Number: NAL 97-01
Date: April 23, 1997
Subject: Proposed Fee Survey
Graham H. Nicol, Esquire
Law Offices of Jakeman & Nicol
269 Thornberg Drive
Tallahassee, FL 32312
RE: FLORIDA HEALTH CARE COMMUNITY ANTITRUST GUIDANCE ACT -- ANTITRUST NO-ACTION LETTER -- DENTAL SOCIETY'S PROPOSED SURVEY, REPORT, AND EXCHANGE OF FEE-RELATED INFORMATION
Dear Mr. Nicol:
On behalf of your client, the Clay County Dental Society, Inc. ("CCDS"), you have requested an antitrust no-action letter pursuant to the Florida Health Care Community Antitrust Guidance Act with respect to a proposed survey, report, and exchange of information relating to CCDS members' "usual and customary" fees for certain dental procedures. Attorney General Butterworth has asked us to respond to your request.
In sum, this office concludes that, under all the circumstances involved in the proposal, the survey, report, and exchange of information are not likely to be anticompetitive in over-all effect. Accordingly, it is the present intention of this office not to take antitrust enforcement action against CCDS or its members with respect to the survey, report, or exchange of information as proposed.
You have advised that CCDS is a Florida not-for-profit corporation. All the regular members of CCDS are licensed dentists who practice in Clay County. The corporate purposes of CCDS include improving the public health and promoting the art and science of dentistry. Some fifty of the approximately sixty dentists who practice in Clay County are members of CCDS.
The Clay County School Board makes dental care benefits available to its employees and their dependents. The School Board is exploring dental care financing and delivery alternatives, including a managed care plan and a new "direct assignment" dental benefits plan known as "Dental Decisions." A "direct assignment" plan is an ERISA-regulated, employer self-funded (with optional stop-loss insurance coverage) employee benefits plan that uses the fee-for-service financing model and offers enrollees "freedom of choice" with respect to the dentists from whom they may obtain covered services (i.e., the plan does not use an exclusive panel of providers). Such plans represent a kind of health care financing that is not presently available to employers in Clay County. When covered dental services are utilized, the enrollee assigns the benefits payable under the plan directly to the provider and thereby avoids having to pay covered amounts at the time of service and obtain reimbursement later. The Dental Decisions plan provides payment for 100% of the cost of the enrollee's covered dental services up to $300, 80% of the next $300, and 50% of the excess up to an annual maximum amount. Thus, a co-payment amount, payable by the employee, applies with respect to dental services that cost more than $300 during the plan year. In order to decide whether offering the Dental Decisions plan as an employee benefit would be in the best interest of the School Board and its employees, the School Board will need to know whether and to what extent the sum of the fees for the services plan enrollees would most frequently utilize during the plan year is likely to exceed the $300 threshold.
CCDS proposes to gather and provide the needed information by conducting a survey of its member-dentists. The survey will be conducted through a written form, a copy of which was enclosed with your request. The form asks the dentist to provide his or her current "usual and customary" fee for each of ten (10) dental procedures and the approximate number of each of such procedures the dentist has performed during the preceding three (3) months. The enumerated procedures are commonly performed by general practitioners and tend to be those most frequently utilized by enrollees of group dental benefits plans. Participation in the survey will be voluntary and anonymous; the survey form will not identify the dentist whose fee information is being furnished. Because CCDS has no paid staff, the administrative aspects of the survey will be performed by Andrew Brown, D.D.S., President Emeritus of CCDS. Survey forms will be sent out by and returnable to Dr. Brown. Dr. Brown limits his practice to orthodontia and provides only one of the ten dental procedures that are the subjects of the survey.
Dr. Brown will aggregate the fee data received through the survey and prepare a report of the average fee, the high fee, and the low fee, for each of the procedures. Dr. Brown will not report data on any procedure unless (1) there were at least five providers reporting data on that procedure, and (2) no individual provider's data represents more than 25 percent on a weighted basis of that statistic.
