Association for Quality Health Care, Inc

Bureau sfCompetition
F E D E R A L TRADE GOMMlSSION
WASHINGTON, 0.8. 20%0
August 	28, 1986
Cecil M. 	a e v e s , 	Esquire
Page, Scrantom, Harris,
McGlamry 	b 	mapman, 	B , C ,
I043 	n i r d Avenue
Colunrbus, Georgia 	31994
Re: 	Association 	for Quality Health Care, Iwc,
Bear 	Mr, 	Q n e v e s :
You 	have 	requested 	s t a f f 	advice concerning a proposed
"preferred provider organization" ( P P O ) 	program 	f o e 	tbe 	provision
of 	health care services to be established by your client, the
~ssaeiatianfor Quality Health Care, Znc, ( t h e "Association"),
~ccordingto the information contained in or accompplying 	your
request, the Association 	is a nonprofit, t a x - e x e m p ~
corporation, open to rnemership by any employer 	in the 	Columbus,
Georgia area. 	m e 	"service and market areas" for the Association
include Muscogear Stewart, Harris, Talbot, and aattahsochee
counties in Georgia, and 	Russell County in Alabama, 	n e s e
counties have 	a total population of ahout 270,000, sf whom &out
39,000 (14.4%) potentially could 	participate 	in the Associakian'e
program 	i f all 15 of t 3 e 	self-insured employers 	currently 	in the
service and market area 	joined the Association, 	Absue 	200
physicians practice in the Association" 	service and marketing
area, 	You 	state that 	the Association was esta3lisked 	to address
the 	rising 	cost of health care by 	negotiating and entering i n t o
contracts w i t h 	certain 	local area physicians to provide health
c a r e 	services for the Association's members, 	and 	th+ir employees
and 	dependents, pursuant 	to each mexiraerk 	individual plan or
program of employee health care benefits,
m e Association 	is to be governed by a board 	sf directors
elected by 	t h e Association" 	members. 	Ne more 	than 25% sf t%e
board 	mem5ers 	"may be physicians sr be 	selected by physician
groups such as medical 	societies, individual practice 	assoeia-
tians, medical 	service bureaus, 	foundations 	far 	medieaf 	care,
Under Section 501 (c1 ( 4 1 	of 	the Internal lievanus 	Code.
0

medical 	c l i n i c s 	and hospital medical 	staffs."lj You characterize
the ~ s s o c i a t i o nas 	"an itgpociation of [health care services3
users 	-- not 	p r ~ v i d e s s . ~
Ewployers 	wishing to become 	m c d e r s 	of the Association must
pay 	an " i n i t i a l 	assessment" of $ 2 , 5 0 0 . 0 0 	and an annual membership
fee, and 	e x e c u t e a Membership Agreement. 	mis Membership
Agreement 	includes numerous 	prsvisisne relating to the
responsibilities and contemplated actions of the member and the
Association, respectively, regarding the proposed PPO program,
Pursuant 	to the Membership Agreement, the Association will, 	among
other 	things, eontract with certain health care providers who
agree to provide medical serviees to employees and 	degendents 	of
the Associatisn" 	members; 	prepare and update a list of partici-
pating prsvlders 	for the members 	and provide educational programs
for members, 	employees, and 	dependents, ow the 	use of preferred
providers 	and 	other topies s c l a t P n g to 	")udieisus" 	and 	"cost-
sensitive" u s e 0%health care services: 	and provide utilization
review data 	to mern$crs and arrange f o r a program sf ~tilization
review by an organization selected by 	the Assseiatloa, 	Members
agree, 	among other t h i n g s , 	to: 	provide 	incentives in their
health benefits plans 	Ear 	employees 	and dependents to use
"preferred" physicians who have contracted with the Aasseiatian;
verify coverage o f 	employees and dependents t o physicians: 	e n s u r e
prompt payment of charges to preferred 	physicians for coverad
serviees: 	and 	provide the Association with data necessary 	for
utilization review-
Pkvsicians who w i s 3 	to become participating 	"preferrede'	1
physicians of the Association e x e c u t e 	a Physicians' Agreement
with 	the Association, 	Under 	this Agreement, physicians agree,
among other 	things, to: 	provide necessary and appropriate
medical serviees to employees of Association members and their
dependents; refer covered patients to othdr participating 	pro-
viders, insofar 	as possible: 	empbsy e e r t a i n 	cast-containment
measures, such as using outpatiant facilities when 	appropriate:
cooperate 	in the 	utilization review program and abide by 	its
decisions: accept "usual, customary, and 	reasonable" ( U C R ) 	reim-
bursement 	for covered serviees from Association members 	as
21 	Association 	f s r 	Quality Health Care, P n c , , 	Bylaws, 	Artisle
X I I e 	Seetion 1, 	(Exhibit A 	to letter of September 	24,
1984) ,
@ 	2/ 	Letter of September 24. 	1984. 	at 	3.

