HealthBrief. A Health Care Law Update

Transcription

1 HealthBrief A Health Care Law Update J NEW FTC PHYSICIAN NETWORK GUIDELINES NO COLLECTIVE BARGAIN Physicians who form IPA s and similar networks to contract with employers and managed care companies can only take small comfort from the long awaited new guidelines promulgated by the Federal Trade Commission and the Department of Justice. The FTC on August 28 issued its third Statements of Antitrust Enforcement Policy since The Statements are designed to give the provider community a better understanding of how the agency primarily charged with enforcing federal antitrust laws views the multiplication of nonintegrated contracting networks in the health care industry today. 1 For those who hoped for additional clarification of FTC policy, the Statements provide useful insight. For those, however, who A PHYSICIAN PATIENT RELATIONSHIP MAY EXIST WHERE THE PHYSICIAN HAS NEVER EVEN MET THE PATIENT In a previous issue of HealthBrief, we reported on St. John v. Pope, in which the Texas Supreme Court held that a medical malpractice claim was precluded where there was no physician-patient relationship between the plaintiff-patient and the defendant-physician. This article will address an issue which was only tangentially addressed in Pope, but which could have significant consequences for the physician who, either individually or as part of a group, has contracted to furnish medical services to the members of a health care plan. In Pope, the Supreme Court reiterated the rule that a physician may not be held liable for malpractice unless the physician breaches a duty flowing from a physician-patient relationship. In Pope, the plaintiff went to the emergency room of a community hospital complaining of back pain and fever. The emergency room physician called Dr. St. hoped the FTC also would significantly loosen its restrictive and sometimes chilling views of what conduct is permissible by groups of erstwhile competitors who wish to form a contracting network to broaden their appeal to payors, while achieving certain operating efficiencies, the FTC Statements offer little comfort. They did not include any new safety zones for physician networks. They slightly expanded the current safety zones, and more clearly articulated what reasoning the FTC would employ in assessing networks falling outside those safety zones. And they modestly expanded allowable messenger model contracting structures. (see FTC Antitrust Guidelines on page 3) John, an on call board certified internist, at home. Dr. St. John did not see the patient, but, because he felt that neither he nor any other doctor at the hospital had the specialized training to handle neurology or neurosurgery, he recommended that the (see Physician-Patient Relationship on page 9) Contents New FTC Guidelines No Collective Bargain 1 A Physician-Patient Relationship May Exist Where the Physician Has Never Even Met the Patient 1 New Developments for 5.01(a) Corporations 2 Federal Courts Strike Down Assisted Suicide Laws 5 Jackson Walker L.L.P. - HealthBrief 1 WINTER 2001

2 NEW DEVELOPMENTS FOR 5.01(A) CORPORATIONS During 1996 two Texas administrative agencies adopted important regulations affecting non-profit health or 5.01(a) corporations. Specifically, the Texas State Board of Medical Examiners approved final regulations that allow 5.01(a) corporations to qualify for tax-exempt status while simultaneously preserving the independent medical judgment of physicians. In addition, the Texas Department of Insurance approved final regulations that allow a 5.01(a) corporation to contract directly with HMOs for all health care services. These new rules boost the competitive status of 5.01(a) corporations and put to rest a number of uncertain issues. Section 5.01(a) of the Medical Practice Act provides a statutory exception to Texas long standing doctrine prohibiting the corporate practice of medicine. Texas is one of only a handful of states with strong corporate practice of medicine prohibitions and perhaps the only one with a widely used exception to the prohibition. A 5.01(a) corporation is a Texas non-profit corporation that is organized for health care purposes and has a board of directors consisting solely of licensed physicians who are actively engaged in the practice of medicine. Originally created in the early 1970 s as a narrow legislative effort to improve the availability of health care in the Rio Grande Valley, 5.01(a) corporations have exploded in recent years to become important components of hospital controlled integrated delivery systems. Federal Tax-Exempt Status For some time observers have feared that the Board of Medical Examiners would approve proposed rules that would prohibit certification as a 5.01(a) corporation unless physicians, among other things, controlled all board appointments, all bylaw amendments, and all policies on credentialing, quality assurance, utilization review and peer review. The concern was that such stringent requirements would prevent 5.01(a) corporations from qualifying for exemption from federal income tax because of the IRS requirement that the delivery of health care through a corporation be combined with a management structure that prevents physicians with interests in the corporation from exercising an undue level of control over the corporation. The policy underlying the federal requirement is to make health care corporations responsive to the community they serve rather than the doctors who practice through the corporations. Those fears were put to rest in early January 1996, when the Texas Board of Medical Examiners adopted new rules under the Texas Medical Practice Act that preserve the independent medical judgment of physicians to comply with the prohibition against corporate practice of medicine while providing sufficient mechanisms to allow corporations seeking non-profit certification under Section 5.01(a) to qualify for federal tax-exempt status. To qualify for 5.01(a) certification under the new rules, a 5.01(a) corporation must (a) be formed solely by one or more physicians licensed in Texas; (b) have a board of directors consisting solely of physicians licensed in Texas and actively engaged in the practice of medicine; (c) be organized for the purpose of delivery of health care to the public and/or any of several other health-related purposes set forth in the statute; (d) have bylaws that reserve to the 5.01(a) corporation (i) through its retained physicians the sole authority to engage in the practice of medicine and (ii) through its board of directors the sole authority to direct the medical, professional and ethical aspects of the practice of medicine; and (e) terminate physicians retained to provide medical services only through action of board of directors or its physician designees. The rules preserving tax-exempt status come into play in the special provisions that apply to those corporations seeking 5.01(a) certification that have a non-physician Member. Those provisions permit the Members to exercise control over certain financial matters if such control is necessary to the 5.01(a) corporations obtaining tax-exempt status. While not yet tested, this expansion of authority to the Member appears to have alleviated the IRS s concern about conferring undue power upon physicians who practice through the 5.01(a) corporation. The issue high- (see 5.01(a) Corporations on page 3) Jackson Walker L.L.P. - HealthBrief 2 WINTER 1997

