ways that do not constitute or facilitate an unlawful agreement on fees and other competitively significant terms. Such an arrangement, however, will not avoid horizontal agreement if the “messenger” or another agent negotiates fees and other competitively significant terms on behalf of the participating physicians, or facilitates the physicians’ coordinated responses to contract offers by, for example, electing not to convey a payor’s offer to them based on the agent’s, or the participants’, opinion on the appropriateness, or lack thereof, of the offer. RESTRAINT OF TRADE PARAGRAPH 11: NTSP’s participating physicians, including the members of its Board of Directors, constitute numerous discrete economic interests. The conduct of NTSP constitutes combined or concerted action by its participating physicians. PARAGRAPH 12: NTSP, acting as a combination of competing physicians, and in combination with physicians and other physician organizations, has restrained competition among its participating physicians by, among other things: VOLUME 140 Complaint A. facilitating, negotiating, entering into, and implementing agreements among its participating physicians on price and other competitively significant terms;

B. refusing or threatening to refuse to deal with payors except on collectively agreed-upon terms; and C. negotiating fees and other competitively significant terms in payor contracts for NTSP’s participating physicians, and refusing to submit payor offers to participating physicians unless and until price and other competitively significant terms conforming to NTSP’s contract standards have been negotiated.

VOLUME 140 Complaint FORMATION AND OPERATION OF NTSP PARAGRAPH 13: NTSP was organized in November 1995 as a nonprofit corporation. Its initial Board of Directors, composed of three participating physicians, was established in NTSP’s Certificate of Incorporation. Pursuant to NTSP’s By-Laws, successor Board members are elected from among the participating physicians for three-year terms by the members of each of NTSP’s sections, which are organized by medical specialty. NTSP is funded through fees paid by physicians on first becoming participating physicians and through its receipt, pursuant to its physician participation agreements, of a stated percentage of the fees paid by payors to participating physicians pursuant to certain NTSP-payor contracts. NTSP presently is composed of approximately 600 physicians, some 130 of whom are primary care physicians.

PARAGRAPH 14: Pursuant to a few of NTSP’s contracts with payors, some of the NTSP physicians who participate in the arrangement share financial risk, for example, through the provision of services at an agreed capitated rate. However, pursuant to the great majority of NTSP’s contracts with payors, those NTSP physicians who participate in the arrangement do not share any financial risk, each physician typically receiving a specified fee for each service provided. Whereas only about onehalf of NTSP’s participating physicians–and few if any primary care providers–participate in any risk-sharing arrangements, substantially all of NTSP’s participating physicians participate in some non-risk contracts. With respect to these non-risk contracts, NTSP often has sought to negotiate for, and often has obtained, higher fees and other more advantageous terms than its individual physicians could obtain by negotiating individually with payors. PARAGRAPH 15: Physicians seeking to participate in NTSPpayor contracts apply for participating physicianship. A physician becomes a participating physician by entering into a “North Texas Specialty Physicians Physician Participation Agreement” with NTSP, granting to NTSP authority to arrange for his or her VOLUME 140 Complaint services to be provided to persons covered by payors pursuant to agreements between NTSP and the payors. Each physician covenants that he or she will forward to NTSP for further handling payor offers the physician receives, and will refrain from pursuing any such offer until NTSP notifies the physician that it is permanently discontinuing negotiations with the payor. If, and only if, NTSP approves and enters into an agreement with a payor, NTSP then forwards the agreement to its participating physicians, who then may elect to participate (or not) in the payor’s offer. NTSP’S ILLEGAL ACTS AND PRACTICES PARAGRAPH 16: NTSP has engaged in various acts and practices, as more fully described subsequently, that unlawfully restrain competition among NTSP’s participating physicians. NTSP has undertaken these acts and practices with the knowledge of its Directors and other participating physicians, and often at their explicit instruction.

PARAGRAPH 17: NTSP periodically polls its participating physicians, asking each to disclose the minimum fee, typically stated in terms of a percentage of RBRVS, that he or she would accept in return for the provision of medical services pursuant to an NTSP-payor agreement. In conformity with its agreement with its participating physicians, NTSP then calculates the mean, median, and mode (“averages”) of minimum acceptable fees reported by its physicians. NTSP then reports these measures back to its participating physicians, confirming to the participating physicians that these averages will constitute the minimum fees that NTSP will entertain as the basis of any contract with a payor. Such interchanges of prospective price information among otherwise competing physicians reduce price competition among those physicians, and enable the participating physicians, acting through NTSP and otherwise, to price their services interdependently to achieve supra-competitive prices. PARAGRAPH 18: Sometimes when NTSP begins discussions with a payor regarding a possible contract for the provision of VOLUME 140 Complaint services by NTSP’s participating physicians, NTSP informs the payor that its physicians have established fee minimums for NTSP-payor agreements, identifies those fee minimums (the poll averages referred to in the preceding Paragraph), and states that NTSP will not enter into or otherwise forward to its participating physicians any payor offer that does not satisfy those fee minimums.

PARAGRAPH 19: In other instances, payors have proposed to NTSP agreements, or amendments to existing agreements, for the services of its participating physicians that included proposed fee schedules that did not satisfy the NTSP physicians’ fee minimums. NTSP has then advised the payors of NTSP’s established fee minimums and told the payors to resubmit their proposals with fee schedules that satisfy those minimums, or otherwise actively bargained with payors as to fees to be paid NTSP’s participating physicians. As a result, payors sometimes have either submitted new offers with higher fees or accepted the higher fees pressed on them by NTSP on behalf of its physicians. PARAGRAPH 20: In at least one instance, NTSP, at the explicit dictate of its Directors, sought instruction from its participating physicians as to the disposition of a payor offer that already had been made. NTSP wrote to its participating physicians, reminding them of their previously agreed-to minimums and noting that the specified payor’s offer approximated those minimums as to some of its medical insurance plans, but fell materially below those minimums as to other plans. NTSP then asked each of its participating physicians to respond to a poll by indicating the minimum fees, again typically stated in terms of a percentage of RBRVS, that he or she would accept in return for the provision of medical services to the specific payor’s subscribers. When NTSP calculated the average minimum fees that its participating physicians would accept to contract with that payor, it found that the participating physicians collectively would not accept fees lower than the previously established minimums. It then rejected the payor’s offer and explicitly refused to forward the offer to any of its participating physicians, whether or not the proposed fees VOLUME 140 Complaint were above any given physicians’ stated minimum acceptable fees. Following refusals by NTSP to forward the proposed contract to its participating physicians and several communications between NTSP and its participating physicians attacking the payor’s fee proposal as “below market,” the payor increased its proposed fees to the NTSP fee minimums. Only then did NTSP enter into a contract with the payor and forward the agreement to its participating physicians, affording them the option to participate (or not) in the payor’s offer. PARAGRAPH 21: In addition, while seeking to negotiate fees on behalf of its participating physicians, NTSP has discouraged and prevented payors and participating physicians from negotiating directly with one another. In at least one instance, after NTSP fee negotiations with a payor broke down, NTSP orchestrated the simultaneous withdrawal of NTSP physicians from an arrangement pursuant to which numerous NTSP participating physicians had provided medical services to the payor’s subscribers through another physician organization with which NTSP had contracted. This increased the pressure on the payor to contract for the services of NTSP’s participating physicians through NTSP, at higher proposed fees. The payor ultimately yielded to that pressure and contracted with NTSP and its physicians at increased fee levels. LACK OF SIGNIFICANT EFFICIENCIES PARAGRAPH 22: The acts and practices described in Paragraphs 16 through 21, including NTSP’s negotiation of fees and other competitively significant terms of contracts under which each physician is paid on a fee-for-service basis, have not been, and are not, reasonably related to any efficiency-enhancing integration. With respect to these contracts, NTSP’s participating physicians do not share substantial financial risk and are not otherwise integrated in ways that would create the potential for increased quality and reduced cost of medical care that the physicians provide to patients.

VOLUME 140 Complaint ANTICOMPETITIVE EFFECTS PARAGRAPH 23: NTSP’s acts and practices as described herein have had, or tend to have, the effect of restraining trade unreasonably and hindering competition in the provision of physician services in the Fort Worth area in the following ways, among others:

A. price and other forms of competition among NTSP’s participating physicians were unreasonably restrained; B. prices for physician services were increased; and C. health plans, employers, and individual consumers were deprived of the benefits of competition among physicians. PARAGRAPH 24: The combination, conspiracy, acts, and practices described above constitute unfair methods of competition in violation of Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45. Such combination, conspiracy, acts, and practices, or the effects thereof, are continuing and will continue or recur in the absence of the relief herein requested. NOTICE Notice is hereby given to the Respondent that the sixteenth day of January, 2004, at 10:00 a.m. o'clock, or such later date as determined by an Administrative Law Judge of the Federal Trade Commission, is hereby fixed as the time and Federal Trade Commission offices, 600 Pennsylvania Avenue, N.W., Room 532, Washington, D. C. 20580, as the place when and where a hearing will be had before an Administrative Law Judge of the Federal Trade Commission, on the charges set forth in this Complaint, at which time and place you will have the right under the Federal Trade Commission Act VOLUME 140 Complaint to appear and show cause why an Order should not be entered requiring you to cease and desist from the violations of law charged in this Complaint.

You are notified that the opportunity is afforded you to file with the Commission an answer to this Complaint on or before the twentieth (20th) day after service of it upon you. An answer in which the allegations of the Complaint are contested shall contain a concise statement of the facts constituting each ground of defense; and specific admission, denial, or explanation of each fact alleged in the Complaint or, if you are without knowledge thereof, a statement to that effect. Allegations of the Complaint not thus answered shall be deemed to have been admitted. If you elect not to contest the allegations of fact set forth in the Complaint, the answer shall consist of a statement that you admit all of the material allegations to be true. Such an answer shall constitute a waiver of hearings as to the facts alleged in the Complaint, and together with the Complaint will provide a record basis on which the Administrative Law Judge shall file an initial decision containing appropriate findings and conclusions and an appropriate Order disposing of the proceeding. In such answer you may, however, reserve the right to submit proposed findings and conclusions under Section 3.46 of the Commission's Rules of Practice for Adjudicative Proceedings and the right to appeal the initial decision to the Commission under Section 3.52 of said Rules.

Failure to answer within the time above provided shall be deemed to constitute a waiver of your right to appear and contest the allegations of the Complaint and shall authorize the Administrative Law Judge, without further notice to you, to find the facts to be as alleged in the Complaint and to enter an initial decision containing such findings, appropriate conclusions, and Order.

VOLUME 140 Complaint The Administrative Law Judge will schedule an initial prehearing scheduling conference to be held not later than 14 days after the last answer is filed by the Respondent. Unless otherwise directed by the Administrative Law Judge, the scheduling conference and further proceedings will take place at the Federal Trade Commission, 600 Pennsylvania Avenue, N.W., Room 532, Washington, D. C. 20580. Rule 3.21(a) requires a meeting of the parties’ counsel as early as practicable before the prehearing scheduling conference, and Rule 3.31(b) obligates counsel for each party, within 5 days of receiving Respondent’s answer, to make certain initial disclosures without awaiting a formal discovery request.

NOTICE OF CONTEMPLATED RELIEF Should the Commission conclude from the record developed in any adjudicative proceeding in this matter that Respondent North Texas Specialty Physicians (“NTSP”) is in violation of Section 5 of the Federal Trade Commission Act as alleged in the Complaint, the Commission may order such relief as is supported by the record and is necessary and appropriate, including, but not limited to:

1. An Order to cease and desist from entering into, adhering to, participating in, maintaining, organizing, implementing, enforcing, or otherwise facilitating any combination, conspiracy, agreement, or understanding between or among any physicians: (a) to negotiate on behalf of any physician with any payor; (b) to deal, refuse to deal, or threaten to refuse to deal with any payor; (c) regarding any term, condition, or requirement upon which any physician deals, or is willing to deal, with any payor, including, but not limited to, price terms; or (d) not to deal individually with any payor, or not to deal with any payor through any arrangement other than NTSP. 2. An Order to cease and desist from exchanging or facilitating in any manner the exchange or transfer of information among physicians concerning any physician’s willingness to deal with VOLUME 140 Complaint a payor, or the terms or conditions, including price terms, on which the physician is willing to deal. 3. An Order to cease and desist from attempting to engage in any action prohibited by Paragraphs 1 or 2, above. 4. An Order to cease and desist from encouraging, suggesting, advising, pressuring, inducing, or attempting to induce any person to engage in any action that would be prohibited by Paragraphs 1-3, above.

5. A requirement that, for a period of five (5) years, NTSP notify the Commission prior to entering into any arrangement with any physicians under which NTSP would act as a messenger, or as an agent, on behalf of those physicians. 6. An Order requiring NTSP to terminate, without penalty or charge, and in compliance with any applicable laws, any contract that it has entered into with any payor since January 1, 1998.

7. An Order to cease and desist from engaging in, attempting to engage in, or encouraging others to engage in illegal horizontal agreements with competitors.

8. Any other provision appropriate to correct or remedy the anticompetitive practices engaged in by NTSP. 9. A requirement that NTSP distribute a copy of the Order and Complaint, within thirty (30) days after the Order becomes final, to: (a) each physician who is participating, or has participated, in NTSP since January 1, 1998; (b) each officer, director, or manager, and each employee who has or had any responsibility regarding NTSP’s physician networks; and (c) each payor that NTSP has contacted, or been contacted by, since January 1, 1998, regarding contracting for the provision of physician services.

VOLUME 140 Complaint 10. A requirement that for five (5) years after the Order becomes final, NTSP distribute a copy of the Order and Complaint, within thirty (30) days of the event triggering this requirement, to: (a) each newly participating physician in NTSP; (b) each person who becomes an officer, director, or manager, or an employee who has any responsibility regarding NTSP’s physician networks; and (c) each payor that NTSP contacts, or is contacted by, regarding contracting for the provision of physician services. 11. A requirement that for five (5) years after the Order becomes final, NTSP annually publish a copy of the Order and the Complaint in an official report or newsletter sent to all physicians who participate in NTSP, and on any website maintained by or for NTSP, with such prominence as is given to regularly featured articles.

12. Requirements that NTSP file periodic compliance reports with the Commission, notify the Commission of any changes that may affect compliance obligations, and permit Commission representatives prompt access to NTSP documents and personnel for the purpose of determining or securing compliance with this Order.

WHEREFORE, THE PREMISES CONSIDERED, the Federal Trade Commission, on this sixteenth day of September, 2003, issues its Complaint against NTSP.

VOLUME 140 Initial Decision INITIAL DECISION By D. Michael Chappell, Administrative Law Judge I. INTRODUCTION A. Summary of Decision This is a horizontal price fixing case. The Federal Trade Commission ("FTC") charges that Respondent North Texas Specialty Physicians ("NTSP"), on behalf of its participating physicians, collectively bargained with health insurance plans in order to obtain higher prices or more favorable economic terms in contracts for physician services.

Respondent NTSP is an independent practice association ("IPA") of approximately 500 physicians, the vast majority of whom are specialists who practice in Fort Worth, Texas. NTSP physicians are a significant presence and make up a large percentage of practitioners in many specialities in the Fort Worth area. One the functions of NTSP is to receive offers from health insurance plans of Health Maintenance Organization ("HMO") or Preferred Provider Organization ("PPO") contracts ("non-risk contracts") to provide physician services in the Fort Worth, Texas area. Upon receipt of a payor offer of a non-risk contract, Respondent evaluates the offer and determines whether to send it -- messenger it -- to its participating physicians. Respondent docs not messenger to its physician members any offers on non-risk contracts that fall below minimum rates established by the NTSP Board ("Board minimums"). NTSP establishes Board minimums by conducting polls among its physician members that ask each physician to disclose the minimum price that he or she would accept to provide medical services pursuant to a non-risk contract. In its defense, Respondent asserts that it did not negotiate economic terms of non-risk contracts. Respondent further asserts that it is entirely proper for Respondent to determine whether or not to send contract offers it receives from health care members to the physicians who participate in NTSP. VOLUME 140 Initial Decision The government proved its case. As explained in detail in the findings of fact and analysis below, the evidence establishes that physicians participating in NTSP, who arc otherwise competitors of each other, communicated to NTSP the minimum prices that they were willing to accept for physician services and that NTSP used this information to negotiate higher rates and more favorable terms for non-risk contracts than those initially offered by various health insurance plans. Through the use of price information collected from its physician members to leverage increased offers or better terms from health insurance payors, NTSP has engaged in a combination, contract, or conspiracy that has unreasonably restrained trade. Accordingly, Complaint Counsel has demonstrated a violation of Section 5 of the FTC Act. The appropriate remedy is an order to cease and desist. B. Summary of Complaint and Answer The FTC issued its Complaint in this matter on September 16 2003. The Complaint charges that Respondent, acting as a combination of competing physicians, has restrained competition by negotiating and entering into agreements among its participating physicians on price; refusing or threatening to refuse to deal with payors except on collectively agreed upon terms; negotiating fees in payor contracts for NTSP's participating physicians; and refusing to submit payor offers to participating physicians unless and until price and other competitively significant terms conforming to NTSP's contract standards have been negotiated. Complaint P 12. The Complaint further alleges that the acts of Respondent have had the effect of restraining trade unreasonably and hindering competition in the provision of physician services in the Fort Worth area in the following ways: price and other forms of competition among NTSP' participating physicians were unreasonably restrained; prices for physician services were increased; and health plans, employers, and individual consumers were deprived of the benefits of competition. Complaint P 23. The Complaint charges that the combination, conspiracy, acts and practices alleged in the Complaint constitute unfair methods of competition in or affecting commerce in violation of Section 5 of the Federal Trade VOLUME 140 Initial Decision Commission Act, as amended, 5 U. § 45. Complaint P 24. In its Answer, filed on October 7 2003, Respondent denied the material allegations of the Complaint and asserted the following defenses: that it is a memberless non-profit corporation and therefore is not subject to the jurisdiction of the Federal Trade Commission; that NTSP' conduct does not constitute commerce as defined in the Federal Trade Commission Act; that NTSP has the right as an entity under United States v. Colgate Co., 250 U. S. 300, 307 (1919) to refuse to become a party to another's contract or transaction; and that NTSP's conduct has been fair, reasonable, and justified. Answer p. 3.

C. Procedural Background On March 2, 2004, Complaint Counsel filed a Motion for Partial Summary Decision. Also on March 2, 2004, Respondent filed a Motion for Summary Decision. Respondent's motion was denied by Order dated April 9, 2004. Complaint Counsel's motion was denied by Order dated April 14, 2004. Both motions were denied on the ground that genuine issues of material fact raised by the pleadings could only be properly determined after an evidentiary hearing.

The final prehearing conference was held in Fort Worth, Texas on April 27, 2004. Trial commenced immediately following the prehearing conference. Nearly 1 500 exhibits were admitted and 17 witnesses testified, either live or by videotape. Trial concluded on May 25 2004.

On June 16 2004, both parties filed proposed findings of fact, post trial briefs, and conclusions of law. Complaint Counsel filed its response to Respondent's brief and proposed findings of fact on June 30, 2004, and filed a corrected response to Respondent's proposed findings of fact on July 1, 2004. Respondent filed its response to Complaint Counsel's brief and proposed findings of fact on June 30, 2004. Closing arguments were heard on July 21 2004.

The hearing record was closed pursuant to Commission Rule 3.44(c) by Order dated June 2004. Rule 3. 51(a) of the VOLUME 140 Initial Decision Commission's Rules of Practice states that an Initial Decision shall be filed "within ninety (90) days after closing the hearing record pursuant to § 3.44(c) . . . or within such further time as the Commission may by order allow upon written request from the Administrative Law Judge." 16 C.F.R. § 3.51(a). Ninety days from the close of the record was September 7, 2004. By Certification for Extension of Time to File Initial Decision dated August 25, 2004, the Commission was requested to extend the time for filing this Initial Decision by sixty days, until November 8, 2004. By Order dated September 17 2004, the Commission granted this request and extended the date for filing the Initial Decision until November 8, 2004.

Rule 3.51(a) also states that an Initial Decision shall be filed within one year "after the issuance of the administrative complaint, except that the Administrative Law Judge may, upon a finding of extraordinary circumstances, extend the one-year deadline for a period of up to sixty (60) days." 16 C.F.R. § 3.51 (a). The Complaint in this matter was issued on September 16 2003. One year from the issuance of the Complaint was September 16, 2004. By Order dated September 14, 2004, extraordinary circumstances were found to extend the one-year deadline for a period of up to sixty days, until November 15 2004. D. Evidence This Initial Decision is based on the exhibits properly admitted in evidence, the transcript of trial testimony, and the briefs, proposed findings of fact and conclusions of law, and replies thereto submitted by the parties. Citations to specific numbered Findings of Fact in this Initial Decision arc designated by "F."

Under the Commission's Rules of Practice, a party or a nonpary may file a motion seeking in camera treatment for material, or portions thereof; offered into evidence. 16 C. § 3.45(b). The Administrative Law Judge may order that such material be placed in camera only after finding that its public disclosure will likely result in a clearly defined, serious injury to the entity requesting in camera treatment. 16 C.F.R. § 3.45(b). Pursuant to VOLUME 140 Initial Decision Commission Rule 3.45(b), several orders were issued granting in camera treatment to material that met the Commission's strict standard. In addition, when the paries sought to elicit testimony at trial that revealed information that had been granted in camera treatment, the hearing went into an in camera session. In instances where a doeument or certain trial testimony has been given in camera treatment, but the portion of the material cited to in this Initial Decision does not rise to the level necessary for in camera treatment, such material is disclosed in the public version of this Initial Decision, pursuant to Commission Rule 3.45(a) (the AU "may disclose such in camera material to the extent necessary for the proper disposition of the proceeding"). In camera material that is used in this Initial Decision is indicated in bold font and braces ("[Redacted]") in the in camera version; it is redacted from the public version of the Initial Decision, in accordance with 16 C.F.R. § 3.45(f).

This Initial Decision addresses only material issues of fact and law. Proposed findings of fact not included in this Initial Decision were rejected, either because they were not supported by the evidence or because they were not dispositive or material to the determination of the allegations of the Complaint or the defenses thereto. The Commission has held that Administrative Law Judges arc not required to discuss the testimony of each witness or all exhibits that are presented during the administrative adjudication. In re Amrep Corp., 102 F.T.C. 1362, 1670 (1983). Further, administrative adjudicators are "not required to make subordinate findings on every collateral contention advanced, but only upon those issues of fact, law, or discretion which are 'material.'" Minneapolis St. Louis Ry. Co. v. United States, 361 U.S. 173, 193-94 (1959).

II. FINDINGS OF FACT A. Background 1. Organization of and contracting by physician practices 1. Physicians often organize their practices into medical VOLUME 140 Initial Decision groups, which operate as single integrated entities having a single CEO, accountant, office manager, and staff. (Casalino, Tr. 2795- 96).

2. Physicians and medical groups often contract with health plans in order to increase the volume of patients available to them. (Frech, Tr. 1288-89).

3. Competing physicians and medical groups sometimes enter into arrangements with others to form independent practice associations, known as IP As. IP As are looser combinations of medical groups formed for the purpose of negotiating contracts with managed care health plans. (Casalino, Tr. 2796; Frech, Tr. 1292).

4. IP As generally lack direct authority to control the practices of their member physicians. (Casalino, Tr. 2799-2800). 2. Health care insurance and managed care 5. Historically, most health care insurance coverage was indemnity insurance. The prevalence of indemnity insurance skewed incentives in such a way that consumers often neither sought to reduce price by seeking lower-priced providers, nor quantity by seeking to avoid over-utilization. (Frech, Tr. 1282- 83).

6. Managed care was introduced to address these deficiencies and control the cost of health care services through health plan contracting with physicians, control of utilization, and management of care. (Frech, Tr. 1282-84, 1289). 7. One form of managed care is the Health Maintenance Organization ("HMO"). HMOs generally feature small provider panels, low co-payments for patients, and broad administrative controls to limit utilization, with no coverage for patients who choose providers outside the network. (Frech, Tr. 1283-84). 8. HMO contracts can involve a variety of physician compensation structures. In some instances, participating physicians are paid a stated fee for each service rendered. This compensation structure is referred to as fee- for-service. (Mosley, Tr. 131-32).

VOLUME 140 Initial Decision 9. A less tightly controlled form of managed care is the Preferred Provider Organization ("PPO"). Relative to HMOs, PPOs generally involve fewer administrative controls and higher patient co-payments to limit utilization, but larger physician panels and greater access to out-of-network physicians, albeit at a reduced rate of reimbursement. (Frech, Tr. 1283- 84). 10. The Medicare RBRVS fee schedule is Medicare's Resource Based Relative Value System ("RBRVS"), a system developed by the United States Centers for Medicare and Medicaid Services to determine the amount to pay physicians for each service rendered to Medicare patients. (Frech, Tr. 1286; Wilensky, Tr. 2144).

11. Health plans that contract with physicians on a fee- forservice basis often do so based on a stated percentage of the Medicare RBRVS fee schedule, which provides reimbursement rates for a large number of specific procedures. (Frech, Tr. 1286; Mosley, Tr. 137; Grizzle, Tr. 692-93).

12. The Medicare RBRVS establishes weighted values for each medical procedure, such that the application of a percentage multiplier (such as 100% for Medicare itself), enables one to determine the fees for thousands of different services simultaneously. (Frech, Tr. 1286).

3. Distinction between risk and non-risk agreements 13. In a risk sharing agreement ("risk contract"), sometimes referred to as a capitation agreement, physicians participating in an HMO are paid (or share) a set dollar amount stated per member, per month, irrespective of the quantity of services rendered. (Frech, Tr. 1293; Mosley, Tr. 131-32; Wilensky, Tr. 2177-78).

14. Capitation agreements shift the risk of overutilization of medical services to the capitated physician or physician group. (Quirk, Tr. 255; Mosley, Tr. 206; Lovelady, Tr. 2638). Physicians respond to capitation and other incentive systems by modifying their utilization and other practice patterns. (Frech, Tr. 1293-94; Casalino, Tr. 2811; Lovelady, Tr. 2640-41). VOLUME 140 Initial Decision 15. In a non-risk sharing agreement ("non-risk contract"), physicians are paid under a fee-for-service reimbursement arrangement. (CX 1177 (Grant, Dep. at 78); CX 1198 (Vance Dep. at 36)). In fee-for-service arrangements, physicians do not bear the risk of overutilization of physician services because payments are made for the services provided. (Frech, Tr. 1346- 47).

16. PPOs generally utilize non-risk sharing agreements where the insurance company contracts to reimburse providers at a predetermined level for services performed by the physicians. (Mosley, Tr. 134).

B. North Texas Specialty Physicians 1. Organization and composition 17. NTSP is an IPA located in Fort Worth, Texas. (CX 311 at I; CX 1196 (Van Wagner 08. 29. 02 IHT at 8)). It is a nonprofit corporation organized, existing, and doing business under and by virtue of the laws of Texas, with its office and principal place of business at 1701 River Run Road, Suite 210, Fort Worth, Texas, 76107. (Complaint P 1; Answer P 1; RX 1674 (NTSP fact sheet)). 18. NTSP does not function as a clinically integrated organization for patients seen under non-risk contracts. (Casalino, Tr. 2877).

19. NTSP was formed in 1995 under section 5. 01(a) of the Texas Medical Practice Act which allows nonprofit entities to engage in the practice of medicine for the purposes of research medical education, or the delivery of health care to the public. (Van Wagner, Tr. 1489-90; RX 1674; RX 1675; RX 1676). 20. NTSP caries on business for the pecuniary benefit of its member physicians. (CX 311 at 10-11 and CX 275 at 30-31 ("NTSP shall use its best efforts to market itself and its Participating Physicians to Payors and to solicit Payor offers for the provision of Covered Services by Participating Physicians"); CX 310 (stating that NTSP physician's ability to negotiate VOLUME 140 Initial Decision "substantially improved" by NTSP; noting NTSP's discussions with payors" should lead to contracts that are more favorable than we would be able to achieve individually or through other contracting entities"); CX 159 at 2 (noting contractual issues addressed by NTSP include "maintaining minimal reimbursement standards for its member physicians")). 21. NTSP, as an organization, receives its revenue from risk contracts and a one time fee of $ 1,000 from each physician. (Van Wagner, 'Ir. 1552).

