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Inova, a hospital chain quickly reaching throughout  Washington, D.C.’s wealthy Virginia suburbs, has dropped its plans to acquire another hospital.

Last year, Inova announced a plan to acquire a hospital in Manassas, Virginia, a formerly exurban community that has quickly become a part of the Washington suburban area.  The acquisition would have given the company more than 80% of the available hospital beds in Northern Virginia, and the Federal Trade Commission quickly announced it would oppose the move.

This week, faced with a legal complaint from the agency, Inova abandoned its plans to acquire the hospital.  We spoke with some area residents about the loss of promised new facilities and expansion.  One told us that he goes to Inova’s Fairfax Hospital whenever possible.  “For a broken arm or something basic, [Prince William]…hospital is fine, but if I want a team ready to help me 24/7, I’m going to a place with top trauma teams and more facilities and money.”

We agree that competition is ultimately good for consumers and that the economic barriers to entry for a new hospital are staggering.   Since so much health care is actually dictated by a very small group of insurance companies, however, we wonder about the wisdom of letting the accountants dictate the quality of care versus a hospital.  There are potentials for abuse on both sides, but if more resources means the quality of care increases for some Virginia residents, we have to question whether the FTC’s actions in this matter really benefited public health.

Posted under Health

A physicians’ independent practice association (IPA) in Texas has agreed to settle Federal Trade Commission charges that it engaged in unlawful collective bargaining to set fees its members would accept from health insurance plans and advised its members against dealing individually with plans. The Commission charged that both practices resulted in higher medical costs for consumers. The consent order settling the FTC’s charges will prohibit the IPA from engaging in such anticompetitive conduct in the future.

The FTC’s complaint alleges that Health Care Alliance of Laredo, LC (HAL), a multi-specialty IPA with about 80 physician members, restrained competition among the members in violation of Section 5 of the FTC Act. HAL claimed it employed a “messenger model” process to negotiate contracts. If properly orchestrated, a messenger model process does not restrain competition. HAL engaged in collective bargaining, however, and did nothing that might justify its challenged conduct.

“Physicians need to be wary of any organization that tells them it can bargain with health plans to increase payments to its members because it follows a ‘messenger model’ approach,” said Jeffrey Schmidt, Director of the FTC’s Bureau of Competition.

“A messenger approach is a way to facilitate the flow of information between health plans and doctors, not a means of gaining bargaining leverage. Collective price negotiations are entirely inconsistent with a properly conducted messenger arrangement. As this case shows, physician organizations will not avoid price fixing charges when they send contract offers to their members after negotiating to get the price the group wants,” Schmidt said.

The FTC’s complaint alleges that in 2003, HAL negotiated fees with two health plans that were trying to contract individually with Laredo area physicians. HAL urged its members not to sign individual contracts with at least one of these plans, noting that collective bargaining would yield higher fees for its members. By negotiating collectively, HAL was able to negotiate reimbursement rates that were 30 percent higher than the individual contract offers from one of the plans and 20 percent to 90 percent higher than the contract offers from the other plan.
The complaint alleges that HAL orchestrated the boycott of a third health plan that refused to negotiate with HAL, advising its members not to sign individual contracts. A year after the health plan began soliciting physicians for its network, only 10 HAL members had signed contracts with it, even though many non-HAL members in Laredo had accepted its individual contract rates.

The FTC also charged HAL with orchestrating collective price negotiations with several other health care payors during a seven-year period, making proposals and counter-proposals and accepting or rejecting offers, without transmitting offers to its members until its board approved the negotiated prices.

The Commission’s proposed consent order is designed to remedy the effects of the alleged conduct and prevent its recurrence. It would prohibit HAL from entering into or facilitating agreements between or among physicians: (1) to negotiate with payors on any physician’s behalf; (2) to deal, refuse to deal, or threaten to refuse to deal with any payor; (3) to designate the terms upon which any physician deals or is willing to deal with any payors; or (4) not to deal individually with any payor, or to deal with any payor only through any arrangement involving HAL. The order permits HAL to operate or participate in legitimate joint ventures that might benefit consumers.

The Commission vote to accept the consent order subject to public comment was 5-0. The Commission is accepting public comment on the order for 30 days, until March 15, after which it will decide whether to make it final. Comments should be sent to: FTC Office of the Secretary, 600 Pennsylvania Ave., N.W., Washington, DC 20580.

NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000.

Posted under Finance