A proposal to establish a national network (PPO) of cardiologists, cardiovascular surgeons, and acute care hospitals in 41 metropolitan areas around the country to provide cardiac care to beneficiaries of large third-party payers, such as insurers, unions, and multi-site employers.

APPROVED: The network will assume significant financial risk by providing specialized cardiac care services at all-inclusive, global prices covering all hospitalization and physician expenses of plan beneficiaries. In addition, in areas where it contracts with competitors, the network will not sign up more than 20% of the cardiologists, or more than 20% of the cardiovascular surgeons with active admitting privileges at hospitals in any relevant geographic market, thereby qualifying for an antitrust safety zone under the health care industry policy statements.

The Association proposed that each participating member company would agree to limit the annual increase in the average change in the prices of its prescription drug products to a level not greater than the annual increase in the consumer price index. The proposal was not to have applied to any individual product and specifically excluded new products.

REJECTED: "Agreements among competitors, including agreements setting maximum prices, that interfere with the ability of each firm in a market to determine its own prices have long been illegal. Maximum price agreements often become agreements on actual price increases. Courts have recognized this danger and have held such agreements to be clearly unlawful."

National manufacturers' trade association proposed to undertake a voluntary data exchange program among its members regarding the transportation and distribution costs of its members' goods sold to wholesale and retail customers, which are drugs, toiletries, and other products commonly sold in drug stores.

APPROVED: The shared information would not result in monopsony power, as HPCDC does not intend to negotiate transportation rates collectively on behalf of its members; HPCDC's members, further, account for only 3% of nationwide revenue of motor carriers. The information will not result in price coordination because the cost of transportation of members' goods as a percentage of total cost is very low; also, an independent third party will collect, organize, compile, and ultimately publish the data, which will not reveal individual identities of any survey participants.

General acute care hospital in Rockford, Illinois proposed to offer multi-provider preferred provider contracts to employers and other third-party payers. Providers were free to contract independently of the multi-provider contract. The hospital also proposed to contract with a second hospital to cover services that St. Anthony does not, or cannot, provide (overflow services) and to allow for patients' choice of hospitals (patient-choice). Both patient-choice and overflow referrals to the second hospital would be limited to 20 percent of admissions at that hospital.

APPROVED: The proposal provides employers and payers with an additional managed care plan. This should increase competition for managed care plans and should help drive down costs for the consumers. Additionally, since the second hospital would be limited to only 20 percent of admissions for patient-choice and overflow referrals, it would be motivated to compete with St. Anthony for a larger share of the managed care business.

The association proposed to form a statewide chiropractic managed care organization (MCO) that would contract with third-party payers at a capitated rate and allow the third-party payers to enter into a single statewide contract for chiropractic services through the MCO.

APPROVED: The MCO will be a bona fide joint venture in which the participating chiropractors will share significant financial risk via capitation; efficiency will be enhanced via utilization standards; the MCO will be non-exclusive; and the MCO will take steps to include no more than 50% of the chiropractors in any local market. In addition, if the MCO attempted to raise prices above competitive levels, managed care plans and other payers believe that they have reasonable alternatives to the MCO that would allow them to defeat such a price increase.

BBGH, aSan Francisco non-profit organization, proposed that it ask several HMOs to bid on two standard benefit plans and negotiate prices. Sixteen California companies expressed interest in joining BBGH. Participating companies were free to negotiate independently of the group with HMOs not dealing with or approved by the group.

APPROVED: A substantial majority of all potential HMO customers will not be represented by BBGH; although some current BBGH members are direct competitors, the members' costs of purchasing HMO health benefits account for only a small percentage of the selling price of the products and services they provide; the BBGH has the potential to create efficiencies in the delivery of HMO services that could result in lower health care costs.

The association proposed that it produce a survey and report of employee wages and salaries paid by hospitals in New Jersey. APPROVED: The survey and report would be compiled and published by an independent third party, set forth information solely on an aggregated basis and in a manner so that the responses of individual hospitals or hospital chains were not detectable, and contain information that was at least three months old.

The Coalition proposed that it form a Group Purchasing Association to contract with health care providers to deliver health care services to Coalition members' employees and their dependents in a 13-county area surrounding Houston at predetermined rates. Not all Coalition members will choose to become members of the Association; those Coalition members who are also providers will be in an "associate member" category and will not be permitted to vote on any matters involving the Association's activities, be represented on the Board of Trustees, or take part in decisions involving reimbursement rates. An independent consultant will compile data from providers regarding the costs associated with various Diagnostic Related Groups ("DRGs"), and will survey average historical costs for various procedures at approximately 65 health care facilities in the area to assemble a data base of prevailing charges for those DRGs available for program coverage. No provider will have access to the data submitted by any other provider, and only Association members will have access to the data or the study. The schedule of reimbursement rates thus compiled by the Association will be distributed to providers so they may decide whether to contract with the Association.

APPROVED: No more than 20% of any health care specialist-physician providers in any relevant market in which the Association operates will be associate members. This limitation on specialty provider participation will significantly reduce any risk of provider collusion. No provider that is also an associate member may take part in negotiating reimbursement rates or setting those rates on the Association's behalf. Also, providers will not have access to any specific cost data obtained by the Association from any other providers. The Association has the potential to create efficiencies in delivering health care services that could result in lower health care costs. Finally, members are free to deal with or approach any providers individually, including providers who contract with the Association.

Union proposed to provide a one-time historical claims report to the PPO with which it contracts to provide health care services to its members. The report would compare the amounts the union actually paid for each procedure to each PPO physician between 9/1/91 and 8/31/92 with the amount the physician would have received under the Resource-Based Relative Value Scale fee schedule it has developed in order to help each physician make an informed decision as to whether or not to accept the RBRVS fee schedule for future services.

APPROVED: The limited information exchange has the potential to enable individual physicians to make more informed decisions about selling their services to the Welfare Fund and make health care available to more employees at a reasonable cost. The PPO agreed with the union not to disclose to any physician another physician's payments.

24 businesses and 10 hospitals in the Birmingham area proposed to collect and analyze data about the clinical effectiveness and cost of three types of services: obstetrical delivery, pneumonia, and acute myocardial infarction, and to compare outcomes with Birmingham averages, national averages and national "benchmark" averages.