After the report has been prepared, Dr. Brown will furnish it to (1) the Clay County School Board; and (2) Bankers Risk Management Services, a Florida-licensed third party administrator that serves as administrator for the Dental Decisions plan. After a period of at least three (3) months following the furnishing of the report to those entities, Dr. Brown will make copies of the report available to CCDS members who request them.
The Statements of Antitrust Enforcement Policy in Health Care issued jointly by the United States Department of Justice and the Federal Trade Commission provide useful guidance to this office in deciding whether it will challenge conduct of firms in the health care industry on antitrust grounds. Statement 5 establishes an "antitrust safety zone" for providers' collective provision of fee-related information to purchasers of health care services. Conduct that falls within the safety zone will not be challenged by those agencies absent extraordinary circumstances. In order to fall within the Statement 5 safety zone, the collection of information to be provided to purchasers must satisfy the following conditions:
(1) the collection is managed by a third-party (e.g., a purchaser, government agency, health care consultant, academic institution, or trade association);
(2) although current fee-related information may be provided to purchasers, any information that is shared among or is available to the competing providers furnishing the data must be more than three months old; and
(3) for any information that is available to the providers furnishing data, there are at least five providers reporting data upon which each disseminated statistic is based, no individual provider's data may represent more than 25 percent on a weighted basis of that statistic, and any information disseminated must be sufficiently aggregated such that it would not allow recipients to identify the prices charged by any individual provider.
Statement 5 explains that these conditions are "intended to ensure that an exchange of price or cost data is not used by competing providers for discussion or coordination of provider prices or costs." Statement 6 establishes a safety zone with similar parameters for "[p]articipation by competing providers in surveys of prices for health care services." Both Statements are relevant to the proposed conduct at issue here.
The survey, report, and exchange of information CCDS proposes appear to fall within the safety zones established in Statements 5 and 6. First, the collection and aggregation of data will be managed by CCDS, a third party trade association. Second, although current fee-related information will be provided to the School Board and a licensed third party benefits administrator, that information will not be made available to CCDS members and will not otherwise be obtained by them until the underlying data have become more than three months old. Third, CCDS will not provide information on a procedure unless (1) there were at least five providers reporting data on that procedure, and (2) no individual provider's data represents more than 25 percent on a weighted basis of that statistic. Because the survey responses will be anonymous, it will not be possible for any recipient of the fee-related information to identify the prices charged by any individual provider.
Traditional antitrust analysis likewise leads this office to conclude that, under all the circumstances involved in the proposal, the survey, report, and exchange of information are not likely to be anticompetitive in over-all effect. Generally, this office applies the same antitrust standards in evaluating conduct of providers in the health care industry as it does in evaluating conduct of firms in other industries. An agreement among otherwise competing providers (here, Clay County dentists whose practices are not integrated) on the prices or other terms of payment they will accept from a payor would constitute price fixing -- a "per se" violation of the Florida Antitrust Act of 1980 and section 1 of the Sherman Antitrust Act of 1890. However, the agreement that underlies CCDS' proposal is one among otherwise competing providers to collectively furnish current information to a potential purchaser, and to exchange historical information, about their usual and customary fees (i.e., the prices at which they offer certain services to their current and prospective patients on a nondiscounted basis) for certain procedures. Such an agreement, standing alone, is not a price-fixing agreement and indeed will not necessarily have any anticompetitive effect. Nevertheless, because experience has shown that competitors' exchanges of information about pricing can facilitate price fixing and other unlawful conduct, antitrust scrutiny is warranted. The lawfulness of an agreement of this kind is to be tested under the "rule of reason."
In a rule of reason analysis, an agreement among competitors about future conduct is deemed unlawful only if it is likely to result in an unreasonable restraint of trade -- that is, if, under the circumstances, its likely anticompetitive economic effects in a relevant market outweigh its likely procompetitive effects in that market. The courts apply the rule of reason in various ways. Generally, the first step in the analysis consists of defining the relevant market the agreement likely will affect. The second step is a determination of whether the competitors involved collectively have market power. If not, the agreement lacks "'the potential for genuine adverse effects on competition'" in the relevant market and accordingly is not proscribed. The third step is a weighing of likely procompetitive justifications and effects against likely anticompetitive effects toward a determination of whether, on balance, the agreement likely will have a "substantially adverse" effect upon competition in the relevant market. The fourth and final step is an inquiry into whether the agreement is "'reasonably necessary to the accomplishment of the legitimate goals and narrowly tailored to that end.'"
