FOR IMMEDIATE RELEASE                                          AT
MONDAY, JULY 1, 1996                               (202) 616-2771
                                               TDD (202) 514-1888

     WASHINGTON, D.C. -- The Department of Justice said today
that it will not challenge a proposal from a group of Arizona
doctors to form a physician network of colon and rectal surgical
specialists in the Phoenix area that will negotiate and contract
with health benefit plans to provide surgical and related
services for the treatment of colon and rectal diseases and
related conditions.
     The Department's Antitrust Division said that the proposed
physician network joint venture, to be called Allied Colon and
Rectal Specialists, will not pose a significant anticompetitive
threat due to the availability of colon and rectal services
through other medical providers in Maricopa County, which
encompasses the greater Phoenix metropolitan area.
     The Department also said that the network has the potential
to benefit managed care plans and their enrollees through
efficiencies that may result from payers' ability to contract
with a group of providers through a single representative and
from utilization review and quality assurance monitoring.  
     The Department's position was stated in a business review
letter from Anne K. Bingaman, Assistant Attorney General in
charge of the Antitrust Division, to counsel representing the
     The Department said that the proposed activities do not
raise substantial antitrust concerns when analyzed under the
principles 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 in 
September 1994.
     Although the network comprises seven of the nine dedicated
colon and rectal specialists in Maricopa County, and seven of 10
statewide, many other types of surgeons, including general
surgeons and osteopathic surgeons, routinely perform similar
procedures.  This was confirmed by interviews with third-party
payers.  Based on a weighted average of the 10 most commonly
performed colon and rectal procedures performed by all
practitioners, Allied Colon and Rectal Specialists physicians
provide only 15 percent of these services in Maricopa County and
9 percent statewide.
     The network will involve significant risk sharing, and will
include utilization review and quality assurance monitoring. 
Each Allied Colon and Rectal Specialists contract with health
benefit plans will provide for physician services compensation
either in the form of a capitated payment or under a discounted fee
-for-service schedule for its member physicians with a "risk
pool" withhold of at least 20 percent of the fees due each
physician.  This risk pool account will be distributed to the
participating physicians only if the panel of doctors as a group
meets pre-established efficiency and quality parameters.
     Allied Colon and Rectal Specialists physician providers will
participate in the network on a non-exclusive basis.  Individual
member providers will be able to affiliate and contract directly
with competing multi-specialty networks, primary care groups,
independent practice organizations, physician hospital
organizations, managed care plans, and other third party payers. 
The network has established safeguards on information flow among
its members to eliminate enforcement concerns about the sharing
of information.
     The proposal involves additional provisions that reduce the
possibility of anticompetitive effects. 
     Under the Department's business review procedure, an
organization may submit a proposed action to the Antitrust
Division and receive a statement as to whether the Division will
challenge the action under the antitrust laws.  
     A file containing the business review request and the
Department's response may be examined in the Legal Procedure Unit
of the Antitrust Division, Room 215 North, Liberty Place,
Department of Justice, Washington, D.C. 20530.  After a 30-day
waiting period, the documents supporting the business review will
be added to the file.