APPROVED: The information will be collected by an independent corporation and will for each report be based on data more than three months old. This project was initiated by purchasers of hospital services and is the result of collaboration between these purchasers and providers of hospital services. Such collaboration has the potential of allowing businesses that provide health care benefits to make better informed purchasing decisions and should also promote hospital effectiveness and efficiency.

Accounting firm representing 5-10% of dentists in the Cincinnati, Ohio area proposed to collect price information from its dental clients on approximately 400 procedures and publish a report showing the high, low and average price for a given procedure, citing a need for the firm and the dentists to have reliable statistical data on prices for various services provided to patients.

APPROVED: The data collected would be historical, identity of dentists in the program would not be disclosed, and no prices would be included for any specialty containing fewer than five dentists, and price information would be collected from only 5 - 10% of the dentists in the market. In addition, no discounts from list price would be reported.

Des Moines General Hospital and 177 physicians in south-central Iowa proposed to form a PHO to offer a health care plan to business owners seeking new ways to cover their workers' medical needs in a 25 county area. The providers would contract with payers at capitated (per subscriber) rates or discounted fee for service rates with a 20% withhold.

APPROVED: The members of CPO will share risk via both capitation and a withhold of discounted fee for service rates. CPO members will not be directly involved in setting fees, but will retain a third party administrator who will survey CPO members and compile aggregate fee data to be used in negotiating contracts for health care services. In the most populous county, less than 20% of all licensed physicians will join CPO, including less than 20% of all primary care physicians. In 18 of 30 identified specialties, membership will also be less than 20%, but in 12 specialty areas membership would exceed 20%. No CPO member will have access to another member's fees, pricing data or other financial information. The proposal will provide an additional alternative health care delivery system and could increase competition and lower health care costs for consumers.

A subsidiary of the New York State Podiatric Medical Association proposed to act as an intermediary to facilitate communication between managed care plans and non-integrated groups of podiatrists (members of the Association) who desire to enroll as providers in such plans. The Network would not negotiate fees on behalf of its members, and only at the specific written request of payers may the Network negotiate certain non-price matters.

APPROVED: Fee information would not be shared with or among members; the Network would be a bona fide intermediary, would not negotiate fees for competing podiatrists, and each podiatrist would independently accept or reject any contract offer; the Network is non-exclusive and should not impede the participation of its members as podiatric providers in other managed care networks.

Nonprofit chiropractor's association proposed to form a for-profit network of its members statewide that would contract with third-party payers, limiting membership to no more than 50% of the chiropractors in any relevant geographic market. The network will negotiate maximum fee for service rates with each of its network-user clients. Members will not charge more than the negotiated rate, and must charge their usual rates if those are lower than the network rate. The network will monitor utilization patterns and will drop providers whom it deems to be over-utilizers.

APPROVED: The group will be a bona fide joint venture in which the participating chiropractors will assume significant financial risk by participating in fee withhold arrangements and a risk pool. Absent the overall network's efficient operation, all or part of the risk pool will not be available to the participating chiropractors for distribution. Further, ICAC will be genuinely non-exclusive and will be but one of several competing chiropractic networks. Since potential users of ICAC need only a small number of chiropractors, if ICAC attempted to demand noncompetitive terms, alternative chiropractors with the ability and incentive to supplant ICAC on competitive terms would be available to users.

Over 100 of the 276 physicians in south-central Kentucky proposed to form a provider network to offer services to self-insured employers and other third-party payers in the area. Care will be provided using either capitated or discounted fee for service rates with a 20% withhold. PCI will establish utilization standards and other measures to help contain health care costs.

APPROVED: This non-exclusive venture will provide alternative health care services to consumers, and its members will share significant financial risk. The proposed network will have as much as 37% of primary care physicians in some local markets, and a higher percentage of some specialties; but, in the largely rural areas where this network will operate, those percentages appear to be necessary to provide adequate coverage for enrollees. No PCI member will have access to another member's fees, pricing data or other financial information.

Two pulmonary specialist physician groups in Albuquerque, New Mexico, each employing five doctors, four full time and one part time, proposed to merge. The combined firm, with 8 full time and 2 part time doctors, would be competing against at least 100 other physicians offering similar services in the area.

APPROVED: Because board-certified pulmonologists are not the exclusive providers of the services they provide, but face competition in these services from general surgeons, cardiac surgeons, thoracic surgeons and internists as well as family physicians; because HMOs and other third-party payers in the area currently employ, contract with or reimburse many non-pulmonologists for the same type of services provided by pulmonologists; and because staff privileges at area hospitals are extended to many non-pulmonologists to perform these services, it appears that the new firm would not be able to exercise market power.

Group of radiologists proposed to offer prepaid radiological services on capitated and discounted fee for service (with a substantial withhold) bases to third party payers and self-insured employers in an eight-county area in and around Chicago. Membership would include about 25% of the more than 780 radiologists in the Chicago area, and is not expected to exceed that level in any relevant local market within that area.

APPROVED: The group is assuming significant financial risk through capitation and withholds on fee for service payments. It has developed safeguards to address concerns regarding the sharing of price information when using fee for service contracts. Each CRN physician will be expressly prohibited from disclosing any information regarding usual and customary charges or the charges he/she has agreed to accept under any managed care arrangement to any other CRN physician, and CRN will not develop a fee schedule. Rather, each physician will receive the lesser of his usual and customary charges or the payer's fee schedule, less at least 20% to be distributed only if cost control goals are met. In addition, other radiological groups, and at least one other radiological network, are competing in the area. The network will provide cost savings to payers by educating referring physicians on more effective utilization of radiologist services.

Minneapolis health and life insurance company proposed to offer its internal medical claims fraud and abuse detection services to outside parties for a fee. The current inhouse fraud detection unit would become a separate division of the company, offering its services to third party payers, employers, and insurance companies. NWNL would continue to process its own medical claims and deal with its own claims disputes, using the fraud detection unit as any other customer.

APPROVED: NWNL would establish sufficient protections to assure that claims information submitted by outside clients to its fraud detection unit would not be shared with NWNL, and vice versa, or among the outside clients. A nationwide databank of medical practitioners' fraud and abuse histories would be available for use by all clients of the fraud and abuse detection unit, but only after cases were closed.

Hillhaven, an operator of nursing homes, proposed a joint venture with three other nursing home operators to offer managed care customers a statewide network of subacute-care medical and rehabilitation beds in nursing home facilities. None of the four participating firms offers nursing home services, or will offer sub-acute-care services, in the same local markets. Hillhaven will establish a "network price" for subacute-care services and provide a central referral process for the network, but each of the joint venturers will remain free to offer its services independently of the others, at an independently-determined price.