For purposes of this letter, this office assumes that the relevant product market is general dentistry, that the relevant geographic market is Clay County, and that CCDS members collectively have market power. The procompetitive effects of the agreement among CCDS' member-competitors to participate in the price survey at issue here include: (1) facilitating the entry of an innovative form of health care financing into the Clay County area; (2) facilitating an expansion of payor and patient choice there; and (3) assisting the Clay County School Board in making an informed, rational, health care purchasing decision and in efficiently developing payment terms to be offered to providers of dental services. In addition, the price information that is to be exchanged in connection with the survey may be used by CCDS members -- on an individual basis and not a collective one -- to "price their services more competitively."
These procompetitive effects are balanced against potential anticompetitive effects, which include the possibility that the collection, dissemination, and exchange of price information may lead, directly or indirectly, to (1) an agreement on price or other terms the competitors will accept in dealing with the School Board or other purchasers of their services; (2) a reduction of competition on price, resulting in increased or stabilized prices; or (3) a reduction of quality or availability of services. The likelihood that such anticompetitive effects might actually occur is minimized here, however, by the proposed survey's structural design and the planned three-month delay in making the report available to CCDS members. These features of the proposal will help ensure that neither the process nor the end-product of the survey will facilitate discussion or coordination of prices or services among the competitors. So minimized, the agreement's anticompetitive effects appear to be outweighed by its procompetitive effects.
The goal of the survey and report is to supply information the School Board needs in order to make a reasoned decision on whether offering the Dental Decisions plan as an employee benefit would be in the best interest of the School Board and its employees. The goal of the information exchange is to supply CCDS members with information, at little or no economic cost, that will enable them on an individual basis to price their services more competitively. These goals are legitimate justifications for the proposal; they are consistent with assumptions of economic theory that in a perfectly competitive market "consumers have perfect information about the prices being charged by the various vendors of the good," and that vendors "have perfect information about prices being paid by consumers elsewhere." The agreement is reasonably necessary to the accomplishment of these goals because it would be impracticable and costly for the School Board or CCDS members separately to undertake the tasks involved in the proposal. The agreement is narrowly tailored toward the accomplishment of the goals. The scope of the information that will be gathered, aggregated, reported, and exchanged is no broader than that which is necessary to permit the School Board to make a rational purchasing decision and CCDS members on an individual basis to adjust their prices in response to market conditions.
Accordingly, based upon the information you have provided and the specific facts presented thereby, it is the present intention of this office not to take antitrust enforcement action against CCDS or its members with respect to the proposed survey, report, or exchange of information.
This letter expresses this office's present enforcement intention only. It applies only to the conduct described in your written request, as summarized above. In particular, this office would be concerned if the process or end-product of the survey were to be used by unintegrated providers (i.e., actual or potential competitors) to facilitate an agreement on price or price-related terms; collective bargaining (through CCDS or any other person) with the School Board (or any other purchaser) over price or other contract terms; a group boycott or threat thereof; a concerted refusal to deal except on collectively determined terms; a market-allocation agreement (i.e., an agreement to divide geographic markets, services offered, or patients served); or an agreement to obstruct other innovative forms of health care delivery or financing (such as managed care). Such conduct generally is proscribed by the Florida Antitrust Act and by section 1 of the Sherman Act. This office reserves the right to bring enforcement action in the future if the actual operation of the proposed survey, report, or exchange of information should prove anticompetitive in purpose or effect.
Finally, you have asked whether, in light of section 455.277(7), Florida Statutes, CCDS will be required in the future to file affidavits with this office concerning changes in the facts CCDS has presented in connection with its request for this no-action letter. This office concludes that CCDS will not be required to do so. The specific conduct addressed in and covered by this letter, consisting of a single survey, report, and exchange of information, is not the kind of continuing business activity the statutory language contemplates. Furthermore, the business activity proposed likely will be concluded in less than one year. In the event a subsequent survey, report, or exchange of information should be proposed, CCDS may at its option request the issuance of a separate antitrust no-action letter covering that business activity.
