Module 4 – Case
The federal trade commission found the physian health organizations. According to their
own analysis physical health organizations had engaged in arrangements which were defined as
per se illegal. They, however, have gone ahead to explain why they defined the arrangement as
per se illegal. Justified undertakings ensure that what is done facilitates healthy competition to
the satisfaction of every one (Ettinger & Lasser, 1997).
Explain why this arrangement would be found “per se” illegal under the FTCs’ analysis.
When the federal trade commissions evaluated the actions of the physician hospital
organization they found them illegal. Their plan to cancel their contracts with the payers and fix
the physician fee and discount was unlawful because most of the health care providers were
rivals with one another and, thereby, it was considered antitrust law principle where it is illegal
for rivals to agree on prices to be charged unless they are in good terms and are ready to come
together and make affective decisions which will be of benefit. Agreements where that the trend
is always to increase prices or reduce outputs are considered as a per se illegal because the
agreements are said not to compete on the prices or the output. Their arrangement was
considered anticompetitive since assessing the market power of the health providers was limited
A significant disincentive could be created against selective discounting due to the fixing
of the discounts. By not involving the physicians by asking each of them individually the
minimum price they would accept while under the payer contract there were complains that the
contract prices were not individually negotiated. That leaves some of the physicians offended
(Mains, Coustasse & Lykens, 2003). Thereby, the hospitals are faced with antitrust risks when
MODULE 4 – CASE 2 2
they are involved in the fixing of prices by physicians where there is no justification. Federal
trade commissions complained that the four physician hospital organizations organized SG
human performance in 1995 where competing hospitals and physicians were to bargain
collectively but their pans were to get higher fees for themselves (Ettinger & Lasser, 1997). That
provides another reason why the arrangements of the physician health organization were termed
per se illegal by the commission. There was also restriction of member hospital ability to make
any contract outside the physician health organizations (Coustasse & Lykens, 2003).
What kind of actions could be taken to restructure this arrangement to avoid a
determination that it is per se illegal?
In order for the physician health organizations’ arrangement not to be considered as
illegal, they were supposed to make a collective price setting which could lead to achievement of
noteworthy integrative efficiencies. If the organizations involved the health workers by enquiring
to know the minimum amount they would expect from the payers that would be a transparent act
as the workers would have a chance to give their opinions (Ettinger & Lasser, 1997). They could
also have not used a messenger model as a contracting mechanism to provide them with a clean
bill of health. They should not have used a messenger. Exclusive arrangements could have been
made to eliminate the doubts on the competition. Physician health organization had an opinion to
make their arrangements straight to avoid them being termed as per se illegal but they failed
hence ended up facing charges from the federal trade commissions. If the hospital members of
physician health organizations had not participated in the fixing of prices and discounts by the
physician members, they could not be blamed for taking part in the antitrust risks (Mains,
Coustasse & Lykens, 2003).
Discuss the alternate FTC analysis that is applied to such cases if they are suspect but not
found to be per se illegal.
MODULE 4 – CASE 3 3
They can first start by investigating the kind of competition taking place. They can also
assess whether monopoly power is possessed by that market. If only found to be suspects,
warning can be given in advance so that they may know the consequences of price and discount
fixing without the involvement of the other involved parties. They can also be advised on how to
carry out their arrangements without turning into victims of per se illegal. Investigations can be
made on whether competition engaged in is reasonable or unreasonable (Ettinger & Lasser,
If the conduct which a firm is engaged in has already being termed as illegal under
antitrust laws, it can be considered exclusionary. If the conduct is not independently illegal, then
the competition being carried in is not reasonable (Greaney, 1995). Another action which can be
taken is restricting price and discount fixing without involving the right people or authorities.
That will already inform those involved in these arrangements that they are not allowed. The
federal trade commissions can try to identify the providers of the services both from within and
outside the organization. They can also engage in calculating the, market shares of the
organizations. That may make the payors migrate to seek alternative providers. Interest to know
the financial analysis of the involved organizations will bring everything into light preventing the
involved doing things for the sake of personal interest and not for the benefit of the whole
organization. The federal trade commissions can enquire on the proceedings of the suspect to
fully understand their arrangements. Monitoring of the practices being engaged in will straighten
a way for significant clinical incorporation (Greaney, 1995). .
In conclusion, the physician hospital organizations have got the power to offer weighty
integrative efficiencies. They are likely to face antitrust risks if they do not implement
integration forms which are meaningful. There for in every arrangement they make it is
important to involve the parties associated with the change.
MODULE 4 – CASE 4 4
Greaney, T. (1995). Regulating for Efficiency in Health Care Through the Antitrust Laws. Utah
Law Review, 1995(2).
Ettinger, D. A., & Lasser, M. L. (1997). Government agencies soften stance on what constitutes
price fixing. Healthcare financial management: journal of the Healthcare Financial
Management Association, 51(2), 27-29.
Mains, D. A., Coustasse, A., & Lykens, K. (2003). Physician Incentives: Managed Care and
Ethics. Internet Journal of Law, Healthcare & Ethics, 2(1).