APPROVED: The joint venture will enable managed care customers to contract prospectively with a single statewide network of subacute-care providers, which will compete with hospitals that offer subacute-care beds. Competition will not be affected since the four providers are not located and do not compete in the same local markets.

Physician-owned corporations proposed to create a nonexclusive physician network and affiliated HMO to provide primary care and specialist physician services within 100 miles of Memphis, Tennessee. The physician network would negotiate contracts with the HMO and other third-party payers, either on a capitated basis or under a fee-for-service schedule utilizing a "risk pool" withhold of at least 20% of the fees due each physician. Fees would be established by an independent consultant after gathering a variety of information from the participating physicians. No participating physician will have access to any of the information collected. The physician members will comprise no more than 30 percent of any type of primary care physician in Memphis or in any of the five surrounding counties. For all but two of the physician specialties in its panel, the Alliance will have fewer than 30 percent of area specialists.

APPROVED: The Alliance appears to be a bona fide joint venture whose members will share substantial risk with an incentive to achieve quality and efficiency objectives. Without attempting to define precisely the boundaries of the relevant geographic market for primary care physicians or for each physician specialty, for any reasonable market, the concentrations of specialists and primary care physicians expected in the network are not likely to have anticompetitive effects. Area payers view the formation of the Alliance as procompetitive since it will serve as an alternative to existing networks of providers formed by large hospitals in the area.

A subsidiary of the nation's largest operator of nursing homes proposed to provide a nationwide database of services offered by nursing homes and other long-term care facilities. AdviNet, Inc. would contract with employers, insurers, associations and individuals to make such information available through a toll-free number. Members of the network would be encouraged but not required to provide discounts to subscribers of the service and their listings would be more detailed than those of non-members. AdviNet would also assist in scheduling site visits by customers.

APPROVED: AdviNet would operate independently of its parent corporation and with a separate computer system. Specific pricing information received from providers would not be made available to any other provider. This network appears to meet a consumer need and should promote competition by facilitating informed consumer choices.

Group of orthotists and prosthetists proposed to form an IPA (POPE) to contract with third-party payers. POPE would be non-exclusive and limit its membership to 20% of each type of practitioner in any relevant geographic market. A management company will negotiate on behalf of the members, and sensitive information will not be shared among the members. POPE will establish a "risk pool" by withholding no less than 20% of each member's billings to create incentives to achieve efficiency and quality goals. The risk pool will be distributed to POPE members only if as a group they meet those goals.

APPROVED: Because of its low percentages of each type of specialist in any relevant geographic market, its intention to withhold 20% of all fees as a means of creating shared financial risk among members, its non-exclusivity, and lack of any concerns among third-party payers, POPE is not likely to cause anticompetitive effects in the market for the provision of prosthetic and orthotic devices.

Manufacturer and distributor of orthotic and prosthetic devices, and owner and operator of over 80 orthotics and prosthetic clinics nationwide proposed to form a national network of prosthetists and orthotists to contract with third-party payers. The network will not include any competitors in any relevant geographic market. Further, it will be exclusive in relevant geographic markets where Hanger contracts with an orthotic and prosthetic clinic only if the total revenues the contracted clinic earns from providing orthotic or prosthetic services does not exceed 20% of the total revenues for orthotic or prosthetic services in the relevant geographic market.

APPROVED: Since none of the members of the Hanger network will be competitors in any relevant geographic market, and since Hanger will enter into exclusive contracts with orthotics and prosthetics clinics only where the clinic earns no more than 20% of total local market revenue, Hanger's network is not likely to cause anticompetitive effects.

South Carolina dermatologist proposed to form a network of all South Carolina board-certified dermatologists to contract with managed care entities and third party payers, but only for those services not uniquely provided by dermatologists. The group of approximately 85 doctors (if all join) would be non-exclusive and would share substantial financial risk either by accepting capitated rates or by withholding a minimum of 20 percent of fees as a risk pool to be distributed only if certain efficiency goals are met. Inpatient hospital care and any procedure that dermatologists perform in more than 30 percent of all cases would not be covered in any contracts handled by the network.

APPROVED: The service market would include many different types of doctors, including internists, general practitioners, family practitioners and plastic surgeons. The letter is premised on the assumption that in any relevant local market, the network's members will not exceed 30 percent of all physicians available to provide services of the type offered by the network in that market. Thus, it is not likely the network would attain market power. In addition, the group will share significant risk, provide incentives to achieve cost-containment goals, and be non-exclusive in nature.

An association of cancer research institutions (hospitals and universities) proposed to collect data from its members regarding the cost effectiveness and resource utilization of clinical trials. Results would be made public and used in part to convince insurance companies that treatment in clinical trials is a cost-effective alternative to standard care and that therefore patients participating in such trials should not be denied insurance coverage. The association will track numbers of physician visits, laboratory tests, x-rays, nurses visits, drugs, and hospitalizations, and will assign costs to all treatments based on standardized data bases. Data would be collected from at least five providers and would be more than three months old at the time of analysis. Results would be stated so as to allow providers to draw their own conclusions about the cost effectiveness of any given treatment.

APPROVED: SWOG's proposed activities involving the exchange of cost information would fall under the Statement 6 safety zone. There also is no agreement among SWOG members to approach or negotiate with insurance companies collectively or to attempt to coerce concessions from them by taking a unified position in separate negotiations. The study promises to benefit consumers by providing information that can be used to control health care costs and ensure the most cost-effective use of health care resources.

Network representing 92 of Georgia's 212 podiatrists (but open to all members of the state podiatry association, of which there are 187) proposed to employ or contract with an agent to act as an intermediary for soliciting and managing managed care contracts between the network's members and third party payers. The non-exclusive group would operate under a messenger model, transmitting terms and conditions from individual doctors to payers, and transmitting contract offers from payers to physicians, who would then decide unilaterally whether or not to accept each payer's contract offer. If payers so request, the Network may discuss with payers such potentially competitively significant non-price issues as utilization review, credentialing, and quality assurance standards, but may not negotiate such standards or terms on behalf of the members.

