MEDICAL PRICE CONTROLS
Reader Skip Oliva, president of Citizens for Voluntary Trade writes:
One price control on reimbursement rates that gets no discussion nationally is the FTC and DOJ's use of antitrust law to prevent physicians from organizing to negotiate with managed care plans. For example, if a group of pediatricians in a region get together and jointly negotiate with the dominant HMO to stop reimbursing them below cost for administering child vaccines (I'm taking this from a real case), the FTC would deem that an antitrust violation, since the doctors are not "competing" sufficiently.
Under a 1993 FTC-DOJ policy, physicians that wish to jointly assert their economic power in negotiations with managed care payors can use one of three options. One option, called withholds, is illegal in many states. The second option, capitation, always results in financial losses for physicians. The final option, known as the messenger model, is so ineffective even the FTC and DOJ can't tell you exactly how to comply with the requirement.
Obviously its nonsensical for a bunch of antitrust lawyers to decide there are only three lawful methods of "competing" in the managed care market. But that's the point--they don't want doctors competing; they want them losing money to help the managed care plans lower costs. The magic word in the FTC-DOJ policy is "risk-sharing"; if the doctors don't assume nearly all of the financial risk, they are presumed criminals in the eyes of the law for trying to harm the "free" market.
The other problem with this policy is that nobody knows what the "correct" market rate is. Most private managed care plans calculate their reimbursements as a percentage of the Medicare reimbursement level (a figure known as RBRVS). For example, an HMO might offer a physician group a contract for 120% of RBRVS. If the physicians get together and counter-offer 130%, the FTC will step in and prosecute the physicians for essentially price gouging. The government's policy is inconsistent, however, because it's unclear at what RBRVS level the FTC and DOJ will rule the prices too high.
One final note: Although this policy has been in place since 1993, the enforcement has only stepped up since Bush's FTC chairman took over two years ago. Right now we're seeing about one physician group a month "settle" with the FTC under this policy (the DOJ generally cedes this are to the FTC, but they did conclude one case last year). By our internal count, the prosecuted groups included more than 6,000 physicians. That's a lot of folks running around violating antitrust laws.