payment 	i n 	fu11.41 and 	not 	seek any 	reimbursement from the
employee sr beneficiary, atkcr 	t h a n 	for any deductibles 	or
copayments provided 	for under 	the member's benefits plan.
Asrsrcaciation 	agrees, among 	other 	things, to: 	negotiate
contracts 8 0 8 	membership with 	local 	employers whereby 	the Latter
agree to include 	i n 	their health benefits programs 	incentives for
employee% and beneficiaries to use participating physicians; keep
the 	physicians apprised o f 	membership in the Association and
require membershemplayees 	to have appropriate identification of
their coverage; verify coverage of serviees for the physician;
and prepare and 	update a directory 	of participating physicians
for use by 	members and 	their employees, 	m e Association also
will establish a utilization review program, 	"to be 	performed by
an organization or entity selected by the ASSOCIATION," "which
s3all 	seek to avoid unnecessary or u n d u l y 	costly hospital 	and
medical 	services while ensuring 	the 	delivery s f 	quality health
care 	services for 	the members, 	employees and their dependents,*
You 	indicate that t o provide physician services and 	the
utilization review function, the Association will 	contract with
Physicians Group, I n e , 	("KG%"),	an organization that 	"the local
physicians have agreed among 	themselves to form 	. , . in ol;g?r
that collectively they may negotiate with 	the Association,
According to the latest 	information you have providedD 94 local
phpicians 	iaut of 	about 200 in the proposgd service/marksting
area) in approximately 25 medical 	specialty and subspecialty
@ areas are members of P C I .
In your 	correspondence, you have 	requested staff opinions on
several aspects of the Association" 	proposed 	structure and
operation.
Medical Control
You have asked 	"[wlhether 	the P P 8 	is eontrolled by 	physicians
in a manner 	which violates 	t h e 	antitrust 	standards 	set 	forth in
the Statement of Enforrement Policy 	C~ithRespect 	to Physician
Agreements 	to Control Medical Prepayment plans2 of the Federal
41 	in your 	l e t t e r 	of September 	24. 	1984, you 	B t a t e 	(at p. 	5 )
that physicians agree to ascept 	their UCR 	rcirabursement
"less a ten percent 	(10%)discount" as 	f u l l 	payment 	for
services rendered to persons 	covered under 	the Assoeiation'm
programs, 	Tke Physicians-~gfeement 	attached 	as Exhihit %
to that letter, h o w e v e r , 	states 	(at p, 	3 ) 	t h a t 	pbysiciana
agree 	to accept UCR 	reimbursement, 	with no mention sf 	any
discounting of 	fees,
Letter of November 	3. 	1984.