22. From January 1 1999 to December 22, 2003, NTSP purchased $ 1,047,819.86 from vendors with billing addresses outside of Texas. (CX 1203; CX 1195 (Van Wagner, 01.20. Dep. at 77)). For example, NTSP purchased $ 457,373.09 of stop loss insurance from McPhee & Associates, a California insurance broker. (CX 1203; CX 1195 (Van Wagner, 01.20. 04 Dep. at 81)). 23. NTSP's Board of Directors ("Board") is made up of eight physicians. Under NTSP' organizational documents and under Texas law, NTSP's directors, other than an "Officer Director" must be physicians who are actively engaged in the practice of medicine. (CX 275 at 7; Van Wagner, Tr. 1493-94; see also TEX. OCC. CODE ANN. § 162. 001 (Vernon 2004)). 24. The Board of Directors is elected from among NTSP's member physicians and meets once a week. (Van Wagner, Tr. 1493-94).

25. NTSP has a salaried, core administrative staff of eight people, including executive director Karen Van Wagner, provider relations staff, provider sponsored network ("PSN" development and contracting staff, data processing staff, credentialing staff; and clerical support staff. (Van Wagner, Tr. 1494-95; RX 1674). 26. NTSP's Medical Executive Committee includes the chairs of each of NTSP's specialty divisions who are elected by the member physicians within each specialty. (Deas, Tr. 2559-60; CX 275 at 5).

VOLUME 140 Initial Decision 27. Karen Van Wagner, Ph.D. is NTSP's executive director. Van Wagner joined NTSP in 1997, roughly a year after the organization was established. (Van Wagner, Tr. 1461-62). 28. Dr. Thomas Deas is the current president and chairman of the Board of NTSP. addition to heading the Medical Executive Committee, Deas is a medical director of NTSP. (Deas, Tr. 2524, 2556).

29. Dr. William Vance was one of the founding members of NTSP, serving as its president from 1996 until 2001. Vance was a member of the Medical Management Committee from its inception through 2002. In addition, he was the chairman of NTSP's cardiology section. His role within NTSP ceased when his practice group, Consultants in Cardiology, withdrew from NTSP in April 2002. (CX 1198 (Vance, Dep. at 9, 48, 49)). 30. Dr. John Johnson, II is a medical physician and a current member of NTSP's Board of Directors. (CX 1182 (Johnson, Dep. at 6, 13)).

2. Member physicians 31. NTSP has member physicians in eight counties in and around the Dallas/Fort Worth Metroplex. (Van Wagner, Tr. 1468- 69). Approximately 85-88% of NTSP's member physicians are located in Tarrant County, with the majority located in Fort Worth. (Van Wagner, Tr. 1471; CX 1196 (Van Wagner, 08.29. 02 IHT at 15- 16)).

32. At the time of trial (April 2004), NTSP had approximately 480 participating physicians. (Van Wagner, Tr. 1510, 1518). In 2003, NTSP had approximately 575 participating physicians, practicing in 26 different specialties, who had signed NTSP's Physician Participation Agreement ("PPA"). (CX 311 (physician paricipation agreement); RX 3118 (Maness Report PP 4, 19)). In 2001, NTSP had as many as 652 physicians. (CX 209 at 2 ("NTSP has become a 'gorilla network' with approximately 124 PCP's [primary care physicians] . . . and 528 specialists."). VOLUME 140 Initial Decision 33. NTSP member physicians attend general membership meetings, pay dues, and elect NTSP's Board. (CX 1178 (Hollander, Dep. at 21- 34)).

34. NTSP member physicians are organized into specialty divisions, based on field of practice. (Van Wagner, Tr. 1510). 35. NTSP's member physicians have distinct economic interests, reflecting their separate clinical practices. (CX 1182 (Johnson, Dep. at 21); see also CX 524 (roster of NTSP member physicians listing multiple physicians and/or physician groups practicing the same specialty in Fort Worth)). 36. Many NTSP physicians and physician practices are in competition with one another. (CX 1182 (Johnson, Dep. at 21) ("We compete for patients. We compete at the different hospitals at which we work."); CX 550 (noting that NTSP's disagreements with payors were supported by its membership despite the fact that "short term advantage and perceived best interest are always controversial and potentially divisive, weakening the strength that our numbers provide.")).

3. Overview of NTSP's functions 37. NTSP was founded in 1995 to allow a group of specialist physicians to accept economic risk on medical contracts and to participate in the medical decision-making process. NTSP has since broadened its activities to include entering into and messengering non-risk contracts and has expanded its membership to include primary care physicians ("PCPs"). (RX 1675; Vance, Tr. 587- 88; Wilensky, Tr. 2158-59). 38. The Board manages the organization, determines NTSP's minimum contract prices and evaluates contract offers. If a payor offer is at or above Board minimum rates (infra F. 83-90) and is otherwise acceptable, NTSP will messenger the offer to its member physicians. (CX 275 at 5; Van Wagner, Tr. 1642-43; Vance, Tr. 595-96; CX 1177 (Grant, Dep. at 22-24); CX 1174 (Deas, Dep. at 42)).

39. NTSP represents its member physicians and provides administrative expertise to review contracts, confront timely VOLUME 140 Initial Decision payment issues, and lobby government agencies for physician issues. NTSP has evolved into a forum for its member physicians to cooperate and discuss the general and specific business of medicine and receive advice and information. (CX 350). 40. NTSP's Medical Executive Committee transmits information and feedback including the status of fee-for-service contract discussions, between NTSP's staff and Board and the membership. (CX 1174 (Deas, Dep. at 20-21); Deas, Tr. 2560). 41. NTSP communicates with its member physicians by sending faxes called "Fax Alerts" which keep its member physicians informed of the activities of NTSP, including contractual issues. (CX 1178 (Hollander, Dep. at 48); CX 1198 (Vance, Dep. at 54)).

42. NTSP holds "general membership meetings" to provide contracting updates for specific payor negotiations and to discuss and share NTSP's poll results with the membership. (CX 1178 (Hollander, Dep. at 21-23); CX 182; CX 183; CX 184; CX 186; CX 187).

4. Contracts with health insurance providers 43. NTSP "is in the business of' contracting with health maintenance organizations health care networks and other payors to provide health care services through physicians and physician groups who have contracted with NTSP to provide health care services. (CX 311 at 1 (WHEREAS Recital of NTSP PPA)). 44. One of NTSP's functions is to negotiate reimbursement terms in contracts with health plans on behalf of NTSP's member physicians. (CX 159 at 2 ("Contracting issues addressed by NTSP this past year included . . . maintaining minimal reimbursement standards for its physicians."); CX 350 ("NTSP was stared in an attempt to provide a seat at the table of medical business for the individual specialty physicians. . . . NTSP, through PPO and risk contracts, has provided a consistent premium fee-for-service reimbursement to the members when compared with any other contracting source."); CX 1182 (Johnson, Dep. at 10- 11) ("NTSP was going to be a group of physicians that would bring a voice to VOLUME 140 Initial Decision organizing physicians who often practiced in individual groups to hopefully be able to secure contracts, improve patient care, and provide a voice at the table for physicians. . . . [It was] to represent physicians . . . in obtaining contracts from businesses or insurance companies or in dealing with hospitals.")). 45. NTSP analyzes contract language from both operational and legal perspectives communicating with payors about the terms of the contract, determining the payor's payment policies and timing, mailing contracts to participating physicians, determining when physicians accept a given contract, and establishing and updating systems to track physician and plan member participation in a given contract. (Van Wagner, Tr. 1648- 49; Wilensky, Tr. 2195-96; RX 3118 (Maness Report P 76); CX 1196 (Van Wagner, 08.29. 02 IHT at 56-57)). This review benefits physicians. (CX 1182 (Johnson, Dep. at 11) ("As a busy physician, I had relatively little time to look at contracts, and oftentimes did not understand the legal language in contracts, so having another organization that could review contracts and educate mc as to the terms in the contracts" was a benefit.)). 46. NTSP originally focused on negotiating shared-risk contracting with health plans, but as the market moved away from risk-sharing arrangements, NTSP increasingly sought to negotiate and did negotiate non-risk contracts. (CX 195). 47. In 2001, NTSP accepted risk on only approximately 32 000 lives. (CX 616 at 2 (NTSP takes professional risk on approximately 20 000 commercial and 12 000 Medicare lives)). 48. In March 2001, NTSP's Board of Directors stated that "risk business is a small part of the business" and concluded that NTSP's "focus should center on how to benefit members on feefor-service contracts as well." (CX 83 at 3). 49. NTSP has one risk-sharing contract -- the one it shares with PacifiCare. (CX 1177 (Grant, Dep. at 19)). Within the past five years, NTSP also had a risk contract with AmCare. (CX 1196 (Van Wagner, 08.29. 02 IHT at 14); CX 1195 (Van Wagner, 01.20. 04 Dep. at 15)).

VOLUME 140 Initial Decision 50. NTSP has approximately twenty fee-for-service contracts, covering many more lives. (CX 1196 (Van Wagner, 08. 29. 02 IHT at 14); see also CX 265 in camera (listing, by health plan, lives covered under NTSP's non-risk contracts)). 51. Sixty percent of NTSP's physicians participate in fee-forservice contracts. Roughly half of those physicians participate in risk-sharing contracts. Some of these physicians participate in NTSP through a participation agreement under which they can gain access to NTSP's non-risk contracts, but are not eligible to participate in NTSP's risk contract. (CX 616 at 12; CX 1197 (Van Wagner, 08. 30. 02 IHT at 182, 228-29); Van Wagner, Tr. 1830; CX 1194 (Van Wagner, 11.9. 03 Dep. at 37-38)). C. Relevant Market 52. In contracting for health plan services, Fort Worth employers demand significant coverage by physicians who practice in the Fort Worth area and who admit patients to Fort Worth hospitals. (Grizzle, Tr. 688-89, 722; Frech, TL 1304-05; Mosley, Tr. 141-42; Quirk, Tr. 276- 280; Jagmin, Tr. 1104-07). 53. To be competitively marketable to Fort Worth area employers, health plans must include many physicians who practice in a variety of fields in the Fort Worth area. (Grizzle, Tr. 688-89, 720, 722; Jagmin, Tr. 1104-07). 54. When buying health coverage, employers look for networks that include all of the tertiary care hospitals in an area, most of the other hospitals within the area, and a broad selection of physicians in the locale, including a wide selection of specialists within each specialty. (Jagmin, Tr. 971- 1102-03; Quirk, Tr. 270-72, 275-76).

55. Health plans try to assemble and market a panel of physicians that will satisfy employers ' preferences for greater access to a wide array of conveniently located physicians without compromising the overall cost of care. (Quirk, Tr. 270-72; Jagmin, Tr. 972).

VOLUME 140 Initial Decision 56. Fort Worth employers typically would consider a network adequate if it had physicians within ten miles of at least 85%, and preferably 90%, of its employees. (Mosley, Tr. 141-42). 57. NTSP physicians agree that Fort Worth specialists are better able to address the needs of patients (and primary care physicians) located in Fort Worth than physicians located elsewhere. (E.g., CX 583 at 1-2 (Johnson, an NTSP member physician, writing: "obviously a provider network whose business is based entirely here in Fort Worth is better positioned to address the needs of both patients and physicians.") (emphasis in original). See also CX 1187 (McCallum, Dep. at 59) (NTSP Board member testifying that Dallas physicians compete in a different market than NTSP physicians)). 58. A large network of physicians located in Dallas or in We Mid-Cities, defined as the areas including Arlington, Hurst, Euless, Bedford, Colleyville, and Southlake (CX 1196 (Van Wagner, 08.29. 02 IHT at 16), would not be marketable to Fort Worth employers if the network did not also have a large number of appropriate physicians located in Fort Worth. (Mosley, Tr. 142-43; Jagmin, Tr. 1103-04; Quirk, Tr. 280-82). 59. A network of physicians located in Dallas or the Mid- Cities that did not also have a large number of appropriate physicians located in Fort Worth would not achieve the geographic access required by employers with large numbers of Fort Worth employees and would not be acceptable to employers, even if they were discounted by five or ten percent, relative to those areas. (Mosley, Tr. 142-43; Quirk, Tr. 279-80). 60. If all Fort Worth physicians increased prices by five percent, health plans serving Fort Worth employers would not be able to avoid the price increase by substituting away from Fort Worth. (Grizzle, Tr. 723; Quirk Tr. 280-82; Jagmin, Tr. 1103-04). 61. NTSP physicians are a significant presence in the Fort Worth area. NTSP physicians make up a large percentage of Tarrant County practitioners in several medical specialties: 80% for pulmonary disease, 68. 6% for urology, and 58. 8% for cardiovascular disease. (Frech, Tr. 1299). Tarrant County includes VOLUME 140 Initial Decision Fort Worth and several surrounding cities. (Quirk, Tr. 420; Maness, Tr. 1992).

62. A loss of NTSP's physicians from a health plan's network would have "a very deleterious affect" on the health plan's ability to market its product in Tarrant County. (Jagmin Tr. 1091). One health insurance plan's representative testified that, without NTSP's physicians it would suffer from significant holes in coverage for a number of specialties in Fort Worth. ([Redacted], in camera).

63. NTSP has stated that a health plan attempting to serve the employees of the City of Fort Worth "would not be able to satisfy employer/employee match or network access standards without NTSP Physicians Participating in the Network" and that, "NTSP is the only stable physician organization left in the Tarrant County market." (CX 1042. See also CX 576 at 3 (NTSP stating that "without NTSP specialists in the Aetna network, a severe network inadequacy problem will exist in Fort Worth.")). D. Contract, Combination, or Conspiracy 1. Physician Participation Agreement 64. NTSP and its paricipating physicians enter into the Physician Participation Agreement ("PPA"), establishing their relationship. (CX 276 at 1).

65. The PP A grants NTSP the right to receive all payor offers and imposes on the participating physicians a duty to promptly forward those offers to NTSP. (CX 276 (Fax Alert stating that NTSP shall have "exclusive right, on behalf of its members, to receive all payor offers"); CX 275 at 24 ("NTSP shall have the right to receive all Payor Offers made to NTSP or Physician . . . If Physician receives a Payor Offer, . . . Physician will promptly forward such Payor Offer to NTSP for further handling in accordance with the provisions of this Agreement.")). 66. The PP A grants NTSP a right of first negotiation with payors, with each physician agreeing that he or she will refrain from pursuing offers from a health plan until NTSP notifies them VOLUME 140 Initial Decision that NTSP is permanently discontinuing negotiations with the health plan. (CX 275 at 2; CX 276; CX 311 at 8; Deas, Tr. 2405- 06; CX 1178 (Hollander, Dep. at 68) ("And there were various criteria like time limits that the participating physician[s] generally agreed that they would just wait and after that time limit was expired, then they were free to negotiate on their own.")). 67. With respect to "Non Risk Payor Offers" the PP A states: promptly after receiving any Non Risk Payor Offer, NTSP shall deliver to Physician and each other Participating Physician the Fee Schedule and other economic provisions of the Non Risk Payor Offer. Physician shall have ten (10) business days within which to accept or reject such Fee Schedule and economic provisions, with the understanding that if Physician fails so to accept or reject within such 1 Oday period, Physician shall be deemed to have accepted such Fee Schedule and economic provisions.

If the Participating Physicians who approve and who are deemed to have approved the Non Risk Payor Offer constitute 50% or more of all Participating Physicians, then NTSP, on behalf of Physician, shall notify the Payor of the acceptance and proceed with negotiation and execution of a Payor Agreement. If 50% or more of the Participating Physicians request that NTSP submit a counter-proposal to the applicable Payor, then NTSP shall submit the counter-proposal to such Payor. If the counterproposal is accepted, then NTSP, on behalf and as agent of Physician, shall proceed with negotiation and execution of a Payor Agreement with respect to such counter-proposed offer.

If the counter-proposal is not accepted by the Payor but the Payor submits its own counter-proposal, then VOLUME 140 Initial Decision such counter-proposal shall be treated as a new payor offer and will be submitted to Participating Physicians in accordance with the preceding provisions.

(CX 275 at 25-26).

68. Although under the PP A, NTSP is obligated to deliver to each physician the fee schedule and other economic provisions of a non-risk payor offer (CX 275), NTSP delivered only those offers which were approved by NTSP and which met minimum levels established by the Board, as determined by the results of a poll. (Van Wagner, Tr. 1706; CX 1196 (Van Wagner, 08. 29. 02 II-IT at 29-30) (the Board does not send to physicians offers below the minimal acceptable level as determined by the results of a poll.)).

69. With respect to "Payor Offers Rejected by NTSP," the PPA states:

If NTSP rejects any Payor Offer and advises the Participating Physicians in writing that it is permanently discontinuing negotiations or if the Participating Physicians who approved and who are deemed to have approved a Non Risk Payor Offer constitute less than 50% of all Participating Physicians, then NTSP shall have no further responsibilities with respect thereto and any Participating Physician shall have the right to pursue such Payor Offer on its own behalf.

(CX 275 at 26).

70. NTSP has urged its member physicians to avoid undermining NTSP's role in negotiating contracts on behalf of its member physicians. (E.g., CX 550 (Vance's "Open Letter to the Membership": "We must continue to move forward as a group or we will surely falter as individuals"); CX 380 at 3 (NTSP warning its physicians that physician fees will decline unless "NTSP or someone can provide a unifying voice for physicians"); CX 400 at VOLUME 140 Initial Decision 2 (NTSP warning its member physicians that without their support "it is likely NTSP will not be around the next time Aetna, Cigna, or United come to town" with unsatisfactory rate proposals.)).

71. NTSP cannot and does not bind any member physician or physician group to non-risk contracts. (Frech, Tr. 1362-64; Van Wagner, Tr. 1637, 1777).

72. NTSP's member physicians can and do contract with health plans outside of NTSP cither directly, through financially integrated physician groups, or through other IP As. (Quirk Tr. 288- 89; Van Wagner, Tr. 1564, 1637; Deas, Tr. 2432). 73. There are no agreements between one or more NTSP member physicians to not participate in or to reject a non-risk payor offer. (Frech, Tr. 1365; Maness, Tr. 2048). 74. NTSP's member physicians and physician groups do not consult with each other when making decisions on non-risk payor contracts. (Maness, Tr. 2049-50).

75. NTSP's member physicians and physician groups do not know what any other physician or physician group will do in response to a non-risk payor offer. (Frech, Tr. 1436-37; Maness, Tr. 2044-46; Deas, Tr. 2423).

2. Power of attorney forms 76. In the process of negotiations with United Healthcare ("United") and with Aetna Health, Inc. ("Aetna"), NTSP has solicited and obtained power of attorney forms from its member physicians, giving NTSP the legal authority to negotiate non-risk contracts on behalf of those member physicians. (CX 1173 (Deas IHT at 56-57); Palmisano, Tr. 1250-51. E.g., 347 at 2; CX 1061 at 1).

77. The power of attorney forms that NTSP provided to its physicians with respect to contract negotiations with United and Aetna state:

The undersigned . . . appoints, with full power of substitution North Texas Specialty Physicians . . . as VOLUME 140 Initial Decision attorney-in- fact to act for me in any lawful way with respect to all contracts and agreements (including without limitation all prospective contracts or agreements) with and/or involving the undersigned and . . . [United Health Care / Aetna]. This power of attorney grants to the agent the authority to act on the undersigned's behalf regarding the foregoing described agreements in all respects, including the authority to negotiate the terms of, enter into, execute, amend, modify, extend or terminate any such agreements.

(CX 1061-1103 (United); CX 347-404 (Aetna)). 78. In distributing the power of attorney forms to its member physicians, NTSP has instructed its physicians to inform health care payors' representatives that NTSP is his or her contracting agent and to instruct the health care payor to contact NTSP with respect to contracting activity. (CX 1066 (United); CX 548 (Aetna)).

79. NTSP also includes in power of attorney solicitations information about the number of physicians who already have executed the power of attorney forms. (CX 1066 ("Thus far, NTSP has received 107 signed documents from NTSP member physicians assigning NTSP power of attorney to act on their behalf in regard to all contracting activity between themselves and United Healthcare."); CX 548 (NTSP sent 180 power of attorney authorizations in regard to Aetna HMO and PPO commercial products)).

80. With respect to negotiating with Cigna Healthcare ("Cigna"), NTSP requested its member physicians to sign an "authorization form" to allow NTSP to serve as its physicians' agent. (CX 332).

81. NTSP physicians have referred health plans that sought to contract directly with them back to NTSP, at times noting that the deferral was based on agency or power of attorney held by NTSP. (Beaty, Tr. 454-60; Grizzle, Tr. 696-98, 701, 709; CX 760 VOLUME 140 Initial Decision (exhibit admitted as an exception to the hearsay rule for verbal acts and not for the truth of the matter asserted therein ["limited admission"]). See also CX 1178 (Hollander, Dep. at 116) ("If an NTSP physician had signed an agency agreement specifying that NTSP was to be their exclusive agent in connection with these contracts, then my understanding was that [the payor] had to deal with NTSP and not with the individual physician himself."). 82. NTSP has advised health plans during rate negotiations for fee-for-service contracts and at other times that it represented NTSP member physicians, through power of attorney forms, (Roberts, Tr. 540-41), or otherwise (CX 760 (limited admission) (letters from NTSP physicians to Cigna citing NTSP as their contracting "agent"); Beaty, Tr. 454-60). 3. Board minimums 83. "Board minimums" are the minimal acceptable rates for NTSP to enter into non-risk contracts with health plans. (Van Wagner, Tr. 1921; Frech, Tr. 1324). Payor offers falling below Board minimums are rejected by NTSP. (Frech, Tr. 1324. E.g., F. 127, 154, 300, 341).

84. NTSP establishes Board minimum prices for use in negotiating non-risk contracts with health plans. (Van Wagner, Tr. 1642-43; Frech, Tr. 1321; e.g., CX 274 (Fax Alert stating: NTSP "utilizes these minimums when negotiating managed care contracts on behalf of its participants.")). 85. Board minimums are also used by NTSP to predict when the participation rate of NTSP's member physicians will be high enough for NTSP to messenger an offer to its member physicians. (Deas, Tr. 2433; Maness, Tr. 2079-80). Multiple times over several years, NTSP has informed health plans that its physicians have established minimum fees for NTSP-payor agreements and that NTSP will not forward to its member physicians, or enter into a contract, based on payor offers that do not satisfy those fee minimums. (Van Wagner, Tr. 1822-24; CX 1196 (Van Wagner, 08.29.02 IHT at 63, 154)).

VOLUME 140 Initial Decision 86. Board minimums may have been utilized as early as 1997. (CX 1042 (2001 Fax Alert from NTSP to its member physicians stating "NTSP board minimums have remained constant for four years.")). NTSP conducted its first poll in either 1998 or 1999. (CX 1194 (Van Wagner, 11.19.03 Dep. at 86-87)). 87. NTSP conducts polls to determine minimum reimbursement rates for use in negotiation of non-risk contracts with health plans. (Van Wagner, Tr. 1639 ("We contact our physicians and we ask them to respond to a . . . survey on . . . what they believe are acceptable fees that they want to see in the nonrisk contracts."); CX 1196 (Van Wagner, 8.29.02 IHT at 27 ("Every year the Board asks the members to tell them what they consider to be appropriate reimbursement. . . . Once a year we poll the members and get that information from them.")); e.g., CX 565).

88. NTSP's polling form explains to the member physicians that each year, "NTSP polls its affiliates and membership to establish Contracted Minimums. NTSP then utilizes these minimums when negotiating managed care contracts on behalf of its participants." (CX 387 at 1; CX 633). 89. NTSP's polling form asks each physician to disclose the minimum price that he or she would accept for the provision of medical services pursuant to a fee-for-service HMO or PPO agreement. (CX 565; CX 1196 (Van Wagner, 08.29.02 IHT at 27)).

90. NTSP's member physicians are asked to indicate their price selection by placing a check mark next to one of several preprinted Medicare RBRVS ranges. (CX 274; CX 565; CX 633). 91. By quoting a particular percentage of RBRVS, one can establish the prices for thousands of different services simultaneously. By using the Medicare index and a percentage of Medicare as a conversion factor, voluminous price information is reduced to a single dimension. (Frech, Tr. 1287). 92. NTSP's member physicians and physician groups do not consult with each other when responding to the poll. (Maness, Tr. 2049-50; Lonergan, Tr. 2718).

VOLUME 140 Initial Decision 93. After receiving the poll responses, NTSP calculates the mean, median, and mode ("averages") of the minimum acceptable fees identified by its physicians and establishes its minimum contract prices. (Van Wagner, Tr. 1640; CX 103; CX 387). 94. NTSP informs its physicians of the average poll results and NTSP's minimum contract prices based thereon. (Van Wagner, Tr. 1644. E.g., CX 393, CX 430, CX 1042). 95. NTSP physicians are informed only of the mean, median, and mode of the poll responses. They do not know how any other specific physician or physician group responded to the polls. (Van Wagner, Tr. 1641-44; Frech, Tr. 1436-37; Maness, Tr. 2044-46; Deas, Tr. 2423).

96. On October 15, 2001, the NTSP Board received annual poll results. Based on the poll results, NTSP established minimum prices of 125% of 2001 Medicare RBRVS for HMO products and 140% of 2001 Medicare RBRVS for PPO products as minimally acceptable fee schedules for health plan contracts. (CX 103 at 4; CX 389).

97. On November 11, 2002, NTSP conducted another annual poll to determine minimum reimbursement rates for use in negotiation of HMO and PPO products and anesthesia contracts with health plans. On its polling form sent to physicians, NTSP included the prior year's poll results, reported by mean, median, and mode. (CX 430).

98. The results of the 2002 annual poll by mean, median, and mode, for HMO were 131%, 135%, and 135%; for PPO, 146%, 145%, and 145%. NTSP reported these figures to its member physicians and stated that the "poll's objective is to identify what reimbursement levels NTSP members deem acceptable." (CX 432).

99. By providing this pricing information to its member physicians, NTSP effectively informs the physicians of the potential reward for entering into a contract with health plans through NTSP, as opposed to entering into a contract with a health plan by directly negotiating with the health plan. (Frech, Tr. 1326).

VOLUME 140 Initial Decision 100. Such price information sharing reduces each physician's uncertainty as to the conduct of its competitors in the aggregate. (Frech, Tr. 1327; see also CX 1170 (Blue, Dep. at 33) (poll results provide "a guideline where we saw the numbers, we would like to have these rates, if possible, and it kind of gave you an idea of where the market was. So if I got other communications independently and some . . . [were] paying 80 percent of Medicare, but it looked like a lot of plans were paying 110 percent, then 80 percent of Medicare sounded pretty low.")). E. NTSP's Dealings with Several Health Plans 1. United Healthcare Services, Inc.

a. Corporate structure 101. United Healthcare Services, Inc., is a wholly owned subsidiary of United Healthcare through which United Healthcare offers its PPO and other non-HMO products in Texas. (Quirk, Tr. 234-35, 239, 241, 247-48). United Healthcare of Texas is a wholly owned subsidiary of United Healthcare through which United Healthcare offers its HMO products in Texas. (Quirk, Tr. 235, 247-48). [United Healthcare Services and United Healthcare of Texas are collectively referred to as "United."] 102. United Healthcare is a subsidiary of United Health Group, a publicly traded company. (Quirk, Tr. 248; Wilensky, Tr. 2156). The success or failure of United's Texas entities are reflected in the stock price of United Healthcare. (Quirk, Tr. 248). 103. United contracts with multi-state employers, some of whom are domiciled outside of Texas but have employees in Texas, such as Raytheon and Home Depot. (Quirk, Tr. 253-54). 104. If health care costs rise in the Ft. Worth area, the pricing of the overall package to Raytheon or other national companies would be affected. (Quirk, Tr. 254-55). VOLUME 140 Initial Decision 105. Since 1999, Thomas J. Quirk has been the CEO for the North Texas and Oklahoma Region of United Healthcare Services, Inc., and the President, Chairman of the Board and the CEO of United Healthcare of Texas. (Quirk, Tr. 234-36). 106. Quirk oversees all of United's operations for the North Texas and Oklahoma regions, which include sales for commercial employers, municipalities and school districts; account management for United's existing customers and network operations, which encompass contracting with physicians, hospitals, and other provider networks; and maintenance of those relationships. (Quirk, Tr. 235-36).

b. NTSP's negotiations with United in 1998 107. In July 1998, NTSP informed its member physicians that United was attempting to standardize its physician agreements by, among other things, changing the fee schedule. (CX 1005 (Fax Alert # 79)).

