FTC and Price Fixing Price

FTC and Price Fixing

Price Fixing

The Federal Trade Commission (FTC) sued Brown & Toland Medical Group, for allegedly "fixing the prices and terms under which its doctors would contract with payors to provide services for preferred provider organization (PPO) enrollees." (Federal Trade Commission, 2004). In 2001, Brown & Toland and some of its physician members formed a PPO. Brown & Toland began negotiating reimbursement rates on behalf of those members. In addition, Brown & Toland directed the physicians to terminate preexisting contracts and forbade them from accepting prices other than the ones determined by Brown & Toland.

In 2003, the FTC filed an administrative complaint alleging that Brown & Toland organized a horizontal agreement under which its physicians agreed collectively on the price and other significant terms on which they would enter into contracts. Furthermore, the FTC contended that this horizontal agreement raised prices for physician services in San Francisco.

Brown & Toland entered into a settlement agreement, which prohibited it "from negotiating with payors on behalf of physicians, refusing to deal with payors, and setting terms for physicians to deal with payors - unless the physicians are clinically or financially integrated" (Federal Trade Commission, 2004). In addition, any contracts that were illegally obtained were to be terminated. However, Brown & Toland could continue to negotiate with payors on behalf of physicians if such action was "reasonably necessary to the formation of a 'qualified risk-sharing joint arrangement' or a 'qualified clinically-integrated joint arrangement,' as defined by the order." (Federal Trade Commission, 2004). Therefore, the settlement was aimed only at limiting behavior that prevented the member physicians from freely contracting with the payors, and not at behavior that reflected actual financial or clinical relationships between member physicians.