Patricia A. Conners
Kimberly L. King
Assistant Attorneys General
1. s. 455.277, Fla. Stat. (Supp. 1996).
2. U.S. Dep't of Justice & Federal Trade Comm'n, Statements of Antitrust Enforcement Policy in Health Care (Aug. 28, 1996), reprinted in 4 Trade Reg. Rep. (CCH) ¶ 13,153.
3. The Statement 6 safety zone for "provider participation in written surveys of . . . prices for health care services" applies where the following conditions are satisfied:
(1) the survey is managed by a third-party (e.g., a purchaser, government agency, health care consultant, academic institution, or trade association);
(2) the information provided by survey participants is based on data more than 3 months old; and
(3) there are at least five providers reporting data upon which each disseminated statistic is based, no individual provider's data represents more than 25 percent on a weighted basis of that statistic, and any information disseminated is sufficiently aggregated such that it would not allow recipients to identify the prices charged . . . by any particular provider.
4. A CCDS member's conduct in obtaining or using the competitive information that is to be included in the report before the underlying data have become more than three months old would fall outside the safety zones and would warrant close antitrust scrutiny by this office.
5. See Arizona v. Maricopa County Medical Soc'y, 457 U.S. 332, 335-36 (1982) (holding that certain "agreements among competing physicians setting, by majority vote, the maximum fees that they may claim in full payment for health services provided to policyholders of specified insurance plans" constituted price fixing and were unlawful per se); United States v. A. Lanoy Alston, D.M.D., P.C., 974 F.2d 1206, 1209 (9th Cir. 1992) (in criminal prosecution against dentists for conspiring to fix and raise co-payments payable by enrollees of dental plans, trial court "properly allowed the government to proceed on a per se theory"); Greenberg v. Mount Sinai Medical Center of Greater Miami, Inc., 629 So. 2d 252, 258 n.1 (Fla. 3d DCA 1993) ("A per se violation is one which requires no proof of anti-competitive effect").
6. Ch. 542, Fla. Stat. (1995 & Supp. 1996). Section 542.18, Florida Statutes (1995), provides: "Every contract, combination, or conspiracy in restraint of trade or commerce in this state is unlawful."
7. Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal.
15 U.S.C. s. 1 (1994).
8. United States v. United States Gypsum Co., 438 U.S. 422, 441 n. 16 (1978) ("The exchange of price data and other information among competitors does not invariably have anticompetitive effects; indeed such practices can in certain circumstances increase economic efficiency and render markets more, rather than less, competitive").
9. See Maple Flooring Mfrs. Ass'n v. United States, 268 U.S. 563, 585 (1925) ("information, gathered and disseminated among the members of a trade or business, may be the basis of agreement or concerted action to lessen production arbitrarily or to raise prices beyond the levels of production and price which would [otherwise] prevail").
10. See Amey, Inc. v. Gulf Abstract & Title, Inc., 758 F.2d 1486, 1505 (11th Cir. 1985) ("The exchange of price information among competitors is not a per se violation of the antitrust laws"), cert. denied, 475 U.S. 1107 (1986); Levine v. Central Fla. Medical Affiliates, Inc., 72 F.3d 1538, 1546 (11th Cir. 1996) ("Agreements that do not fit within an established per se category are analyzed under the ‘rule of reason,' i.e., courts will engage in a comprehensive analysis of the agreement's purpose and effect to determine whether it unreasonably restrains competition"), cert. denied, 117 S. Ct. 75, 136 L. Ed. 2d 34 (1996).
11. See, e.g., F.T.C. v. Indiana Federation of Dentists, 476 U.S. 447, 448 (1986) (a "conspiracy among dentists to refuse to submit x rays to dental insurers for use in benefits determinations" constituted an unreasonable restraint of trade).
12. Levine v. Central Fla. Medical Affiliates, Inc., 72 F.3d at 1551.
14. Id. (citation omitted).
15. United States v. Arnold, Schwinn & Co., 388 U.S. 365, 375 (1967), overruled on other grounds, Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 57-58 (1977); Graphic Products Distributors, Inc. v. Itek Corp., 717 F.2d 1560, 1573 (11th Cir. 1983).