3 J FTC Antitrust Guidelines (cont d from pg. 1) The guidelines fell short, however, of applying Rule of Reason treatment across the board to physician networks, a professed goal of the AMA and the subject of legislation reported out of the House Judiciary Committee by Judiciary Chairman Henry Hyde (R-Ill.). The result of the new Statements is that physicians and their advisors continue to be left to their own devices (and their own appetite for regulatory risk) in the formation and operation of physician networks. ANTITRUST LAWS The Sherman Act, 15 U.S.C. 1, prohibits contracts, combinations or conspiracies in restraint of trade. Criminal violations of section 1 are punishable by imprisonment not to exceed three years, and monetary penalties up to $10 million for individuals and entities engaging in anti-competitive behavior in violation of the law. Private causes of action for damages suffered due to a Sherman Act violation are also available. Such actions are subject to treble damage awards, and may be available even if the defendant complies with an antitrust safety zone. Price fixing by competitors is one activity condemned as a per se violation of the law. If a per se violation occurs, the reasonableness of the parties conduct, or the fact that the conduct may actually be pro-competitive is irrelevant; the law is violated. As the 1996 Statements note: [a]ntitrust law treats naked agreements among competitors that fix prices or allocate markets as per se illegal. (see FTC Antitrust Guidelines on page 4) 5.01(a) Corporations (cont d from pg. 2) lights, however, the continuing tension that exists between many state and federal laws regulating the health care industry. Contracting Directly with HMO s on a Capitated Basis Two bills passed by the Texas legislature last year added new authority, and new restrictions, to 5.01(a) corporations. HB3111 and SB1407 included apparently conflicting provisions about the extent to which 5.01(a) corporations could contract with HMO s on a risk sharing or capitated basis. One bill purported to allow the corporation to contract to provide all health care services, while the other arguably limited the corporation to providing physicians services and certain limited services ancillary to the physicians services. The interpretation and harmonization of the legislation was left to the Department of Insurance. The Department of Insurance in March, 1996, finally settled the issue, approving regulations that allow 5.01(a) corporations (however as an approved non-profit health care corporation, or ANHC, under the new regulations) to contract directly with HMOs for all health care services, including physician services and hospital services, on behalf of a primary HMO on a risk-sharing or capitated risk-sharing basis. The Department of Insurance had debated with the provider community about whether a 5.01(a) corporation could accept such global capitation contracts, originally taking the position that they could not. Fortunately, with the approval of these regulations, it is clear that 5.01(a) corporations will be the only entities in Texas that can accept global capitation payments for all health care services from an HMO. 5.01(a) corporations thus have a competitive advantage unprecedented in Texas health care delivery system. The new regulations are aimed at the HMO. They require an HMO entering into a contract with a 5.01(a) corporation, for such a corporation to provide health care services on a risk-sharing or capitated risk arrangement, to: (a) submit a monitoring plan setting out how the HMO will ensure the 5.01(a) corporation will timely and accurately reimburse physicians and providers and will comply with all regulatory requirements with respect to all HMO functions delegated to it; (b) file a copy of the agreement between the 5.01(a) corporation and the HMO that must meet certain delineated regulatory requirements; and (c) conduct an on-site audit of the 5.01(a) corporation at least semiannually to verify compliance with regulatory requirements. Janie James Jackson Walker L.L.P. - HealthBrief 3 WINTER 1997