108. In Fax Alert # 79, NTSP sent its physicians an agency agreement for the purpose of obtaining consent to enter into negotiations. NTSP stated that "because United Healthcare has the potential to be a major payor in this market place, the NTSP Board wishes to contact them and negotiate on behalf of its membership." (CX 1005 at 2).

109. NTSP explained later that it was United's attempt to change fee schedules that prompted NTSP negotiations with United. (CX 1014).

110. NTSP encouraged its member physicians to "refrain from responding to United Healthcare while NTSP's request for agency status [was] being tabulated." (CX 1005 at 2 (capitalization omitted)).

111. Some of NTSP's physicians authorized NTSP to negotiate with United on their behalf. (E.g., CX 1006 (July 15, 1998 letter from Deas of Gastroenterology Associates of North Texas to Van Wagner allowing NTSP to serve as its agent in regard to future negotiations, including price terms, with United and instructing NTSP not to agree to any fee schedules lower than VOLUME 140 Initial Decision 135% of 1997 Medicare RBRVS for United's HMO product and 147% for United's PPO product); Deas, Tr. 2573-77). 112. On August 20, 1998, NTSP requested, and United granted, an extension on the time line for the assignment of contracts. (CX 1008). NTSP informed its member physicians of the extension and instructed them that they did not need to sign or return any documents or contracts to United. (CX 1008). 113. In September 1998, NTSP proposed to United that the Dallas Medicare RBRVS be used in calculating the rates for its HMO and PPO products for NTSP physicians, and informed its member physicians of this proposal in Fax Alert # 94. (CX 1010). 114. NTSP also informed its member physicians in Fax Alert # 94 that "for many specialists, Dallas rates are approximately three to five percent higher than PPO rates applied to Tarrant County." (CX 1010 at 2).

115. On October 27, 1998, in Fax Alert # 101, NTSP informed its member physicians that discussions with United had been productive, that the parties agreed to extend the deadline, and that member physicians need not take any action with regard to standardizing their United contract until this extension expired. (CX 1011).

116. United made an offer to NTSP on a non-risk contract that was below the rates available to NTSP participating physicians through another IPA, Health Texas Provider Network ("HTPN"). (Van Wagner, Tr. 1726-27).

117. HTPN, which is an affiliate IPA of Baylor Health Care System, is an organization of employed as well as independent contracted physicians in Dallas. NTSP and HTPN had an arrangement whereby NTSP member physicians would be allowed to access HTPN's payor offers. NTSP did not participate in discussions with payors regarding economic terms of HTPN contracts. (Van Wagner, Tr. 1559-60; Quirk, Tr. 311-12; RX 1947).

VOLUME 140 Initial Decision 118. On December 2, 1998, in Fax Alert # 112, NTSP informed its member physicians that NTSP proposed to United that NTSP's physicians contract with United through HTPN. (CX 1012).

119. On March 9, 1999, in Fax Alert # 12, NTSP recommended to its member physicians that they transition their existing contracts into a standard United contract, and assured them that this would have no effect on the reimbursement rates that they were receiving under their current contract. NTSP further informed its member physicians that "we [NTSP] continue our discussions with United Healthcare on proposed fee schedules for these products." (CX 1014).

120. Ultimately, a significant number of NTSP physicians accessed United through the NTSP-HTPN arrangement. (CX 1015).

c. NTSP's negotiations with United in 2001 121. Beginning in March 2001, NTSP member physicians contacted NTSP, asking that NTSP seek and obtain a contract with United. (CX 1117 at 1). On March 14, 2001, NTSP expressed to United its "desire for a group contract reflecting today's market." (CX 1117 at 2; Quirk, Tr. 284-89). 122. NTSP targeted United because NTSP believed that United's rates were below market rates. (CX 211 at 3 (NTSP informing its Primary Care Physician Council that they had identified United as a re-negotiating target, noting that United was becoming a significant player in the Fort Worth market and that United's rates were well below market)). 123. NTSP's discussions with United involved fee-for-service contracts. (Quirk, Tr. 291, 293-94).

124. As of March 2001, United had contracts with approximately two-thirds of the NTSP physicians, either directly or through other organizations, such as HTPN. (Quirk, Tr. 288- 89). Therefore, United concluded that there was no need to enter into an agreement with NTSP. (Quirk, Tr. 289-90). VOLUME 140 Initial Decision 125. On April 12, 2001, NTSP reported at its Primary Care Council Meeting that the reimbursement rates under the United- HTPN contract - 130% of 1997 St. Anthony RBRVS (145% Radiology) for HMO, 145% of 1997 St. Anthony RBRVS for POS, and 145% of 1997 St. Anthony RBRVS for PPO - were below market. (CX 209 at 3; CX 1015 at 4). A majority of NTSP physicians had accepted this contract in 1999 through NTSP's affiliation with HTPN. (CX 1015 at 1).

126. In or about May 2001, notwithstanding its view that United already had a sufficient network in Fort Worth, United offered to NTSP its then standard rates in the Fort Worth area: 110% of 2001 Dallas RBRVS, which was the equivalent of 115% of 2001 Tarrant County RBRVS, to NTSP. United's offer extended one rate for both HMO and PPO products. (CX 87 at 7; CX 89 at 3; Quirk, Tr. 290, 297-98).

127. NTSP did not messenger the May 2001 offer to its physicians and rejected it for two reasons: (1) it fell below NTSP's Board minimums; and (2) it extended one rate for all products, instead of different rates for HMO and PPO products. (Quirk, Tr. 300-01; CX 87 at 7).

128. On June 19, 2001, a United representative wrote to an NTSP representative, explaining that United's offered rates were identical for HMO and PPO reimbursement because, from the physician's standpoint, each United patient is administratively the same. (CX 1027).

129. On June 25, 2001, the NTSP Board discussed United's rate offer and rejected it. (CX 89 at 3; Quirk, Tr. 300-01). d. NTSP's discussions with the City of Fort Worth 130. In 2001, NTSP physicians provided health care to the majority of employees of the City of Fort Worth and their dependents under NTSP's risk contract with PacifiCare. (Mosley, Tr. 148-49, 203).

131. The City of Fort Worth, in 2001, decided to become selfinsured and began accepting bids from payors to become the administrator of its health plan. (Mosley, Tr. 148-49). One of the VOLUME 140 Initial Decision bidders against PacifiCare was United. (Mosley, Tr. 203-05; Van Wagner, Tr. 1743).

132. NTSP learned, in the spring of 2001, that United was negotiating with the City of Fort Worth to provide health care coverage to city employees and their dependents. (CX 89 at 3). 133. NTSP believed that United was threatening to displace an NTSP risk contract. (Mosley, Tr. 206-07; Quirk, Tr. 363-65). If the City of Fort Worth selected United, the effect would be to remove this major employer's patients from NTSP's risk network (PacificCare) and substitute in its place a four-year-old non-risk contract that NTSP had with United through HTPN. (Van Wagner, Tr. 1728-29; CX 1042).

134. NTSP also had concerns about the adequacy of United's network and utilization management for the City's patient population and about United's ability to provide care to the City. (Van Wagner, Tr. 1729-35; Deas, Tr. 2424-25, 2429-30; Mosley, Tr. 185-87; Vance, Tr. 856-57; CX 1031). 135. During its negotiations with United, beginning in June 2001, NTSP encouraged its Board members to contact "any city council members they know to let them know that United's panel is not adequate." (CX 89 at 3).

136. NTSP also urged its primary care physicians to contact the Mayor and city council members to educate them about the situation with United and ask for help. (CX 211 at 3). 137. NTSP, on July 13, 2001, provided to its member physicians model letters for the purpose of contacting city officials. Attached to Fax Alert # 44 was a sample letter to the Mayor of Fort Worth with the fax number for the Mayor and the names, addresses, fax numbers, and email addresses of the members of the city council. The sample letter included the following statements:

Many of my patients are city employees or dependants and I/we have enjoyed caring for and managing their health for years. . .

VOLUME 140 Initial Decision I look forward for your assistance in communicating to United that they offer a reasonable solution to this situation so I/we can continue to see City Employees and their dependants without disruption. . . In the best interest of my/our current City of Ft. Worth patients, I/we ask for your assistance in resolving this dispute before the City transitions to United Health Care.

(CX 1042 at 4).

138. On July 2, 2001, NTSP member physicians Blue, Vance, Deas, and Grant signed a letter addressed to the Mayor of Fort Worth bearing NTSP's letterhead. The letter asserted that United's rates were "well below market benchmarks" and that "NTSP simply has not and will not accept United's request for our participation in their provider network for your employees." The letter also asserted that "the City may experience significant network disruption once United officially begins their duties (up to 588 doctors no longer available)." (CX 1029 at 3-4; see also CX 1031 (July 9, 2001, letter from Vance to the Mayor of Fort Worth, stating that the City's recent switch to United placed the relationship between the City employees and their physicians "in serious jeopardy," that the United offer was "significantly below market," and stating that unless "this contractual issue is resolved," there was the "likelihood that NTSP members will no longer be available to city employees.")). 139. Other NTSP physicians wrote letters to the Mayor of Fort Worth reflecting the points discussed by NTSP in Fax Alert # 44. (CX 1036; CX 1037; CX 1041; CX 1046).

140. NTSP, as an existing provider for the City of Fort Worth, arranged a meeting with the City and communicated to the City NTSP's concerns about the adequacy of United's panel and the cost impact on the City if the City were to change from the PacifiCare risk contract to the United non-risk contract. (Mosley, Tr. 186-87, 192-93; Van Wagner, Tr. 1744; Deas, Tr. 2424-25, 2429-31).

VOLUME 140 Initial Decision 141. At the September 13, 2001 meeting with the City, NTSP representatives also told the City that United had offered rates on a non-risk contract with NTSP that were unacceptable to NTSP and that NTSP was going to reject the United offer. NTSP told the City that they may have a significantly different network on October 1, 2001, when the City would transition from PacifiCare to United. (Mosley, Tr. 186-87; CX 1042). 142. The NTSP Board informed its member physicians in Fax Alert # 44, dated July 13, 2001, that NTSP Board members met with the Mayor of Fort Worth regarding the "possible inadequacy of the United network" and stated that although they "got the attention of the Mayor, our work is not done." (CX 1042). 143. Jim C. Mosley, a health care consultant to the City of Fort Worth, contacted a representative of United and shared with United the City's concerns regarding the continuation, maintenance, and preservation of the then existing United network. The possibility that City employees might lose access to NTSP physicians was a matter of concern to the City. United was requested to maintain the network without compromising costs. (Mosley, Tr. 173, 179-80, 182; Quirk, Tr. 309). 144. On September 13, 2001, NTSP met again with representatives of the City of Fort Worth. NTSP told the City that United's new, increased PPO reimbursement offer to NTSP physicians was still unacceptable. NTSP further expressed concerns about United's practice of "bundling" claims, pursuant to which physicians who provided multiple services on a single occasion were reimbursed at a single, bundled rate (lower than the rate at which each service would be compensated if billed separately). NTSP expressed its view that United's bundling practice under-compensated physicians. (Mosley, Tr. 185-93; CX 1075).

145. Following the September 13, 2001 meeting between NTSP and the City of Fort Worth, NTSP wrote a letter to the City of Fort Worth informing the City that United continued to offer low rates. (CX 1075 (Letter from Deas to City Manager for the City of Fort Worth, noting that despite some "positive VOLUME 140 Initial Decision movement," United's overall rates "may still prove inadequate" and this "may affect the overall size of United's physician network")).

146. NTSP's September 13, 2001 letter to the City of Fort Worth also reported that several physician's offices refused to contract with United unless a group contract through NTSP was negotiated on their behalf and noted that NTSP's termination notice to HTPN would take effect October 21, 2001. Notification letters to patients could be sent as soon as October 1, 2001, the same day as the City was supposed to transition to United. (CX 1075).

e. Continued negotiations and termination of HTPN contract 147. On July 9, 2001, NTSP informed United that United's current offer of 110% RBRVS (Dallas conversion factors) for all products was below the Board minimums that NTSP could accept. NTSP told United that the Board minimums were 125% RBRVS for HMO and 140% RBRVS for PPO (Tarrant County conversion factors). (CX 1034 at 1; Quirk, Tr. 299-01). 148. On July 13, 2001, in Fax Alert # 44, the NTSP Board informed all NTSP member physicians that NTSP and United were in agreement as to basic fundamental language terms but "far apart in agreeing to a market reimbursement fee schedule." (CX 1042 at 1).

149. The NTSP Board also noted in Fax Alert # 44 that many NTSP physicians were contracted with United through HTPN. The rates under the United-HTPN contract were indexed to 114% of 2001 Tarrant County RBRVS for HMO and 127% of 2001 Tarrant County RBRVS for PPO and were reported to be below or little above Medicare for many NTSP specialties. (CX 1042). The NTSP Board contrasted the NTSP minimums of 125% of 2001 Tarrant Medicare RBRVS for HMO and 140% of Tarrant Medicare RBRVS for PPO with United's direct offer to NTSP of 110% 2001 Dallas Medicare RBRVS for all products. (CX 1042). 150. The NTSP Board, in Fax Alert # 44, also informed the member physicians that "the NTSP Board has authorized VOLUME 140 Initial Decision termination [of] the United Health Care contract. However, notice has not yet been sent to United as NTSP must attempt one last strategy." (CX 1042).

151. On July 23, 2001, the NTSP Board approved the termination of its participation in the United-HTPN contract. (CX 91; CX 1051B). At that time, 101 of NTSP's physicians contracted with United through the United-HTPN contract. The rest of NTSP physicians contracted with United were through direct contracts (77) or through another IP A or other organizations. (CX 1055; CX 1057; Quirk, Tr. 302-04). 152. The effective date of termination was to be October 20, 2001, less than three weeks after the City of Fort Worth had planned to transition its employee health plans from PacifiCare to United. (CX 1051B; CX 1042 at 1).

153. On July 23, 2001 NTSP sent a letter to United, submitting its ninety day notice of its termination of participation in all United products offered through HTPN ("termination letter"). NTSP sent a copy of the July 23, 2001 termination letter to the Mayor of the City of Fort Worth. (CX 1118; Quirk, Tr. 312- 13).

154. NTSP explained to its member physicians, by Fax Alert # 52 dated August 9, 2001, that the United contract through HTPN was terminated because United offered rates below Board approved minimums and because of United's proposal of a single fee schedule for both HMO and PPO. (CX 1062). f. Poll results used to establish Board minimums 155. United's May 2001 offer to NTSP of 110% of current Dallas Medicare RBRVS fee schedule fell below NTSP's Board minimums that had been determined by the Board based on the result of polling. (CX 1042).

156. Subsequent to the May 2001 offer, NTSP completed its annual reimbursement poll. As NTSP informed its member physicians, "this poll's objective is to identify what reimbursement levels NTSP members deem acceptable." (CX 393).

VOLUME 140 Initial Decision 157. On October 29, 2001, in Fax Alert # 83, NTSP communicated to its member physicians the results of NTSP's annual reimbursement poll of NTSP member physicians' acceptable rates on both HMO and PPO levels. (CX 393). 158. The results of the 2001 annual poll for HMO were 128.46% (mean), 127% (median), and 127% (mode). The results for PPO were 142.07% (mean), 144.5% (median), and 144.5% (mode). "All percentages index to current Medicare rates and represent[] the percentage of Medicare that the 'average NTSP physician' would find acceptable for the next twelve months on HMO and PPO products." (CX 393).

159. On October 29, 2001, NTSP held a general membership meeting in which the offer from United was detailed along with the latest poll results which reflected a higher minimum for PPO than United's fee proposal. The PPO rate was listed as an "open issue." (CX 186 at 1).

g. Power of attorney forms 160. On August 9, 2001, in Fax Alert # 52, NTSP solicited power of attorney forms from NTSP member physicians because, "as with previous contracts, several members have requested that NTSP act on their behalf in regards to all contracting activity between themselves and United Health Care." (CX 1062). 161. The power of attorney provided to the physicians with Fax Alert # 52 explained to them that "this power of attorney grants to the agent the authority to act on the undersigned's behalf regarding the foregoing described agreements in all respects, including the authority to negotiate the terms of, enter into, execute, modify, extend or terminate any such agreements." (CX 1062 at 2-3).

162. A copy of Fax Alert # 52 was obtained by United. Quirk made a handwritten notation on this copy indicating United's view that United needed to redevelop a network strategy for Tarrant County. (CX 1051; Quirk, Tr. 320-21).

163. United decided to try to recruit the terminated NTSP physicians directly. (CX 1056; CX 1057 at 1). In August 2001, VOLUME 140 Initial Decision shortly after receiving NTSP's termination letter, United made the decision that David Beaty, Senior Network Account Manager for United, would contact all of the affected NTSP physicians whose contracts with United through HTPN were to be terminated by NTSP. (Quirk, Tr. 334; Beaty, Tr. 452, 454). 164. Beaty wrote to these physicians, inviting them to continue participation in United's network under a direct contract with United, and offered them the same reimbursement rates as they were receiving under the HTPN-United agreement. Some physicians accepted this offer. (Quirk, Tr. 334; Beaty, Tr. 452; CX 1068).

165. On August 24, 2001, in Fax Alert # 56, NTSP informed its member physicians that NTSP had been receiving calls from some NTSP physicians regarding direct contract offers that they had received from United. NTSP reported that the rates paid to the NTSP physicians through the United-HTPN arrangement were below the NTSP acceptable Board minimums and noted that this had been NTSP's reason for terminating the HTPN arrangement. (CX 1066).

166. NTSP also informed its member physicians, in Fax Alert # 56, that NTSP would "continue to pursue a direct contract with United Healthcare that meets or exceeds the fee schedule minimums set by the NTSP membership." (CX 1066). 167. Also, through Fax Alert # 56, NTSP informed its member physicians that it had already received 107 executed power of attorney forms "from NTSP members assigning NTSP power of attorney to act on their behalf in regard to all contracting activity between themselves and United Healthcare," and sought the submission of executed powers by additional member physicians. (CX 1066 at 1-2; see also CX 1002 at 1-12). 168. NTSP advised those physicians who had signed the power of attorney forms that they "should inform all United representatives who contact you that NTSP is your contracting agent for United Healthcare and instruct them to contact NTSP directly." (CX 1066 at 1; see also CX 1002 at 1-12). VOLUME 140 Initial Decision 169. United obtained a copy of Fax Alert # 56 and learned that NTSP had gathered 107 power of attorney forms from physicians and that NTSP was continuing to solicit additional power of attorney forms to be used in collective bargaining with United. (Quirk, Tr. 326-27, 330-31; CX 1051A).

h. United offers increased rates 170. In the summer of 2001, United increased its offer to All Saints Integrated Affiliates ("ASIA"), another Fort Worth IPA through which 113 NTSP physicians had contracts with United. (CX 1055; Quirk Tr. 345; 336-37). United's offer to ASIA was 125% of 2001 Tarrant County RBRVS for HMO and 130% of Tarrant County RBRVS for PPO. (Quirk, Tr. 345). United made this offer to Medical Clinic of Northern Texas ("MENT") also. (CX 1119 at 1).

171. In September 2001, United also extended the offer of 125% of 2001 Tarrant County RBRVS for HMO and 130% of 2001 Tarrant County RBRVS for PPO to the NTSP physicians whose contracts through HTPN had been terminated. (CX 658; see also CX 1119).

172. More than ten physicians' groups participating in NTSP did not respond to United's offer at this rate, even though it was higher than rates they had prior to their pending termination, effective October 21, 2001, by NTSP. (Beaty, Tr. 454-55). 173. United's account representative contacted the physician groups that had rejected the new United offer. (Beaty, Tr. 454-55; CX 658; CX 1119). Some of those groups responded that they rejected United's offer for a direct contract because NTSP was negotiating on their behalf. (Beaty, Tr. 455, 459-60). 174. On September 5, 2001, NTSP held a general membership meeting, at which Van Wagner updated NTSP's member physicians on recent progress in contract negotiations with United. (CX 1076; CX 158).

175. On September 7, 2001, United declined NTSP's offer to attend an NTSP Board meeting. (CX 1121). VOLUME 140 Initial Decision 176. On September 13, 2001, in Fax Alert # 60, NTSP reported to its member physicians that United had increased reimbursement levels "via a contract amendment with ASIA, as well as individual direct offers to several NTSP physicians." (CX 1076).

177. As a result of the increased offers, NTSP deferred activation of the power of attorney forms for two weeks, subject to NTSP's reconsideration. (CX 1076).

178. On September 19, 2001, NTSP informed its member physicians that in order to allow NTSP to consider the increased United offer available through ASIA or directly, NTSP would defer any further action until September 27, 2001. NTSP would then contact each member who previously gave a power of attorney to determine if those member physicians desired additional action by NTSP on their behalf. Member physicians who considered individual contracts with United were invited to review the proposed negotiated group contract. (CX 1079). 179. In a September 20, 2001 letter, United accepted NTSP's invitation to meet with the NTSP Board. (CX 1080; Quirk, Tr. 338-39).

180. On September 21, 2001, Van Wagner updated NTSP's Medical Executive Committee on contract negotiations with United. (CX 198 at 2).

181. On September 24, 2001, United representatives met with NTSP's Board. NTSP stated that it opposed United's offer of one rate for all products because the offer was below Board minimums, which were different for HMO and PPO products. NTSP told United's representatives that PPO rates should be higher than HMO rates. (Quirk, Tr. 340-41, 344). 182. At the September 24, 2001 meeting, the NTSP Board also told United that NTSP's contractual arrangement with HTPN enabled NTSP to terminate the arrangement for United's products on behalf of its physicians. (CX 1081; Van Wagner, Tr. 1727-28). 183. In a September 24, 2001 letter, Deas invited United to reopen negotiations. (CX 1084).

VOLUME 140 Initial Decision 184. On September 24, 2001, NTSP sent a letter to its member physicians with a summary of terms to be included in any direct contract with United. The summary discussed price related terms, including: (1) United's reimbursement methodologies should not translate into less than what Medicare would have paid; and (2) a fee maximum change from 80% of usual and customary to 100% of usual and customary. (CX 1064).

185. On or about October 10, 2001, United sent NTSP a new offer. United offered NTSP an increased rate of 125% of 2001 of Tarrant County RBRVS for HMO and 130% of Tarrant County RBRVS for PPO. (CX 1088; CX 1096; Quirk, Tr. 347-49). 186. NTSP and United signed a contract for 125% of 2001, Tarrant County RBRVS for HMO and 130% of 2001 Tarrant County RBRVS for PPO, effective November 1, 2001. (CX 1095 at 10).

187. The new contract represented an increase of 10% from the initial HMO offer and of 15% from the initial PPO offer. (Quirk, Tr. 290, 297-98). Compare CX 87 at 11 (for both HMO and PPO, 115% of Tarrant County RBRVS) with CX 1095 (for HMO, 125%; for PPO, 130% of 2001 Tarrant County RBRVS). 188. The contract was an increase from United's initial offer to NTSP. But, it was the same rate that United had previously offered other IP As - ASIA and MENT. (CX 1119). It was also a lower rate than the one given to HTPN in February 2001. (CX 1099).

189. On November 1, 2001, in Fax Alert # 84, NTSP sent the contract to its member physicians to opt in or opt out, indicating that the contract was a result of negotiations and that the 125% of the 2001 Tarrant County RBRVS for the HMO was "at the average level of acceptable reimbursement." NTSP noted to its member physicians that the PPO rate of 130% of Tarrant County RBRVS was below the acceptable average reimbursement levels determined by the NTSP Board, based on the poll results. (CX 1097; Van Wagner, Tr. 1642-43).

190. Vance, a former NTSP President who at the time was a member of the NTSP Board of Directors, summarized NTSP's VOLUME 140 Initial Decision success in these United negotiations to his medical group, in an effort to convince the group to continue their membership with NTSP:

United Health Care came to town six months ago and offered a straight 110% of Medicare contract. . . . Through the efforts of NTSP lobbying the City [of Fort Worth] and [terminating] a group contract with Health Texas, United blinked. United was so eager to dilute our effectiveness that they refused to negotiate with NTSP but offered an improved contract thru ASIA. The fees in the [ASIA] contract are very close to the numbers that NTSP presented as market rates for [Fort Worth] and were rejected out of hand by United officials. United has now returned to the table with NTSP at the direct request of the Commissioner of the Dept[.] of Insurance. This United negotiation is a template for other efforts that will need to occur in the near future and would best be coordinated by NTSP.

(CX 256; see also CX 1199 (Vance, Dep. at 310-11)). 191. The level of acceptance of the NTSP/United contract by NTSP member physicians was low. (CX 1100). Fax Alert # 95, dated November 19, 2001, indicates that 258 NTSP member physicians responded. (CX 1100). For HMO, 24% accepted and 76% rejected the contract. For PPO, 23% accepted and 77% rejected the contract, (CX 1001 at 2).

i. NTSP reported United to Texas Department of Insurance 192. NTSP reported United to the Texas Department of Insurance in 2000 and 2001 for prompt pay violations, noncompliance with contracts, and predatory pricing concerns. (Van Wagner, Tr. 1772).

193. NTSP's Board Minutes of September 24, 2001, reported that Deas met with the Texas Commissioner of Insurance to discuss predatory pricing by health plans. The Commissioner VOLUME 140 Initial Decision stated that he would send letters to CEOs of major plans cautioning them against predatory pricing activities. Deas also discussed with the Commissioner the impact of HMO and PPO contracting revisions on Tarrant County physicians. (CX 100 at 3- 4).

194. In August 2001, the Texas Department of Insurance fined United $ 1.25 million and ordered it to pay restitution to providers for failing to follow Texas laws on prompt payment and clean claims. (RX 3103).

2. Cigna Healthcare a. Corporate structure 195. Cigna of Texas is a subsidiary of Cigna Healthcare ("Cigna") which has its corporate headquarters in Philadelphia, Pennsylvania. (Grizzle, Tr. 669). Cigna Corporation reports consolidated earnings for the entire corporation, including Cigna of Texas. (Grizzle, Tr. 669-70).

196. A change in revenue and earnings for Cigna of Texas would affect the revenues and earnings for the entire corporation. (Grizzle, Tr. 670).

197. When Cigna contracts with multi-state employers, a single contract is signed. (Grizzle, Tr. 682). A change in costs for Cigna of Texas could affect the health insurance costs of an employer with multi-state coverage. (Grizzle, Tr. 683). 198. An increase in Cigna's costs would increase premiums which could affect Cigna's competitiveness in other states. (Grizzle, Tr. 683-85).

199. Mr. Rick Grizzle is the vice president of network development for Cigna Healthcare, with responsibilities for contracting and managing provider services in Texas, Oklahoma, and Louisiana. (Grizzle, Tr. 666-67).

VOLUME 140 Initial Decision b. Cigna's acquisition of Healthsource and initial contacts with NTSP 200. In late 1997, Cigna purchased Healthsource, a company which offered both HMO and PPO products, covering approximately one million lives nationally. Many NTSP member physicians had direct contracts with Healthsource. (Grizzle, Tr. 695, 767-70).