16. Thompson v. Metropolitan Multi-List, Inc., 934 F.2d 1566, 1581 (11th Cir. 1991) (citation omitted), cert. denied sub nom. DeKalb Bd. of Realtors, Inc. v. Thompson, 506 U.S. 903 (1992).
17. This office will conduct a more complete rule of reason analysis, without such assumptions, in determining whether to bring enforcement action where the actual operation of the proposed survey, report, or exchange of information has proven anticompetitive in purpose or effect.
18. See generally 2 John J. Miles, Health Care & Antitrust Law: Principles and Practice s. 15:6 (Agreements Among Competitors to Exchange or Disseminate Pricing Information) (Clark Boardman Callaghan 1996); 1 Miles, supra, s.3:3 (Agreements to Exchange or Disseminate Information).
19. Statements of Antitrust Enforcement Policy in Health Care, supra n.2, at Statement 6.
20. See, e.g., Maricopa County Medical Soc'y, 457 U.S. at 335-36 (holding that certain "agreements among competing physicians setting, by majority vote, the maximum fees that they may claim in full payment for health services provided to policyholders of specified insurance plans" constituted price fixing and were unlawful per se); In re Southbank IPA, Inc., 114 F.T.C. 783 (1991) (consent order) (resolving allegations that otherwise competing obstetrician/gynecologists with staff privileges at Jacksonville's Baptist Medical Center used an unintegrated independent practice association to facilitate "collective decisions on fees and other terms to be sought from third-party payors, and to collectively . . . coerce third-party payors to accept those fees and terms" through threatened group boycotts (i.e., letters of resignation and refusals to deal with payors except collectively through the IPA); ordering the physicians to cease and desist from "deal[ing] with any third-party payor on collectively determined terms" and to dissolve the IPA); United States v. Burgstiner, 1991-1 Trade Cas. (CCH) ¶ 69,422 (S.D. Ga. 1991) (consent decree) (resolving allegations that competing obstetrician/gynecologists practicing in Savannah, Georgia, area exchanged current and prospective fee information during meetings of their professional society and at other times, all increased their fees for normal deliveries and cesarean sections by approximately $500 in one month, and agreed on a range of fees they would submit to an organization negotiating the price of medical services on behalf of employers; enjoining such conduct).
21. See, e.g., United States v. Container Corp. of America, 393 U.S. 333 (1969) (corrugated container manufacturers' reciprocal provision of most recent price charged or quoted to identified customers violated section 1 of Sherman Act under rule of reason standard, where result was to stabilize prices, though at a downward level); Tigard Elec., Inc. v. National Elec. Contractors Ass'n, 790 F. Supp. 1498, 1503 (D. Or. 1992) (an "exchange of information may violate antitrust laws when carried out to raise prices . . . or where circumstances suggest that the exchange of price information will stabilize industry prices").
22. David M. Kreps, A Course in Microeconomic Theory, 264 (Princeton Univ. Press 1990).
23. See, e.g., Arizona v. Maricopa County Medical Soc'y, 457 U.S. 332 (1982) (price fixing); United States v. Lake County Optometric Soc'y, Crim. No. W-95-CR114 (W.D. Tex., Judgment in a Criminal Case entered July 15, 1996) (optometric society pled guilty and was fined $75,000 on criminal charges that it and others unnamed conspired to raise, fix, maintain, and stabilize the price of eye examinations in central Texas by meeting to discuss prices being charged for eye examinations, discussing the price to be charged, agreeing to raise the price, agreeing to adhere to the price discussed, and monitoring and enforcing compliance with the agreement to adhere to the established price).