APPROVED: The Network will function as a bona fide messenger to facilitate contract agreements and may facilitate the adoption of efficiency-enhancing utilization review and quality assurance procedures through non-binding discussions undertaken at the request of payers. Such discussions will not be used to facilitate collusive behavior among the network's members. Non-exclusivity further assures that competing networks can be formed and joined by members of the Network.

Group of 100 dermatologists, 19 plastic surgeons, and 11 dermatopathologists proposed to offer tailor-made panels of specialists to provide skin treatment services to managed care groups and other third-party payers in Dade, Broward and Palm Beach counties, Florida, through a single agent. The group will share risk through capitation, but would begin operations by contracting for capitated rates with a certain percentage of standard Medicare reimbursement levels guaranteed. After approximately six months, contracts with payers would be fully capitated. The group will establish quality assurance, utilization review and credentialing rules and standards and will be non-exclusive in nature, allowing its members to join or continue their present participation in other networks.

APPROVED: Dermnet's members will share significant risk through capitation. While the group will represent 43.5% of board-certified dermatologists in the tri-county area, its ability to acquire market power in any relevant geographic market will be limited by its non-exclusivity and the presence of other similar networks. Payers did not believe that their ability to contract with dermatologists would be adversely affected by the creation of Dermnet. The group would raise no competitive concern with respect to plastic surgeons since it represents only 12.5% of the board-certified plastic surgeons in the area, and its membership would not exceed 30% of all plastic surgeons in any reasonably drawn market. While eleven of the fifteen dermatopathologists in the tri-county area will be Dermnet members, payers can and do use dermatopathologists significantly beyond the tri-county area and are not concerned by Dermnet's large panel.

Group of 17 small and mid-sized independent clinical laboratories in California proposed to form a network to compete with several large national laboratories for regional managed care laboratory services contracts, particularly those to be let by the California state medicaid system, MediCal. PLAN membership will be open to all clinical laboratories, but it will be limited so that it will account for no more then 30 percent of the laboratory sales volume for any relevant market. PLAN intends to share risk by operating primarily using capitated rates; on those rare occasions when a fee-for-service contract is sought, rates will be set using a messenger model to avoid any agreement as to price by member labs. When not bidding for large regional contracts, members of PLAN will continue to compete with one another for traditional laboratory business, which is expected to constitute the majority of PLAN members' revenue for the foreseeable future.

APPROVED: In the markets for "stat" tests (blood counts, throat and urine cultures and other tests that require very quick turnaround) and "routine" tests (those that are generally uncomplicated and widely used but not particularly time sensitive), PLAN members compete with other independent clinical labs and hospital labs. To the extent that PLAN members provide esoteric or exotic tests (those requiring more sophisticated lab procedures or equipment and usually not time sensitive), they compete with reference labs throughout the country. While the market share information provided was limited and necessarily inexact, the combined market shares were sufficiently low to indicate that PLAN's members, as a group, would not possess potentially anti-competitive levels of market power. Furthermore, PLAN will operate in a nonexclusive manner, and payers and California state government officials all agree that competition in lab markets is fierce. The presence of three large national labs in the primary target area for MediCal HMO contracting offsets any market power that these 17 smaller labs might command. In addition, there are many other independent labs available to create similar networks, and hospital labs also provide competition in local markets.

Oklahoma physicians proposed to establish a statewide, non-exclusive physician network and an HMO to provide primary care and specialist services in Oklahoma. The physician network would negotiate contracts with the HMO and other third-party payers, either on a capitated basis or under a fee-for-service schedule utilizing a "risk pool" withhold of 20 percent of the fees due each physician.

APPROVED: The proposal appears to be a bona fide joint venture whose members will share substantial risk with an incentive to achieve cost containment and utilization goals. Participating primary physicians generally comprise no more than 30 percent of the primary physicians in putative local markets in both urban and rural parts of the state. The network has fewer than 30 percent of the specialist physicians in most specialties in urban parts of the state, but does have more than 30 percent of specialists in some putative local markets in rural parts of the state. However, the network will retain an incentive to ensure that its physician services are priced competitively because roughly 90 percent of the physician-members are in specialties in local market in which the network does not have a substantial percentage of the physicians.

65 to 70 pediatricians practicing in seven counties in southern New Jersey proposed to form a provider network to contract with managed care plans for the provision of basic health care to children of plan enrollees. The group proposed to share risk either through capitation or via an unspecified percentage fee withhold subject to its meeting certain cost containment goals. CHPA would have a right of first refusal to negotiate with any payer seeking to initiate or renew a contract with an individual member of the group, after which members would be free to contract individually or join other similar networks. CHPA alleged a service market reaching to any other primary care or specialty physicians who treat children, and a geographic market encompassing the greater Delaware Valley, consisting of southern New Jersey, southeastern Pennsylvania and northern Delaware, and asserted that within those parameters it would possess no market power and thus pose no competitive threat.

REJECTED: Rule of reason analysis led the Department to conclude that CHPA, if implemented as proposed, would likely violate the antitrust laws. In the area to be serviced by CHPA, family practitioners are not acceptable substitutes for pediatricians in the development of managed care physician networks, and markets for basic pediatric services are significantly more localized than CHPA asserted. As a result, in several south New Jersey communities, CHPA would achieve high levels of concentration (50% - 77%) in the relevant service market and would be able to exercise market power to the detriment of consumers. Further, information developed in our investigation suggested a significant danger that CHPA might operate in a de facto exclusive manner, thus depriving plans of competitive alternatives in an area where there are, according to plan managers, significant barriers to new entry. On balance, the projected efficiencies claimed by CHPA, such as risk-sharing, development of practice procedures, sharing of administrative expenses and joint purchasing, do not outweigh the significant threat of anticompetitive effects posed by the venture.

SHC proposed to form a physician hospital organization ("PHO") among its owned and/or operated hospitals and nursing homes in northern Georgia and those facilities' affiliated physicians, to be called the Southeastern Healthcare Alliance, Inc. While the PHO would include high percentages of the primary care doctors in this rural area, joint price setting among horizontal competitors would be avoided by use of a messenger model to establish contracts with managed care plans and other payers. An agent of the PHO would receive contract offers from payers and convey these individually to members of the PHO. At the specific written request of payers, the agent would discuss and transmit information regarding potentially competitively significant terms or conditions (e.g., utilization review or credentialing) and would negotiate for the group regarding administrative issues such as billing practices and contract interpretation. The PHO would be non-exclusive, allowing doctors and/or hospitals to join other networks or to contract individually with payers. APPROVED: By avoiding any horizontal fee-setting or joint agreement on other competitively significant contract terms among competing doctors, the PHO is not likely to cause harm to existing competition in the market for physician services. The market for hospital services will not be affected since the four SHC hospitals are already under common ownership and control. Because providers are free to join other networks or contract individually with plans, the PHO would not impede the development of competing networks as managed care develops in the area.

