Rhode Island Professional Standards Review Organization

FEDERALTRADE COMMISSION
WASHINGTON, D. C. 	2 0 5 8 0
Edward 	J, 	Lynch
Executive Vice 	President
Rhode 	Zsland Professional Standards
Review Organization, 	Inc,
The Weld 	Building
3 4 5 	Blackstone Boulevard
Providence, Rhode 	Island 	02906
Dear 	Mr, Lynch:
This 	is 	in 	response 	to your 	request 	for 	an 	advisory opinion
concerning 	a proposed 	program 	for private 	peer 	review 	to be
8 undertaken 	by 	the Rhode 	Island 	Professional Standards Review
Organization 	("RIPSRO"). 	By 	letter of January 	5 , 	1983, you 	asked
the Bureau 	of 	Competition whether 	RIPSRO and 	its participating
physicians 	would 	violate 	the antitrust 	laws by 	performing 	peer
review 	for private 	employers' 	bhelth 	benefits 	programs. 	You
clarified 	your 	request 	by 	telephone with 	Bureau 	of 	Competition
Assistant 	Director Arthur 	N, 	Lerner, sending 	supplemental
materials 	to him, 	including 	a draft of 	the contract 	to be 	used 	in
the program, 	Since your 	request 	raises an 	i s s u e 	of 	significant
public 	interest, under 	Section 1,E of 	the Commission" 	Rules of
Practice an 	advisory opinion 	from 	the Commission 	itself, 	rather
than 	from the Bureau 	of 	Competition, is warranted,
Based 	on 	the 	information 	provided, 	the Commission under-
stands that RIPSRO 	is a nonprofit organization of 	physicians 	in
Rhode 	Island 	that 	intends 	to perform 	certain 	services as part 	of
its private 	peer 	review program 	"to assure 	that only medically
necessary 	care 	is provided 	and 	that 	this 	care meets profes-
sionally 	recognized standards of quality," 	Services RIPSRO will
perform 	under 	the program 	include: 	I) preadmission 	review of
hospital admissions 	for 	elective 	surgery; 	2) concuerent 	review of
~n-nospital health 	services, 	including 	certification or 	non-
certification of 	admissions, assignment of 	recommended appro-
8
, 	priate 	length 	of 	stay, and 	periodic 	recommendation concerning
continued 	stay; 3) retrospective 	review of 	certain hospital
admissions; 	4) monitoring 	of hospital 	discharge 	planning; and
5 ) 	quality 	review studies. 	The Commission 	also 	understands 	that
I

RIPSRO has 	no current plans 	to perform 	any 	fee 	review under 	this
program-
t According 	to your 	submission, determinations made 	by 	RIPSRO
l t h r o u g h 	its reviewing 	physicians 	and 	registered nurses will be
advisory 	in 	nature, 	RIPSRO h a s 	no legal or contractual 	authority
to bind 	any pasty 	-- 	including 	the 	contracting 	employer, 	insurer,
health 	care provider, or 	beneficiary 	-- concerning 	its determina-
tions, 	Final decision 	regarding 	payment of 	all health 	care
benefit 	claims w i l l 	rest w i t h 	t h e 	employer 	andfor 	the 	applicable
insurer,
In considering 	your 	request, the C o m i s s i o n has 	reviewed 	the
Supreme C o u r t * 	recent ruling 	i n 	Union 	Labor 	Life 	Insurance @o,
U,S. 	162 S,Ct, 3002 	( 1 9 8 2 ) - 	The professional
peer 	review activiti 	n 	that ease were 	held 	not 	to be 	exempt
from 	the antitrust 	laws as part 	of 	the 	"business of 	insurance,"
The Commission 	also has considered 	the 	recently enacted 	federal
8Peer 	Review 	Improvements Act 	of 	1982, which 	facilitates private
peer 	review, even mandating 	it 	in certain 	circumstances.
Although 	there 	is no direct 	judicial precedent on the 	legality
under 	the antitrust 	laws of 	a peer 	review program 	such as the one
you have proposed, 	the Commission has 	taken 	into account both 	its
advisory 	spinion 	letter 	of April 	8, 1 9 8 2 on 	fee review 	to 	the
Iowa Dental Association 	(copy enclosed) 	and 	the 	business 	review
letter 	of March 	2, 1977 from 	the Department of Justice, 	indi-
cating 	that 	it did 	not 	intend 	to oppose 	under 	the antitrust 	laws
the operation sf peer 	review committees by 	the 	International
Chiropractors Association,
Based 	on 	the Comission's 	review of your 	proposed 	peer
review program, 	the 	Cornmission 	is of 	the opinion 	that 'operation
of the program 	as described 	would 	not violate 	Section 5 of 	the
Federal Trade 	Commission Act 	or 	any other 	provision 	of 	Paw 	the
Federal Trade Commission 	enforces. 	The program 	does not 	appear
to involve any price-fixing, 	concerted 	refusal 	to deaf, agreement
not 	to compete, or 	other 	conspiracy 	in 	restraint of 	trade, 	The
program 	could, 	in 	fact, promote 	competition, thereby 	providing
substantial benefits 	to consumers, 	Contracting 	insurers and
8
( 	employers can use 	the 	information generated 	by 	RIPSROts peer
review 	program 	in 	deciding 	whether 	to pay 	for 	medical 	care 	I n
Darticular 	instances, and 	consumers can use 	this 	information 	in
heEiding 	whether 	to 	keceive or 	"purchase" medical 	care. 	TO 	the
extent 	that 	the peer 	review program 	helps participating 	prepaid

health 	care plans 	reduce costs, it also will. increase 	the 	eom-
petitive 	incentives 	for other 	third-party 	payers 	to participate
. 	in effective 	cost-containment 	programs, 	In addition, 	RIPSROss
1 	peer 	review program 	can 	help 	health 	care providers 	practice 	in 	a
cost-csnseious 	manner, 	and 	give 	them 	greater 	incentive 	to do 	so,
This advisory opinion, Like 	all 	those 	the Commission 	issues,
is 	limited 	to 	the proposed 	eonduet your 	submission describes,
T h u s , 	as noted 	in 	t h e 	Commission's opinion 	Let-ter concerning 	the
Iowa Dental Association" 	fee 	review program, 	", . . great 	care
must 	continually 	be 	taken 	in carrying 	out 	the program 	to a s s u r 2
that 	its purpose 	remains legitimate and 	t h a t 	it does not produce
significant 	anticompetitive effects and 	thereby 	run 	afoul of 	the
antitrust 	laws," 	Usu should, for 	example, 	avoid 	any misuse 	of
the 	peer 	review program 	to discriminate against 	innovative com-
petitors whose 	practices, a l t h o u g h 	legitimate and 	appropriate,
may 	pose 	a 	competitive 	threat 	to other 	physicians 	involved 	in
8the 	peer 	review program,
Finally, the Commission 	retains 	the 	right 	to 	reconsider
the 	questions 	involved 	and, with 	notice 	to 	the 	requesting 	party
in accordance 	with 	Section 	L , 3 ( b ) 	of 	the Commission" 	Rules 	of
Practice, 	to rescind or 	revoke 	its opinion 	i f 	implementation
of 	the 	proposed 	peer 	review program 	results 	in anticompetitive
effects, 	i f 	the program 	is used 	for 	improper 	purposes, or 	if
the 	public 	interest otherwise 	so requires,
By 	direction o> 	the Commission.
m i P y 	PI. 	Rock
Secretary
Enclosure