On April 13, 2009, the Federal Trade Commission's Bureau of Competition (Bureau) issued a 37-page Advisory Opinion to a physician-hospital organization named TriState Health Partners, Inc. (TriState) of Hagerstown, Maryland. The Advisory Opinion approved TriState's proposal to integrate the provision of its members' healthcare services and to contract with health plans and other payers on a fee-for-service basis to provide services for its members. Exceptionally notable about this Advisory Opinion is that it addressed activities not only of independent physicians, the traditional focus of the few preceding opinions, but also a hospital partner in the network.

TriState sought to facilitate cooperation and collaboration among its member physicians, create a comprehensive program of care management by engaging everyone associated with TriState, and offer a previously unavailable integrated set of services that would be desirable to self-insured employers who want to lower healthcare costs in an effort to offer a competitive advantage over other health plans.

TriState would create clinical practice guidelines to improve clinical efficiency and have a program to monitor the physicians' adherence to those guidelines. Physicians would be required to refer their patients to other member physicians (though the patient still had the choice of which physician to select) and to grade their peers. TriState also proposed the implementation of a web-based health information technology system that will help identify high-risk and high-cost patients and facilitate the exchange of patients' treatment and medical management information.

While the proposed plan required the agreement of competing physicians for the fees charged for their services (and thus normally would be "condemned as per se illegal price fixing"), the Bureau stated that the analysis differed because the plan arose in the context of a "potentially efficiency-enhancing joint venture among otherwise competing market participants." The Bureau, in part guided by the Health Care Statements, determined that it would not challenge the program between the 212 physician members and the hospital due to three principal reasons:

  • The program had the potential to lower healthcare costs and improve the quality of care for patients;
  • TriState's collective negotiation of contracts with payers, including the prices paid for participating physician services, is "subordinate and reasonably related" to the overall proposal to integrate healthcare for its members, and so the rule of reason should be used to evaluate it; and
  • An essential element to the Bureau's decision was that there would not be an increase in the market power of either TriState or the physician members as a group because all concerned were still free to contract individually outside the proposed program.

Accordingly, the Bureau determined that it would not recommend the commencement of any legal enforcement action against TriState or its providers as long as the proposed plan was followed and no anti-competitive activities, like the exercise of market power, arose.

With the continued push for digital healthcare and a system that provides better access, it is highly likely that this will be the first of many alternative arrangements that will be brought before the Bureau.