Five large, financially integrated anesthesia medical groups that currently serve as the exclusive or principal anesthesia suppliers for six major Orange County hospitals proposed to form a contracting organization ("ORLA") to negotiate with the hospitals, managed care health plans and primary provider organizations (such as IPAs and large medical groups) they serve. The proposed joint venture would be exclusive -- its member-groups, and their member-anesthesiologists, would not be free to contract directly with managed care customers in competition with ORLA. REJECTED: Each of the hospitals served by the five ORLA groups would consider, as a viable competitive alternative to its existing group, only a similarly large, financially integrated anesthesia group with comparable hospital anesthesia management experience. Further, each hospital would substitute a lower-priced alternative group only if the alternative group's anesthesiologists lived and worked in close proximity to that hospital. For each hospital served by one of the five ORLA groups, there currently are at most six such competitive alternatives (i.e. the five groups that propose to form ORLA, and the one comparable Orange County group that is not participating in ORLA); if ORLA is implemented as proposed, it would reduce the number of competitive alternatives to no more than one. (For some of those hospitals, ORLA may eliminate all existing competitive alternatives.) Under current market conditions, entry by credible competitive alternatives is unlikely to occur in the near future on a sufficient scale to offset ORLA's substantial reduction in competition. Thus, hospitals, primary provider groups and managed care health plans believed that the joint venture would enable ORLA to exercise market power. Finally, any efficiencies ORLA may achieve could otherwise be achieved in ways that would not reduce competition.

Group of allergists serving Massachusetts and six neighboring states proposed to form a non-exclusive physician network joint venture to negotiate and contract with health benefit plans. The group, to be called Allergy and Asthma Consultants, Inc. ("AAC"), would provide services either under a capitated payment plan or using a discounted fee-for-service schedule with a "risk pool" withhold of at least 20% of the fees due each physician.

APPROVED: The proposed activities fall within the "safety zone" of Statement 8 of the Statements of Enforcement Policy and Analytical Principles Relating to Health Care and Antitrust issued by the Department of Justice and Federal Trade Commission on September 27, 1994. AAC would represent approximately 10 percent of the practicing allergists in the Commonwealth of Massachusetts. The network will achieve significant integration through risk sharing, and provide utilization review and quality assurance monitoring. Since AAC physician providers will participate on a non-exclusive basis, competing networks will not be adversely affected. The proposal also involves additional competetive safeguards, including provisions relevant to a previously entered consent decree between the United States and one of the initial participants in AAC.

Two small physician clinics (one with 13, one with 8 physicians) in rural northern Minnesota proposed to merge for the stated purpose of enhancing their ability to provide quality care in a cost-effective manner and to facilitate the recruitment of specialist physicians into the merged group in order to increase the range of health care services available locally..

APPROVED: Relying substantially on the clinics' presentation of the pertinent market facts, the Department evaluated the proposed merger for its likely competitive effects in two relevant product markets: (1) primary care services provided by primary practice doctors and internists; and (2) general surgical services. In those markets the merged clinic would employ about 40% of the primary care doctors and about 32% of the general surgeons. Given the lack of any competitive concerns among payers and some payers' belief that the merger would increase access to medical care, the merger did not appear likely to substantially lessen competition.

Group of institutions that coordinate delivery of care to terminally ill patients proposed to form a joint venture to negotiate and contract with health benefit plans to provide enrollees with hospice services. Each of the seven initial members operates in a different New Jersey county.

APPROVED: Hospice services are provided in local markets. The seven initial members of the venture are in distinct geographic areas and thus not direct competitors. Therefore, joint marketing and other cooperative arrangements among the members are unlikely to have an anticompetitive effect in any local market. However, if future members are direct competitors with other members, the group must either avoid joint pricing and agreements on other significant terms of competition, or they must assure that such joint decisions are necessarily related to significant economic integration among them.

Eight plastic surgeons practicing in southwest Connecticut proposed to form a nonexclusive network joint venture to contract with HMOs, employers, primary care IPAs, PHOs and other payers to provide a variety of plastic and reconstructive surgical services. Members would contribute capital to the corporation and would share risk through either fee withholds or capitated rates.

APPROVED: PSAC appears to be a bona fide joint venture whose members will share substantial financial risk and will not possess anticompetitive levels of market power in any reasonable geographic market. There are adequate reasonable substitutes for the services provided by PSAC's members, and PSAC's formation appears to fall well within the 30% safety zone for non-exclusive physician networks. In addition, it appears that PSAC will likely provide efficiency-based benefits, including lower prices for plastic surgery services, to health care payers and consumers and is likely to foster increased competition.

Seven of the nine dedicated colon and rectal specialists in the Phoenix metropolitan area (and seven of ten statewide) proposed to form a non-exclusive independent practice association ("IPA") in Maricopa County, Arizona. Members would assume significant financial risk by participating in either capitated contracts or in a fee withhold arrangement.

APPROVED: Although this network is the only one in Arizona specializing in colon and rectal surgical services and includes of seven of nine specialists in the county and seven of ten in the state, payers confirmed that colon and rectal surgical services are readily available from general surgeons and other types of surgeons. When these substitutes for ACRS surgeons are included in the service market, a reasonable approximation of ACRS's combined market share is 15% in Maricopa County and 9% statewide. The ready availability of substitute providers makes it unlikely that ACRS could successfully act anticompetitively. The network also may have procompetitive effects.

Proposal by 48 physicians in eight medical specialties to form a network that will provide medical services in a six-city area including New Haven, Connecticut and will represent its members on an exclusive basis in negotiations with managed care payers. The group will offer both capitated and discounted fee-for-service contracts (with a 20% withhold at risk). The six-city area in which PSMC will operate can be easily traversed by automobile within approximately 20 minutes, a travel time payers view as generally acceptable for patient convenience.

APPROVED: PSMC's members will account for less than 20% of the physicians in each medical specialty in the six-city area in which PSMC will operate and will share substantial financial risk. Thus, PSMC's proposal meets the 20% safety zone for exclusive physician networks. It is unlikely that PSMC would create market power that would lead to competitive harm.

