FOR IMMEDIATE RELEASE                                          AT
WEDNESDAY, FEBRUARY 12, 1997                       (202) 616-2771
                                               TDD (202) 514-1888

                                
JUSTICE DEPARTMENT WILL NOT CHALLENGE PROPOSAL TO FORM PROVIDER
                NETWORK IN SANTA FE, NEW MEXICO


     WASHINGTON, D.C. -- The Department of Justice's Antitrust
Division does not plan to challenge the formation of a provider-
controlled network joint venture in Santa Fe, New Mexico that
will provide hospital and physician services to health insurance
plans and other third-party payers.

     The venture, to be known as Santa Fe Managed Care
Organization, will be organized as a nonprofit corporation.  
St. Vincent's Hospital, which is the only acute care hospital
open to the general public in the Santa Fe area, and
approximately 70-75 physicians with offices in the city are
expected to be members in the organization.  The organization
will also supplement its physician panel by subcontracting
individually with additional physicians to offer payers a panel
that could include virtually all of the physicians in Santa Fe. 
 
     Joel I. Klein, Acting Assistant Attorney General in charge
of the Department's Antitrust Division, said that although Santa
Fe Managed Care Organization'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.  Klein said that under all the circumstances described in
the proposal, the Department was unable to conclude that the plan
would likely cause anticompetitive harm if it is implemented as
proposed.

     Both Santa Fe Managed Care Organization's members and its
non-member participating physicians will participate in the
network on a non-exclusive basis.  There will be no restriction
on their ability to compete with the organization, and they will
not be discouraged from joining other networks or contracting
directly with health benefits plans.  The organization's primary
interest is in negotiating risk contracts with payers.  For
contracts that do not involve substantial financial risk sharing
among its members, the organization will act as a "messenger" to
facilitate contracting between third-party payers and its
individual member and non-member participating physicians.

     The compensation of Santa Fe Managed Care Organization's
members will be linked to its overall financial performance
through a formula that will make them liable for a share of the
organization's deficits and eligible for a share of its surplus. 
The compensation of the organization's non-member
(subcontracting) physicians will not depend on the overall
economic performance of the organization.  

     The arrangements the Santa Fe Managed Care Organization will
use in subcontracting with non-member physicians will also
include other requirements designed to create divergence of
economic interest between member and non-member physicians.  The
organization will be structured so that it will have the
incentive to bargain down the compensation paid to non-member
participating physicians.

     Santa Fe Managed Care Organization will also have limits on
the number of its physician members.  With three exceptions, its
member physicians together with any physician employees of St.
Vincent's will not exceed 30 percent of the physicians with
offices in the City of Santa Fe in any physician specialty.  The
exceptions are for:  physician specialties in which all the Santa
Fe Managed Care Organization 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; family
practitioners and internists who are represented to be good
substitutes for each other in the Santa Fe area; and
pediatricians.

     Santa Fe Managed Care Organization will also invite La
Familia Health Center, a publicly-funded health care clinic in
Santa Fe that provides a substantial portion of the care for the
uninsured and those covered by Medicaid in the community, to send
a representative to its board meetings in an advisory or "ex
officio" capacity. 

     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.
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97-066