0 Trade 	Commission and 	t h u s 	violates the spirit 	of the Sherman and
clayton ~nti-TrustA c t s . "61 As 	the 	Commission has emphasized:
The analysis 	of [physician3 	control is s
practical owe, a s k i n g 	whether the plan" 	%lines
of 	authority give 	the physician group t h e
ability 	(cit3er "on 	paper" oar in practice) to
make 	overall plan policy. 	The existence o f
control will be clearest when 	a 	physician
group owns 	t3e 	plan, 	P t 	is also likely w3en 	a
group 	selects 	a majority of 	the voting mertlbers
of eke plan's governing body, 	men 	neither sf
these 	conditions is present, de 	dacto control
may 	nevertheless exist. 	Far 	a jlakysi-
eian group may be able to dominate a plan's
decisionmaking processes through the selection
of a minority 	sf meRtbers sf a plan" 	governing
body. 	. 	. . A s 	with 	f a c t u a l 	issues in other
areas sf 	antitrust e n f o r c e m e n t , 	substance will
govern over 	form 	in determining &ether
control exists, 	{Faatnates omitted), -	9 /
Consequently, 	it 	i s not possible to give you a definitive answer
a s 	to whether 	or n o t 	the Association 	would he medically
controlled. 	mile 	the srigi 	initial governance, and 	formal
structure of the Associatios? all suggest that 	it 	i s 	controlled
a / 	Letter of Septeanber 24, 1984, at 8,
9/ 	Sta-ment 	of 	E n f o r c e m n t 	Policy with 	Respect to Physician
Agreements 	to Control Medical Prepayment Plans, 46 Fed, Reg,
48982, 	48986 	Ih981), 	It 	is not elear t h a t 	the Association,
an organization of 	self-insuring employers 	purchasing
medical care for their employees and their 	dependents, is a
"medical prepayment plan" as that term 	Is defined 	i n 	the
Commission's Statement of 	Enforcement Policy. 	See 46 Fed,
R e g * a t 	48984 n , P , 	However, the concept sf control, as used
in the 	Statement 	sf E n f o r c e m e n t 	Policy, 	would 	appear 	to be
applicable in other 	eontexts as 	well*
m i l e 	rucb a possibility 	appears unlikely, e v e n 	the 	formal
governance 	structure of the Wssosiation does 	n o t 	absolutely
mule 	o u t 	medical control of the Association. 	mile Article
1 x 1 , Saetian 	1 sf the Association" 	Bylaws states that na
more 	t h a n 	25% of the boar6 menrbers of 	any 	time may be pkrysi-
eians 	or selected by physician groups, Article I f , 	Seetion 2
states 	that any employer 	(including, presumably, a physician
who employs office s t a f f , 	a clinic, ss a medical 	rscicty,
Zsr 	example) may Become s 	mexnber 	of 	the A s s s e i a t i ~ n ~	and One
members, 	in turn, elect the Board 	(Article T I P , 	Section 21,
n u s , 	at 	least 	theoretically, pbysieianra 	could 	esme 	to dsrrri-
nate 	the Associationk 	mm&bership, 	and elect 	a majority 	sf
@ 	eo on ti nu ad)

by purchasers 	of healt3 care eerviees, 	rather 	thaa by providers,
only observation of the A s s a c i a t i s n b 	operations -- whichr sf
course, 	may 	v a r y 	over 	t i m e -- would demonstrate whether 	or not a t
a n y 	particular time i t 	in f a c t 	is medically controlled, 	m i s ,
therefore, i a 	not the type of issue 	that properly c a n be
determined 	i n advance as a matter 	sf 	l a w ,
One point af clarification about 	t h i s 	issue is 	i n order,
however. 	m e question, as phrased 	.in your 	letter, suggests t h a t
the existence of physician 	control 	itself amounts to a violation
a	( 	antitrust standards set 	forth in the Commission" 	Statement sf
Enforcement Policy, 	"and t h u s 	v i o l a t e s 	the spirit sf the Sherman
and 	ePayton Anti-Trust 	Acts," 	I n 	the 	C o m m i s s i o n k 	sopinion, as
explained 	in detail 	in the Statement sf Enforcement Psliey with
Respect to Physician Agreements 	to Control Medical Prepayment
Plans, the mere existence of 	physician c o n t r o l 	af m ~ d i c s P
prepayment 	p l a n s 	is n o t 	automatically illegal u n d e r 	the 	antitrust
laws, 	and 	is not necessarily indicative 	that 	the controlled plan
is anticompetitive, 	Physician control means merely 	that eueh
plans 	involve horizontal agreement among 	the competing physicians
controlling the p l a n , 	meeker 	suck agreement is lawful or
illegal in a particular ease, however, depends upan 	a c a r e f u l
analysis of t h e nature and purposes o f 	the agreement and 	"joint"
activities, and 	their competitive effects whichr in turn, may
depend 	on the 	p l a n k 	market 	power, 	In shast, 	a finding of 	physi-
cian control only begins the 	inquiry 	into a medica4/prepayment
p l a n k 	lawfulness: 	it does not resolve that 	issue-
a Interstate Commerce
You have 	asked 	w 	her 	the PPO 	"substantially affects
interstate commerce. "B7	presumably 	to ascertain whether 	the
Wssaciationb 	activities would be 	subject 	to the federal anti-
trust 	Laws. 	Given that t h e Assoeiationh 	proposed 	service and
marketing area 	includes parts of 	two states, its activities would
likely be 	in ar affecting 	interstate commerce, and 	it therefore
appears 	t h a t 	interstate commerce jurisdiction over 	the
Association and 	its actiuities could be established under the
federal antitrust 	laws,
the Board, thereby structurally controlling the Assoeiationo
-	9/ 	But 	sea Wddiws v, 	Cenesee Valley 	Medical 	C a r e , 	I n c e p
upp, 	892 	(W.D, N.YI 	19841,
lo/ 	Letter of September 24, 1984. 	at 	8.