Eight general surgeons in El Paso proposed to form a nonexclusive network to provide general surgical services in the El Paso area at reduced costs to managed care plans and other third party payers. EPSG would be non-exclusive and would share risk either through capitation or by withholding at least 20% of fees due as a risk pool. EPSG may expand to include no more than 4 additional general surgeons and it may also add other types of doctors.

APPROVED: As proposed, EPSG constitutes approximately 23% of the general surgeons in the area; if four more are added, it will comprise 34%. Based on payer interviews, it is not likely that the network would result in market power or cause anticompetitive effects. If EPSG adds other types of physicians but includes no more than 30% of the physicians in any specialty in the area, the network would fit within the safety zone for nonexclusive physician networks. Higher percentages would be judged under the rule of reason.

An 80-bed community hospital and 23 physicians engaged in group or solo practice proposed to form a nonexclusive network to provide primary care and specialist physician services in the Ridgecrest, California area. Sierra will retain the services of an independent third party to administer the operations of the venture and act as a "messenger" between payers and individual members. The messenger will convey contract offers between payers and individual members without expressing his or her views or otherwise attempting to influence contract decisions, and each member will independently accept or reject such offers. Sierra will also establish policies and procedures to restrict the flow of competitively sensitive information among network members and from the venture to the members. Members may compete with Sierra and will not be discouraged from joining other networks or contracting directly with health plans.

APPROVED: Sierra appears to have properly structured its messenger model arrangements to avoid agreements on prices and other competitively sensitive matters. If the arrangements are carefully implemented, the network's operations should not result in price collusion or cause anticompetitive harm, even though Sierra's network will include virtually all of the physicians in the Ridgecrest area and the markets for physician services there are highly concentrated.

Three home health care providers in Mississippi proposed to form a statewide network to contract with managed care plans. Home health agency territories in Mississippi are designated by the state, and these three agencies compete in only one county, although additional competing agencies may be added to the network in the future. The network would be non-exclusive and would avoid joint price setting by using a "messenger model" contracting process. An independent third party ("messenger") will obtain fee schedules from each member and convey them to payers; payer contract proposals will be forwarded to each member for its unilateral decision whether to accept the contract terms offered. At a payer’s request, the messenger may discuss but not negotiate or agree to non-price issues such as utilization review, credentialing, and quality assurance standards.

APPROVED: Since the proposed initial members are competitors in only a single county and cannot become competitors in the future without a change in Mississippi law, there is little possibility of horizontal collusion among them. While additional competing members may be added in the future, this should not cause competitive harm since the network will operate using messenger model arrangements that appear to be properly structured to avoid agreements on price and other competitively sensitive matters.

56 of the approximately 158 board eligible or board-certified orthopaedic surgeons practicing in the greater Cincinnati metropolitan area proposed to form an independent practice association to offer prepaid medical and surgical services on a capitated basis to third party payers and self-insured employers. Currently in ten separate practice groups, the 56-orthopaedist group will be non-exclusive in nature and will contract with third party payers either on a capitated basis or possibly using a discounted fee-for-service schedule with a risk pool withhold of at least 20% of the fees due to members. The risk pool would be distributed only if the group as a whole meets pre-established efficiency and quality parameters. No CROSMA member will have access to any other member’s fee information, and CROSMA will use a third party administrator (who is restricted from disclosing fee information to members) to negotiate with payers.

APPROVED: CROSMA appears to be a bona fide joint venture in which members will assume significant financial risk. Here, it appears appropriate to treat services provided by orthopaedic surgeons as the relevant service market. Although there is insufficient information to determine if CROSMA’s proposed 28-county region is the appropriate geographic market, good evidence indicates that CROSMA’s market share (about 35 percent) would not be appreciably greater with a smaller geographic market definition. CROSMA should not create anticompetitive market power since payers have significant alternatives who will constrain CROSMA’s pricing and CROSMA members will be able to contract with payers individually if they choose. Several payers expressed support for the formation of CROSMA and it appears that the network’s formation may create operational efficiencies that could lower costs to consumers in the greater Cincinnati area.

The sixteen independent practitioner anesthesiologists that currently provide anesthesia services at Anne Arundel Medical Center in Annapolis, Maryland proposed to merge into a single, integrated group to contract with the Medical Center and third party payers. The Medical Center and payers indicated a preference for a single anesthesia group for a variety of reasons including ease of negotiating contracts, scheduling doctors’ time, identifying and budgeting for costs, and establishing and monitoring consistent quality control standards. The proposal would enable the Medical Center to contract with the integrated group about pricing terms in order to offer payers global fee arrangements.

APPROVED: Under any plausible geographic market definition and assumption about the number of market participants, the merger does not raise substantial competitive concern. This conclusion is bolstered by the lack of concern about possible anticompetitive effects by the Medical Center or any third-party payers who utilize the Medical Center. The merged group should face effective competitive constraints on its ability to exercise market power. In addition, the merger may produce substantial efficiencies to the benefit of consumers.

A group of 21 small, rural hospitals in Wisconsin proposed to form a network to contract with managed care plans and other third-party payers. Initially, network contracts would provide for services on a discounted fee-for-service basis, but the network’s goal would be to provide services on a capitated basis. The network would employ the services of a third-party administrator, probably the Rural Wisconsin Health Cooperative, of which they are all members, to collect and analyze data from each member hospital, create data bases, prepare statistical analyses and furnish recommendations to enable the network to contract with payers. No member would have access to any disaggregated information held by the administrator. Each member would be free to join other networks and to contract individually with payers. The network contended that each of its proposed members serves a different geographic area and that members do not compete with each other for patients.

APPROVED: Based on the parties’ representations regarding the absence of competition among the network’s member hospitals, the network’s proposed operations are not likely to cause anticompetitive effects. The network appears to be a bona fide joint venture designed to facilitate health care contracting between small, rural hospitals that are not actual or potential competitors and managed care organizations and other large third-party payers. No managed care plan or other third-party payer expressed concern that the network is likely to result in competitive harm.

Two Marin County, California hospitals proposed to consolidate their inpatient mental health services. While the two hospitals compete in providing inpatient and other psychiatric care to adults, Marin General does not provide the chemical dependency programs and the inpatient psychiatric services for children and adolescents that Ross provides. The hospitals will continue to compete in the sale of the consolidated services and will not jointly determine prices for the consolidated services, other than for Medicaid and indigent patients covered under the county’s program. Joint pricing for Medicaid and county program patients will not eliminate competition, however, since the hospitals do not compete for that business.