4 FTC Antitrust Guidelines (cont d from pg. 3) ENFORCEMENT EFFORTS In the health care arena, the FTC and Department of Justice jointly since 1993 have published antitrust enforcement guidelines to give the provider community a better understanding of how those agencies will enforce the antitrust laws. As the agencies themselves note in the 1996 statements: The 1993 policy statements... were designed to advise the health care community in a time of tremendous change, and to address, as completely as possible, the problem of uncertainty concerning the Agencies enforcement policy that some said might deter mergers, joint ventures, or other activities that could lower health care costs.... [T]he Agencies continue to analyze all types of health care provider networks under general antitrust principles. These principles are sufficiently flexible to take into account the particular characteristics of health care markets and the rapid changes that are occurring in those markets. The Agencies emphasize that it is not their intent to treat such networks either more strictly or more leniently than joint ventures in other industries, or to favor any particular pro-competitive organization or structure of health care delivery over other forms that consumers may desire. Safety Zones The hallmark of the FTC enforcement statements has been the establishment of safety zones, under which otherwise per se violations would be reviewed under a rule of reason. One of the antitrust safety zones pertains to physician networks joint ventures such as IPA s and PPO s. That guideline provides that agreements among physicians to set prices and pricerelated terms in contracts to provide medical services will not be held to be illegal per se (absent extraordinary anti-competitive circumstances), if the entities meet the requirements of the safety zone. Prior to the August 28 Statements, the physician network safety zone provided that a physician network which jointly negotiates prices with a payor and contains no more than 20% of the practicing physicians in each specialty in an exclusive network, or no more than 30% of the practicing physicians in a non-exclusive network, and where the physicians share substantial financial risk, would not be challenged by the agencies. 2 The safety zones provide two examples of sharing substantial financial risk: (1) when the venture agrees to provide services under a capitation contract, or (2) when the venture creates significant financial incentives for its members to achieve cost containment goals, such as withholding a substantial amount of the compensation due to them, with distribution of that amount only if the cost containment goals are met. The guidelines are careful to point out that other forms of economic integration may amount to sharing substantial financial risk and the above two examples are not exclusive. The case law and the insight gleaned from business review letters and opinion letters issued from the FTC and Department of Justice indicate that absent a capitation contract, a 15% to 20% withhold in a fee-for-service contract would constitute substantial financial risk. The prior guidelines also specified that if the physicians share substantial financial risk or if the physician joint venture offers a new product producing substantial efficiencies, then such a physician network falling outside of the safety zones does not necessarily violate the antitrust laws, but will be reviewed under a Rule of Reason analysis. Under the Rule of Reason, the agencies look at and balance the pro-competitive aspects of the venture against any anti-competitive aspects. Thus, if a network contains 40% of the physicians in a specialty, but contracts exclusively for capitation contracts, the enforcement agencies will balance all the pro-competitive aspects of the venture against any anti-competitive aspects. Only if the anticompetitive aspects outweigh the pro-competitive benefits of the venture will the conduct then be held to violate the antitrust laws. Messenger Model The views of the enforcing agencies are given great weight. 3 The FTC in the last 12 to 18 months has increased its scrutiny of IPA s and other physician network entities, particularly those operating under the so-called messenger model. Under the messenger model, physicians who otherwise would be competitors collect their respective fee information through a third party messenger, and the third party transmits (see FTC Antitrust Guidelines on page 7) Jackson Walker L.L.P. - HealthBrief 4 WINTER 1997