Certain types of restraints involving aopects 	of 	the 	medical
care system have Been h e l d 	to meet 	the test of 	effect on
interstate commerce despite their 	appearance as ineraataka
activities* 	n u s , for example, cx~klfe the 	provision 	of
medical 	care may be 	Largely s 	Local activity# "6i3nteebsr-
@ 	(Continued)

--
Ysu have asked 	whether 	the Association may 	contract with 	the
g r a u P , 	P G I , 	r a t h e r 	than with 	individual physicianst to
provide mediea 	rvices to persons 	covered u n d e r 	the 	Assseia-
tion" 	pprogram 	As 	explained 	? o w , 	such contracting may
raise 	serious antitrust concerns.
Tn 	eonsidering t h e 	legality o f 	a n 	agreement between the
Association and P G P I 	it 	is necessary first 	to analyze the
arrangement among B G I k 	member 	p h y s i c i a n s , 	Insofar as w e 	are
able to discern from 	t h e 	materials and 	information you have
provided, BGP 	appears to be an organization of 	independent,
competing physicians who have 	farmed PGX 	to 	j o i n t l y
market 	their services to PPQs or other purchasers, 	such as the
association, 	including negotiating 	jointly through 	PGI 	as 	to the
prices at which the individual physicians will 	sell their
cervices 	to those 	purchasers. 	PGI 	also w i l l 	perform u t i l ' i z a t i o w
review services for the Association,
enees with 	the 	interstate travel of patients, the 	i n t e r s t a t e
payment sf fees, and 	the interstate purchase of medication
are well-recognized 	methods 	for demonstrating an effect on
interstate commerce in antitrust 	Litigation," 	Cardis-
Medical Associates, L t d . 	v. 	Crozer-aestcr 	Medical 	Center,
721 F . 2 d
Weiss v,
68, 76 (3d C i r * 	1983) 	(citations smittcd),
Uork 	Hospital, 745 P.2d 	786, 824 	n e 6 5 See i r e
105 S. 	Ct. 	1 7 7 7 	(1985); United 	s
t e s 	I n t q l , 	Xne,, 	1980-81 Trade Cas, 	(CCH)
( 63,721 at 77,853 	(E,B, La. 	1980): Michigan State Medical
Societyc 181 F , T . C , 	at 212, 250 	(initial decision),
12/ 	Letter 	sf O e t s b e r 	3 1 , 	1984, 	at 	2.