APPROVED: The proposed consolidation will not result in per se illegal conduct, and under a rule-of-reason analysis the Department is not prepared to say that the consolidation is likely to have a net anticompetitive effect. While these are the only hospitals in Marin County providing inpatient psychiatric care, the venture explicitly preserves the potential for price competition between the hospitals and includes protections against the unnecessary sharing of confidential business information. The venture may lower the cost of adult mental health services by eliminating duplicative costs and spreading fixed costs over a larger population. The consolidation may thus permit the hospitals to offer competitive rates for the care of Medicaid patients and indigent patients covered by a Marin County program. On the other hand, the venture has significant potential for eliminating competition in quality of care or other nonprice areas, and joint pricing for Medicaid patients could facilitate collusion on the pricing for other patients. On balance, and on the facts presented, the Department does not have a present intention to challenge the venture, but that view could change depending on how the venture actually operates.

Sole general acute care hospital and 70-75 physicians in Santa Fe proposed to form a non-profit managed care organization to negotiate primarily risk-based contracts with payers. By subcontracting, the organization’s physician panel could include virtually all remaining Santa Fe physicians. All physicians would provide services on a non-exclusive basis. For contracts not involving substantial risk sharing among SFMCO’s members, SFMCO will act as a "messenger" to facilitate contracting between third-party payers and SFMCO’s individual member and non-member participating physicians. While SFMCO members will be liable for a share of SFMCO’s deficits and eligible for a share of SFMCO’s surplus, non-member (subcontracting) physicians will not. SFMCO will also implement other requirements designed to create divergence of economic interest between member and non-member physicians, giving members incentives to bargain down the compensation paid to non-member physicians. With three exceptions, SFMCO’s member physicians together with any physician employees of the hospital will not exceed 30 percent of the physicians with offices in the City of Santa Fe in any physician specialty. The exceptions are for (1) physician specialities in which all the SFMCO member physicians in the specialty are in a preexisting integrated practice group that has not been formed or expanded to avoid the 30 percent limitation, (2) family practitioners and internists who are represented to be good substitutes for each other in the Santa Fe area, and (3) pediatricians.

APPROVED: Although SFMCO’s proposal creates the potential for anticompetitive conduct that could cause harmful effects on consumers, it also has the potential for creating significant efficiencies by offering payers capitation and global fee arrangements that are not now generally available in the Santa Fe area. Under all the circumstances here, the Division is unable to conclude that SFMCO’s plan would likely cause anticompetitive harm if it is implemented carefully as proposed.

Two groups of orthopedic specialists in the greater Mobile, Alabama, area proposed to merge. The combined entity would be an integrated group practice comprised of 16 of the 50 providers of orthopedic services (32%) in the greater Mobile area.

APPROVED: Such a combination could raise competitive concerns, but no managed care plan or other third-party payer expressed any concern that the proposed merger would likely cause any substantial anticompetitive effects. Rather, payers were confident that if the merged group attempted to raise prices, they would have adequate substitutes to defeat such a strategy. Therefore, it does not appear likely that the proposed merger would lessen competition substantially in the greater Mobile area.

Group of six cardiovascular-thoracic surgeons proposed to merge with group of four peripheral vascular surgeons. The groups were more complementary than competitive, with only 60 procedures performed in common by the two groups -- about 15% of the procedures performed by CVT were peripheral procedures also performed by VSA. The groups contended that their geographic market was at least as large as an area within one and one-half hours’ drive from Baton Rouge, including the cities of Hammond, New Orleans, Houma, Lafayette and Thibodaux. In that area the merged entity would represent significantly less than 20% of the surgeons available to perform the relevant procedures. The merging groups accounted for approximately 50% of the vascular surgeons listed in the Baton Rouge Yellow pages.

APPROVED: While the Department doubted that the geographic market was as large as the parties proposed, the payers in the greater Baton Rouge area (a more probable geographic market) needed very few peripheral vascular surgeons to successfully market their plans to consumers. Competing surgeons from the New Orleans area seemed capable of quickly entering the Baton Rouge market, and had in fact begun to do so. Payers in the area were generally confident that the merged group was not likely to acquire market power. The Department concluded that the proposed merger was not likely to have any significant adverse competitive effects and might result in efficiencies benefitting consumers and payers.

Ten of approximately 62 orthopedic specialists in the Albuquerque metropolitan area proposed to form a non-exclusive risk-bearing joint venture to jointly market their services to third party insurers covering a statewide population. Risk would be shared either by accepting capitated rates, or by offering services under a discounted fee-for-service schedule with a 15% withhold that would be forfeited unless SOS as a whole meets certain efficiency and quality parameters. While the network intends to expand in the future to meet insurers’ coverage needs, at no time would it exceed 30% of the orthopedic specialists in any relevant geographic market.

APPROVED: Absent extraordinary circumstances, the Department will not challenge a non-exclusive physician network joint venture whose participants share substantial financial risk and constitute 30% or fewer of the physicians in a practice specialty in a relevant market. SOS meets these criteria.

Three practice groups each comprised of four gastroenterologists proposed to merge into a single 12-person firm in Allentown, Pennsylvania. The group would then represent 12 of 14 gastroenterologists in Allentown (85.7%) and 12 of 19 gastroenterologists in Allentown and nearby Bethlehem (63%). The group suggested that the geographic market area within which to measure the potential market power of the merged firm would be the Greater Lehigh Valley, including Lehigh and Northampton counties and parts of Bucks, Berks, and Carbon counties, because some of the merging physicians regularly traveled to these areas to provide services at outlying hospitals. Within that area, the group would comprise 36% of all board-certified gastroenterologists.

REJECTED: Managed care payers told the Department that they could not market a product that excluded gastroenterologists, and the Department concluded that the medical specialty of gastroenterology was the appropriate product or service market for analyzing the merger. The Department also found the relevant geographic market to be at most the cities of Allentown and Bethlehem, and possibly only the city of Allentown. Managed care payers told the Department that they could not ask enrollees to travel to distant counties or, in many instances, even from Allentown to Bethlehem, to obtain gastroenterologic services in order to defeat a price increase by the merging firms. Based on its investigation, the Department concluded there was a substantial likelihood that the merging group would cause anticompetitive harm in the market for gastroenterologic services in the Allentown/Bethlehem area. It was not apparent that entry within two years of additional gastroenterologists would occur to defeat a price increase, particularly as it appeared there was already an oversupply of gastroenterologists in the area. The parties demonstrated no merger-specific efficiencies to counteract the potential anticompetitive harm posed by this merger. As a result, the Department could not state that it would not take enforcement action against the merger were it consummated as described.