201. For physicians with agreements with both Cigna and Healthsource, Cigna, in July 1998, informed physicians that their contracts under Healthsource would be terminated and assigned to Cigna. (CX 332; Van Wagner, Tr. 1752-53). 202. For physicians with agreements with only Healthsource, Cigna, in July 1998, requested that physicians assign their contracts from Healthsource to Cigna and informed physicians that if they did not wish to assign their contracts to Cigna, they could continue under their Healthsource agreements, as long as Healthsource products were being offered in the marketplace. (CX 332; Van Wagner, Tr. 1752-53).

203. Healthsource subsequently went out of business. (Grizzle, Tr. 770).

204. Some NTSP physicians went to NTSP regarding the change in their Healthsource contracts and requested that NTSP contact Cigna. (Van Wagner, Tr. 1752). NTSP did contact Cigna regarding these issues. (Van Wagner, Tr. 1753-54). 205. NTSP sent to its member physicians a sample letter refusing the contract assignment from Healthsource to Cigna and directing Cigna to negotiate with NTSP as their agent. NTSP also sent its member physicians an agency agreement that authorized NTSP to negotiate on the behalf of consenting member physicians. NTSP informed its physicians that "if 50% or more of NTSP member physicians concur that agency is appropriate, NTSP will contact CIGNA and Healthsource directly in regards to this matter." NTSP advised "its members not to consent to the assignment of your Healthsource provider agreements to CIGNA." (CX 332 (emphasis omitted)).

VOLUME 140 Initial Decision 206. Cigna received 40 letters, all virtually identical to the sample letter provided by NTSP, representing 52 NTSP member physicians, in which NTSP physicians did not agree to assign to Cigna their Healthsource agreements, and which directed Cigna to negotiate with NTSP on their behalf. (CX 760 (limited admission); Grizzle, Tr. 696-98, 709, 724). 207. The physicians who did not agree to assign their Healthsource agreement to Cigna believed that they had the right to do so. (Van Wagner, Tr. 1753-54; Grizzle, Tr. 768). 208. Upon receiving these letters, Cigna concluded that the 52 physicians who had sent Cigna letters would not directly contract with Cigna and that Cigna would need to approach NTSP instead. (Grizzle, Tr. 697, 709-10, 747).

209. Cigna has entered into direct contracts with some NTSP physicians independent of NTSP. (Grizzle, Tr. 724). In some instances, the direct contract between Cigna and physician is at a higher reimbursement rate than the Cigna/NTSP contract. (Deas, Tr. 2410).

c. NTSP's negotiations with Cigna 210. Beginning in 1999, NTSP sought a risk contract with Cigna. (Grizzle, Tr. 775; Van Wagner, Tr. 1754-55; CX 764, in camera). NTSP and Cigna were unable to agree to a risk-sharing arrangement. (Van Wagner, Tr. 1758; CX 764, in camera). 211. Cigna and NTSP have entered into several fee-forservice agreements. These agreements are: the Letter of Agreement, the First Amendment, the Second Amendment, and the Third Amendment. (CX 764, in camera; CX 769; CX 771 at 1, in camera; CX 809, in camera; CX 810, in camera; Grizzle, Tr. 715-16; Grizzle, Tr. 723-24).

(i) Letter of Agreement, First Amendment 212. NTSP and Cigna entered into a Letter of Agreement (LOA) in October of 1999. The LOA only covered fee-for-service rates for Cigna's HMO business, and not its PPO business. (Grizzle, Tr. 710-11; CX 782A, in camera). VOLUME 140 Initial Decision 213. Under the LOA, Cigna agreed to reimburse NTSP specialists, with the exception of cardiologists/cardiovascular surgeons, gastroenterologists, urologists, oncologists, and podiatrists, on a fee schedule equal to 125% of the 1998 Dallas County RBRVS. (Grizzle, Tr. 710-14; CX 782A, in camera; CX 764 at 1, in camera).

214. Cigna entered into this agreement with NTSP because Cigna believed that the core group of NTSP, the specialists in Fort Worth, were critical for Cigna. (Grizzle, Tr. 719-20). 215. The LOA was entered into by NTSP and Cigna in anticipation of a risk contract and specifically called for the establishment of a risk contract within a short time. (Van Wagner, Tr. 1757-58; CX 784, in camera; CX 782A, in camera). 216. The 1999 LOA was amended in January 2000 (First Amendment) to add PPO coverage for NTSP specialists at a reimbursement rate of 135% of Dallas County 1998 RBRVS. (CX 769; Grizzle, Tr. 714).

217. Cigna's representative, Grizzle, testified that the reimbursement rate of 125% of RBRVS on HMO and 130% of RBRVS on PPO was somewhere between 15 and 20 percent higher than Cigna's standard rates. Grizzle also testified that the rates Cigna paid to NTSP were in the "general ballpark" of the rates Cigna paid to other IP As [redacted]. (Grizzle, Tr. 716, 958- 59, in camera).

(ii) Conflicts between NTSP and Cigna 218. NTSP believed that Cigna had breached its contract with respect to how fee schedules were loaded into Cigna's system. There were instances of a change in the fee schedule as called for by the contract where NTSP would later find that Cigna had failed to load the changes. NTSP complained to Cigna regarding Cigna's failure to pay in accordance with the agreed upon schedule and informed Cigna that NTSP considered the failure a material breach. (Grizzle, Tr. 797; Van Wagner, Tr. 1769; CX 792, in camera; RX 497; RX 960, in camera; RX 1486, in camera). VOLUME 140 Initial Decision (iii) Second Amendment 219. NTSP also believed that Cigna breached the LOA and First Amendment by not adjusting the fee schedule to current year RBRVS. (Grizzle, Tr. 799-800; Van Wagner, Tr. 1979-80). 220. The 1999 LOA was amended in May 2000 (Second Amendment) to clarify the proper year of RBRVS reimbursement. While the First Amendment to the LOA did not require that the fee schedule be adjusted annually, the Second Amendment explicitly called for an annual adjustment of the HMO and PPO schedule to current year [redacted] RBRVS. (CX 769; CX 770, in camera; CX 771, in camera; CX 800 at 2; Grizzle, Tr. 715, 740- 41).

(iv) Cardiologists 221. Under the LOA, Cigna agreed to reimbursement of "NTSP specialists, with the exception of NTSP cardiologists/CV [cardiovascular] surgeons, gastroenterologists, urologists, oncologists and podiatrists." (Grizzle, Tr. 710-14; CX 782A, in camera).

222. NTSP's cardiologists were carved out of the LOA. (Grizzle, Tr. 927, in camera; Van Wagner, Tr. 1764-66). 223. In a carve out arrangement, certain specialists or services are outside of a capitation plan and are paid in some other manner. (Frech, Tr. 1434).

224. Although NTSP's cardiologists were initially carved out of the LOA, an addendum to the LOA gave a right of first refusal for NTSP's cardiologists to participate with Cigna if Cigna's carve out agreements with cardiologists were terminated. (Grizzle, Tr. 927, in camera; Van Wagner, Tr. 1764-66; CX 770, in camera). 225. Regarding Cigna's need for cardiologists, Cigna had contracted with American Physician Network ("APN") for cardiology services. (Grizzle, Tr. 726-27, 929-30, in camera). VOLUME 140 Initial Decision 226. In July 2000, Cigna informed NTSP that the carve out arrangment that Cigna had with NTSP had been assigned to APN and told NTSP to work out an agreement with APN. (Grizzle, Tr. 929-30, in camera; Van Wagner, Tr. 1768; CX 775). 227. Cigna viewed its action as an assignment of the contract and believed that the LOA did not allow NTSP's cardiologists to join the Cigna fee-for-service contract if the carve out had been assigned. (Grizzle, Tr. 725).

228. NTSP viewed Cigna's action as Cigna's termination of the cardiologists' carve out agreement. NTSP believed that Cigna had breached the LOA by refusing to give NTSP's cardiologists a right of first refusal to participate in the NTSP agreement. (Grizzle, Tr. 929-30, in camera; Van Wagner, Tr. 1766-68; CX 775; CX 776; CX 784; CX 785, in camera). 229. NTSP sent Cigna a letter, dated August 2, 2000, stating that NTSP was exercising its option under the terms of the present Cigna arrangement for NTSP cardiologists to participate under the terms of the HMO arrangement. (CX 776). 230. APN subsequently submitted a fee-for-service offer to NTSP's cardiologists. (Grizzle, Tr. 726-27). 231. NTSP rejected APN's offer, in a letter dated October 6, 2000, which stated that the offer "was shared with affected members of NTSP's Cardiology Division and NTSP's board. At this point, we must decline your proposal as it does not meet our minimum reimbursement levels." (CX 777A; Grizzle, Tr. 726- 27).

232. In an October 16, 2000 letter from NTSP to Cigna, NTSP stated that NTSP's Cardiology Division and Board found Cigna's proposal to be "woefully inadequate. The financial arrangements proposed were well below the agreed upon fee schedule contained in the NTSP/Cigna agreement. As a result, [APN] was notified on October 6, 2000 that [their] proposal was declined, as it did not meet minimum reimbursement levels." (CX 777). VOLUME 140 Initial Decision 233. The October 16, 2000 letter from NTSP to Cigna also states that "obviously Cigna's failure to resolve this issue may affect current NTSP participation and future dialogue with Cigna regarding a PSN [provider sponsored network] type risk arrangement." (CX 777; Grizzle, Tr. 730). 234. NTSP believed that it had the right to terminate its contract with Cigna if what NTSP believed to be Cigna's breaches of contract were not cured. (Grizzle, Tr. 797; Van Wagner, Tr. 1769-71; RX 497; RX 960, in camera; RX 1486, in camera). 235. Cigna performed an analysis of the impact of the potential loss of NTSP's physicians from its network. Cigna determined that NTSP's termination would leave it with gaps in specialty coverage in the Fort Worth area. (Grizzle Tr. 730-31 (stating that Cigna took the threat seriously because NTSP presents "a fairly unified force, well-represented and looked like a strong entity . . . working in Fort Worth"); CX 779, in camera (charting impact of NTSP termination by specialty)). 236. Within the next twelve months, APN went bankrupt and dissolved. Cigna then allowed NTSP's cardiologists to participate in the Cigna/NTSP agreement. (Grizzle, Tr. 731-32, 937 (in camera); Van Wagner, Tr. 1768).

(v) Third Amendment: primary care physicians 237. Under the 1999 contract between Cigna and NTSP, Cigna agreed to reimburse "NTSP specialists," with the exception of those specialists explicitly carved out. (Grizzle, Tr. 710-14; CX 782A, in camera).

238. NTSP sought to have its primary care physicians ("PCPs") included under its contract with Cigna. By letter dated November 9, 2000, NTSP wrote to Cigna expressing its belief that the agreement between Cigna and NTSP was in serious jeopardy due to Cigna's refusal to allow NTSP cardiologists to participate at the contracted rate. NTSP wrote: "in an effort to maintain NTSP network participation during this critical period of open enrollment, I believe a timely good faith gesture by Cigna would be appropriate." One of the terms which NTSP would consider VOLUME 140 Initial Decision was that, "Cigna immediately allow all of NTSP's sub-contracted Primary Care Physicians the option to participate under the terms of our HMO and PPO agreements." (CX 786, in camera; Grizzle, Tr. 732).

239. Cigna had already contracted with a sufficient number of primary care physicians at lower rates than those under the NTSP agreement. Allowing NTSP's primary care physicians to opt in to the NTSP/Cigna specialist contract would increase Cigna's costs with no additional benefit to Cigna. (Grizzle, Tr. 718-19, 733-34). 240. In order to maintain the relationship with NTSP and despite increasing its costs, Cigna offered NTSP's primary care physicians a tiered reimbursement fee schedule in which the primary care physicians would initially receive NTSP's specialist rates and would, over time, return back to a "market level." (Grizzle Tr. 735-36).

241. In December 2000, NTSP rejected Cigna's offer on behalf of its primary care physicians. (Grizzle, Tr. 736; CX 791 ("NTSPs Board absolutely cannot and will not negotiate or offer an agreement in which our PCP partners are paid less than our specialists . . . . The 125% of the then current Dallas (not Tarrant County) RBRVS must stand as per our current agreement.")). 242. On June 7, 2001, NTSP sent an email to Cigna requesting that Cigna bring NTSP primary care physicians into the NTSP/Cigna agreement on the PPO product. (CX 800 at 1). 243. By return email that same day, June 7, 2001, Cigna reiterated its resistance to NTSP's demands to include NTSP's primary care physicians at NTSP's specialist rates. (CX 800 at 2; Grizzle, Tr. 740-41).

244. NTSP subsequently, on June 12, 2001, sent a notice of termination letter to Cigna, providing Cigna with 60 days notice. NTSP's letter stated, NTSP "look[s] forward to utilizing the next 60 days in resolving the issue of Cigna not allowing our affiliated Primary Care Physicians to participate under the terms of our PPO agreement." (CX 802).

245. In response to NTSP's notice of termination letter, Cigna and NTSP negotiated a third amendment to the NTSP/Cigna VOLUME 140 Initial Decision contract. (Grizzle, Tr. 749-51; Van Wagner, Tr. 1771; CX 810, in camera).

246. The 1999 LOA was amended in August 2001 (Third Amendment) [redacted] (Grizzle, Tr. 749-51, 755, 942-43, in camera; Van Wagner, Tr. 1771-72; CX 809, in camera; CX 810, in camera).

247. The Third Amendment is the current contract under which Cigna and NTSP were operating at the time of trial (April 2004), and was set to expire September 14, 2004. (CX 809, in camera; CX 810, in camera).

248. Cigna estimated that it would cost Cigna [redacted] to add more NTSP physicians to the NTSP/Cigna arrangement. These additional physicians were already individually-contracted with Cigna at "market rates." (CX 814, in camera). Cigna realized no benefit from having these additional NTSP physicians in the network. (Grizzle, Tr. 877-79, in camera). (vi) Third Amendment: terms 249. The contract between NTSP and Cigna that was current at the time of trial, April 2004, the Third Amendment, is a nonrisk agreement. (CX 809, in camera; CX 810, in camera; F. 251- 55).

250. Under the Third Amendment, PPO reimbursement is at a rate of [redacted] and HMO reimbursement is at a rate of [redacted]. (CX 809, in camera; CX 810, in camera). 251. In NTSP's summary of the contract terms, NTSP characterizes the agreement as a "non-risk agreement." (CX 810, in camera).

252. The Third Amendment does include: capitation payments, a pay-for-performance provision, and a withhold provision. (Van Wagner, Tr. 1758-59, 1761; F. 253-55). 253. [redacted] (Grizzle, Tr. 755, 879-80, in camera). 254. [redacted] (Grizzle, Tr. 880, 896, 946-48, in camera; Van Wagner, Tr. 1974-76).

VOLUME 140 Initial Decision 255. [redacted] (Grizzle, Tr. 881-82, in camera). d. NTSP reported Cigna to Texas Department of Insurance 256. NTSP reported Cigna in 2000 and 2001 to the Texas Department of Insurance for prompt pay violations, noncompliance with contracts, and predatory pricing concerns. (Van Wagner, Tr. 1772).

257. In August 2001, the Texas Department of Insurance took action against Cigna for violations of Texas claims payment laws. Cigna was fined $ 1.25 million and ordered to pay restitution to providers as a result of Cigna's failure to comply with clean claims laws. (RX 3103).

258. In September 2001, the Texas Attorney General investigated Cigna's payment methodology. (CX 108 (Board minutes reporting Office of Attorney General's letter); RX 1290; RX 1651).

3. Aetna Health, Inc.

a. Corporate structure 259. Aetna Health, Inc., ("Aetna") is a wholly owned subsidiary of Aetna, Inc., which has its headquarters in Hartford, Connecticut. (Roberts, Tr. 474).

260. Aetna provides health insurance coverage in the North Texas area. In the Fort Worth area, Aetna currently has approximately 40,000 to 50,000 HMO members and 100,000 PPO members. (Roberts, Tr. 474; Jagmin, Tr. 981). 261. Aetna's network has about 7,200 physicians in the Dallas-Fort Worth Metroplex. (Jagmin, Tr. 1121). 262. Aetna's clients in the Fort Worth area include national companies such as Bell Helicopter and Lockheed Martin. (Roberts, Tr. 476).

263. When Aetna pays a claim in Texas, it is paid from premiums which may have come from states outside of Texas. (Roberts, Tr. 476).

VOLUME 140 Initial Decision 264. Aetna's performance in the Fort Worth area affects Aetna's national performance because any profits or losses roll up and appear on the financial statements of the publicly traded parent company. (Roberts, Tr. 474, 477). 265. Dr. Christopher Jagmin is currently the medical director for medical policy. (Jagmin, Tr. 969). Jagmin works for Aetna, Inc., based out of Blue Bell, Pennsylvania, and he consults and advises for the North Texas area. (Jagmin, Tr. 972, 974). 266. Mr. David Roberts is employed by Aetna Health, Inc., as a network vice-president. He has worked for Aetna Health, Inc., (or another subsidiary of the national company) since 1999, when Aetna acquired Prudential. Prior to 1999, Roberts worked for Prudential. In May 2001, Roberts assumed responsibility for contracting with physicians in the North Texas area. (Roberts, Tr. 468-70).

b. NTSP's relations with Aetna through HMS and MSM 267. In 1994, many physicians signed an HMO risk contract and a PPO non-risk contract to treat Aetna patients through another IPA, Harris Methodist Select ("HMS"). (Van Wagner, Tr. 1692; RX 832).

268. The 1994 HMS contracts with Aetna were exclusive and were not terminable until June 30, 1999. (RX 3146). 269. Many of the physicians who had contracts with HMS signed participating physician agreements with NTSP. (RX 832). 270. In 1997, NTSP believed that HMS had breached the 1994 contracts by attempting to amend those contracts without consent, agreeing to non-exclusivity with Aetna, and failing to make full payments to physicians. (Vance, Tr. 591; Van Wagner, Tr. 1692; RX 309; RX 310; RX 832).

271. NTSP was appointed by NTSP's participating physicians to represent them in the contract dispute with HMS. (Van Wagner, Tr. 1681).

VOLUME 140 Initial Decision 272. In 1999, during the time of the contract dispute between NTSP and HMS, HMS became Medical Select Management ("MSM"). Contracts between physicians and HMS were assigned to MSM. (RX 832).

273. The contract between MSM and Aetna, which served about 115,000 patients, was primarily a "global risk deal," through which Aetna delegated almost all the medical risk to MSM under an HMO plan. (Jagmin, Tr. 984-85, 997). MSM also had a non-risk PPO contract with Aetna. (RX 832). 274. Many of NTSP's participating physicians had been contracted with MSM to provide physician services pursuant to MSM's agreements with Aetna. (Jagmin, Tr. 982). 275. In June 1999, NTSP, as the class representative for its participating physicians, sued HMS and MSM. The class action lawsuit against HMS and MSM alleged that HMS and MSM refused to honor the terms of the 1994 contract. (Van Wagner, Tr. 1652-53; RX 335; RX 849; CX 1172 (Collins, Dep. at 6-9)). c. NTSP's initial contract negotiations 276. In late 1999, NTSP initiated a meeting with Aetna and proposed a direct contracting relationship between Aetna and NTSP, that would not involve MSM, under a risk contract. (Jagmin, Tr. 981-84; Van Wagner, Tr. 1700; CX 531). This meeting did not develop into broader negotiations. (Jagmin, Tr. 988-89).

277. Around April 2000, NTSP again initiated negotiations with Aetna to discuss a direct contract between NTSP and Aetna. (Jagmin, Tr. 989-90).

278. In early June 2000, NTSP met with Aetna to discuss future business and contract arrangements. (CX 177). NTSP told Aetna that its physicians might leave the MSM contract because of what NTSP perceived to be MSM's continuing breaches of contract and financial problems. (Jagmin, Tr. 983-84; Van Wagner, Tr. 1652-53, 1692-95, 1700; CX 531). VOLUME 140 Initial Decision 279. Subsequent to the June 2000 meeting between NTSP and Aetna, Aetna discussed internally the possible contracting scenarios with NTSP and concluded that the most favorable scenario was keeping NTSP's physicians within Aetna's current contract through MSM, rather than signing a separate contract with NTSP. This conclusion was based on Aetna's belief that a separate contract would duplicate administrative costs. (CX 525 at 1-2).

280. The internal Aetna discussion considered a scenario in which Aetna would lose most of NTSP's member physicians. This turn of events was envisioned by Aetna as a realistic possibility if NTSP's member physicians were to pull out of the MSM contract, Aetna were to fail to reach an agreement with NTSP, and only a few of NTSP's member physicians were to contract with Aetna directly. Aetna's conclusion was that this scenario would create undesirable holes in particular specialities and perhaps service areas. Under the same scenario, Aetna was also "very concerned" with the fact that many of its health plan members, especially "given their national client base," would complain that their doctor was no longer in the network. (CX 525; Jagmin, Tr. 1000- 02).

281. In these internal Aetna discussions, NTSP was perceived as representing the "majority of the preferred SPECs [specialists] in [Fort] Worth," and as specialist-dominated. (CX 525 at 2). 282. In Fax Alert # 55, dated August 7, 2000, Van Wagner informed NTSP member physicians that "NTSP has started negotiations with Aetna in regards to a risk and non-risk contract. As of this date, a term sheet has been received and is being reviewed. It is the goal of both parties to implement a new contract effective January 1, 2001. Given the stages of our negotiation, NTSP will know in approximately thirty days whether or not a direct contract with Aetna will be in the best interest of its members." NTSP asked its member physicians to allow NTSP to continue discussions with Aetna for the next thirty days. (CX 942 at 2).

VOLUME 140 Initial Decision 283. An October 5, 2000 Fax Alert informed NTSP physicians that NTSP had filed suit against MSM on behalf of its member physicians and that NTSP had begun discussions with Aetna on a direct contract for Aetna HMO patients. The Fax Alert sought physicians to sign a power of attorney to authorize NTSP to represent them:

In order to pursue these initiatives to their maximum outcome, having NTSP act as the members' agent and attorney in fact in negotiations, amendments, extensions and/or terminations of Aetna contracts was suggested.

A Motion was made and passed that 66% of all affected NTSP physicians should agree to NTSP's role as agent or attorney in fact regarding this matter. Attached to this fax is a copy of a Power of Attorney for each member's consideration. If you wish NTSP to represent you as your attorney in fact regarding your contracts with Aetna US Healthcare, . . . please sign below and fax return to the NTSP offices. . . . (CX 347 at 1-2).

284. The power of attorney appointed NTSP to act as the signatory attorney in fact with respect to "all contracts and agreements (including without limitation all prospective contracts or agreements)" with Aetna, MSM, and other entities. (CX 347 at 4).

285. In October 2000, negotiations between NTSP and Aetna for a risk contract ended without an agreement. (Jagmin, Tr. 1006-09; CX 540 at 1).

VOLUME 140 Initial Decision d. Continued negotiations on a non-risk contract (i) Initial proposals 286. In October 2000, after NTSP and Aetna determined that they could not agree on a risk contract, NTSP and Aetna continued to negotiate for a non-risk contract only. (Jagmin, Tr. 1004-05; CX 717 at 4; CX 544 at 3).

287. With respect to rates for anesthesiologists, Aetna's initial offer to NTSP, in October 2000, was $ 40 per unit. NTSP told Aetna that anesthesia unit rates for a PPO product were between $ 46 and $ 48 in the market. (Jagmin, Tr. 1017, 1034-35, 1045; CX 544 at 2, 3). In an October 20, 2000 letter, Aetna informed NTSP that an anesthesia rate of $ 46 to $ 48 was too high. (CX 540 at 4; Jagmin, Tr. 1017).

288. With respect to HMO and PPO products, Aetna's initial offer to NTSP, in October 2000, was based on a reference schedule that uses the same relative value units from the RBRVS schedule, but places a different multiplier on different specialties' services, based on supply and demand. (Jagmin, Tr. 1012-13). Aetna's initial offer aggregated to about 111% to 112% RBRVS for HMO and about 123% to 125% RBRVS for PPO, with some specialities being offered more or less than the aggregate, based on the scarcity or abundance of the particular specialty of the physician. (Jagmin, Tr. 1015-16, 1022-24). 289. In October 2000, NTSP sought from Aetna a non-risk contract with uniform rates of 125% RBRVS for HMO and 140% RBRVS for PPO. (Jagmin, Tr. 1023, 1033-34, 1040-41; CX 543 at 3-4).

290. NTSP's proposed rates of 125% of RBRVS for HMO and 140% of RBRVS for PPO were the same rates that physicians had been receiving for providing services to Aetna patients through the MSM contract. (Jagmin, Tr. 1023; Van Wagner, Tr. 1697; CX 538). (Compare RX 968, in camera, with RX 24 at 21). VOLUME 140 Initial Decision 291. NTSP's proposal for both HMO and PPO was a uniform rate for all physicians, instead of the different rates to each speciality that Aetna initially had offered. (CX 543 at 3-4; Jagmin, Tr. 1023).

292. Aetna expressed concern to NTSP that a uniform rate based off of Medicare RBRVS would impose overpayment to some NTSP specialties, while other NTSP physicians might choose not to participate on the basis of underpayment, which might require Aetna to have to contract with those physicians individually at a higher rate. (Jagmin, Tr. 1031-32). 293. NTSP informed Aetna that it would not be involved in any non-risk contract that proposed different rates for different member physicians. (Roberts, Tr. 523-24; Jagmin, Tr. 1165). 294. Aetna's representative talked to physician groups to try to contract with them directly. Some of those physicians referred Aetna back to NTSP. (Jagmin, Tr. 1042-44). 295. Aetna, at the time of these negotiations, was concerned about losing physicians because it was late in the enrollment period, the time when employees choose their health plans or change their prior selections. (Jagmin, Tr. 990-91; 1060-61). 296. On November 7, 2000, NTSP sent a letter to "NTSP Members," providing them with a termination letter that NTSP's Board of Directors "is sending to . . . MSM on your behalf. . . . This termination letter notifies MSM that they are in material breach of your 1994 contract regarding the Aetna HMO." (CX 546).

297. On November 20, 2000, NTSP sent Aetna an email informing Aetna that NTSP physicians would no longer serve Aetna's patients through MSM:

North Texas Specialty Physicians' (NTSP) 260 doctors have treated Aetna patients for over ten years. . . . We are pleased that Aetna has contacted us in an effort to work out the details for a direct contracting relationship. . . . If a direct contracting relationship between NTSP and Aetna is accomplished, all of VOLUME 140 Initial Decision Aetna's PPO lives will be served directly by NTSP physicians. In addition, approximately 15,000 of the 100,000 Aetna HMO covered lives will have direct access to NTSP doctors. The remaining approximately 85,000 Aetna HMO covered citizens are contracted through Medical Select Management's Aetna contract. As of today, NTSP has notified Medical Select Management that under current contractual conditions, NTSP physicians can no longer participate.

(CX 559).

298. By November 20, 2000, Aetna made a new offer of a uniform rate based on RBRVS and increased its offer to 116% RBRVS for HMO and 140% for PPO. Aetna's offer on anesthesia rates remained at $ 40 per unit. (CX 561; Jagmin, Tr. 1044-45, 1076-77).

299. With respect to Aetna's PPO and anesthesia offer, Van Wagner informed Aetna that she thought that Aetna's PPO fee schedule of 140% of current Medicare RBRVS would be "well received when we messenger it out by all except anesthesia. . . . As you know their contracting minimums on PPO rates were not met." Jagmin understood that most member physicians would accept the 140% rate for PPO, but that no anesthesiologist would sign up under the contract. (CX 558 at 2; Jagmin, Tr. 1052). 300. With respect to Aetna's HMO offer, NTSP did not present Aetna's HMO offer to its member physicians because the rate fell below the established Board minimums. (Van Wagner, Tr. 1927-28).

301. Aetna's representative met with NTSP's Board and had conversations with Board members and with Van Wagner and NTSP's Director of Managed Care, David Palmisano, in which both physicians and NTSP staff conveyed to Aetna that NTSP's Board minimum was 125% of RBRVS for HMO and that NTSP did not have the authority to messenger any contracts below these rates. (Jagmin, Tr. 1021-23; CX 571).