n e s e antitrust ecsncerms arise even if the Wssseiation 	is
not csntralLed by physicians at physician organizations, but
rather 	is an organization sf purchasers 	of physician
services, 	f f 	the Wssoeiation 	is a physician-contraPled
organization, an even 	greater 	r i s k 	of antitrust problems
exists. 	With a provider 	eontrolled organization, its
decisions 	l i k e l y 	would 	be viewed 	under the antitrust Laws as
being agreements among the competing, controlling physicians
to t a k e 	those 	actions, 	I f 	those decisions had
antieoaapetitivc 	effects, t h e y 	could be held 	to be 	illegal
agreements i n 	restraint of trade, and could 	even Be held 	to
be +er 	se 	illegal. 	See 	V i r g i n i a 	Academy 	of Clinical
Psye olzists v , 	131 	Virginia, 624 F,2d 	4 9 6 # 479-
81 (4th Cir, 19801, 	450 U - S , 	916 	(19BP)r
Addino v. 	Genesee V 	Care, 	P n e , , 	5 9 3 	F a Supp,
892 	(W,B, 	N,V, 	1 9 8 4 ) , 	See also Federal Trade 	C s m i s s i a n ,
Enforcement 	Policy With 	Respect to Physician Agreement@ 	to
Control Medical Prepayment 	P l a n s , 	46 	Fed, 	Reg. 	48982 	(19811,

c e r t a i n 	activities of P G T , 	particularly those 	relating to
t h e 	prices charged by member 	p%ysieians, 	may constitute agree-
ments t h a t 	restrain 	trade, 	and 	absent 	sufficient productive
laws r e c e n t l y w a s 	provided 	i n 	another 	s t a f f 	advice letter, to
Michael 	A. 	Bunsheon, 	E s q u i r e , 	a copy of 	which 	is enclosed,
Antitrust concerns could also be 	raised 	i f 	BGI, FJnich has about
half o f 	the local area physicians 	a s menibers, were 	to prohibit 	o r
l i m i t 	i t s 	m a m S e r s ~ p s r t i e i p a t i o ni n 	third-party 	payment 	programs
~ t k e rt h a n 	through P G I , 	S u c h a prohibition or limitation might
prevent 	other PPO programs 	unwilling 	to deal with P G % from
entering the 	market 	by precluding 	them from access 	to local
physicians, whose 	services would be 	necessary 	for 	any 	auch
program*
Assuming 	Skat 	PGX" 	activities 	d i d 	constitute unlawful
agreements, the Association, as 	a 	result of 	contracting wfgh PGI,
also could be party 	t o 	illegal conduct, 	A 	purchaser who, 	by
contract 	OP 	agreement, 	facilitates an 	illegal conspiracy among
providers 	might 	be 	viewed 	a s 	a eo-eonsplrator 	rather 	t h a n a
14/ 	C e r t a i n 	of P G % k activities, 	such %s 	i t s p a r f o ~ m a n c csf
u t i l i z a t i o n 	review 	services, appear 	to be 	the type s f 	j o i n t
activity by 	competing physicisas 	that 	sften may 	be 	albawablc
u n d e r 	the antitrust 	laws, 	assuming t h a t 	the ueiLIzatisn
review 	program 	is n o t 	used 	far the antieompetitivc purpose
sf disadvantaging 	competitors or stherwise 	to 	further some
anticompetitive 	agreement 	among 	P C I k 	member 	physieians*
Of C O U ~ B C . depending 	on 	the 	facts. 	the Association 	might 	not
Be named 	i n 	a n 	aetion challenging the 	illegal conducte 	For
exampleb i n 	several cases the Federal Trade 	Commissisn has
not 	charged 	as co-conspirators 	purchasers 	ab professional
health 	services coerced 	i n t o agreeing 	t o 	anticompetitive
arrangements by 	unlawfu 	i o n on 	the part 	of
health 	care providers, 	Michigan State Medical
Society, 	L O 1 F . T , C , 	191 	a Federation of
%ntLets, 	181 F,"F,CI 	5 9 	745 	F - 2 d 1124 	(9th
a C i r * 	19841 @ 	C i , 	2089 	(19866:
Indiana Den 	1979) 	(consent order)?