Approximately 40 physicians from various medical specialties in Rutland, Vermont, proposed to have their jointly-owned corporation negotiate risk contracts collectively on their behalf with third-party payers. With three different types of exceptions, VPC’s participating physicians will not exceed 30 percent of the physicians in any specialty. The exceptions are for: 1) specialties in which all of VPC’s physicians are in a pre-existing integrated group practice not formed or expanded to avoid the 30 percent limitation; 2) internal medicine practitioners, who were properly considered part of a larger market that includes family practitioners; and 3) three specialties, each of which represents a small percentage of the total number of VPC’s physicians. Safeguards will be established to ensure that VPC’s competing physicians do not learn of their competitors’ fees and prices through its operations. VPC will provide utilization review, quality improvement services, and some administrative services. VPC’s individual physicians and practice groups have no current intention of terminating their existing contracts with third-party payers, or refusing to negotiate individually with them in the future.

First Priority Health ("FPH"), an HMO subsidiary of Blue Cross of Northeastern Pennsylvania, and NEPPO Ltd, a limited partnership of 166 specialist and primary care physicians ("PCPs") practicing primarily in Lackawanna County, Pennsylvania (Scranton) proposed to form FPHS, a risk-bearing 50/50 joint venture, to provide and manage medical services for FPH’s HMO enrollees in Scranton and surrounding counties. The PCPs in NEPPO would agree not to provide gatekeeper services for any other gatekeeper-type managed care plan. They would be free to contract with non-gatekeeper plans. Neither the specialists in NEPPO, nor any non-NEPPO specialists or PCPs hired by FPHS would be restricted from contracting with other plans, and some NEPPO PCPs would be excused from the exclusivity requirement because of shortages of PCPs in the towns where they practice. Fees for FPHS would be set by a Reimbursement Committee made up of only payer representatives on the FPHS Board of Directors; thus, no providers would be involved in setting provider fees. In addition, highly regarded Community Medical Center ("CMC"), one of three hospitals in Scranton, would continue an agreement not to contract with any other gatekeeper-type HMO, and FPHS would agree to send all of its Lackawanna County area enrollees to CMC unless medical necessity dictated otherwise.

APPROVED: While other area managed care plans and some area employers felt that the loss of 38 NEPPO PCPs (most of whom will have to withdraw from other plans) could cause competitive harm to rival plans, the Department concluded that roughly 70% of area PCPs would still be available to the rival plans, and that other area hospitals, IPAs and PHOs would provide adequate competition to the FPHS system. Although FPH currently controls 60% of the managed care lives in Lackawanna County, there are three other active gatekeeper-type plans currently operating there, and a fourth about to enter. At least two of these are strong national competitors that have formed relationships with the other two Scranton hospitals. NEPPO physicians will be at risk for any losses of FPHS through their ownership interest and capitation, and are thus motivated to effect cost-saving measures and other efficiencies. On balance, we are reluctant to discourage an innovative and potentially procompetitive venture but remain free to challenge FPHS should anticompetitive effects result.

The Pharmaceutical Roundtable (APRT@) of the American Heart Association (AAHA@) proposed changes to PRT operations, which were the subject of a business review in 1989 when the PRT was formed. The PRT sponsors and funds basic biomedical research in the cardiovascular field by independent researchers. It proposed changes to: (1) increase the annual contribution of PRT members to $1,000,000; (2) decrease the terms of its members’ agreements from five years to three years; and (3) use members’ contributions also to fund targeted research in specific areas of interest in the cardiovascular field.

APPROVED: Legitimate research ventures are not usually on balance anticompetitive, particularly in the case of joint ventures to perform basic, non-appropriable research. The PRT, which has been and will remain essentially a funding device, appears to constitute such a joint venture. Knowledge obtained from research funded by the PRT will continue to be made public. Moreover, the PRT’s proposed operations appear to contain sufficient limitations to prevent significant anticompetitive spill-over effects in any market, including the market for biomedical research.

Two independent practice organizations in northeastern Pennsylvania (principally Lackawanna County) proposed to merge to form a nonexclusive risk-bearing multi-specialty physician network and associated management services organization (AMSO@) to contract with payers for the provision of physician services. The Heritage Alliance’s members were 90 primary care physicians (APCPs@) practicing in six counties, while the Lackawanna Physician’s Organization consisted of 167 specialists and 23 PCPs, all located in Lackawanna County. Negotiated terms for physician compensation would be either capitation or fee schedules from which 15% would be withheld pending accomplishment of efficiency goals. Contracts would be negotiated through the MSO, which would also market the Network’s services and provide medical management services and practice management support. An actuarial firm might eventually develop a fee schedule for various payers based on demographic and market conditions, but in no case would prices charged by individual physicians be solicited or communicated to other physicians, or used to set fees for the network. The Network would limit its membership to no more than 30% of the non-employed pediatricians or any other specialists currently constituting less than 30% of the group in any relevant geographic market, and would add no members in any specialty where the group already represented more than 30% of physicians in the area.

APPROVED: Members of the Network propose to share substantial financial risk , and it appears that the establishment of common prices is reasonably necessary to achieve anticipated efficiencies. Thus, a Rule of Reason analysis is appropriate. The Network would account for approximately 39% of non-pediatrician PCPs in Lackawanna County, the primary geographic market, and 28% of pediatricians. These percentages are not likely to cause substantial adverse competitive effects in this market. However, a rise in the 39% figure might cause concern. As for specialists, in eight of 27 medical specialties represented, the Network will account for more than 50% of Lackawanna County physicians. While these numbers might also be cause for concern, they represent the pre-merger composition of Lackawanna Physicians Organization, which does not appear to have caused competitive harm at those levels. In general, payers interviewed supported formation of the Network and did not consider anticompetitive effects likely. In addition, the Network could well provide significant competition to another physician network operating in Lackawanna County. Thus the Department does not intend to challenge the Network if it operates as proposed.