NCPA - National Center for Policy Analysis

Doctors' Orders

December 6, 2010

Doctors who own independent practices sometimes band together to provide a bulk offering of services, at a collectively negotiated rate, for third-party payers such as large health insurance carriers in groups called "independent practice associations," or IPAs, says S.M. Oliva.

Since 2001, the Federal Trade Commission (FTC) and the Department of Justice Antitrust Division have prosecuted independent practice associations for the crime of "price fixing."  By setting some of their prices on a group level, the theory goes, doctors are illegally colluding in a way that thwarts competition at the expense of insurance companies, other third-party payers and ultimately patients.

More generally -- and alarmingly -- the FTC is asserting itself as the best arbiter of what business models are appropriate for physicians.  Although the agency claims to be promoting competition among independent physicians, this "competition" is only permitted through FTC-designed models.

FTC orders don't merely restrict business models, says Oliva.

  • They also ban speech deemed likely to improve physicians' bargaining position.
  • A standard clause bans the IPA from "exchanging or facilitating in any manner the exchange or transfer of information among physicians concerning any physician's willingness to deal with a payer, or the terms or conditions, including price terms, on which the physician is willing to deal with a payer."
  • Some orders are even more explicit, stating that the IPA cannot "suggest," "encourage" or "advise" a physician to take any action with regard to a proposed contract.

Insurers realize that the FTC's enforcement practices give them a huge advantage over physicians in contract negotiations.  If the government deems an IPA's practices anticompetitive, the resulting consent orders allow payers to terminate their existing contracts without penalty and negotiate new ones under more favorable terms.

Criminalizing physician-insurer contract negotiations would be unjust, ineffective, and disastrous for patient care.  Cracking down on the collective bargaining of self-employed doctors will do nothing to reduce rising health care prices, while serving to dampen the competition the government claims to defend, says Oliva.

Source: S.M. Oliva, "Doctors' Orders," Reason Magazine, December 2010.

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