24. See, e.g., In re Trauma Associates of North Broward, Inc., Dkt. No. C-3541 (F.T.C. Nov. 1, 1994) (consent order), 59 Fed. Reg. 63,805 (1994) (Notice) (resolving allegations that an unintegrated group of general surgeons in Broward County, Florida, agreed to use a corporation for collective negotiations with the North Broward Hospital District over the terms of a contract for trauma services at two trauma centers, and that the surgeons threatened to and later did walk out of the trauma centers when their demands were not met, forcing the District to shut down one of the centers; ordering the surgeons to cease and desist and that the corporation be dissolved); United States v. Massachusetts Allergy Society, Inc., 1992-1 Trade Cas. (CCH) ¶ 69,846 (D. Mass. 1992) (consent decree) (resolving allegations that an unintegrated group of allergists in Massachusetts agreed to have MAS act as their joint negotiating agent to obtain higher fees from certain HMOs for allergy services and to resist competitive pressures to discount fees, and adopted a fee schedule to be used in such negotiations; enjoining MAS from collectively negotiating fees on behalf of its member allergists); In re Southbank IPA, Inc., 114 F.T.C. 783 (1991) (consent order) (ordering unintegrated Jacksonville obstetrician/gynecologists to cease and desist from "deal[ing] with any third-party payor on collectively determined terms").
25. See, e.g., Pennsylvania Dental Ass'n v. Medical Serv. Ass'n, 815 F.2d 270, 272 (3d Cir.) (summary judgment dismissing Blue Shield's section 1 claim was erroneous, where record contained abundant evidence that dental associations and individual dentists had engaged in "concerted action . . . intended to encourage Pennsylvania dentists to withdraw from or to avoid the status of Blue Shield participating dentists"), cert. denied, 484 U.S. 851 (1987); In re Roberto Fojo, M.D., 115 F.T.C. 336 (1992) (consent order) (resolving allegations that competing obstetrician/gynecologists with staff privileges at Miami's North Shore Medical Center collectively threatened to withhold emergency room call services from the hospital toward obtaining a more favorable economic arrangement with the hospital; ordering former chairman of hospital's obstetrics and gynecology department to cease and desist); In re Southbank IPA, Inc., 114 F.T.C. 783 (1991).
26. See, e.g., In re Trauma Associates of North Broward, Inc., Dkt. No. C-3541 (F.T.C. Nov. 1, 1994) (consent order), 59 Fed. Reg. 63,805 (1994) (Notice); In re Southbank IPA, Inc., 114 F.T.C. 783 (1991).
27. See, e.g., Palmer v. BRG of Georgia, Inc., 498 U.S. 46, 50 (1990) (agreement between two bar review course providers under which each agreed not to compete in the other's territory was "unlawful on its face"); Blue Cross & Blue Shield United of Wisconsin v. Marshfield Clinic, 65 F.3d 1406, 1415-16 (7th Cir. 1995) (upholding jury's verdict of liability against Clinic for agreeing with its competitors to divide geographic markets), cert. denied, 116 S. Ct. 1288, 134 L. Ed. 2d 233 (1996).
28. See, e.g., In re Montana Associated Physicians, Inc., Dkt. No. C-3704 (F.T.C. Jan. 13, 1997) (consent order), 62 Fed. Reg. 11201 (1997) (Notice) (resolving allegations that two physician-controlled corporations obstructed the entry of managed care plans into Billings, Montana, agreed on prices they would accept from third-party payors, and otherwise acted to thwart cost-containment measures; ordering the corporations not to negotiate or refuse to deal with any third-party payor, determine the terms on which physicians become or remain participating physicians in any third-party payor's plan, or fix the fees charged for any physician's services); In re Physicians Group, Inc., Dkt. No. C-3610 (F.T.C. Aug. 11, 1995) (consent order), 61 Fed. Reg. 10,349 (1996) (Notice) (resolving allegations that an unintegrated group of physicians in Danville, Virginia, through a corporation they controlled, conspired to prevent or delay the entry of third-party payors into the market, to deal concertedly with third-party payors, to resist the cost containment measures of third-party payors, and to fix the rate of reimbursement and cost containment measures they were willing to accept from managed care plans; ordering that the physicians cease and desist and that the corporation be dissolved).
29. The recipient of a no-action letter must annually file with the Attorney General's office an affidavit stating that there has been no change in the facts the recipient has presented, at which time the Attorney General may renew the no-action letter.
s. 455.277(7), Fla. Stat. (Supp. 1996).