(Continued)

Antitrust 	r i s k s 	a l s o potentially exist with 	regard 	to
a e x e l u s i ~ n a r vaaraemenes
where 	thooe
betyee~
agreements
the Association
may h a v e
and
a n t x e b m i ) & e ~ i v e
outside
par ?~_es	r f i ~ P ~ f
effect*, 	FOP 	example, your ZjQ 	ragardfng 	tTe X e g k ~ f t ~ - ~ +
t x e ~sssciationa g r e e i n g 	with 	the 	definition of a pre-
ferred provider organization, whereby the Association would 	n o t
contract with 	any individual physicians or PPO consisting of-%esa
t h a n 	f i v e *ysleians, 	references 	an area 	of antitrust concerns,
m e ~sssciatianitself may 	lawfully decide 	t h a t 	it 	is i n 	i t a 	awn
best 	i n t e r e s t 	not 	t o contract witk 	individual physicians 	or 	small
groups, 	but 	rather 	to require t h a t 	any 	"preferred provider
organization" with k4ki~kit e ~ n t r a s t sbe comprised of a t 	Peast
f i v e physicians, 	Hpw@v@
for 	the purposeL q y ~ t 5 -
ec6n 	/kses-ex~tsof the
pet$ 	and	= vict%ace t5e
true *ere, 	as y m 	naTe-i 	i t s e l f 	has 	no
legitimate business reason 	to want 	such a 	restrictive policy a n d ,
as you 	have 	suggested, i n 	f a c t 	may 	prefer 	to have the 	option
signing participation agreements with 	individual physicians
Texas Dental Association, 100 F , T . C , 	536 	(1982) 	(consent
order); 	Association of 	Independent Dentists, 108 F.T.C, 	518
( 1 9 8 2 ) 	(eonsent o r d e r ) : 	Jose F , 	CaLimZim e t 	a l e , m C 	D k t ,
No. 	9199 (complaint issued 	Sept. 	30, 1 9 8 5 ) -
16/ such a 	tinding might 	result. 	for example, 	where 	the
Association adopted 	the poiicy 	in response 	to coercion By
P G P .
mile 	it 	might 	Be 	necessary 	for 	a plaintiff to ohow t h a t 	the
Association benefitted 	from the 	challenged restraint (see
Harold Friedman, P n c . 	v, 	Knoger 	Co,, 581 F.2d 	1068 (3
L 9 7 8 ) ) , 	this requirement might be met by 	the Association
having obtained 	the 	medical and utilization review services
for i t s P B 8 program 	v i a 	the 	contract with 	PGH,
American Society of Mechanical Engineers, Xnc.
Corp., 	$56 	U , S , 	556 	( 2 9 8 2 ) , 	where a nonprofit 	s
e i n g 	organization was held 	liable 	bar 	treble damages under
the 	Sherman A c t 	for the antitrust violation8 sf agent@
acting within the 	scope of 	t h e i r 	apparent 	authority* 	I n
the Supreme eoure 	spccifi~sllyrejected 	the
at A S m 	should 	not 	be held 	liable unless its
d 	witk an 	intent to benefit 	the srgaafzatban,
Pd, 	at 573-34,

several questions raised 	in your
essentially the 	same general question: 	*at 	are 	the
limitations f m p a e d by 	the 	antitrust 	1 	t h e 	activities of an
organization l i k e 	the Association 	thae is a ca&inatiaw 	sf
purchasersp w%tk 	respect 'to i t s 	ability 	to L i m i t 	with w h o m , 	or "
see 	the terms under 	w%%eh, 	i t 	will 	con 	t. with physicians 	to
p r o v i d e 	services under 	the PPO program.
organizations of gurehasers, s u c h 	as 	cooperative buying
asgaeiatians, can serve 	legitimate, 	procompetitive purposes 	and,
*-many 	eases, 	may be expected 	ts facilitate rather 	t h a n 	to impair
eomgetition. 	For example, 	such arrangements may 	allow the
to benefit from ccsnamies of scale 	i n 	their
purchases, facilitate di-s~ernLd~-tron-	of-f a t e m a t IBn BB
aEad 	o r 	s~wicesor -products 3s 6Cpurehased,
trans-aefiG 	casts, aha e% 	--- 	- 	s e l i e k 3 to	age 	competitaon 	g
obe;s8~n-~ar&s 	- 	v e r p IS 	B	- 	%I 	trance%, th&ee	g s n t g a c p .
opgan~zatxsnsmay 	cnga>e 	i n 	c o n d u c t , 	or a t t a i n a degree of mrket
power, that 	raises concerns 	under 	the 	antitru~tlaws,
A 	cooperative buying 	arrangement 	may raise 	antitrust
c o n c e r n s 	i f 	i t 	represents a 	s u f f
market 	so t h a t 	it can exereise rn
pricqs 	of >he-ao~d-sand 	aervieea
_ $ e d " q U ~ 	aria	_ ~ u t p u t ~ 	thus
s.=/ 	milbe-the 	Assseiationb 	potential 	market 	ahare 0 %
18/ -	See 	letter 	of September 	24. 	1994. at 	8 : 	l e t t e r 	of October 	3 1 .
1984, at 2, 3 .
