Antitrust law and regulation

Anti-Trust

The conduct of the Wisconsin Chiropractic Association (WCA)

The Role of the Federal Trade Commission

The Federal Trade Commission (FTC) is entrusted with the responsibility of protecting consumers against anti-competitive behavior. The FTC does not prohibit all forms of monopolistic behavior on the part of organized entities providing services to consumers, such as the regulated utility monopolies. However, part of its mission is to review mergers and acquisitions that would likely lead to higher prices, fewer choices, or less innovation that would be disadvantageous to consumers; it also challenges anticompetitive collusion such as price-fixing agreements between competitors, and it finally promotes competition in industries where the need for competition and/or regulated monopolies is high to protect consumers such as the field of health care and health insurance ("Welcome to the bureau of competition," 2008, FTC).

Conduct of the WCA: Anti-competitive behavior

The Wisconsin Chiropractic Association (WCA), an association of 90% of the state's licensed chiropractors was accused by the Federal Trade Commission of creating a conspiracy amongst WCA members to increase prices for chiropractic services and to boycott third-party payers to obtain higher reimbursement rates from health insurance companies. The result of this collusion was less competition and higher prices for consumers of chiropractic services. This occurred after the federal government and many private insurance companies began using new billing codes for chiropractic manipulations in 1997, which enabled the WCA to orchestrate a price increase. Chiropractors were advised "to raise their prices to specific levels" and were assured by the WCA "that if they all raised their rates, third-party payers would not reject or reduce these higher charges for the new codes" ("Wisconsin Chiropractic Association and its director agree to settle FTC charges of price-fixing," 2008, FTC).

The misconduct did not simply end there: the WCA also circulated fee surveys to facilitate coordinated pricing by its members, thus demonstrating when certain members were 'undercharging' customers, which meant they would be contacted and encouraged to charge more. It aggressively pursued all its members and encouraged them to charge more money, urging chiropractors not only to squeeze more money from client's pockets but also to negotiate higher fees with health insurance companies. It engaged in open collusion, advising members to discuss contract offers from insurance companies amongst one another as this would improve all chiropractors' bargaining position with health insurance companies, as the insurance companies would have no choice but to accept better contracts if most chiropractors in the state were demanding higher fees. It even "encouraged and assisted in boycotts of two managed care plans to obtain higher reimbursement rates for chiropractic services" ("Wisconsin Chiropractic Association and its director agree to settle FTC charges of price-fixing," 2008, FTC).

Penalty: Fair or unfair?

The FTC's identification of this behavior and targeting of the WCA as abusing the consumer seems justified. Encouraging such collusion hurt chiropractic patients by encouraging providers of the service to charge more, because they knew they would be reimbursed more, and health care companies would have to pass the costs onto policy holders -- or refuse to cover the service at all, which would ultimately hurt both patients and the chiropractic profession in the long-term. Even non-chiropractic patients would be hurt, as the costs might be passed onto all users of all components of the health insurance plans who were being effectively extorted for money.

The ultimate settlement that emerged prohibited the WCA "from fixing prices for any chiropractic goods or services, or the terms of third-party payer contracts," which seems more than fair and reasonable -- it seems overly lenient given the damage that was done ("Wisconsin Chiropractic Association and its director agree to settle FTC charges of price-fixing," 2008, FTC). However, because price-fixing can be difficult to prove, some of this leniency on the part of the FTC may be due to the need to engage in a settlement rather than a lengthy court battle with the WCA. Given the centrality of the organization's head Russell a. Leonard, in engaging in such tactics, demanding his resignation seems not only fair, but reasonable.

However, perhaps the most important aspects of the ultimate settlement that emerged were that certain regulatory measures were imposed by the FTC upon the WCA to ensure that such non-competitive professional practices were eschewed. The WCA was barred from negotiating on behalf of any chiropractor or group of chiropractors, which seems reasonable given that groups of chiropractors could do so independently, as well as to boycott any payer or provider, which could also lead to prohibiting cheaper providers (to the consumer) who reimbursed doctors at a lower fee for their services ("Wisconsin Chiropractic Association and its director agree to settle FTC charges of price-fixing," 2008, FTC).