VOLUME 140 Initial Decision (ii) Power of attorney forms 302. At the same time that NTSP and Aetna were discussing the non-risk contract, Van Wagner sent Aetna a list of the physicians to whom NTSP had sent power of attorney forms seeking delegation of NTSP as the organization that would conduct negotiations for them. (Jagmin, Tr. 1029; CX 534). 303. Jagmin asked both physicians and NTSP staff about the power of attorney forms and was told that the power of attorney forms assigned to NTSP direct contracting efforts between Aetna and the physicians. (Jagmin, Tr. 1029). 304. On November 10, 2000, Van Wagner informed Jagmin that NTSP had sent approximately 180 power of attorney forms from NTSP member physicians to MSM, and told Jagmin that the powers of attorney cover any direct contracting with Aetna. (CX 558 at 2).

305. Aetna believed that, with these power of attorney forms, NTSP would be representing individual physicians in negotiating with Aetna if Aetna did not enter into a contract with NTSP. (Jagmin, Tr. 1051; CX 558).

306. Because Aetna believed that NTSP was going to represent each one of the individual physicians or physician groups in a direct contract negotiation, Aetna believed that there was pressure for Aetna to enter into a contract with NTSP. (Jagmin, Tr. 1058-60).

307. In a November 2001 NTSP Board meeting that was attended by an Aetna representative, the power of attorney forms that NTSP had collected from its member physicians were referenced during the discussions between NTSP and Aetna on the proposed rates for a non-risk contract. (Roberts, Tr. 537-39). (iii) Re-polling of NTSP member physicians 308. By November 21, 2000, Aetna and NTSP had reached an agreement on 140% of current Medicare RBRVS for PPO, but had not reached an agreement on HMO rates, with NTSP seeking across the board 125% of Medicare RBRVS and Aetna seeking across the board 116% of Medicare RBRVS. The parties also had VOLUME 140 Initial Decision not reached an agreement on anesthesia rates. (CX 561; Jagmin, Tr. 1071-72).

309. NTSP discussed its negotiations with Aetna at an NTSP general membership meeting on November 21, 2000. (CX 180). 310. By Fax Alert # 81, dated November 29, 2000, NTSP informed its member physicians that Aetna's then current offer was an across the board fee schedule of 140% of current Medicare RBRVS for its PPO product, an across the board fee schedule of 116% of current Medicare RBRVS for its HMO product, and $ 40 per unit for anesthesia rates for both the HMO and PPO products. (CX 565).

311. NTSP informed its member physicians in Fax Alert # 81: In keeping with the minimum compensation standards as conveyed from the membership earlier this year, [Aetna's] PPO offer of 140% of current Medicare approximates an acceptable minimum standard. The minimum standard previously shared by the membership on an HMO product is 125% of current Medicare or approximately 9% less than Aetna's present offer. . . .

Because this is a fee-for-service offering falling below the minimum as previously shared via the messenger model to the NTSP Board, we are repolling the membership on the acceptability of the present Aetna offering. Please check in the space below what your minimum acceptable range of compensation for the Aetna HMO product is. (CX 565).

312. The polling ballot listed ranges of rates for selection by NTSP's member physicians. Aetna's offered amounts (116% for HMO, $ 40-42 per unit for anesthesia) were listed as the lowest "minimum acceptable range of compensation" that NTSP physicians could select on the polling ballot. (CX 565 at 2; Van Wagner, Tr. 1929-30).

VOLUME 140 Initial Decision 313. As reported at NTSP's December 4, 2000 Board meeting, sixty-one responses had been received, with the majority choosing the 121%-130% range. At that meeting, it was also noted that the termination of the contract with Aetna through MSM would be carried out in thirteen days. (CX 74 at 4). 314. On December 8, 2000, NTSP conveyed the poll results to Aetna: "the numbers on the messenger model return for the [HMO] product are as follows . . . mean: 124.89% of current medicare; mode 127.38% of current medicare; median 123.70% of current medicare." NTSP wrote to Aetna that "this response is essentially the current reimbursement rate for Aetna [HMO] lives not attached to [MSM]." (CX 571).

315. Aetna then convened an internal meeting and concluded that increasing its offer by 9% to match NTSP's proposal meant losing money on NTSP HMO services. (Jagmin, Tr. 1080). 316. On December 11, 2000, NTSP sent Fax Alert # 84 to its member physicians, containing the following statements: "The membership's message that a 125% of current Medicare HMO fee schedule is required has been transmitted to Aetna and a response on this final contractual item is expected within the next 24 to 36 hours . . . . NTSP Continues To Act As Your Agent Both With Aetna Direct And With MSM. At This Point, No Further Action Is Required On Your Part . . . . Please refer all contacts and materials received from either Aetna or MSM to NTSP directly." (CX 573 (emphasis omitted)).

(iv) Aetna agrees to NTSP's proposals 317. NTSP wrote to Aetna on December 12, 2000 to inform Aetna that Van Wagner had "polled the Board informally today" and that the NTSP Board "would urge Aetna to reconsider their position on not accepting the members['] poll results on compensation for the [HMO] direct contract." (CX 578). 318. On December 13, 2000, after receiving instructions from his general manager and regional manager to reject the HMO terms and to attempt to finalize a PPO only contract, Jagmin replied to NTSP, agreeing to proceed with the PPO contract, and VOLUME 140 Initial Decision stated to NTSP that "the physician expectations for the HMO contracts are not acceptable to Aetna and are rejected." (CX 580 at 1; see also CX 582 at 1; Jagmin, Tr. 1082-83). 319. On December 15, 2000, NTSP received Aetna's final proposed IPA agreement which repeated Aetna's position: "Per your discussion with Chris Jagmin, MD, non HMO based products to be paid at 140% of then current RBRVS per the Fort Worth, TX geographic locality. Anything with no established rate is paid at Company's then current Reasonable Equitable Fee Schedule (REF). Anesthesia services at $ 40 per unit." (CX 660). 320. The conflict between NTSP and Aetna received publicity in the marketplace. (Jagmin, Tr. 1005-06, 1081-92). Aetna received calls from large employers in Tarrant County such as the Arlington independent school district and other employers and brokers. (Jagmin, Tr. 1083, 1094).

321. On December 18, 2000, Van Wagner reported to the NTSP Board that the PPO arrangement had been completed. Van Wagner referred the Board to a letter from Commissioner Montemayor concerning complaints that the Texas Department of Insurance had recently received from physicians. Van Wagner further "reported that NTSP will continue to negotiate with Celina Burns [General Manager] of Aetna on an HMO contract. There was a lengthy discussion on an acceptable fee schedule. The membership's response when polled was 125%. The Board instructed NTSP to present 125% on a direct contract." (CX 76 at 2-3).

322. Later on December 18, 2000, Van Wagner wrote to Aetna with a status update that reflected that NTSP's proposal was: for PPO, 140% of current Medicare RBRVS, anesthesia at $ 45.00; for HMO, 125% of current Medicare RBRVS, anesthesia at $ 43.00. (CX 585).

323. Ultimately, Aetna agreed to NTSP's terms. On December 19, 2000, Aetna wrote to NTSP and proposed: for PPO, 140% of current Medicare RBRVS, anesthesia at $ 45.00; for HMO, 125% of current Medicare RBRVS, anesthesia at $ 43.00. (CX 585 at 1). VOLUME 140 Initial Decision 324. NTSP responded to Aetna on December 19, 2000, stating that NTSP would send out a notice to its member physicians notifying them that the PPO and HMO offers are within the messenger minimums. NTSP further informed Aetna that it would tell its member physicians that they could choose whether or not to participate in the offerings. (CX 589). 325. In Fax Alert # 85, sent to NTSP member physicians on December 19, 2000, NTSP notified its member physicians of the agreed upon rates and stated, "the rates agreed upon for the direct HMO reimbursement and the PPO reimbursement meet NTSP minimum messenger model standards as shared by our members. Because of this, the Board has accepted these reimbursement levels as appropriate in completing contractual discussions in regards to these products." (CX 586 at 10). 326. NTSP forwarded the NTSP-Aetna contract to its member physicians. (CX 597; CX 615 at 1; CX 611 at 2 ("NTSP is pleased to present two new NTSP contract offerings to all NTSP Members . . .")). Ultimately, 188 NTSP member physicians signed the NTSP-Aetna contract. (Jagmin, Tr. 1088). 327. The rates of the NTSP-Aetna contract are increased from Aetna's initial proposal. Compare Jagmin, Tr. 1015-16, 1022-24; CX 544 at 2, 3 (for HMO, aggregated to about 111% to 112% RBRVS, and anesthesia at $ 40 per unit; for PPO, aggregated to about 123% to 125% RBRVS, and anesthesia at $ 40 per unit) with CX 585 (for HMO, 125% RBRVS, and anesthesia at $ 43 per unit; for PPO, 140% RBRVS, anesthesia at $ 45 per unit). 328. The rates in the 2000 Aetna-NTSP contract were identical to the Aetna-MSM rates, a contract Aetna had with another IPA. (Jagmin, Tr. 1132-33; Van Wagner, Tr. 1697, 1701- 02, 1708-09).

329. Aetna's representative, Roberts, testified that Aetna's reimbursement rates to NTSP were higher than rates for other IPAs for similar services. Roberts also testified that a straight comparison could not be easily made because it depends on the total package of services that an IPA or a physician group might bring to the discussions. (Roberts, Tr. 472-73). VOLUME 140 Initial Decision 330. On July 10, 2001, Vance's practice group recorded the following from their practice group's Board of Directors meeting: Aetna is now offering a 95% of Medicare contracts for all commercial business. This contract was not presented to a solo practitioner, but to Texas Oncology, a very large corporate entity. This aggressive contracting by Aetna bodes ill for any small entities attempting to contract with Aetna this year. NTSP has been successful in negotiating decent rates from Aetna but only after threatening to term the entire NTSP network last year. As I have argued for a number of years, physicians divided will be cannon fodder in this business. The hope that the Cardiology IPA will protect us from these gorillas is unrealistic. Even a 700 doctor organization such as NTSP may make only a ripple in the water in the coming days but is much more effective than any other organization at this time. Without NTSP's influence this last two years, our market level of reimbursement would be significantly below its present level.

(CX 256).

e. Subsequent contract negotiations 331. On August 10, 2001, NTSP submitted to Aetna a nonrisk contract proposal that would incorporate NTSP's medical management and utilization management functions. NTSP's clinical integration proposal incorporated the existing NTSP- Aetna rates (125% for HMO and 140% for PPO of then current Medicare RBRVS) and proposed a contract period of three years. (CX 616; Roberts, Tr. 472-73, 488, 508, 550-51, 560; Van Wagner, Tr. 1709-12).

332. On September 28, 2001, Aetna wrote to NTSP, stating Aetna's intention to continue discussions to finalize a mutually acceptable new agreement before the end of 2001, to commence VOLUME 140 Initial Decision on February 1, 2002. Aetna's letter terminated Aetna's existing agreement with NTSP, effective January 31, 2002. (CX 644, in camera; Roberts, Tr. 489-90).

333. The renegotiation between Aetna and NTSP involved only non-risk components. (Roberts, Tr. 487). 334. On October 8, 2001, the NTSP Board reviewed Aetna's termination letter and decided to continue negotiations with Aetna. (CX 102 at 1-3).

335. Van Wagner informed the Board that Aetna's new proposed rates would be lower and that negotiations would be arduous. (CX 102 at 1-3).

336. On October 15, 2001, the NTSP Board received and accepted the results of the 2001 annual poll. The acceptable contract minimums as estabished by the annual poll were 125% of current Medicare RBRVS for HMO and 140% of current Medicare RBRVS for PPO. The Board meeting minutes further reported: "this year's polling of NTSP members as per a messenger model indicates these levels have not changed. The Board accepted this information and instructed staff to use these levels as minimally acceptable fee schedules for HMO and PPO contract offers." (CX 103 at 4-5).

337. On October 29, 2001, NTSP shared the poll results with its member physicians at a general membership meeting at which member physicians also received an update on the ongoing Aetna negotiations. (CX 186).

338. On October 30, 2001, Aetna proposed to NTSP an "Aetna Market Based Fee Schedule. For PCPs and Specialists this is 85% / 115% for the HMO Based Plans and 95% / 129% for the Non-HMO Based Plans." Aetna's "market-based fee schedule" refers to a fee schedule that Aetna uses primarily for individual physicians, but is also used with some IPAs and some groups. (CX 629; Roberts, Tr. 492-93, 568).

339. The rates Aetna offered NTSP on October 30, 2001 were based off of then current Dallas RBRVS. The proposal also included a "steering incentive," a 10% increase to those rates, for physicians in certain speciality areas that steered outpatient VOLUME 140 Initial Decision procedures to one of Aetna's preferred outpatient surgery centers. (CX 629; Roberts, Tr. 492-93, 568).

340. NTSP rejected Aetna's proposal of a 10% steering fee for some specialties because the reimbursement methodology would not be applied to all of NTSP's physicians. (Roberts, Tr. 523-24; Van Wagner, Tr. 1771).

341. NTSP never distributed Aetna's October 30, 2001 offer to its membership, lacking Board authority to do so. (Van Wagner, Tr. 1713-14; Roberts, Tr. 495).

(i) NTSP's claims of efficiencies 342. On November 1, 2001, NTSP sent utilization data to Aetna and in an attached letter advocated against a decrease in NTSP's then current fee schedule. NTSP stated: "although NTSP's current fee schedule is higher than that proposed by Aetna at the unit cost level, budget to actual PMPM [per member, per month] historical figures indicate that significant savings will accrue to Aetna given historical utilization patterns of NTSP physicians." (CX 553).

343. Aetna believed that it was "critical to [their] organization" to determine if NTSP's efficiency claims were valid. Aetna believed that, "if, in fact, there were efficiencies and we couldn't come to terms [with NTSP], then when those services went to other physicians in the marketplace, then the costs would actually go up . . . so it was critical to us [Aetna] that we do an indepth review of this data and try to determine if there were efficiencies and, if there were, to make sure this contract continued." (Roberts, Tr. 497).

344. NTSP provided to Aetna data derived from NTSP's risk contract with PacifiCare, though NTSP did not provide the underlying data. (Van Wagner, Tr. 1911-14; Roberts, Tr. 506-07, 520-21, 578-79).

345. Aetna was not able to run an analysis of NTSP physicians compared to other physicians due to problems with Aetna's own data. (Roberts, Tr. 560-61). VOLUME 140 Initial Decision 346. Due to the limited data provided by NTSP and deficiencies in Aetna's own internal data, Aetna could neither validate or invalidate NTSP's claims of clinical efficiencies. (Roberts, Tr. 504-05).

(ii) No agreement on non-risk contract 347. On November 6, 2001, Aetna informed NTSP that its analysis of Aetna's own data did not support NTSP's efficiencies claims. "In light of this review of our data, we can not identify significant management objectives that would require any adjustment to [the] proposed fee schedule." (CX 501; Roberts, Tr. 502-03, 524-27).

348. On November 7, 2001, NTSP replied that although negotiations would proceed, "to ask high performing physicians to take pay cuts because others have not done as well will be a difficult sell." NTSP also noted that Aetna would meet with the NTSP Board. (CX 502).

349. On November 12, 2001, Aetna representatives attended an NTSP Board meeting and addressed Aetna's proposal. Aetna offered an overall reimbursement average of 118% for the HMO product and 133% for the PPO contract. (CX 106). At that Board meeting, NTSP proposed a compromise between the parties at a rate level in the low 120s, which was below NTSP's offer of 125%, but above Aetna's offer of 118%. (Roberts, Tr. 537-39). 350. At the November 12, 2001 Board meeting, NTSP informed Aetna that NTSP had collected signed power of attorney forms from its member physicians. (Roberts, Tr. 540-41). 351. Following the November 12, 2001 Board meeting, NTSP did not distribute Aetna's offer to its member physicians because the offer was below Board minimums. (CX 503; Roberts, Tr. 542- 43; Van Wagner, Tr. 1642-43, 1776; Deas, Tr. 2433). 352. On November 19, 2001, the Board reviewed Aetna's latest proposal to NTSP. Van Wagner reported that it was essentially the same proposal, which was less than the minimum rates that the membership had messengered as acceptable. (CX 107 at 2-3).

VOLUME 140 Initial Decision 353. On December 3, 2001, Aetna wrote to NTSP informing it that Aetna believed that NTSP's current level of reimbursement was not competitive and that termination of the Aetna-NTSP agreement would be effective on January 31, 2002. (CX 640). 354. On December 7, 2001, NTSP informed its member physicians that Aetna's proposal fell "below payment rates our members have messengered to NTSP as acceptable to continue negotiations." NTSP informed its members that they may contract directly with Aetna or request that Aetna re-open negotiations with NTSP. (CX 643).

355. There is no current contract between NTSP and Aetna. (Roberts, Tr. 549; Van Wagner, Tr. 1718-19). 356. After terminating the contract, Aetna sent direct offers to NTSP's member physicians. NTSP's member physicians were not prevented from dealing directly with Aetna, and Aetna was able to contract directly with many of the physicians who had been part of the NTSP-Aetna contract. (Roberts, Tr. 544-46; RX 1076; RX 9).

f. Aetna investigated by Department of Justice, Texas Attorney General, and Texas Department of Insurance 357. In June 1999, the Department of Justice sued Aetna over its acquisition of Prudential Insurance Company of America as an attempt to gain improper market power over doctors. (RX 451; RX 3099). NTSP assisted the Department of Justice in that investigation. (RX 451). In December 1999, Aetna signed a consent order. (RX 3100).

358. In May 2000, the Department of Justice investigated Aetna's use of an all-product requirement in its contracts. NTSP was asked to and did assist in this investigation. (CX 57). 359. The Texas Commissioner of Insurance issued admonishment letters to Aetna in December 2000 and October 2001 questioning misrepresentations Aetna and MSM were making in contract discussions and questioning the adequacy of VOLUME 140 Initial Decision Aetna's provider network. (CX 586; RX 3105 (Aetna ordered to pay restitution and fines for violations through October of 2001); CX 508 (Aetna's response referencing Commissioner's letter)). 360. The Texas Attorney General issued an Assurance of Voluntary Compliance ("AVC") to Aetna in April 2000. (RX 1302; CX 505). Chris Jagmin, an Aetna medical director, was disciplined in August 2001 for violating the AVC by making false representations. (RX 339). NTSP was notified of the Assurance of Voluntary Compliance with Aetna and of Jagmin's disciplinary notice. (CX 103).

361. NTSP reported several payors, including Aetna, to the Texas Department of Insurance in 2000 and 2001 for prompt pay violations, noncompliance with contracts, and predatory pricing concerns. (Van Wagner, Tr. 1772).

362. In November 2001, the Texas Department of Insurance fined Aetna $ 1.15 million and ordered it to pay restitution to providers for failing to follow Texas laws on prompt payment and clean claims. (RX 1660; RX 1666; RX 3105). 363. In 2002, NTSP made complaints about Aetna's contracting practices to the Texas Department of Insurance. NTSP also sent a complaint letter to Aetna, with a copy to the Texas Department of Insurance. (CX 507; CX 509; CX 512; CX 513; RX 2325).

F. No Valid Procompetitive Justifications 1. No meaningful efficiencies 364. NTSP is not clinically integrated for patients covered under NTSP's non-risk contracts. (Van Wagner, Tr. 1878; Casalino, Tr. 2877; Frech, Tr. 1351-52). 365. NTSP does not engage in case management for PPO patients covered under NTSP's non-risk contracts. (Van Wagner, Tr. 1878).

366. NTSP's medical director has no responsibility for controlling costs for patients covered under NTSP's non-risk contracts. (Deas, Tr. 2552-53).

VOLUME 140 Initial Decision 367. NTSP's medical management committee does not evaluate the care of patients covered under NTSP's non-risk contracts. (Deas, Tr. 2550-51).

368. NTSP's hospital utilization management program does not apply to patients covered under NTSP's non-risk contracts. (Van Wagner, Tr. 1837-38).

369. NTSP's information systems do not include data for patients covered under NTSP's non-risk contracts. (Van Wagner, Tr. 1837-41; Deas, Tr. 2488). The absence of an electronic medical records system for its non-risk patients prevents NTSP from implementing an effective reminder system for patient care at the point of care. (Casalino, Tr. 2839). 370. NTSP does not operate or refer patients to any disease management programs or patient registries which would improve health care quality for patients with specific, long-term conditions such as diabetes or congestive heart failure for patients covered under NTSP's non-risk contracts. (Casalino, Tr. 2812-14; Van Wagner, Tr. 1834-35, 1877).

371. Disease management programs typically include a nurse case manager who maintains regular contact with each patient; monitors indices of each patient's health; ensures that each patient takes prescribed medications; directs each patient to specialist physicians; and encourages each patient to participate in relevant patient education programs. (Casalino, Tr. 2812-13). 372. NTSP does not provide feedback to physicians concerning patient care under NTSP's non-risk contracts. (Lonergan, Tr. 2722-24).

373. NTSP does not require adherence to its clinical guidelines and protocols for its fee-for-service physicians and patients. (Van Wagner, Tr. 1843-44). NTSP does not provide reminders to physicians at the point of care to employ the guidelines and protocols and does not monitor physicians' adherence to them. (Casalino, Tr. 2837-39; Van Wagner, Tr. 1843-44).

VOLUME 140 Initial Decision 374. NTSP's goal of enhanced teamwork among its physicians is hindered by the lack of pediatricians, obstetricians, and cardiologists in NTSP, forcing NTSP patients needing the services of these core specialists to seek physicians outside of NTSP. (Casalino, Tr. 2854-56).

375. NTSP does not engage in meaningful patient education. The patient education features of its web site were created in 2004, after this Complaint was issued, and are largely limited to links to other public web sites. (Casalino, Tr. 2844-48). 2. No significant spillover benefits 376. NTSP engages in utilization and quality control efforts in connection with two health plan agreements: its risk contract with PacifiCare, and, to a lesser extent, its HMO contract, but not its PPO contract, with Cigna. (Van Wagner, Tr. 1830-54). 377. For an IPA to achieve significant "spillover" benefits from its shared-risk patients to its non-risk patients, it would need to apply organized processes to its non-risk patients. (Casalino, Tr. 2864-65).

378. NTSP is hindered in implementing organized processes for patients under non-risk contracts because it lacks data for these patients. (Casalino, Tr. 2868-69; Frech, Tr. 1352-53). 379. NTSP physicians who do not participate in NTSP's shared-risk contract are unlikely to learn and apply techniques to control costs and to improve quality that are developed or learned in the context of that risk-sharing arrangement. (Casalino, Tr. 2859-60; Frech, Tr. 1353-54).

380. Negotiation of rates in non-risk contracts is not necessary for any efficiencies achieved from NTSP's risk panel to spillover to NTSP's non-risk panel. (Deas, Tr. 2577 (asserted spillovers from NTSP's risk to fee-for-service contracts are "completely unrelated" to NTSP's setting of minimum contract prices); Frech, Tr. 1347-51 (any spillover is unrelated to setting of Board minimums and joint negotiation)).

VOLUME 140 Initial Decision III. ANALYSIS AND CONCLUSIONS OF LAW A. Jurisdiction The Complaint charges Respondent North Texas Specialty Physicians ("NTSP") with violating Section 5 of the Federal Trade Commission Act, as amended ("FTC Act"). 15 U.S.C. § 45. Section 5(a)(2) of the FTC Act gives the Commission jurisdiction "to prevent persons, partnerships, or corporations . . . from using unfair methods of competition in or affecting commerce . . . ." 15 U.S.C. § 45(a)(2); Kaiser Aluminum & Chem. Corp. v. FTC, 652 F.2d 1324, 1327 n.2 (7th Cir. 1981). See also McLain v. Real Estate Bd. of New Orleans, Inc., 444 U.S. 232, 241-42 (1980); Hosp. Bldg. Co. v. Trs. of Rex Hosp., 425 U.S. 738, 745-46 (1976). The FTC Act defines "corporation" to include "any company, trust, so-called Massachusetts trust, or association, incorporated or unincorporated, which is organized to carry on business for its own profit or that of its members. . . ." 15 U.S.C. § 44. See also Community Blood Bank v. FTC, 405 F.2d 1011, 1015-16 (8th Cir. 1969). The FTC Act definition of commerce includes "commerce among the several States." 15 U.S.C. § 44.

The "Commission has only such jurisdiction as Congress has conferred upon it by the Federal Trade Commission Act." Community Blood Bank, 405 F.2d at 1015. When the jurisdiction of the Commission is challenged, the Commission bears the burden of establishing its jurisdiction. Id. Respondent has challenged jurisdiction in this case. Respondent's Post Trial Brief ("RPTB") at 33. To establish jurisdiction, Complaint Counsel must demonstrate that NTSP is an association organized to carry on business for its own profit or that of its members. California Dental Assn v. FTC, 526 U.S. 756, 767 (1999). Complaint Counsel must also demonstrate that the acts of NTSP are in or affect commerce. McLain, 444 U.S. at 242. 1. Actions on behalf of members NTSP is an independent practice association ("IPA") that was formed in 1995 for the purpose of allowing a group of specialist VOLUME 140 Initial Decision physicians to accept economic risk on medical contracts. F. 17, 37. NTSP subsequently broadened its membership to include primary care physicians ("PCPs") and broadened its functions to include entering into non-risk contracts with health insurance plans. F. 37. Physicians establish their relationship with NTSP by entering into a Physician Participation Agreement ("PPA") with NTSP and by paying a one time fee of $ 1,000 to NTSP. F. 21, 64. Under the PPA, NTSP negotiates non-risk contracts on behalf of its participants. F. 65-67.

NTSP is incorporated under Texas law as a non-profit entity with no members. F. 17, 19; TEX. Occ. CODE ANN. § 162.001 (Vernon 2004). Respondent asserts, that as a matter of Texas corporation law, the participating physicians of NTSP are not "members." Thus, Respondent argues, because NTSP is a memberless organization, it falls outside the definition of a "corporation" under the FTC Act and outside the jurisdiction of the Federal Trade Commission. RPTB at 33. However, courts and the Commission look to the substance, rather than the form of incorporation, in determining jurisdiction under the FTC Act. See California Dental, 526 U.S. at 767; American Med. Assn v. FTC, 638 F.2d 443, 448 (2nd Cir. 1980), aff'd by an equally divided court, without op., 455 U.S. 676 (1982). "The mere form of incorporation does not put [an entity] outside the jurisdiction of the Commission." Community Blood Bank, 405 F.2d at 1019.

The substance here, as shown by the evidence, is that NTSP's participating physicians are "members," as that word is used in the FTC Act's definition of corporation. The physicians pay dues, participate in association activities, and elect the Board of Directors. F. 21, 24, 33. They meet periodically in "general membership meetings" to discuss matters in the common interest of all physicians, which sometimes includes the negotiation of health plan contracts. F. 33, 42. NTSP refers to its physicians as "members" in its internal communications. For example, the Board or administrative staff of NTSP routinely sends communications to its member physicians called "Fax Alerts," which report on matters, including matters relating to the VOLUME 140 Initial Decision business interests of the physicians, and are directed to "NTSP members." E.g., F. 86, 160, 282, 326 ("NTSP is pleased to present two new NTSP contract offerings to all NTSP Members . . ."). These facts demonstrate that NTSP's participating physicians are "members" of NTSP. Cf. Fed. Election Commu v. Natl Right to Work Comm., 459 U.S. 197, 205-06 (1982) (In construing the term "member" as that term is used in the Federal Election Campaign Act, the Supreme Court held that solicitations to individuals who had previously donated to a non-profit corporation did not constitute solicitation to "members," where the alleged members did not play any part in the operation or administration of the corporation and did not elect corporate officials; where there were no membership meetings; and where alleged members did not exercise any control over the expenditures of their contributions.).

