Significant Developments in Clinical Integration: Federal Trade Commission Advisory Opinion Approves of Physician-Hospital Organization Proposal to Negotiate Jointly with Payers

May 26, 2009 Advisory

On April 13, 2009, the Federal Trade Commission's Bureau of Competition, Health Care Division ("BC") issued a 37-page Advisory Opinion ("Opinion") to TriState Health Partners, Inc. ("TriState"), a physician-hospital organization based in Hagerstown, Maryland, stating that the BC would not recommend that the Commission challenge TriState's proposed clinical integration program under the antitrust laws. The Opinion is noteworthy because it provides the most detailed discussion of clinical integration in any advisory opinion to date, and represents the first time that the BC has given a green light to a proposed clinical integration program that included a hospital member.
What is Clinical Integration?
In general, antitrust laws prohibit direct competitors from jointly negotiating, or agreeing upon, the prices they will charge. This prohibition applies to health care providers, who generally are not permitted to agree to a joint fee schedule or join together to negotiate with third party payers such as insurance companies. One exception to this general rule is where an agreement on price "occurs in the context of a potentially efficiency-enhancing joint venture, . . . and the competitive restraints [i.e., the price fixing agreements] are 'ancillary' to the joint venture." In other words, if physicians combine in order to provide better, more comprehensive and cost-effective services, they may -- under carefully scrutinized circumstances -- be able to discuss or negotiate prices with payers jointly.