Federal officials coming down hard on messenger-model violators

Taking the right precautions can save you trouble

In late February, the Federal Trade Commission (FTC) in Washington, DC, announced the settlement of charges against a Mesa County, CO-based independent practice association (IPA). Although terms of the settlement were not disclosed, it marked the latest in a string of such settlements against groups of physicians the FTC alleges were fixing prices and preventing competition.

The original complaint, filed in May 1998 against the Mesa County Physicians Independent Practice Association, alleged that its 180 physicians — constituting at least 85% of physicians in the area — fixed terms on which they would deal with health plans and collectively refused to deal with others. That led to higher prices and hindered the development of alternative health care financing and delivery systems in Mesa County, the FTC alleges.

According to Reed Tinsley, CPA, an accountant with Horne CPA Group in Houston, physicians who are in messenger-model IPAs need to be extremely careful about how they communicate with each other. "The federal government doesn’t like doctors grouping together in a shell in order to jack up health care costs," he says. "If a group of physicians gets angry and tries to deal with managed care as a group, the government will preclude you from collectively discussing contract issues. That means you have to disseminate information to each physician individually."

There are many such cases — settled and pending — in which the "messenger" of the model tells payers that failure to adhere to his physicians’ terms will result in all physicians terminating their agreement with the payer. "That means they could damage the payer sig nificantly," says Tinsley. "Through market power and size, the IPA can get what it wants."

While that may seem to be the purpose of banding together in an IPA, the government doesn’t like it, Tinsley continues. The upshot is that physicians in messenger-model IPAs can’t discuss pricing jointly. They can’t collude to terminate or damage a provider network. They can’t have a meeting and vote to terminate a contract, and they can’t correspond together or post messages that all members can read on an electronic bulletin board that espouse ideas like, "We won’t accept this contract unless we get X amount." (See related story, p. 44.)

Each person has to make a decision individually, he adds. "The reality is, if you have a messenger you trust, you know that if he or she brings you a contract, you can assume it’s good without colluding with the other providers."

What’s legal, and what’s not?

The government itself has an abundance of information available to practices that can help them determine if they are acting within the law. On the FTC Web site, www.ftc.gov/bc/health. htm, one section — Statements of Antitrust Enforcement Policy in Health Care — includes information on how messenger-model IPAs can be organized and operated.

Those acting within the law, the FTC says, are arranged simply to facilitate contracting and minimize costs associated with it. The messenger in the model is used only to convey information to payers obtained individually from providers. The key, says the FTC, is "whether the arrangement creates or facilitates an agreement among competitors on prices or price-related terms."

In looking at messenger-model IPAs — and Tinsley says the FTC will look at virtually all such agreements — the commission will determine whether the messenger facilitates collective decision making by network providers, rather than independent unilateral decisions. Specifically, it will look at whether the agent:

    • coordinates the providers’ responses to a particular proposal;
    • disseminates to network providers the views or intentions of other network providers as to the proposal;
    • expresses an opinion on the terms offered;
    • collectively negotiates for the providers;
    • decides whether to convey an offer based on the agent’s judgment about the attractiveness of the prices or price-related terms.

If the agent engages in such activities, the arrangement may amount to an illegal price- fixing agreement.

Tinsley, who is working on a booklet for the American Medical Association that includes information on messenger-model IPAs, says all the antitrust activity and scrutiny by the FTC shouldn’t discourage physicians from forming such groups. Along with the cost benefits that can accrue to members, he says, payers prefer working with groups rather than individuals. And there shouldn’t be any reason to fear the FTC looking at your IPA as long as there are firewalls created to separate each participating practice, and each participating practice makes contracting decisions on its own.

Tinsley offers the following advice:

    • engage a messenger independent of the IPA and its members;
    • require the messenger to meet with each IPA physician individually to discuss concerns about current contracting relationships and to determine what each doctor desires from its current and future contracting relationships;
    • require that all discussions concerning prices occur individually with each practice and the messenger.

Once the messenger has concluded discussions with the payer, he or she presents the contract to each participating practice individually. Each then accepts or rejects the contract. If the practice rejects the contract, it is free to contact and work with the payer on its own to develop or maintain a contractual relationship. The messenger also usually informs the payer who rejected the agreement and lets the payer know it, too, can contact each of the practices individually to develop an individual contractual association.


Reed Tinsley, CPA, Horne CPA Group, Houston. Telephone: (713) 975-1000.