The evidence also shows that NTSP acts for the pecuniary benefit of its "members." As NTSP described in a Fax Alert to "NTSP members," under the Physician Participation Agreement, "NTSP will have the exclusive right, on behalf of its members, to receive all payor offers delivered to NTSP or its members." F. 65. As set forth in the PPA entered into between NTSP and its participating physicians, "NTSP is in the business of contracting with health maintenance organizations, health care networks and other payors to provide health care services through physicians and physician groups who have contracted with NTSP to provide such health care services" and "shall use its best efforts to market itself and its Participating Physicians to Payors and solicit Payor Offers for the provision of Covered Services by Participating Physicians." F. 20, 43. See also F. 44 ("NTSP was going to be a group of physicians that would bring a voice to organizing physicians who often practiced in individual groups to hopefully be able to secure contracts. . . . It was to represent physicians . . . in obtaining contracts from businesses or insurance companies or in dealing with hospitals."). NTSP's analysis of contract language, from both operational and legal perspectives, and communications with payors about the terms of contracts constitutes benefits undertaken on behalf of NTSP's member physicians. F. 45.

VOLUME 140 Initial Decision Further illustrating pecuniary benefits, in communications to its member physicians, NTSP has expressed satisfaction about its success in negotiating the fees to be paid to its member physicians. For example, an October 9, 2000 "Open Letter to the Membership" from Dr. Vance (then President of NTSP) notes that NTSP "started in an attempt to provide a seat at the table of medical business for the individual specialty physicians in Fort Worth," and reports that "NTSP has provided a consistent premium fee-for-service reimbursement to the members." F. 44. The evidence shows that NTSP has negotiated fees on behalf of its member physicians under non-risk contracts with health plans, in the course of which it sought increased reimbursement rates or more favorable coverage terms for its member physicians. Infra III.D.2. Negotiation of the level of fees that member physicians of NTSP receive for services provided by their own profit-making physician practices has an effect on the revenues and incomes of the member physicians and thus inures an economic benefit to NTSP's member physicians. The jurisdiction of the Federal Trade Commission extends to non-profit entities when a substantial part of the entity's total activities provides economic benefits for its members. California Dental, 526 U.S. at 767; In re American Med. Assn, 94 F.T.C. 701, 994 (1979). As summarized above, NTSP's activities provide pecuniary benefits for its member physicians. 2. Interstate commerce In addition, NTSP's activities are in or affect commerce, as required by the FTC Act. 15 U.S.C. § 45 (prohibiting unfair methods of competition "in or affecting commerce"). The jurisdiction of the Commission encompasses acts and practices constituting a violation of the Sherman Act. FTC v. Cement Instit., 333 U.S. 683, 690 (1948). The Commission utilizes cases interpreting jurisdiction under the Sherman Act - which regulates agreements "in restraint of trade or commerce among the several States" - in analyzing its own jurisdiction. E.g., In re Indiana VOLUME 140 Initial Decision Fed'n of Dentists, 101 F.T.C. 57, 161 (1983), rev'd on other grounds, 745 F.2d 1124 (7th Cir. 1984), rev'd, 476 U.S. 447 (1986).

The jurisdictional reach of the Sherman Act (and, thus, the FTC Act), "is coextensive with the broad-ranging power of Congress under the Commerce Clause." Chatham Condo. Assn v. Century Village, Inc., 597 F.2d 1002, 1007 (5th Cir. 1979) (citing Burke v. Ford, 389 U.S. 320, 321-22 (1967) ("When competition is reduced, prices increase and unit sales decrease . . . . Thus, the state-wide wholesalers' market division inevitably affected interstate commerce.")).

For purposes of establishing antitrust jurisdiction, actions are in or affect commerce if the government demonstrates "a substantial effect on interstate commerce generated by respondents' . . . activity. Petitioners need not make the more particularized showing of an effect on interstate commerce to fix . . . rates, or by those other aspects of respondents' activities that are alleged to be unlawful." McLain, 444 U.S. at 242-43. Alternatively, the Supreme Court has stated that to establish federal jurisdiction, "there remains only the requirement that respondents' activities which allegedly have been infected by a price-fixing conspiracy be shown 'as a matter of practical economics' to have a not insubstantial effect on the interstate commerce involved." Id. at 246 (quoting Rex Hosp., 425 U.S. at 745).

Although the term used in evaluating the effect on interstate commerce is "substantial" or "not insubstantial," Supreme Court precedent makes clear that an effect on commerce can be viewed as "substantial" even though "its impact on interstate commerce falls short of causing enterprises to fold or affecting market price." Rex Hosp., 425 U.S. at 745. Further, "wholly local business restraints can produce the effects condemned by the Sherman Act." Id. at 743 (citations omitted). For example, in Rex Hospital, a small proprietary hospital, Mary Elizabeth, brought suit against another hospital, Rex, under Sections 1 and 2 of the Sherman Act, alleging that Rex had conspired with others to block the expansion and relocation of VOLUME 140 Initial Decision Mary Elizabeth within Raleigh, North Carolina. The Court found an effect on interstate commerce based upon the allegations in the complaint that the blocked expansion of Mary Elizabeth would cause the following reverberations in commerce: a reduction in the amount of medicine and supplies purchased from out-of-state sellers; diminished revenues from out-of-state insurance companies or the federal government; a decrease in the management service fee paid to its parent company, an out-ofstate corporation; and lost revenues to out-of-state lenders who were expected to finance the planned expansion. 425 U.S. at 744. In McLain, the Supreme Court considered the effects on commerce of an alleged conspiracy by real estate brokers to fix brokerage rates in New Orleans. The Supreme Court held that the jurisdictional requirement was satisfied by allegations that the conspiracy affected both the sale of real estate to interstate buyers and the financing of those sales by interstate lenders. 444 U.S. at 245. Although noting that such a conspiracy would probably have an effect on "the frequency and terms of residential sales transactions," id. at 246, the Supreme Court did not require the plaintiff to demonstrate or allege any particular effect on the overall flow of realty-related commerce into the state. Instead, the Supreme Court explained that jurisdiction would not be defeated "by plaintiff's failure to quantify the adverse impact of defendant's conduct." Id. at 243. See also Goldfarb v. Virginia State Bar, 421 U.S. 773, 785 (1975) ("once an effect is shown, no specific magnitude need be proved").

Furthermore, "in cases involving horizontal agreements to fix prices or allocate territories within a single State, [the Supreme Court has] based jurisdiction on a general conclusion that the defendants' agreement 'almost surely' had a marketwide impact and therefore an effect on interstate commerce." Summit Health, Ltd. v. Pinhas, 500 U.S. 322, 331 (1991) (quoting Burke, 389 U.S. at 322). In Summit Health, the market that was impacted was "the Los Angeles market." Id. "In Burke, the Supreme Court was willing to assume an effect on interstate commerce where the conduct in question, horizontal market divisions, typically has an anticompetitive effect on interstate commerce." Chatham Condo., 597 F.2d at 1007 (citation omitted).

VOLUME 140 Initial Decision In addition, the government "need not allege, or prove an actual effect on interstate commerce to support federal jurisdiction." Summit Health, 500 U.S. at 331. Though not required to prove an actual effect on interstate commerce to support federal jurisdiction, in this case, as summarized in Section III.D.2., infra, Complaint Counsel has demonstrated that NTSP negotiated economic terms of non-risk contracts with health insurance payors. These health insurance payors, United Healthcare ("United"), Cigna Healthcare ("Cigna"), and Aetna Health, Inc. ("Aetna"), are all national health plans, headquartered outside of Texas, that sell health care products throughout the United States. F. 101-03, 195, 197, 259, 262. As such, the health insurance providers' businesses are in interstate commerce. Indiana Fed'n of Dentists, 101 F.T.C. at 161. n1 Any increase in fees for physician services paid to physicians, on whose behalf NTSP negotiated increased rates, affects these multi-state companies. F. 102, 104, 196-98, 263-64. n1 The Commission's holding that the respondent's anticompetitive activity had a substantial effect upon interstate commerce and, thus, that the Commission had jurisdiction over the complaint was not appealed by the respondent. Indiana Federation of Dentists v. FTC, 745 F.2d 1124, 1132 (7th Cir. 1984).

"When determining whether interstate commerce is affected by an alleged violation courts will often examine both the defendant's relationship with interstate markets and the plaintiff's." Construction Aggregate Transport, Inc. v. Florida Rock Indus., Inc., 710 F.2d 752 (11th Cir. 1983) (citing Rex Hosp., 425 U.S. at 741 (local actions by defendants to block relocation of hospital adversely affects interstate commerce with regard to medicines and supplies purchased by plaintiff hospital)); Lehrman v. Gulf Oil Corp., 464 F.2d 26, 34-35 (5th Cir. 1972) (demise of plaintiffs business had impact on interstate flow of goods he would have sold) (alternative holding); Heille v. City of St. Paul, 671 F.2d 1134, 1137 (8th Cir. 1982) (examining both plaintiff's and defendant's use of goods manufactured out-of-state) (other citations omitted)).

VOLUME 140 Initial Decision The Complaint in this case was brought by the Federal Trade Commission, and not by the insurance companies. However, the allegations of the Complaint focused on, and the evidence demonstrated, higher rates paid by the insurance companies. Higher rates and more favorable contract terms directly affect these multi-state companies. See F. 102, 104, 196-98, 263-64. Purchases by a defendant of out-of-state goods are also a factor in determining whether an activity substantially affects interstate commerce. E.g., Rex Hosp., 425 U.S. at 744 (petitioner's purchases of out-of-state medicines and supplies considered in determining "substantial effect" on interstate commerce); Miller v. Indiana Hosp., 843 F.2d 139, 144 n.5 (3rd Cir. 1988) (defendant hospital's treatment of out-of-state patients, purchase of medical supplies from out-of-state, and receipt of money from out-of-state, including federal funds, satisfies the requirement of affecting interstate commerce); Oksanen v. Page Mem. Hosp., 945 F.2d 696 (4th Cir. 1991) (same). See also United States v. Robertson, 514 U.S. 669, 672 (1995) ("[A] corporation is generally 'engaged "in commerce"' when it is itself 'directly engaged in the production, distribution, or acquisition of goods or services in interstate commerce.'") (per curiam) (quoting United States v. Am. Bldg. Maint. Indust., 422 U.S. 271, 283 (1975)).

From January 1, 1999 to December 22, 2003, NTSP purchased $ 1,047,819.86 from vendors with billing addresses outside of Texas. F. 22. For example, NTSP purchased $ 457,373.09 of stop loss insurance from a California insurance broker. F. 22. These purchases from out-of-state sources illustrate that NTSP is directly engaged in the acquisition of goods or services in interstate commerce. This factor, together with the impact of NTSP's negotiation of rates and economic terms paid by multi-state insurance companies, demonstrates that NTSP's activities substantially affect commerce. VOLUME 140 Initial Decision Under the broad jurisdictional scope of "a substantial effect on interstate commerce," the activities of Respondent are in or affect commerce. Thus, the Commission has jurisdiction over NTSP, and the conduct challenged in the Complaint, under Sections 4 and 5 of the FTC Act. 15 U.S.C. § § 44, 45. B. Burden of Proof Under Commission Rule of Practice 3.51(c)(1), "an initial decision shall be based on a consideration of the whole record relevant to the issues decided, and shall be supported by reliable and probative evidence." 16 C.F.R. § 3.51(c)(1). The Commission amended its Rules of Practice, effective May 18, 2001. FTC Rules of Practice, Interim rules with request for comments, 66 Fed. Reg. 17,622 (April 3, 2001). Through the amendments, the Commission removed the requirement of Rule 3.51(c)(3) that the initial decision of an Administrative Law Judge ("ALJ") be supported by "substantial" evidence. 66 Fed. Reg. at 17,626. The Administrative Procedure Act, however, requires that an ALJ may not issue an order "except on consideration of the whole record or those parts thereof cited by a party and supported by and in accordance with the reliable, probative, and substantial evidence." Administrative Procedure Act ("APA") 5 U.S.C. § 556(d). According to Black's Law Dictionary, "probative evidence" means having the effect of proof; tending to prove, or actually proving an issue. "Substantial evidence" is defined in Black's Law Dictionary as such evidence that a reasonable mind might accept as adequate to support a conclusion. At the adjudicative level of these proceedings, any difference between "probative" evidence and "substantial" evidence is not dispositive under these standards. Therefore, all findings of fact in this Initial Decision are supported by reliable, probative, and substantial evidence.

The parties' burdens of proof are governed by Commission Rule 3.43(a), Section 556(d) of the APA, and case law. FTC Rules of Practice, Interim rules with request for comments, 66 Fed. Reg. 17,622, 17,626 (April 3, 2001). Pursuant to Commission Rule 3.43(a), "counsel representing the Commission . . . shall have the burden of proof, but the proponent of any VOLUME 140 Initial Decision factual proposition shall be required to sustain the burden of proof with respect thereto." 16 C.F.R. § 3.43(a). Under the APA, "except as otherwise provided by statute, the proponent of a rule or order has the burden of proof." 5 U.S.C. § 556(d). See also Steadman v. SEC, 450 U.S. 91, 102 (1981) (APA establishes preponderance of the evidence standard of proof for formal administrative adjudicatory proceedings). The government bears the burden of establishing a violation of antitrust law. United States v. E.I. dupont de Nemours & Co., 366 U.S. 316, 334 (1961). "The antitrust plaintiff must present evidence sufficient to carry its burden of proving that there was [an anticompetitive] agreement." Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 763 (1984). Accordingly, Complaint Counsel bears the burden of demonstrating that Respondent's actions in this case are anticompetitive. C. Relevant Market The relevant market has two components, a geographic market and a product market. H.J., Inc. v. Intl Tel. & Tel., 867 F.2d 1531, 1537 (8th Cir. 1989). Even in a horizontal price fixing case analyzed under the per se rule, the relevant market must be defined. Bogan v. Hodgkins, 166 F.3d 509, 515 (2d Cir. 1999) ("It is an element of a per se case to describe the relevant market in which we may presume the anticompetitive effect would occur."); Double D Spotting Serv., Inc. v. Supervalu, Inc., 136 F.3d 554, 558-59 (8th Cir. 1998) ("[A] plaintiff alleging a horizontal restraint must at least define the market and its participants."). The relevant geographic market is the region "in which the seller operates, and to which the purchaser can practicably turn for supplies." Tampa Elec. Co. v. Nashville Coal Co., 365 U.S. 320, 327 (1961). The relevant product or service market is "composed of products that have reasonable interchangeability for the purposes for which they are produced - price, use and qualities considered." United States v. E.I. du Pont de Nemours & Co., 351 VOLUME 140 Initial Decision U.S. 377, 404 (1956); Eastman Kodak Co. v. Image Technical Services, Inc., 504 U.S. 451, 481-82 (1992) (relevant market determined by the choices of products or services available to consumers).

Complaint Counsel argues "that it is unnecessary to define markets or assess market power when conduct is clearly anticompetitive, especially if (as here) there is direct evidence of actual anticompetitive effects (higher prices) as a result of the conduct." Complaint Counsel's Post Trial Reply Brief ("CCPTRB") at 13-14. Cases relied upon by Complaint Counsel hold that market power need not be demonstrated or that anticompetitive effects in the market need not be proved. However, these cases do not hold that the market need not be defined. E.g., Todd v. Exxon Corp., 275 F.3d 191, 206 (2d Cir. 2001) (finding first that plaintiff has adequately defined the market before holding that "actual adverse effect on competition . . . arguably is more direct evidence of market power than calculations of elusive market share figures") (emphasis added); Re/Max Intl, Inc. v. Realty One, Inc., 173 F.3d 995, 1018 (6th Cir. 1999) ("an antitrust plaintiff is not required to rely on indirect evidence of a defendant's monopoly power, such as high market share within a defined market, when there is direct evidence that the defendant has actually set prices or excluded competition") (emphasis added). As Complaint Counsel stated in its brief, "in Polygram Holding, the Commission held that it was not necessary to examine evidence of respondent's market power, such as a high market share within a defined market, where there is direct evidence of price-fixing among competitors." CCPTRB at 14 (citing In re Polygram Holding, Inc., 2003 FTC LEXIS 120, at *45 n.26 (July 24, 2003) (emphasis added). Market definition and market power are different issues. No one can dispute, with any credibility, that the necessity to first define a market is the same thing as a requirement to demonstrate power within that already defined market.

Complaint Counsel's expert, Dr. Harry Edward Frech, did not attempt to prove a relevant market. Dr. Frech's testimony on this point could not be more clear:

VOLUME 140 Initial Decision Q. And by the way, you're not positing any relevant market in this case, isn't that correct? A. That's correct.

Frech, Tr. 1393-94. Fortuitously for Complaint Counsel, despite its misguided belief that the market need not be defined, evidence introduced at trial demonstrates that the relevant market in this case is physician services available to patients in Fort Worth, Texas (the "Fort Worth area"). See F. 52-63. The evidence shows that primary care physicians and specialists from the Fort Worth area are important to health insurers, employers, and consumers. F. 52-62. In contracting for health plan services, Fort Worth employers demand significant coverage by physicians who practice in Fort Worth and who admit patients to Fort Worth hospitals. F. 52, 54. Representatives from health insurance plans testified that they would not be able to effectively market their products to Fort Worth employers without a sufficient number of Fort Worth physicians covering various fields of practice in their network. F. 53. One health insurance plan conducted an independent analysis of the importance of NTSP physicians to its Fort Worth area health plan. This analysis revealed that, without NTSP physicians, there would be substantial coverage holes in the Fort Worth area in several areas of specialization. F. 62. Health plans would not substitute physicians whose services are available in other areas such as Dallas County or the Mid- Cities area to avoid a small but significant Fort Worth area price increase. F. 58. Representatives from health insurance plans also testified that, even if the price of Fort Worth area physician services increased by five percent or greater, they would still need to have various kinds of Fort Worth area physicians included in their health plans to serve Fort Worth employers and consumers. F. 60.

NTSP has approximately 480 participating member physicians, the majority of whom are specialists. F. 32. The vast majority of NTSP physicians are located in the Fort Worth area of VOLUME 140 Initial Decision Tarrant County, Texas. F. 31. NTSP physicians are a significant presence in the Fort Worth area. F. 61. NTSP physicians make up a large percentage of Tarrant County practitioners in many medical specialties: pulmonary disease (80 percent); cardiovascular disease (59 percent); and urology (69 percent). F. 61. NTSP has stated that a health plan attempting to serve the employees of the City of Forth Worth "would not be able to satisfy employer/employee match or network access standards without NTSP physicians participating in the network." F. 63. Accordingly, the evidence establishes that the relevant market is physician services available to patients in the Fort Worth area. D. Horizontal Agreement The FTC Act's prohibition of unfair methods of competition encompasses violations of Section 1 of the Sherman Act, which prohibits agreements in restraint of trade. California Dental, 526 U.S. at 762 n.3. The Commission relies on Sherman Act law in adjudicating cases alleging unfair competition. FTC v. Indiana Fed'n of Dentists, 476 U.S. 447, 451-52 (1986); In re California Dental Assn, 121 F.T.C. 190, 292 n.5 (1996). Section 1 of the Sherman Act prohibits "every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations . . . ." 15 U.S.C. § 1. The ban on contracts in restraint of trade extends only to unreasonable restraints of trade, i.e., restraints that impair competition. State Oil Co. v. Khan, 522 U.S. 3, 10 (1997); Chicago Bd. of Trade v. United States, 246 U.S. 231, 238 (1918).

To determine whether Complaint Counsel has established that Respondent's actions violate Section 5 of the FTC Act or Section 1 of the Sherman Act, the critical questions are: (1) whether there was a contract, combination, or conspiracy; and, if so, (2) whether the contract, combination, or conspiracy unreasonably restrained trade.

VOLUME 140 Initial Decision 1. Whether there was a contract, combination, or conspiracy a. Summary of facts One of NTSP's functions is to messenger to its member physicians the offers that NTSP receives from health insurance providers of fee-for-service, non-risk contracts ("non-risk contracts"). F. 44. NTSP enters into a Physician Participation Agreement ("PPA") with its member physicians. F. 64. The PPA grants NTSP the right to receive all payor offers and imposes on the member physicians a duty to promptly forward those offers to NTSP. F. 65. The PPA also grants NTSP a right of first negotiation with health care payors, with each physician agreeing that he or she will refrain from pursuing offers from a health plan until NTSP notifies him or her that NTSP is discontinuing negotiations with the health plan. F. 65-66. (CX 275 at 24 ("NTSP shall have the right to receive all Payor Offers made to NTSP or Physician . . . If Physician receives a Payor Offer, . . . Physician will promptly forward such Payor Offer to NTSP for further handling in accordance with the provisions of this Agreement.")). The Board of Directors of NTSP ("Board") decides whether to send non-risk contract offers to its member physicians based on "Board minimums." F. 83. Board minimums are minimum rates established through NTSP's polling of its member physicians to determine what each physician believes are acceptable fees for non-risk contracts. F. 84, 87. (E.g., CX 1196 ("Every year the Board asks the members to tell them what they consider to be appropriate reimbursement. . . . Once a year we poll the members and get that information from them."). NTSP's polling form asks each physician to disclose the minimum price that he or she would accept to provide medical services pursuant to a fee-forservice HMO or PPO agreement. F. 89. NTSP collects the results and calculates the mean, median, and mode ("averages") of the minimum acceptable fees. F. 93. NTSP then sends to its member physicians "Fax Alerts," that communicate to NTSP physicians the minimally acceptable fee schedules for non-risk health plan contracts. F. 94, 98, 84 (Fax Alert from NTSP to its member physicians informing them of the results of that year's poll and stating that NTSP "utilizes these minimums when negotiating VOLUME 140 Initial Decision managed care contracts on behalf of its participants"). If a nonrisk contract offer falls below the minimally acceptable fee schedule, NTSP, on behalf of its member physicians, rejects the offer by determining to not messenger the offer to its member physicians. F. 68, 83.

NTSP cannot and does not bind any member physician to nonrisk contracts. F. 71. The PPA gives NTSP no authority to bind physicians. F. 67. Any non-risk contracts which NTSP has decided to accept are messengered by NTSP to NTSP's physicians for their individual decisions on whether or not to join. See F. 71, 72. E.g., F. 189, 326-27.

In the process of negotiations for the provision of physician services under health plans with United Healthcare ("United") and with Aetna Health, Inc. ("Aetna"), NTSP has solicited and obtained powers of attorney from its member physicians, giving NTSP the legal authority to negotiate non-risk contracts with those health plans on behalf of NTSP's member physicians. F. 76- 77, 160-61, 302-04. In the process of negotiations with Cigna Healthcare ("Cigna"), NTSP requested that its member physicians sign an authorization form to allow NTSP to serve as its physicians' agent. F. 80, 205.

NTSP has encouraged its physicians to abstain from negotiating direct contracts with health plans and to refer any health plans' offers to NTSP staff in accordance with their participation agreements. F. 78, 168. NTSP's physicians have referred health plans attempting to contract directly with them back to NTSP, with the knowledge that NTSP would reject offers below Board minimum rates. F. 81. Cigna, for example, received forty virtually identical letters from physicians directing Cigna to contact NTSP, rather than the physicians, because NTSP was acting as the physicians' agent in negotiating the non-risk sharing contract in question. F. 206. When United approached individual physicians to offer direct contracts, United was also referred to NTSP. F. 173.

VOLUME 140 Initial Decision b. Summary of parties' positions Complaint Counsel argues that the mere existence of NTSP is a combination that satisfies the combination requirement of Section 1 of the Sherman Act. Complaint Counsel's Post Trial Brief ("CCPTB") at 51 (citing Alvord-Polk, Inc. v. Schumacher & Co., 37 F.3d 996, 1009 n.11 (3d Cir. 1994) ("There is . . . authority for the proposition that a trade association, in and of itself, is a unit of joint action sufficient to constitute a section 1 combination."). Complaint Counsel further asserts that the evidence - that NTSP polled and disseminated averaged data on future prices; that NTSP set minimum rates for contracting with health plans based on this data; and that NTSP collected powers of attorney from member physicians - demonstrates that NTSP entered into a "contract, combination or conspiracy" to implement and enforce price and related agreements. CCPTB at 59-60. Respondent argues that NTSP, as a single entity, is incapable of colluding with itself. Respondent's Post Trial Reply Brief ("RPTRB") at 7-8. Respondent further asserts that, under the Colgate doctrine, NTSP has the legal right to refuse to sign and messenger to its member physicians contractual offers that are outside NTSP's business model. RPTB at 18, 22 (citing United States v. Colgate & Co., 250 U.S. 300, 307 (1919)). c. Analysis (i) Concerted action must be demonstrated To establish a violation of Section 1 of the Sherman Act, a plaintiff must demonstrate concerted action. Viazis v. Am. Assn of Orthodontists, 314 F.3d 758, 761 (5th Cir. 2002). "The term 'concerted action' is often used as shorthand for any form of activity meeting the section 1 'contract, combination or conspiracy' requirement." Alvord-Polk, 37 F.3d at 999 n.1. In Viazis, the Court of Appeals for the Fifth Circuit held, "despite the fact that 'a trade association by its nature involves collective action by competitors, it is not by its nature a 'walking conspiracy', its every denial of some benefit amounting to an unreasonable restraint of trade.'" 314 F.3d at 764 (quoting VOLUME 140 Initial Decision Consolidated Metal Prod., Inc. v. Am. Petroleum Inst., 846 F.2d 284, 293-94 (5th Cir. 1988)). Simply because NTSP is an organization of otherwise competing physicians does not mean that the concerted action requirement of Section 1 of the Sherman Act has automatically been satisfied. Indeed, in Alvord-Polk, the case relied upon by Complaint Counsel, the Court of Appeals for the Third Circuit held, "concerted action does not exist every time a trade association member speaks or acts. Instead, in assessing whether a trade association (or any other group of competitors) has taken concerted action, a court must examine all the facts and circumstances to determine whether the action taken was the result of some agreement, tacit or otherwise, among members of the association." 37 F.3d at 1007-08.

(ii) Agreement under Maricopa In Arizona v. Maricopa Co. Med. Soc'y, 457 U.S. 332, 356-57 (1982), the complaint challenged agreements among competing physicians, who were members of medical societies or medical foundations, that set, by majority vote, the maximum fees that the physicians could claim in full payment for services to policyholders of specific health insurance plans approved by the foundations. While the Supreme Court's opinion provides little detail on the challenged agreements, more detail is available in the lower court decisions. As described by the Court of Appeals, "the challenged conduct is the setting by majority vote of maximum fees that physician members may claim in full payment for health services they provide to policyholders of [certain] approved insurance plans." Arizona v. Maricopa Co. Med. Soc'y, 643 F.2d 553, 554 (9th Cir. 1980), rev'd on other grounds, 457 U.S. 332 (1982). Further, the Court of Appeals noted that the foundations' "activities include polling their members from time to time to set upper limits on fees they may charge patients covered by insurance plans the [medical societies] approve." Id. at 554-55. At the district court level, the court found, "it is undisputed that the foundations set the maximum amount to be paid [to] physicians who agree to provide services to patients who are enrolled in insurance plans approved by the foundations. It is further undisputed that the doctors who agree to participate in the VOLUME 140 Initial Decision foundation-approved plans are free to set the prices they charge their patients." Arizona v. Maricopa Co. Med. Soc'y, 1979 U.S. Dist. LEXIS 11918, at *2 (D. Az. 1979), aff'd, 643 F.2d 553 (9th Cir. 1980), rev'd on other grounds, 457 U.S. 332 (1982). As described by the Courts of Appeals for the Fourth Circuit and for the Ninth Circuit, the illegal agreements in Maricopa were the agreements by the participating physicians to accept set amounts that had been determined by the foundations as fees in payment for physician services to policyholders. Ratino v. Med. Serv., 718 F.2d 1260, 1270 (4th Cir. 1983); Hahn v. Oregon Physicians' Serv., 868 F.2d 1022, 1027 (9th Cir. 1988). The Supreme Court in Maricopa found these agreements to be a "combination . . . [that] permitted [the physicians] to sell their services to certain customers at fixed prices and arguably to affect the prevailing market price of medical care." 457 U.S. at 356. Thus, the Supreme Court found concerted action without finding that the competing physicians agreed directly with each other to set prices and even where the participating physicians were free to set their own prices. See id. In so holding, the Supreme Court noted that the rule against price fixing "is violated by a price restraint that tends to provide the same economic rewards to all practitioners regardless of their skill, their experience, their training, or their willingness to employ innovative and difficult procedures in individual cases." Id. at 348. In this case, there is no evidence that one or more of the member physicians agreed with each other to reject a non-risk payor offer; there is no evidence that one or more of the member physicians consulted with each other when responding to polls or making decisions on non-risk payor contracts; and, there is no evidence that any member physician knew what another physician was going to do in response to a non-risk payor offer. F. 73-75. However, Maricopa does not require such evidence. The evidence in this case does establish that Respondent entered into agreements with physicians to negotiate non-risk contracts on behalf of those physicians and that physicians agreed to accept the rates of the non-risk contracts entered into between NTSP and health care payors. F. 44, 51, 64, 191, 326. Respondent VOLUME 140 Initial Decision argues that NTSP physicians at times signed contracts with certain health plans, individually or through other physician groups, at rates different than those agreed to by NTSP. RPTB at 19. However, a price fixing conspiracy need not be perfect or complete in order to be unlawful. In re High Fructose Corn Syrup Antitrust Litig., 295 F.3d 651, 656 (7th Cir. 2002) ("An agreement to fix list prices is . . . a per se violation of the Sherman Act even if most or for that matter all transactions occur at lower prices.").