/ 	These questions 	include whether 	the Association 	may 	r e f u a e
to contract with 	certain flysieians, 	whether 	it 	may 	agree
with BGf 	on the 	definition 	sf a preferred 	provider 	organizs-
tian 	for 	the purpose sf defining 	with whom 	the Association
may 	contract 	for 	the provision of physician 	services, 	and
whether 	it 	may have 	multiple 	contracts containing different
terms 	for BGf 	and 	won-BGI 	physicians-
2 0 / 	A 	cooperative buying arrangement 	a180 	may 	raise antitrust
concerns By 	facilitating price 	fixing or sther 	antisompeti-
tive collusion among 	its members 	i n 	the markets 	i n which
they 	are 	sellers. 	S i n c e 	the Associatian 	apparently 	is n o t
made u p of competing Businesses 	i n 	the same 	industry, 	tkfa
would 	not 	appear 	to be 	a concern 	in this 	i n s t a n c e , 	Cwpera-
tivs buying 	asssciatisns 	alss potentially may 	raise anti-
t r u s t 	issues under 	the Robinson-Patman 	Act, 	Bowever, 	that
Act 	only applies to transactions 	involving 	*csmmoditier,"
and 	is not pertinent 	here 	siwee your 	request 	for advice only
relatea 	to the 	purchase 	of s e r v i e c ~-- 	a 	medical 	care
servlscs 	-- By 	the AssociationI

urchasers af medical 	services, 	no more 	t h a n 	1 4 - 4 s of the 	a r e a * s
pulation, 	appears 	to preclude 	the 	possibility 	t h a t 	t h e
has or could obtain market 	power, the 	Association
should be aware of the potential application of the antitrust
laws 	to i t s act%vftios 	s h o u l d 	it 	Ian of operation change 	so
t h a t 	it d i d o b t a i n market 	power, 	However, 	absent such market
p w e r l 	or 	an antieompetitive puapose, 	the Association generally 	-
may 	decide which 	providers or 	categories sf providers it chooses
$0 ~ ~ n t d d ~ t	with, 	and 	on w3at 	t e r m s , without raising 	a n t i t r u s t
concerns, 	mis 	w ~ u P f linclude 	t h e 	freedom 	to contract with PGL 	or
individual physicians, 	or with both 	(except to the 	e x t e n t 	t h a t
such contracting 	i s p a r t 	of an anticompetitive provider
conspiracy, as 	d i s c u s s e d above), 	and 	the Association would be
permitted 	to contract 	on different 	terms with different
categories of providers.
This letter sets out 	t h e 	views of 	the staff of 	the 	Bureau of
Competition, as authorized by 	the 	C s m m i s s i s n b 	rules, 	f t has not
b e e n 	reviewed 	or approved by 	the Commission, 	A s 	the 	C o m i s s i o n 8 e
Rules 	(5 	1 . 3 ( c ) ) explain, 	t h e 	s t a f f " 	advice 	is rendered 	"without
prejudice 	to the 	right 	o f 	the 	Commission Patem 	to rescind the
a d v i c e and, where 	appropriate, to commence an enforeemens
proceeding - "
S i n c e r e l y ,
d
M, 	Elizabeth Gee
Assistant Direetsm
See Mandeville 	Island Farms, %ne. v , 	American Crystal Sugar
3 3 4 	U , S , 	219 	( 1 9 4 8 ) ; 	United S t a t e s 	v , 	Sacsny--Vaeuum Oil
Cs., 	3x0 Us%, 150 	(1948)- 	National Macaroni Mfrs.
ASSIR 	v I 	345 	F,2d 	4 2 1 	1 9 6 5 ) 	(prices of par-
chased 	goods unreasonably depressed by esmbinatisn of aPB or
tho dominant 	purchasers 	i n 	a market), 	mile 	the courts have
not previously applied 	the 	antitrust Paws 	to esmlainatlons 	of
ultimate 	consumers j o i n t l y 	purchasing 	goods or 	services, a@
opposed 	t o eaPR"Binatisns of manufacturers sr 	cellars who p u r -
chased 	inputs and 	l a t e r 	s o l d 	products 	that ueea 	those inputs,
s u s h 	an application has 	n o t 	been precluded by 	the 	courts,