FTC Imposes Civil Penalty for Faulty ‘Messenger Model’ Contract | Blogs | Health law today
On September 30, the Federal Trade Commission (FTC) filed a complaint and proposed judgment in the United States District Court for the District of Columbia against San Juan IPA, Inc. (San Juan) for allegedly operating a “messenger model” illegal in violation of a prior FTC order. The FTC’s action against San Juan is a reminder that the FTC continues to focus on antitrust issues in health care and that provider groups must ensure that their contracting practices and collaborations comply with antitrust laws.
The FTC’s September Complaint against San Juan (the 2022 Complaint) stems from an earlier complaint (the 2005 Complaint) and a 2005 consent agreement between the FTC and San Juan. San Juan is an independent practice association with approximately 450 provider members in the northwest region around Farmington, New Mexico. The 2005 complaint alleged that San Juan failed to engage in a legal messenger model with its participating physicians. Specifically, the FTC accused San Juan of orchestrating and implementing agreements among its member physicians to fix prices and other terms under which they would deal with payers and of refusing to deal with those payers except at collectively determined conditions. In a legal messenger model, the network entity does not negotiate on behalf of its member suppliers, but rather acts as a mere “messenger” passing offers and responses between each prospective payer and supplier. The Department of Justice and the FTC warn in their health care antitrust enforcement policy statements that providers should exercise caution when using a messenger model so that the messenger is not used as an agent for facilitate illegal collusive activity.
The FTC and San Juan settled the 2005 lawsuit. Pursuant to the decision and order proposed in the consent agreement and entered into by the FTC (the 2005 order), San Juan was ordered to cease and to refrain from entering into or participating in any agreement: to negotiate on behalf of any physician with any payer; deal, refuse to deal, or threaten to refuse to deal with a payer; not deal individually with a payor or solely through San Juan; or which included any terms, conditions or requirements under which a physician deals with a payer.
Seventeen years later, the FTC continues to police how Independent Physician Associations (IPAs) can use messaging patterns. The 2022 complaint alleges that beginning in 2014, San Juan “refused to deal or threatened to refuse to deal with a payor, negotiated or attempted to negotiate price-related terms rather than letting the payor negotiate those terms.” individually with each of the San Juans, and has committed to and encouraged its members to do business with a payer only through the API.” The FTC Details San Juan’s Alleged Cases Juan violating the terms of the 2005 order with paymasters in 2014 and 2017, including when San Juan allegedly threatened to terminate a paymaster on behalf of all vendors when the payor failed to complete negotiations with certain vendors and tried separately to negotiate a provision that a payer deals with a member physician only through San Juan.The 2022 complaint alleges that San Juan’s conduct resulted in increased prices for medical services for consumers.
The stipulated Final Judgment and Order of 2022 (the 2022 Order) contains extensive relief. Specifically, the 2022 order imposes a civil penalty of $263,000 on San Juan and requires San Juan to (i) file a report with the FTC detailing if and how San Juan intends to operate as a courier with payors in the future and providing specific information about the arrangement; (ii) provide a copy of the new Payor Agreements with a description and supporting documentation of how San Juan complied with the 2022 Order when negotiating with the Payor; (iii) retain copies of all written communications with any payor or third party and all internal memoranda and reports relating to the negotiation of any payor contract for five years and provide copies upon request to the FTC; (iv) send a copy of the 2022 Order and the 2022 Complaint to San Juan members and each payor who has entered into a contract with San Juan for the provision of medical services since January 1, 2018 and continues to do so. do for five years; and (v) agree to terminate without penalty or charge a pre-existing contract with a payor for the provision of medical services after the payor has received and requested copies of Order 2022 and Complaint 2022. . The 2022 order also reopens the 2005 order to vary and extend the termination date to June 30, 2030.
Revisiting an issue settled more than seventeen years ago, the FTC signals its continued interest in collaborations among healthcare providers. For San Juan, the 2022 order now subjects it and its members to terms and conditions that may have long-term consequences on its commercial and payer contracts. Therefore, suppliers must continue to be diligent in how they form and operate collaborations that may involve actual or potential competitors.
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