The evidence further establishes that the physicians, who are otherwise competitors of each other (F. 35-36), provided to NTSP the minimum prices that each physician or physician group would be willing to accept on a non-risk contract specifically for NTSP's use in negotiating the economic terms of non-risk contracts. F. 87-90, 96-98, 155-59, 308-16. E.g., F. 88 ("NTSP polls its affiliates and membership to establish Contracted Minimums. NTSP then utilizes these minimums when negotiating managed care contracts on behalf of its participants."). And, the evidence establishes that NTSP used this price information to obtain more favorable rates or contract terms from health insurance payors than the payors initially offered. F. 44, 170-90, 317-30. This behavior satisfies the concerted action requirement under Maricopa.

In addition, the evidence establishes that NTSP sought a uniform rate for all of its specialties, regardless of the supply or demand for specific specialty services in the market. F. 291, 293, 340. This behavior is contrary to the Supreme Court's finding in Maricopa that the rule against price fixing was violated by a price restraint that tended to provide the same economic rewards to all practitioners, regardless of skill or experience. Maricopa, 457 U.S. at 348.

The challenged concerted action in this case is similar to the agreement challenged in Hassan v. Indep. Practice Assoc., P.C., 698 F. Supp. 679 (E.D. Mich. 1988). In Hassan, an organization of physicians and osteopaths set a maximum fee schedule that was initially based on schedules submitted by members, as well as information about fees in areas in which the organization did not VOLUME 140 Initial Decision operate. Id. at 681-82. The court concluded that, where the association and the board of directors which set the fees were made up of physicians or osteopaths, health care providers set the fee reimbursement and that, under Maricopa, there was an agreement between competitors. Id. at 687. If, as in Maricopa, it is unlawful for competing physicians to set maximum prices, then, for even stronger reason, it is unlawful for competing physicians to set, through NTSP, minimum prices. See United States v. Socony-Vacuum Oil Co., Inc., 310 U.S. 150, 223 (1940) ("Under the Sherman Act a combination formed for the purpose and with the effect of raising, depressing, fixing, pegging, or stabilizing the price of a commodity in interstate or foreign commerce is illegal per se.").

(iii) Actions on behalf of members Respondent asserts that NTSP is a single entity, incapable of colluding with itself. RPTRB at 7-8. "It is not sufficient to assert, as defendants do, that a corporation cannot conspire with itself. We must look at substance rather than form." Virginia Academy of Clinical Psychologists v. Blue Shield of Virginia, 624 F.2d 476, 480, 481 (4th Cir. 1980) (finding action in concert where "in a real and legal sense, [defendants] are agents of their member physicians"). The substance here is that NTSP, in negotiating economic terms of non-risk contracts, did so for the pecuniary benefit of its member physicians. Supra III.A.1. E.g., F. 84 (NTSP utilizes these minimums determined by polls "when negotiating managed care contracts on behalf of its participants.") (emphasis added).

Respondent is an association of individual competing physicians who have not integrated their medical practices and who have separate and distinct economic interests. F. 18, 35. Where "each doctor practices medicine in his or her own individual capacity[,] each is a 'separate economic entity potentially in competition with other physicians.'" Capital Imaging Associates, P.C. v. Mohawk Valley Med. Assn, Inc., 996 F.2d 537, 544 (2nd Cir. 1993) (quoting Bolt v. Halifax Hosp. Med. Ctr., 891 F.2d 810, 819 (11th Cir. 1990). See also Oregon VOLUME 140 Initial Decision Physicians' Serv., 868 F.2d at 1024, 1030 (denying summary judgment where plaintiff produced sufficient evidence to permit a trier of fact to conclude that an organization founded by physicians that offered and administered a prepaid health care plan was an organization of physicians or an agent of its member physicians and may have acted for the anticompetitive interests of its member physicians).

Respondent not only is an entity composed of physicians, it is managed by a Board composed of eight physicians, elected by physicians. F. 23-24. Physician control of NTSP further undermines Respondent's argument that NTSP is a single entity with a unity of purpose. Virginia Academy of Clinical Psychologists, 624 F.2d at 481 (physician control of prepaid health care plans sufficient to bring its actions within the purview of Section 1 of the Sherman Act). See also Addino v. Genesee Valley Med. Care, Inc., 593 F. Supp. 892, 894, 896-97 (W.D.N.Y. 1984) (where board of non-profit corporation composed of half physicians and half laypersons approved all proposed rates for physician services, plaintiffs' allegation that defendant was merely a vehicle for the member physicians to fix prices was held to be more than sufficient to state a claim of conspiracy between and among defendant's member physicians); cf. Barry v. Blue Cross of California, 805 F.2d 866, 869 (9th Cir. 1986) (where plaintiffs failed to produce any evidence of physician control of the pricesetting entity, court upheld the agreement as to prices and reimbursement).

Accordingly, NTSP is not a single entity with a "complete unity of purpose," incapable of conspiring with itself. See Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 772 (1984) (no concerted action where a parent company and wholly owned subsidiary had a "'unity of purpose or a common design'") (citation omitted).

(iv) Respondent's authority Relying on Viazis, Respondent argues that Complaint Counsel has failed to establish concerted action. RPTB at 16. In Viazis, plaintiff, an orthodontist, claimed that the action taken by an VOLUME 140 Initial Decision association of orthodontists to suspend plaintiff's membership in the association was concerted action, in violation of Section 1 of the Sherman Act. 314 F.3d at 761. After a hearing and appeal, the association's ethics committee found that plaintiff had violated the association's prohibition of false and misleading advertising and determined to suspend plaintiff's membership in the organization for one year. Id. at 761, 764. The Court of Appeals for the Fifth Circuit held that the suspension of plaintiff could "constitute action pursuant to a conspiracy only if the members of [the association] were conspiring among themselves." Id. at 764. Plaintiff "was unable to demonstrate that the ethics proceedings against him were a sham or that the standards applied were pretextual, so he failed to establish the existence of an unlawful conspiracy." Id. at 764-65.

In Viazis, the plaintiff presented no evidence that the proceedings against him were in any way designed to limit competition. Id. In this case, the evidence demonstrates that NTSP engaged in conduct that had the purpose and effect of limiting price competition among NTSP physicians and raising rates above those initially offered to NTSP on non-risk contracts. E.g., F. 187, 327. Accordingly, Viazis does not compel a finding that NTSP did not engage in a contract, combination, or conspiracy.

Respondent also asserts that, under Colgate, 250 U.S. at 307 (establishing manufacturer's right to refuse to deal) and Verizon Communications, Inc. v. Law Offices of Curtis V. Trinko, LLP, 124 S. Ct. 872, 880-81 (2004) (establishing network's right to refuse to make itself available), NTSP has a right to follow its own business model and to refuse to sign and messenger contractual offers that fall below Board minimums. RPTB at 22. Respondent further asserts that the Court of Appeals for the Fifth Circuit recently reiterated the right of an association to refuse to deal in its Viazis decision. RPTB at 22. In Colgate, the United States Supreme Court held that a manufacturer has a right to deal, or refuse to deal, with whomever it likes, as long as it does so independently. 250 U.S. at 307. Colgate involved the unilateral decision by a single corporation, VOLUME 140 Initial Decision Colgate, not to sell its products to dealers who would resell them at prices below the suggested prices set by Colgate. Id. at 302-03. As a single corporation, in fact and in form - unlike NTSP - Colgate could not conspire with itself. But here, where NTSP is not an entity with unity of purpose, Colgate is inapplicable. See St. Bernard General Hosp., Inc. v. Hosp. Serv. Assn, Inc., 712 F.2d 978, 986-87 (5th Cir. 1983) (Colgate doctrine inapplicable to an association comprised of nine local hospitals). Trinko is likewise inapplicable to the facts of this case. In Trinko, the Supreme Court addressed conduct by a single firm charged with monopolization under § 2 of the Sherman Act, not with "contract, combination or conspiracy" under § 1 of the Sherman Act. Trinko, 124 S. Ct. at 878. There was no allegation that the defendant had agreed with any other person on prices or on a refusal to deal. See id. The Court in Trinko held that the defendant was not required to make its communication network available to competitors. Id. at 880. The Court's holding reflects the reluctance of courts to use the antitrust laws to force competitors to cooperate with one another, recognizing that such cooperation may instead lead to collusion or reduce incentives to innovate. Id. at 879. Thus, Trinko is inapposite to a case such as this, involving an agreement on prices and concerted action. Viazis also does not compel a conclusion that NTSP has a fight to refuse to sign and messenger contractual offers that fall outside NTSP's business model. In Viazis, the Fifth Circuit held that a plaintiff cannot show competitive harm "merely by demonstrating that the defendant 'refused without justification to promote, approve, or buy the plaintiff's product.'" 314 F.3d at 766 (quoting Consolidated Metal Products, 846 F.2d at 297). Respondent asserts that this case is similar to Viazis in that NTSP is making a decision on whether or not it wants to be involved in (i.e., "approve") a payor's offer. RPTB at 22. What makes this case different, however, is that the court in Viazis found that there was no evidence that the association had influence over its members' purchasing decisions or that it coerced them into rejecting plaintiff's product. 314 F.3d at 766. Here, there is evidence that NTSP influenced its member physicians to allow NTSP to negotiate economic terms of non-risk contracts on their VOLUME 140 Initial Decision behalf and that NTSP rejected offers that fell below Board minimum rates which NTSP had set based upon polling the member physicians. E.g., F. 65-67, 70, 83-89, 127, 155-57, 300, 311-16.

(v) Summary Complaint Counsel has presented evidence "that tends to exclude the possibility that the alleged conspirators acted independently." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 588 (1986) (quotation omitted). The evidence, as detailed in the Findings of Fact and summarized above, establishes that NTSP and its member physicians entered into agreements to allow NTSP to negotiate on behalf of its member physicians; that NTSP established Board minimum rates by polling its member physicians to determine the minimally acceptable rate that its member physicians would accept for physician services; that NTSP used these Board minimum rates in negotiating the economic terms of non-risk contracts with health insurance plans; and that NTSP obtained for its member physicians more favorable rates or contract terms from health insurance payors than the payors initially offered. Accordingly, Complaint Counsel has demonstrated concerted action. The next required inquiry is whether Respondent's actions unreasonably restrained trade.

2. Whether there was an unreasonable restraint of trade a. Summary of facts A review of the actions NTSP took in its negotiation of economic terms of non-risk contracts with three health insurance payors - United, Cigna, and Aetna - demonstrates that the concerted action taken by NTSP was an unreasonable restraint of trade. As detailed in the Findings of Fact and summarized below, NTSP, on behalf of its member physicians, negotiated economic terms on non-risk contracts and entered into agreements with health care payors through which NTSP obtained higher rates or more beneficial economic terms than the health care payors initially offered to NTSP. NTSP has not demonstrated valid VOLUME 140 Initial Decision procompetitive justifications for this conduct. Thus, as set forth below, Complaint Counsel has demonstrated an unreasonable restraint of trade.

(i) Negotiations of economic terms with health plans The Medicare RBRVS fee schedule is Medicare's Resource Based Relative Value System ("RBRVS"), a system developed by the United States Centers for Medicare and Medicaid Services to determine the amount to pay physicians for each service rendered to Medicare patients. F. 10. Health plans that contract with physicians on a fee-for-service basis often do so based on a stated percentage of the Medicare RBRVS fee schedule, which provides reimbursement rates for a large number of specific procedures. F. 11. The Medicare RBRVS establishes weighted values for each medical procedure, such that the application of a percentage multiplier enables one to determine the fees for thousands of different services simultaneously. F. 12. NTSP's polling form, which asks each physician to disclose the minimum price that he or she would accept for the provision of medical services pursuant to a fee-for-service HMO or PPO agreement, asks member physicians to indicate their price selection by placing a check mark next to one of several preprinted Medicare RBRVS ranges. F. 89-90. On October 15, 2001, the NTSP Board received annual poll results. F. 96. Based on the poll results, NTSP established minimum prices of 125% of 2001 Medicare RBRVS for HMO products and 140% of 2001 Medicare RBRVS for PPO products as minimally acceptable fee schedules. F. 96. On November 11, 2002, NTSP conducted another annual poll to determine minimum reimbursement rates for use in negotiation of HMO and PPO products and anesthesia contracts with health plans. F. 97. On its 2002 polling form sent to physicians, NTSP included the 2001 poll results, reported by mean, median, and mode. F. 97. The results of the 2002 annual poll by mean, median, and mode, for HMO were 131%, 135%, and 135%; for PPO, 146%, 145%, and 145%. F. 98. As summarized below, these minimum rates were used by NTSP in its negotiation of economic terms of non-risk contracts on behalf of its member physicians.

VOLUME 140 Initial Decision . United In June 1998, NTSP sought to negotiate a non-risk contract with United, a health care payor that had been identified by NTSP as a potential major player in the market place. F. 107-08. To that end, NTSP solicited powers of attorney from its member physicians and recommended that the physicians "refrain from responding to United Healthcare while NTSP's request for agency status is being tabulated." F. 108, 110. In the course of its negotiations with United, NTSP made fee proposals to United and instructed its member physicians not to take any actions with respect to a United contract because NTSP was engaged in negotiations with United on behalf of NTSP's member physicians. F. 112-13. In the fall of 1998, United made an offer to NTSP on a non-risk contract containing rates that were below the rates available to physicians through another IPA, Health Texas Provider Network ("HTPN"). F. 116. NTSP and HTPN had an arrangement whereby NTSP physicians would be allowed to access HTPN's payor offers. F. 117. NTSP proposed to United that NTSP's member physicians contract with United through HTPN, which allowed higher rates than those offered to NTSP by United. F. 118-19. A significant number of NTSP physicians did access United through HTPN. F. 120.

In March 2001, NTSP approached United to negotiate a direct NTSP-United non-risk contract. F. 121. At that time, United already had contracts with approximately two-thirds of NTSP's member physicians, either directly or through other physician organizations such as HTPN. F. 124. Therefore, United concluded that there was no real need to enter into a contract with the remainder of NTSP physicians through an NTSP group contract. F. 124. Nevertheless, United offered NTSP its then standard rate in the Fort Worth area of 110% of 2001 Dallas RBRVS, which was the equivalent of 115% of 2001 Tarrant County RBRVS. F. 126. Without presenting the offer to its member physicians, NTSP informed United that the offer was unacceptable because it fell below NTSP's Board minimums and because it offered a single rate for both HMO and PPO products, instead of different rates for the two products. F. 127, 129, 147. In a Fax Alert to the VOLUME 140 Initial Decision member physicians, NTSP's Board informed its member physicians that NTSP and United had agreed to fundamental noneconomic terms, but that NTSP believed that United's rate offer was lower than NTSP's minimum price level. F. 149. Following its rejection of the United offer, NTSP contacted a large employer, the City of Fort Worth, which was engaged in contract negotiations with United to provide health care coverage to the employees of the City of Fort Worth. F. 140, 141, 144. In July 2001, NTSP sent a letter to the Mayor of Fort Worth notifying him that United's reimbursement rates are "well below market benchmarks" and that "NTSP simply has not and will not accept United's request for our participation in their provider network for your employees." F. 138. The letter also stated that "the City may experience significant network disruption once United officially begins their duties (up to 588 doctors no longer available)." F. 138. NTSP encouraged its Board members to "contact any city council members they know to let them know that United's panel is not adequate." F. 135. NTSP also urged its primary care physicians to contact the Mayor and city council members to educate them about the situation with United and ask for assistance. F. 136.

These actions created concern among United's client, the City of Fort Worth, that NTSP physicians might drop out of United's network, leaving an inadequate network of physicians to serve its Fort Worth-based employees. F. 143. Based on these concerns, the City of Fort Worth urged United to do what was necessary to preserve its provider network. F. 143.

United, because it had a majority of NTSP physicians already under contract through HTPN, did not initially increase its offer to NTSP in the summer of 2001. NTSP, in July 2001, informed United that NTSP intended to terminate the contract that NTSP had with HTPN for the provision of physician services to United. F. 153. See also F. 150 (Fax Alert informing NTSP member physicians that "the NTSP Board has authorized termination [of] the United Health Care contract. However, notice has not yet been sent to United as NTSP must attempt one last strategy."). Subsequently, on July 23, 2001, the NTSP Board approved VOLUME 140 Initial Decision termination of NTSP's participation in the United-HTPN contract, effective October 20, 2001. F. 151.

In addition, NTSP solicited powers of attorney from its member physicians to enable NTSP to negotiate contracts between the physicians and United on the physicians' behalf. F. 160. Under the broad language of the power of attorney, NTSP was authorized to negotiate price terms on behalf of the member physicians: "this power of attorney grants the authority to the agent to act on the undersigned's behalf regarding the foregoing described agreements in all respects, including the authority to negotiate the terms of, enter into, execute, amend, modify, extend or terminate any such agreements." F. 161. United learned about NTSP's efforts to solicit powers of attorney from NTSP's member physicians. F. 162. This effort, in conjunction with NTSP's termination of 108 physicians participating in United via HTPN and the concerns expressed by the City of Fort Worth to United about losing NTSP physicians from United's provider network, induced United to change its network strategy for Tarrant County. F. 162. Initially, United tried to recruit the terminated NTSP member physicians individually. F. 163. United directly offered those physicians the opportunity to return to a United contract at the same reimbursement rates that they had received under the HTPN-United agreement prior to their termination by NTSP. F. 164.

NTSP sent another Fax Alert to its member physicians in August 2001. In it, NTSP explained that it had been receiving calls from member physicians regarding direct offers that they had received from United; repeated NTSP's assessment that the United offer fell below Board minimums; noted that NTSP had already received 107 executed powers of attorney from its member physicians "to act on their behalf in regard to all contracting activity between themselves and United Healthcare"; invited the submission of executed powers of attorney by other member physicians; and advised member physicians who had already signed powers of attorney to inform United representatives that NTSP was their contracting agent and to instruct United "to contact NTSP directly." F. 165-68. NTSP VOLUME 140 Initial Decision promised its member physicians that it would continue to pursue a direct contract with United that "meets or exceeds" the fee schedule minimum rates set by NTSP membership. F. 166. United was not successful in signing contracts directly with NTSP physicians. United's initial direct contract invitation attracted only a few physicians, even though the physicians were offered the same rates that they previously received through HTPN. F. 171-72. Some of these physicians who rejected United's offer explicitly referred United back to NTSP as their negotiating agent. F. 173.

After receiving little interest in its initial direct offer to the terminated NTSP physicians, United tried to work through other Fort Worth IPAs or large medical groups. United offered 125% of 2001 Tarrant County RBRVS for HMO and 130% of 2001 Tarrant County RBRVS for PPO to two other IPAs, All Saints Affiliates and Medical Clinic of North Texas. F. 170. Next, United offered NTSP a rate of 125% of 2001 Tarrant RBRVS for HMO and 130% Tarrant RBRVS for PPO. F. 185. NTSP and United signed a contract for 125% of 2001 Tarrant County RBRVS for HMO and 130% of 2001 Tarrant County RBRVS for PPO, effective November 1, 2001. F. 186. On November 1, 2001, NTSP sent the contract to its member physicians to opt in or opt out, indicating that the contract was a result of negotiations and that the 125% of the 2001 Tarrant County RBRVS for the HMO was "at the average level of acceptable reimbursement," but that the PPO rate of 130% was below the acceptable average reimbursement levels determined by the NTSP Board based on the poll results. F. 189. Of NTSP's member physicians, for HMO, 24% accepted, and for PPO, 23% accepted the NTSP-United contract. F. 191. . Cigna Cigna purchased Healthsource, Inc. ("Healthsource") in late 1997 and informed physicians in Healthsource's network that their contracts with Healthsource would be assigned to Cigna. F. 201- 02. NTSP physicians who had contracts with Healthsource, at NTSP's direction, sent Cigna forty virtually identical letters, VOLUME 140 Initial Decision representing fifty-two doctors in separate practice groups, refusing assignment and stating that NTSP would be their representative and agent in negotiations with Cigna. F. 204-06. Cigna and NTSP entered into a Letter of Agreement ("LOA") in October 1999, through which Cigna agreed to reimburse NTSP specialists, with the exception of cardiologists/CV [cardiovascular] surgeons, gastroenterologists, urologists, oncologists, and podiatrists, on a fee schedule equal to 125% of the 1998 Dallas County RBRVS. F. 212-13. Subsequently, NTSP requested, and Cigna agreed to, an amendment to the contract that insured that the rate would be adjusted annually to maintain 125% of current year RBRVS. F. 220.

Under the October 1999 LOA, Cigna entered into a non-risk contract for "NTSP specialists." F. 213, 237. Subsequently, NTSP asked Cigna to allow primary care physicians to "opt in" to the NTSP-Cigna contract. F. 238. Cigna already had an adequate number of primary care physicians in its network and determined that if NTSP's primary care physicians were allowed into Cigna's network, Cigna's overall costs would increase without any benefit to Cigna. F. 239. At times during the negotiations, in late 2000, regarding the inclusion of primary care physicians, NTSP threatened to terminate the NTSP-Cigna contract. F. 244. Cigna eventually agreed to allow NTSP's primary care physicians to opt in to the existing contract. F. 246.

In preparation for its negotiations with NTSP, Cigna analyzed the importance of having NTSP's physicians in its Fort Worth area network. F. 235. Cigna determined that NTSP's physicians made up a high percentage of many specialty practices. F. 235. Cigna also performed disruption analyses to determine the effect of losing access to NTSP's physicians. F. 235. Based on these analyses, Cigna concluded that a loss of NTSP physicians would have a significant negative impact on Cigna's network in several crucial specialties, and that, therefore, it must have those physicians in its Fort Worth area network. F. 235. Cigna also concluded, based on the identical letters it received from NTSP's member physicians designating NTSP as their agent and the threats by NTSP to terminate its contracts with Cigna, that VOLUME 140 Initial Decision NTSP's physicians would only contract through NTSP and would not agree to contract individually with Cigna. F. 206, 208. Under the contract between Cigna and NTSP that was current at the time of trial, April 2004, PPO reimbursement is at a rate of [redacted] and HMO reimbursement is at a rate of [redacted]. F. 250 (in camera). Cigna agreed to allow NTSP's primary care physicians to opt in to the contract on a fixed amount per patient basis and to provide for the future inclusion of specialists who had previously been carved out of the Cigna HMO contract. F. 246. There is insufficient evidence to determine if NTSP's demand of these rates was based on Board minimums or poll results. . Aetna Prior to 2000, many NTSP physicians served Aetna patients in the Fort Worth area through contracts that NTSP's physicians had with Medical Select Management ("MSM"), an IPA to which Aetna had delegated almost all medical risk for HMO care. F. 267, 269, 273-74. In 1999 and again in 2000, NTSP approached Aetna to obtain a direct NTSP-Aetna contract that would not involve MSM. F. 276-77. Initially, NTSP and Aetna tried to negotiate a risk contract, but after those negotiations reached a dead end, in October 2000, their negotiations shifted to non-risk, fee-for-service HMO and PPO products. F. 286. In their negotiations on the terms of a non-risk contract, Aetna initially offered to NTSP rates that were based on a reference schedule that uses the same relative value units from the RBRVS schedule, but places a different multiplier on different specialties' services, based on supply and demand. F. 288. Aetna's initial offer aggregated to about 111% to 112% RBRVS for HMO and about 123% to 125% RBRVS for PPO, with some specialities being offered more or less than the aggregate. NTSP rejected this offer and proposed, instead, uniform rates for all specialities of 125% RBRVS for HMO and 140% RBRVS for PPO. F. 288. In November 2000, Aetna, in response to NTSP's demands, agreed to raise its PPO offer to 140% and offered a higher HMO reimbursement rate of 116%. F. 298. NTSP accepted the offered PPO rates, but continued to insist on the higher rate of 125% for its HMO contract. F. 299, 300.

VOLUME 140 Initial Decision In the midst of negotiating the HMO rates with Aetna, NTSP decided to re-poll its member physicians "on the acceptability of the present Aetna offering." F. 311. Shortly thereafter, NTSP informed its member physicians that "the membership's message that a 125% of current Medicare HMO fee schedule is required has been transmitted to Aetna and a response on this final contractual item is expected within the next 24 to 36 hours." F. 316. NTSP further informed its member physicians that NTSP continued to act as their agent and instructed its member physicians to refer all contacts and materials received from Aetna to NTSP directly. F. 316.

During these negotiations, Aetna was subjected to pressure to reach an agreement with NTSP. In June 2000, NTSP threatened that its member physicians might immediately end their participation in the Aetna-MSM arrangement. F. 278. NTSP also sought and received approximately 180 powers of attorney from its member physicians, authorizing NTSP to act for those physicians in all transactions relating to MSM and to represent its member physicians in any negotiations with Aetna, regarding any term. F. 304. Using the authority provided by the powers of attorney, in November 2000, as previously threatened, NTSP terminated its member physicians' participation in the Aetna- MSM arrangement, citing breach of contract by MSM. F. 297. Based on the language of the powers of attorney and other NTSP statements to Aetna, Aetna believed that it could not negotiate directly with NTSP physicians. F. 306.

Ultimately, Aetna agreed to NTSP's terms. On December 19, 2000, Aetna wrote to NTSP and proposed for PPO, 140% of current Medicare RBRVS, anesthesia at $ 45.00; for HMO, 125% of current Medicare RBRVS, anesthesia at $ 43.00. F. 323. NTSP responded, stating that NTSP would send out a notice to its member physicians notifying them that the PPO and HMO offers were within the messenger minimums. F. 324. NTSP forwarded the NTSP-Aetna agreement to its member physicians. F. 326. One hundred and eighty-eight member physicians agreed to the NTSP- Aetna contract. F. 326.

VOLUME 140 Initial Decision In 2001, Aetna attempted to reduce the rates it paid to NTSP. F. 331. Aetna offered NTSP rates that Aetna believed were more in line with the market, but in some aspects were higher than Aetna's general fee schedule. F. 338-39. NTSP did not present Aetna's rate proposal to its member physicians because NTSP did not have Board authority to do so. F. 341. The Aetna-NTSP contract was terminated at the beginning of 2002. F. 332. (ii) Effects on prices The evidence establishes that NTSP, through its coordinated efforts, was able to demand higher prices from United and Aetna and more favorable terms in its contract with Cigna, than those health insurance payors initially offered. However, there is insufficient evidence to establish that the rates that United, Cigna, and Aetna agreed to with NTSP are uniformly higher than rates health insurance payors offered to other IPAs or directly to other physicians.

