The Health Law Ticker

On January 19, 2017, the Federal Trade Commission announced a settlement which would resolve allegations that competing ophthalmologists violated federal antitrust laws when they refused to negotiate contracts with MCS Advantage, Inc. (MCS), a Medicare Advantage Plan, and Eye Management of Puerto Rico (Eye Management), MCS’s network administrator.

According to the complaint, the charges arise from an arrangement between Eye Management and MCS entered into in April, 2014.  Eye Management agreed to create and manage a network of ophthalmologists to provide services to MCS enrollees and to do so at a cost savings to MCS.   Eye Management planned to replace MCS’s existing contract with each individual ophthalmologist with a new contract between Eye Management and the ophthalmologist at a lower reimbursement rate. In early June 2014, Eye Management sent a proposed contract to every ophthalmologist contracted with MCS at the time. These contracts offered payments at rates that were about 10% lower, on average, than the rates under the existing contracts between MCS and each ophthalmologist.

On June 14, 2014, Cooperativa de Médicos Oftalmólogos de Puerto Rico (OFTACOOP), a 100-member ophthalmologist group based in Puerto Rico, convened a meeting with OftaCoop members and nonmember ophthalmologists. The attendees agreed not to sign a new contract with Eye Management in order to prevent Eye Management from creating a network on behalf of MCS. After the meeting, OftaCoop’s former Secretary of the Board of Directors sent an email to OftaCoop member and non-member ophthalmologists with the subject line DO NOT SIGN THE MCS/EYE MANAGEMENT AGREEMENT. The email urged the ophthalmologists not to sign the contract with Eye Management so they could collectively negotiate with payors through OftaCoop.

Eye Management’s medical director received the email and responded by sending OftaCoop a cease-and-desist letter, asking OftaCoop to stop interfering with negotiations between Eye Management and individual ophthalmologists. The letter also notified OftaCoop that any agreement among competing ophthalmologists to jointly refuse to contract with Eye Management was illegal under the antitrust laws.

Notwithstanding Eye Management’s cease-and-desist letter, OftaCoop met again and attendees were told that they had to be united against Eye Management.  Apparently , this resulted in Eye Management’s inability to form a viable network of ophthalmologists. Next, MCS next tried to lower its costs by offering to continue contracting directly with the ophthalmologists at rates about 10% below the rates in its existing contracts with the ophthalmologists. Again, many ophthalmologists refused to accept MCS’s offer and cancelled, or threatened to cancel, their existing contracts with MCS.  MCS also claimed to have received hundreds of phone calls from its enrollees complaining that ophthalmologists were not offering appointments or cancelling previously scheduled surgeries.

Antitrust issues may arise when competing physicians attempt to collectively bargain with healthcare payors over their fees.  The FTC has taken action to enjoin price fixing or group boycotts by physicians.  Joint negotiation may be permissible, however, where a physician group is sufficiently integrated, such that it has established a coordinated delivery of services by physicians to improve quality and reduce cost both in the treatment of individual patients and in the overall modification of practice patterns. Even so, the proposed competitive restraint must be reasonably necessary to create the integration and achieve efficiencies.  The FTC alleged that OftaCoop had not undertaken any activities to create any integration among OftaCoop members in their delivery of ophthalmology services and thus could not justify the alleged conduct.

Among other restrictions, the proposed consent agreement would prohibit OftaCoop from organizing or implementing agreements to refuse to deal, or to threaten to refuse to deal, with a payor over contract terms, as well as agreements not to deal individually with payors, or to deal only through OftaCoop.   There are also notice requirements for publishing the order. The order would remain in effect for twenty years.  The agreement will be subject to public comment until Feb. 21, 2017, after which the FTC will decide whether to make the proposed consent order final. 82 Fed. Reg. 8752 (Jan. 30, 2017).