The activities of one such organization of physicians and dentists led to a 1998 lawsuit by the Department of Justice (DOJ). As a result of a proposed consent decree filed October 22, 2001 by the Department of Justice in the U.S. District Court for the District of Delaware, the provider organization has agreed to refrain from illegal joint contract negotiations or boycotts to force health plans to pay increased physician fees. The complaint, proposed consent decree, and competitive impact statement are available at http://www.usdoj.gov/atr/whatsnew.htm. The consent decree is entirely consistent with previous DOJ enforcement policy.

In taking this action, the DOJ has further validated the use of the "messenger model" as a means of collectively dealing with managed care contracting while avoiding antitrust scrutiny.

The 1998 civil antitrust Complaint filed by the United States alleged that the defendant, Federation of Physicians and Dentists, Inc., restrained competition in violation of Section 1 of the Sherman Act, 15 U.S.C. ß 1.

The Complaint alleged that the Federation coordinated an understanding among certain of its members—competing Delaware orthopedic surgeons in private practice—that they would seek to negotiate exclusively through the Federation to oppose Blue Cross and Blue Shield of Delaware’s proposed reduction in fees and to inhibit other health care insurers in Delaware from reducing the fees paid to these surgeons. The Federation purportedly recruited almost all the private practice orthopedic surgeons in Delaware to be members. These members were alleged to have agreed to designate the association’s executive director as their agent to negotiate the fee levels they would accept from Blue Cross & Blue Shield of Delaware.

The allegedly illegal agreement to negotiate with Blue Cross only through the association resulted in virtually all Federation orthopedic surgeon members rejecting a new fee schedule proposed by Blue Cross. The members also notified Blue Cross, patients and referring physicians of their intent to terminate their Blue Cross contracts within 90 days. The DOJ alleged that these notices sought to prompt employers and patients to pressure Blue Cross to meet the Federation members’ price demands.

The Federation is a labor organization with its headquarters in Tallahassee, Florida and traditionally has acted as a bargaining agent under federal and state labor law for physicians who are employees of public hospitals or other health care entities. According to the consent order, in recent years the Federation has recruited economically independent physicians in private practice in many states to encourage these independent physicians to use the Federation in negotiating their fees and other terms in their contracts with health care insurers.

Use of the Messenger Model by the Federation and its Members

As a general rule, competing physicians who are not "financially integrated" may not agree on the fees that they will charge any particular payer, nor may they act in concert to influence payer rates. However, a third party can be used by competing groups so long at the third party does not share financial information among the groups and negotiates on behalf of each group separately. This is known as the "messenger model."

The Federation and its members claimed that they were acting as a legitimate third-party messenger, as described in Statements 8 and 9 of the Department of Justice and Federal Trade Commission Statements of Antitrust Enforcement Policy in Healthcare, 4 Trade Reg. Rep. (CCH) ð13,153 at 20,831 (August 28, 1996).

According to the antitrust enforcement agency, however, the conduct of the Federation and its members failed to conform to a legitimate messenger model, which may facilitate contracting between providers and payers. A legitimate messenger arrangement, however, may not collectively negotiate for providers, enhance their bargaining power, organize a refusal to deal or facilitate the sharing of price and other competitively sensitive information among them.

Prohibited Conduct

In general, the proposed Final Judgment prohibits the Federation from participating, encouraging, or facilitating any agreement or understanding between competing physicians, or from negotiating, collectively or individually, on behalf of competing physicians, about any actual or proposed payer contract or contract term. In addition, the Federation is prohibited from making any recommendation to competing physicians about any actual or proposed payer contract or contract term or about whether to accept or reject any such payer contract or contract term.

The proposed Final Judgment also enjoins the Federation from communicating any competitively sensitive information to, or in the presence of, competing physicians, and from communicating to competing physicians any subjective opinion or subjective analysis, evaluation or assessment about competitively sensitive information. It enjoins the Federation from precluding or discouraging any competing physicians from exercising their independent business judgment in determining whether to negotiate, contract or deal directly with any payers. It also enjoins the Federation from participating in, encouraging or facilitating any agreement or understanding between competing physicians to deal with any payer exclusively through a messenger rather than individually or through other channels.

In addition to enjoining certain conduct by the Federation, the proposed Final Judgment also prohibits certain conduct by Federation member physicians who participate in any messenger or any other arrangement provided by the Federation. The Federation’s members are prohibited from participating in, encouraging or facilitating any agreement or understanding among competing physicians about: (1) any competitively sensitive information, (2) using a messenger, or (3) requiring that a payer deal with them only through a messenger or other agent or representative. They are also prohibited from communicating or facilitating the communication of any competitively sensitive information to, or in the presence of, competing physicians.

Permitted Conduct

During the first five years that the Final Judgment is in effect, the proposed Final Judgment permits the Federation to act as a messenger for competing physicians only under certain enumerated conditions. For that five-year period, the Federation is enjoined from acting as a messenger for any competing physicians unless it informs the payer and participating physicians in writing that the payer may decline to communicate through the Federation and that the payer and participating physicians may communicate with each other without the Federation’s involvement. During that period, when acting as a messenger, the Federation is also required to inform payers and its member physicians in writing that it cannot negotiate, collectively or individually, for any such physician about any contract or contract term.

Notwithstanding those prohibitions, the Federation may, at a participating physician’s request, communicate to the requesting physician accurate, factual and objective information about a proposed payer contract offer or contract terms, including, if requested, objective comparisons with terms offered to that physician by other payers. If conducted appropriately, these activities will likely facilitate, rather than impair, competition.

The Federation may also engage in activities reasonably necessary to facilitate lawful activities by physician network joint ventures and multi-provider networks as those terms are used in Statements 8 and 9 of the Health Care Policy Statements and in activities involving physician participation in written fee surveys that are lawful under Statement 6 of the Health Care Policy Statements. In addition, Federation physician members may continue to engage independently, or solely with other members or employees of such member’s bona fide solo practice or practice groups, in activities otherwise prohibited by the Final Judgment, such as choosing the payer or payers with which to contract, and/or refusing to enter into discussion or negotiations with any payer.

Under the proposed Final Judgment, the Federation may continue to engage in lawful union organizational efforts and activities. The organization may serve as a third-party messenger in negotiations between independent physicians and health insurance plans, so long as the association abides by restrictions on such activities.

A decision by an individual physician or an individual physician group to not deal with a managed care organization can be done free of antitrust risk when the group independently and without consultation or collaboration with competing groups decides to not participate. The Sherman Act may be violated, however, when a group of competitors agrees, explicitly or even implictly, not to deal with a certain payer, or to deal only on certain terms. Even in the absence of an actual agreement among the physician groups, substantially identical conduct among competitors may violate Section One of the Act. This is sometimes referred to as "conscious parallelism."

The DOJ action in this case signals that it will actively pursue prosecution when it believes that organizations have made use of a messenger arrangement to facilitate what the agency views as illegal collusion to maintain higher fees.

Nonetheless, the messenger model, when implemented with adequate safeguards, may be used appropriately to facilitate information exchange between plans and physicians, thereby enhancing the negotiation process by the independent groups. The messenger model will come under scrutiny, though, when it is used principally to strengthen the bargaining power of the physician group participants.