Several health plans estimated that they had paid increased prices as a result of NTSP's negotiation of economic terms of nonrisk contracts. United agreed to a contract with rates that were an increase of 10% from their initial HMO offer and an increase of 15% from their initial PPO offer. F. 187. However, the rate that United offered to NTSP was the same rate that United had offered other IPAs. F. 188. Cigna estimated that it would cost [redacted] to shift some of its direct-contracted physicians from market compensation to NTSP compensation. F. 248 (in camera). Cigna's representative testified that the reimbursement rate of 125% of RBRVS on HMO and 130% of RBRVS on PPO was somewhere between 15 and 20 percent higher than Cigna's standard rates. F. 217. However, Cigna's representative also testified that the rates that Cigna paid to NTSP were in the "general ballpark" of the rates Cigna paid to other IPAs [redacted] F. 217 (in camera). Aetna agreed to contract rates for 2000 (uniform rates of 140% RBRVS for PPO and 125% RBRVS for HMO) that were higher than the rates Aetna initially offered (aggregated to about 123% to 125% RBRVS for PPO and to about 111% to 112% RBRVS for HMO). F. 327. Although Aetna's representative testified that the rates in the 2000 Aetna-NTSP contract were higher than other VOLUME 140 Initial Decision IPAs for similar services, those rates were identical to the rates in the Aetna-MSM contract. F. 328-29.

Complaint Counsel, in its post trial brief, argues that NTSP had compared the rates that its physicians were offered directly by the health plans to the rates that NTSP had succeeded in obtaining from those health plans, and concluded that: NTSP's contract rates with Aetna were at least 15 percent higher for both HMO and PPO arrangements; its contract rates with Cigna were at least 12 percent higher for HMO arrangements and 20 percent higher for PPO arrangements; and its contract rates with United were 15 percent higher for HMO arrangements. CCPTB at 21-22. However, the evidence cited by Complaint Counsel does not support these conclusions.

(iii) Procompetitive justifications Respondent asserts that its conduct and business model have strong procompetitive effects and efficiencies, for both risk and non-risk contracts. The evidence presented at trial demonstrates that, with respect to non-risk contracts, NTSP's business model does not generate strong efficiencies, and that any efficiencies generated from NTSP's risk contract business do not, to a significant degree, spillover into NTSP's non-risk contract business. The evidence further establishes that any efficiencies that NTSP has achieved from its risk contract business that may spillover to NTSP's non-risk contract business are not dependent upon and do not require NTSP's negotiation of economic terms in non-risk contracts.

NTSP is not clinically integrated for patients under NTSP's non-risk contracts. F. 246. For patients covered under NTSP's non-risk contracts, NTSP does not: engage in case management; provide feedback to physicians concerning patient care; require adherence to its clinical guidelines and protocols; operate or refer patients to any disease management programs or patient registries; or engage in meaningful patient education. F. 365, 370, 372-73, 375. NTSP's medical director has no responsibility for controlling costs for patients under NTSP's non-risk contracts and NTSP's medical management committee does not evaluate the VOLUME 140 Initial Decision care of patients under NTSP's non-risk contracts. F. 366-67. NTSP's hospital utilization management program does not apply to patients under NTSP's non-risk contracts and NTSP's information systems do not include data for patients under NTSP's non-risk contracts. F. 368-69.

Sixty percent of NTSP's physicians participate in non-risk contracts. Roughly half of those physicians participate in risksharing contracts. F. 51. NTSP physicians who do not participate in NTSP's shared risk contract are unlikely to learn and apply techniques to control costs and to improve quality that are developed or learned in the context of that risk-sharing arrangement. F. 379. Further, NTSP has not achieved significant spillover benefits from its risk business to its non-risk business because it lacks data for patients seen under non-risk contracts and thus is hindered in implementing organized processes for these patients. F. 378. Finally, NTSP does not need to set minimum contract rates in its non-risk contracts in order for any efficiencies achieved through NTSP's risk contract business to spillover to NTSP's non-risk contract business. F. 380. b. Summary of parties' positions Complaint Counsel asserts that because NTSP's acts and practices fit squarely within the conduct traditionally condemned as per se illegal, there is no need to engage in an extensive or elaborate analysis of market definition and competitive effects. CCPTB at 60. Complaint Counsel further asserts that irrespective of the standard of analysis applied, indirect evidence of Respondent's market power is unnecessary where there is direct evidence of price fixing among competitors. CCPTB at 60. Respondent asserts that the rule of reason analysis should be applied in this case since the conduct at issue might plausibly be thought to have a net procompetitive effect, or possibly no effect at all on competition. RPTB at 4. Respondent further asserts that because Complaint Counsel has not demonstrated that the challenged conduct has a net anticompetitive effect and has not proven NTSP's market power, Complaint Counsel has not proven an unreasonable restraint of trade. RPTB at 9, 11. VOLUME 140 Initial Decision c. Analysis Section 1 of the Sherman Act provides that "every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal." 15 U.S.C. § 1. Despite its broad language, Section 1 has long been interpreted to outlaw only those restraints that are "unreasonable." Maricopa, 457 U.S. at 343. The Supreme Court has set forth three methods for analyzing the reasonableness of a restraint on trade: (1) per se analysis, for obviously anticompetitive restraints; (2) quick look analysis, for those with some procompetitive justification; and (3) the full "rule of reason," analysis for restraints whose net impact on competition is particularly difficult to determine. Continental Airlines, Inc. v. United Airlines, Inc., 277 F.3d 499, 508-09 (4th Cir. 2002). In California Dental, the Supreme Court held, as demonstrated by the circumstances before it, "there is generally no categorical line to be drawn between restraints that give rise to an intuitively obvious inference of anticompetitive effect and those that call for more detailed treatment." Id. at 780-81. Instead, what is required is to look to "the circumstances, details, and logic of a restraint." Id. at 781. The three methods are best viewed as a continuum, on which the "amount and range of information needed" to evaluate a restraint varies, depending on how "highly suspicious" and how "unique" the restraint is. Continental Airlines, 277 F.3d at 509 (citing 11 Herbert Hovenkamp, Antitrust Law P 1911a (1998); California Dental, 526 U.S. at 779- 81).

In California Dental, the challenged restraint of trade -restrictions on both discount and nondiscount advertising -- "fail[ed] to present a situation in which the likelihood of anticompetitive effects [was] comparably obvious." Id. at 771. The Supreme Court held that, where competing claims about the effects of the professional advertising restrictions were plausible, the obvious anticompetitive effect that triggers abbreviated analysis had not been shown. Id. at 778. Thus, the Supreme Court remanded the case for a more thorough inquiry into the consequence of the challenged restraints. Id. at 759, 781. VOLUME 140 Initial Decision However, where the effects of an agreement are "intuitively obvious" and "easily ascertained," California Dental, 526 U.S. at 759, 770, no elaborate study of the industry is needed to establish the illegality of the agreement. Dagher v. Saudi Refining Inc., 369 F.3d 1108, 1116 (9th Cir. 2004).

Agreements among competitors to fix or set prices have been historically condemned as per se illegal. Socony-Vacuum, 310 U.S. at 218; Maricopa, 457 U.S. at 344 ("The anticompetitive potential inherent in all price-fixing agreements justifies their facial invalidation even if procompetitive justifications are offered for some."); Catalano, Inc. v. Target Sales, Inc., 446 U.S. 643, 647 (1980) ("It has long been settled that an agreement to fix prices is unlawful per se. It is no excuse that the prices fixed are themselves reasonable.") (citations omitted); Natl Soc'y of Prof'l Engineers v. United States, 435 U.S. 679, 692 (1978) (noting that "price is the 'central nervous system of the economy'" and holding that "an agreement that 'interferes with the setting of price by free market forces' is illegal on its face") (citation and alteration omitted).

Courts, after California Dental, have applied the per se analysis to horizontal price fixing. E.g., Dagher, 369 F.3d at 1116 n.7 ("Because we hold that the plaintiffs have made a sufficient showing with respect to the illegality of the alliance's price fixing system under the per se rule, we need not decide whether that scheme would survive 'quick look' review."); Freedom Holdings Inc. v. Spitzer, 357 F.3d 205, 226 (2nd Cir. 2004); Freeman v. San Diego Assn of Realtors, 322 F.3d 1133, 1150-54 (9th Cir. 2003). "Traditional 'hard-core' price fixing remains per se unlawful under the seminal case United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 212-24 (1940), and its progeny." Todd, 275 F.3d at 198.

Courts employ the quick look approach when a restraint of trade is not illegal per se, but nevertheless has such obvious anticompetitive effects that a "full scale" rule of reason analysis is not necessary. California Dental, 526 U.S. at 770. "When there is an agreement not to compete in terms of price or output, 'no elaborate industry analysis is required to demonstrate the VOLUME 140 Initial Decision anticompetitive character of such an agreement.'" NCAA v. Bd. of Regents, 468 U.S. 85, 109 (1984).

Regardless of what method of analysis is used, "the criterion to be used in judging the validity of a restraint on trade is its impact on competition." NCAA, 468 U.S. at 104. "'Whether the ultimate finding is the product of a presumption or actual market analysis, the essential inquiry remains the same -- whether or not the challenged restraint enhances competition.'" California Dental (quoting NCAA, 468 U.S. at 104). The analytical focus is on what conclusions regarding the competitive impact of a challenged restraint can confidently be drawn from the facts demonstrated by the parties. See California Dental, 526 U.S. at 779-81; NCAA, 468 U.S. at 103-04.

In California Dental, the complaint alleged that an association of dentists had unreasonably restricted two types of advertising: price advertising, particularly discounted fees, and advertising relating to the quality of dental services. 526 U.S. at 762. Here, the challenged restraint is a horizontal price fixing agreement: an agreement on the minimum reimbursement level that NTSP will accept on behalf of its member physicians for those physicians' services pursuant to non-risk contracts with health insurance payors. Whereas in California Dental, the anticompetitive effects of the restrictions on advertising were not obvious, in this case, the effects of agreements to set minimum price levels are "intuitively obvious." Thus, no elaborate study of the industry is needed to establish the illegality of NTSP's actions. See California Dental, 526 U.S. at 759; Dagher, 369 F.3d at 1116. To the extent that an examination of effects is required, in this case, the effects of NTSP's concerted action have been to cause health insurance payors to increase their offers or agree to better terms of coverage than the payors otherwise would have, but for NTSP's collective actions. Although the evidence is not conclusive that NTSP's actions resulted in supracompetitive prices, such evidence does not defeat a finding of liability in this case. FTC v. Superior Court Trial Lawyers Assn, 493 U.S. 411, 424 (1990) (It "is no excuse that the prices fixed are themselves reasonable.") (citations omitted).

VOLUME 140 Initial Decision Also, in California Dental, the restrictions on advertising, at least on their face, were designed to avoid false or deceptive advertising and thus "might plausibly be thought to have a net procompetitive effect, or possibly no effect at all on competition." 526 U.S. at 771. Respondent asserts that NTSP's conduct might plausibly be thought to have a net procompetitive effect because NTSP's conduct and business model have strong procompetitive effects and efficiencies. RPTB at 1. Where a defendant asserts that the challenged conduct has procompetitive effects, the defendant bears the burden of establishing those procompetitive effects. California Dental, 526 U.S. 775 n.12. Courts evaluate whether claimed efficiencies are plausible, NCAA, 468 U.S. at 114; Maricopa, 457 U.S. at 353, and whether the challenged conduct is reasonably necessary to achieve the legitimate objective identified by a defendant. Broadcast Music, Inc. v. CBS, 441 U.S. 1, 19-21 (1979); United States v. Brown Univ., 5 F.3d 658, 678-79 (3rd Cir. 1993).

In this case, as found in F. 364-80, and summarized above, there is no plausible and valid efficiency justification for collectively setting the prices in non-risk contracts, nor is such conduct reasonably necessary to achieve the claimed procompetitive benefits. Because the challenged restraint of trade does not have a net procompetitive effect on competition, a more thorough inquiry into the consequences of the challenged restraints is not necessary. See California Dental, 526 U.S. at 759, 781.

Complaint Counsel has demonstrated that the actions taken by NTSP to coerce health insurance payors to increase their offers of rate reimbursement or offer more favorable economic terms to NTSP's physicians constitute an unreasonable restraint of trade in violation of Section 1 of the Sherman Act and Section 5 of the FTC Act.

VOLUME 140 Initial Decision E. Remedy 1. Standards Pursuant to Section 5 of the Federal Trade Commission Act, upon determination that the challenged practice is an unfair method of competition, the Commission "shall issue . . . an order requiring such . . . corporation to cease and desist from using such-method of competition or such act or practice." 15 U.S.C. § 45(b); FTC v. Natl Lead Co., 352 U.S. 419, 428 (1957) (Commission is authorized "to enter an order requiring the offender to 'cease and desist' from using such unfair method."). The remedy selected must have a "reasonable relation to the unlawful practices found to exist." Natl Lead Co., 352 U.S. at 428.

In this case, Complaint Counsel has proven that Respondent engaged in horizontal price fixing through its negotiation, on behalf of its member physicians, of economic terms of non-risk contracts with health plan payors for the provision of physician services. The remedy necessary to bring an end to this unfair method of competition is an order requiring Respondent to cease and desist from collective price fixing in its negotiation of nonrisk contracts. In addition, to the extent that there are any existing, current non-risk contracts between NTSP, negotiated on behalf of its member physicians, and any health care payor, Respondent must take actions, as set forth in the Order, to allow termination of any such existing contracts.

2. Provisions Complaint Counsel's proposed order seeks a provision requiring Respondent to cease and desist from entering into an agreement among physicians "to deal, refuse to deal, or threaten to refuse to deal with any payor" and "not to deal individually with any payor, or not to deal with any payor through any arrangement other than Respondent." Complaint Counsel's Proposed Order, Sections II.A.2, 4. Complaint Counsel explains that this provision is "intentionally broad so as to preclude respondents from engaging both in the precise conduct found VOLUME 140 Initial Decision unlawful in this action and 'like and related' conduct." CCPTB at 77. See also Complaint Counsel's Opening Statement, Tr. at 60 (Complaint Counsel seeks an order "broadly requiring NTSP to messenger contracts.").

This broad request could have the effect of compelling Respondent to messenger contracts or become a party to contracts sent to it by payors, regardless of potential risks to Respondent, its member physicians, and its patients. A mandatory injunction, which compels a party to act, is an extraordinary remedy that should be granted only in compelling circumstances. Citizens Concerned for Separation of Church and State v. City and County of Denver, 628 F.2d 1289, 1299 (10th Cir. 1980); Justin Indus., Inc. v. Choctaw Sec., L.P., 747 F. Supp. 1218, 1220 (N.D. Tex. 1990), aff'd, 920 F.2d 262 (5th Cir. 1990). Sufficient compelling circumstances have not been demonstrated in this case. Moreover, Complaint Counsel's authority cited in support of its proposed relief is based only on consent decrees. CCPTB at 76. "The circumstances surrounding . . . negotiated [consent decrees] are so different that they cannot be persuasively cited in a litigation context." United States v. E.I. du Pont de Nemours, 366 U.S. 316, 330 n.12 (1961). Sections II.A.2 and 4 of Complaint Counsel's Proposed Order, which are not narrowly tailored to remedy the violation of law found to exist, are broader than required to remedy the unlawful conduct. A provision that could require Respondent to messenger all contracts or become a party to contracts sent to it by payors will not be ordered. Such overreaching is unnecessary. Accordingly, Sections II.A.2, 4 of Complaint Counsel's proposed order are not ordered. In addition, any remedy must not contravene Texas health care laws, other Texas law, or federal law. E.g., 28 TEX. ADMIN. CODE § 3.3703 (laying out contracting requirements for PPOs concerning exclusivity, savings inducements, holdharmless clauses, prompt payment, continuity of care, disclosure of opinions to patients, disclosure of economic profiling criteria, disclosure of quality assessment criteria, and termination); 29 TEX. ADMIN. CODE § 21.2817 (relating to clean claims and prompt payment); TEX. INS. CODE art. 3.70-3C (same issues as VOLUME 140 Initial Decision TEX. ADMIN. CODE § 3.3703). The Supreme Court recently limited an agency's remedies to those that did not conflict with other laws, statutes, and policies unrelated to the agency. Hoffman Plastic Compounds, Inc. v. NLRB, 535 U.S. 137, 144- 45 (2002). The Order issued herewith provides that nothing in this Order shall require NTSP violate state or federal law. Further, the Order is narrowly tailored and reasonably related to the violation of law found to exist.

3. Duration Complaint Counsel has requested that the order issued in this case remain in effect for a period of twenty years. CCPTB at 79. Pursuant to the Policy Statement Regarding Duration of Competition and Consumer Protection Orders, 60 Fed. Reg. 42,569 (August 16, 1995), the Commission's stated policy is for administrative cease and desist orders to terminate after twenty years. The Order entered in this case shall remain in effect for a period of twenty years.

IV. SUMMARY OF CONCLUSIONS OF LAW 1. Respondent North Texas Specialty Physicians ("NTSP") is a corporation, as "corporation" is defined by Section 4 of the Federal Trade Commission Act, ("FTC Act"), 15 U.S.C. § 44. 2. The participating physicians of NTSP are "members" of NTSP, as that term is used in the definition of "corporation" in Section 4 of the FTC Act, 15 U.S.C. § 44. 3. The jurisdiction of the Federal Trade Commission ("FTC") extends to non-profit entities when a substantial part of the entity's total activities provides economic benefits for its members.

4. A substantial part of Respondent's activities provides economic benefits for its members.

5. The acts and practices charged in the Complaint are in or affect commerce, as "commerce" is defined in Section 4 of the FTC Act, 15 U.S.C. § 44.

VOLUME 140 Initial Decision 6. The Federal Trade Commission has jurisdiction over Respondent and over the subject matter of this proceeding, pursuant to Section 5 of the FTC Act, 15 U.S.C. § 45. 7. The relevant market is physician services available to patients in the Fort Worth, Texas area. 8. Complaint Counsel has met its burden of proof of demonstrating that Respondent engaged in an agreement in restraint of trade.

9. Respondent has engaged in a contract, combination, or conspiracy to fix prices in non-risk contracts to be charged by physicians for providing medical services to health plans' patients. 10. Respondent's contract, combination, or conspiracy unreasonably restrained trade.

11. Respondent has not met its burden of proof of demonstrating that the challenged conduct has a net procompetitive effect on competition.

12. Respondent's fixing prices in non-risk contracts does not have a plausible and valid efficiency justification. 13. Respondent's fixing prices in non-risk contracts is not reasonably necessary to create any efficiencies. 14. The acts and practices of Respondent, as set forth in paragraphs 9 and 10 above, constitute unfair methods of competition in violation of Section 5 of the FTC Act, 45 U.S.C. § 45.

15. Relief designed to remedy Respondent's unlawful activities and to require Respondent to cease and desist from collective price fixing is appropriate. 16. The Order entered herein is necessary and appropriate to remedy the violation of law found to exist. VOLUME 140 Initial Decision ORDER:

ORDER I.

IT IS ORDERED that, as used in this Order, the following definitions shall apply:

A. "Respondent" means North Texas Specialty Physicians ("NTSP"), its officers, directors, employees, agents, attorneys, representatives, successors, and assigns; and the subsidiaries, divisions, groups, and affiliates controlled by North Texas Specialty Physicians, and the respective officers, directors, employees, agents, attorneys, representatives, successors, and assigns of each.

B. "Medical group practice" means a bona fide, integrated firm in which physicians practice medicine together as partners, shareholders, owners, members, or employees, or in which only one physician practices medicine.

C. "Participate" in an entity means: (1) to be a partner, shareholder, owner, member, or employee of such entity; or (2) to provide services, agree to provide services, or offer to provide services, to a payor through such entity. This definition also applies to all tenses and forms of the word "participate," including, but not limited to, "participating," "participated," and "participation."

D. "Payor" means any person that pays, or arranges for the payment, for all or any part of any physician services for itself or for any other person. Payor includes any person that develops, leases, or sells access to networks of physicians. E. "Person" means both natural persons and artificial persons, including, but not limited to, corporations, unincorporated entities, and governments.

VOLUME 140 Initial Decision F. "Physician" means a doctor of allopathic medicine ("M.D.") or a doctor of osteopathic medicine ("D.O."). G. "Preexisting contract" means a contract that was in effect on the date of receipt by a payor that is a party to such contract of notice sent by Respondent, pursuant to Paragraph IV.A.3 of this Order, of such payor's right to terminate such contract. H. "Principal address" means either (1) primary business address, if there is a business address, or (2) primary residential address, if there is no business address.

I. "Qualified clinically-integrated joint arrangement" means an arrangement to provide physician services in which: 1. all physicians that participate 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 who participate in the arrangement, in order to control costs and ensure the quality of services provided through the arrangement; and 2. any agreement concerning price or other terms or conditions of dealing entered into by or within the arrangement is reasonably necessary to obtain significant efficiencies through the joint arrangement. J. "Qualified risk-sharing joint arrangement" means an arrangement to provide physician services in which: 1. all physicians who participate in the arrangement share substantial financial risk through their participation in the arrangement and thereby create VOLUME 140 Initial Decision incentives for the physicians who participate jointly to control costs and improve quality by managing the provision of physician services, such as risk-sharing involving:

a. the provision of physician services for a fixed amount per patient, per month paid by payors;

b. the provision of physician services for a predetermined percentage of premium or revenue from payors;

c. the use of significant financial incentives for physicians who participate to achieve, as a group, specified costcontainment goals; or d. the provision of a 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 price, where the costs of that 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; and 2. any agreement concerning price or other terms or conditions of dealing entered into by or within the arrangement is reasonably necessary to obtain significant efficiencies through the joint arrangement. VOLUME 140 Initial Decision II.

IT IS FURTHER ORDERED that Respondent, 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.S.C. § 44, cease and desist from: A. Entering into, adhering to, participating in, maintaining, organizing, implementing, enforcing, or otherwise facilitating any combination, conspiracy, agreement, or understanding between or among any physicians to negotiate on behalf of any physician with any payor, regarding any term, condition, or requirement upon which any physician deals, or is willing to deal, with any payor, including, but not limited to, price terms; B. Exchanging or facilitating in any manner the exchange or transfer of information among physicians concerning the terms or conditions, including price terms, on which any physician is willing to deal with a payor;

C. Attempting to engage in any action prohibited by Paragraph II.A or II.B, above; and D. Encouraging, suggesting, advising, pressuring, inducing, or attempting to induce any person to engage in any action that would be prohibited by Paragraphs II.A through II.C above. PROVIDED, HOWEVER, that nothing in this Order shall prohibit any agreement involving or conduct by Respondent that is reasonably necessary to form, participate in, or take any action in furtherance of a qualified risk-sharing joint arrangement or qualified clinically-integrated joint arrangement. PROVIDED, FURTHER, that nothing contained in this Order shall prohibit Respondent from communicating purely factual information describing the terms and conditions of any payor offer, including objective comparisons with terms offered by other payors, or from expressing views relevant to various health plans. "Objective information" or "objective comparison" VOLUME 140 Initial Decision constitutes empirical data that is capable of being verified or a comparison of such data.

PROVIDED, FURTHER, that nothing contained in this Order shall require Respondent to violate state or federal law. III.

IT IS FURTHER ORDERED that, for three (3) years from the date this Order becomes final, Respondent shall notify the Secretary of the Commission in writing ("Notification") at least sixty (60) days prior to entering into any arrangement with any physician under which Respondent would act as a messenger, or as an agent on behalf of the physician, with payors regarding contracts.

The Notification shall include the identity of each proposed physician participant; the proposed geographic area in which the proposed arrangement will operate; a copy of any proposed physician participation agreement; a description of the proposed arrangement's purpose and function; a description of any resulting efficiencies expected to be obtained through the arrangement; and a description of procedures to be implemented to limit possible anticompetitive effects, such as those prohibited by this Order. Notification is not required for Respondent's subsequent acts as a messenger pursuant to an arrangement for which this Notification has been given.

Receipt by the Commission from Respondent of any Notification, pursuant to this Paragraph III, is not to be construed as a determination by the Commission that any action described in such Notification does or does not violate this Order or any law enforced by the Commission.

IV.

IT IS FURTHER ORDERED that Respondent shall: A. Within thirty (30) days after the date on which this Order becomes final, send by first-class mail, return receipt requested, a copy of this Order to:

VOLUME 140 Initial Decision 1. each physician who participates, or has participated, in Respondent since January 1, 2000; 2. each officer, director, manager, and employee of Respondent; and 3. the chief executive officer of each payor with which Respondent has a record of having been in contact since January 1, 2000, regarding contracting for the provision of physician services. B. Terminate, without penalty or charge, and in compliance with any applicable laws, any preexisting contract with any payor for the provision of physician services, pursuant to a fee-for-service agreement at the earlier of:

1. receipt by Respondent of a written request from a payor to terminate such contract; or 2. the earliest termination or renewal date (including any automatic renewal date) of such contract. Provided, however, a preexisting contract may extend beyond any such termination or renewal date no later than one (1) year after the date on which the Order becomes final, if prior to such termination or renewal date, (a) the payor submits to Respondent a written request to extend such contract to a specific date no later than one (1) year after the date this Order becomes final, and (b) Respondent has determined not to exercise any right to terminate; provided further, that any payor making such request to extend a contract retains the right, pursuant to Paragraph IV.B. 1 of this Order, to terminate the contract at any time. C. Within ten (10) days after receiving a written request from a payor, pursuant to Paragraph IV.B.1 of this Order, distribute, by first-class mail, return receipt requested, a copy of that request to each physician participating in Respondent as of the date Respondent receives such request.

VOLUME 140 Initial Decision D. For a period of three (3) years after the date this Order becomes final:

1. distribute by first-class mail, return receipt requested, a copy of this Order to:

a. each physician who begins participating in Respondent, and who did not previously receive a copy of this Order from Respondent, within thirty (30) days of the time that such participation begins;

b. each payor who contracts with Respondent for the provision of physician services, and who did not previously receive a copy of this Order from Respondent, within thirty (30) days of the time that such payor enters into such contract;

c. each person who becomes an officer, director, manager, or employee of Respondent and who did not previously receive a copy of this Order from Respondent, within thirty (30) days of the time that he or she assumes such responsibility with Respondent;

2. annually publish a copy of this Order in an official annual report or newsletter sent to all physicians who participate in Respondent, with such prominence as is given to regularly featured articles.

E. File a verified written report within sixty (60) days after the date this Order becomes final, and annually thereafter for three (3) years on the anniversary of the date this Order becomes final, and at such other times as the Commission may by written notice require. Each such report shall include: VOLUME 140 Initial Decision 1. a detailed description of the manner and form in which Respondent has complied and is complying with this Order; and 2. copies of the return receipts required by Paragraphs IV.A, IV.C, and IV.D of this Order. F. Notify the Commission at least thirty (30) days prior to any proposed change in Respondent, such as dissolution, assignment, sale resulting in the emergence of a successor company or corporation, the creation or dissolution of subsidiaries, or any other change in Respondent that may affect compliance obligations arising out of this Order.

V.

IT IS FURTHER ORDERED that Respondent shall notify the Commission of any change in its principal address within twenty (20) days of such change in address. VI.

IT IS FURTHER ORDERED that, for the purpose of determining or securing compliance with this Order, Respondent shall permit any duly authorized representative of the Commission:

A. Upon written request and two (2) days' notice to Respondent, access, during office hours and in the presence of counsel, to inspect and copy all books, ledgers, accounts, correspondence, memoranda, calendars, and other records and documents in its possession, or under its control, relating to any matter contained in this Order; and B. Upon written request and five (5) days' notice to Respondent, and in the presence of counsel, and without restraint or interference from it, to interview Respondent or employees of Respondent, relating to any matter contained in this Order. VOLUME 140 Initial Decision VII.

IT IS FURTHER ORDERED that this Order shall terminate twenty (20) years from the date it is issued. VOLUME 140 Complaint