5 J SUPREME COURT HEARS ARGUMENT ON ASSISTED SUICIDE The Supreme Court recently heard an argument on the issue of assisted suicide, reviewing two cases where courts struck down state laws prohibiting physicians from participating in assisting any person to commit suicide. The laws of many states, including Texas, provide criminal penalties for any person who aids or attempts to aid another person to commit or attempt to commit suicide. Although the Texas Natural Death Act provides that a physician does not violate the prohibition against aiding suicide by withholding or withdrawing life-sustaining procedures from a qualified patient, the Act does not permit any affirmative or deliberate acts to end life. Thus, under Texas law, a physician who, knowing the intent of his or her patient, prescribes drugs to be used by the patient to end his or her life, could face criminal penalties including imprisonment for aiding suicide. In separate cases, the United States Courts of Appeal for the Second and Ninth Circuits recently struck down assisted suicide laws in New York and Washington. Like the Texas statute, the New York statute made it a crime to aid another person to attempt suicide. In fact, under the New York statutes, a person who aided another person in a successful suicide attempt could be prosecuted for manslaughter. Similarly, the Washington statute provided penalties of up to five years imprisonment and a $10,000 fine for aiding another person to attempt suicide. As in Texas, the laws of New York and Washington provide that a competent adult may hasten his or her death by refusing medical treatment or by directing physicians to remove life-support systems already in place. A physician who complies with such a patient s request cannot be prosecuted for assisting suicide. The Second Circuit case was brought by three physicians and three terminally ill patients, while the Ninth Circuit case was brought by four physicians, three terminally ill patients, and a non-profit organization called Compassion In Dying. In both cases, the plaintiffs challenged the state statutes insofar as they prohibited physicians from prescribing drugs to be self-administered by mentally competent patients who seek to end their lives during the final stages of a terminal illness. Unfortunately, the terminally ill patients in both cases died before the cases could be decided by the Courts of Appeal. The Ninth Circuit Court of Appeals based its decision on the Due Process Clause of the Fourteenth Amendment to the Constitution. This clause provides that the states may not restrict their citizens in the exercise of fundamental rights, in the absence of a more important state interest. In due process cases, the courts employ a balancing test to determine whether the interests of society in prohibiting certain behavior out-weighs the fundamental interest to be protected. The Ninth Circuit (in an extraordinary 75 page opinion) examined historical attitudes toward suicide, from Greek and Roman times through the present. The Greeks and the Romans (as well as In due process cases, the courts employ a balancing test to determine whether the interests of society in prohibiting certain behavior out-weighs the fundamental interest to be protected. the Sythians and the Vikings) considered suicide to be a noble act. By contrast, suicide was a crime under the English common law, largely because of ancient fears that the spirit of someone who ended his own life would return to haunt the living. Recent polls indicate that a majority of Americans believe that the terminally ill should have the right to request and receive aid from a physician in dying. The Ninth Circuit compared the decision as to how and when to die to personal decisions relating to marriage, procreation, contraception, family relationships, child rearing, and education. After recounting the death of an AIDs patient who had begged for assistance in hastening his death, the Court said, for such patients, wracked by pain and deprived of all pleasure, a state-enforced prohibition on hastening their deaths condemns them to unrelieved misery or torture. Surely, a person s decision whether to endure or avoid such an existence constitutes one of the most, if not the most, intimate and personal choices a person may make in a lifetime, a choice that is central to personal dignity and autonomy. Noting the growing movement to restore humanity and dig- (see Assisted Suicide on page 6) Jackson Walker L.L.P. - HealthBrief 5 WINTER 1997

6 Assisted Suicide (cont d from pg. 5) The [Second Circuit Appeals] court concluded that there is no real difference between disconnecting a patient from lifesupport systems and writing the patient a prescription for life-ending drugs... nity to the process by which Americans die, the Court concluded that the right to die the right to control the time and manner of one s death is a liberty interest protected under the Constitution. The Court held that this right to die is more important than the interests advanced by the state (such as preserving life and protecting the integrity of the medical profession) in prohibiting physician-assisted suicide. Thus, the statute was invalid under the Due Process Clause. The Second Circuit based its decision on the Equal Protection Clause of the Fourteenth Amendment to the Constitution. This constitutional guarantee requires the states to treat in a similar manner all individuals who are similarly situated. Under the Equal Protection Clause, any state statute in the area of social welfare which treats similarly situated individuals differently must be rationally related to a legitimate state interest. The Court held that the New York statutes do not treat similarly circumstanced persons alike: those in the final stages of terminal illness who are on lifesupport systems are allowed to hasten their deaths by directing the removal of such systems, but those who are similarly situated, except for the previous attachment of life-supporting equipment, are not allowed to hasten death by self-administering prescribed drugs. The proponents of the New York statute argued that there is a difference between allowing nature to take its course and using an artificial deathproducing device. In response the Court said: Indeed, there is nothing natural about causing death by means other than the original illness or its complications. The withdrawal of nutrition brings on death by starvation, the withdrawal of hydration brings on death by dehydration, and the withdrawal of ventilation brings about respiratory failure. By ordering the discontinuance of these artificial life-sustaining processes or refusing to accept them in the first place, a patient hastens his death by means that are not natural in any sense. It certainly cannot be said that the death that immediately ensues is the natural result of the progression of the disease or condition from which the patient suffers. The court concluded that there is no real difference between disconnecting a patient from life-support systems and writing the patient a prescription for lifeending drugs, noting, the writing of a prescription to hasten death, after consultation with a patient, involves a far less active role for the physician than is required in bringing about death through asphyxiation, starvation and/or dehydration. Withdrawal of life support requires physicians or those acting at their direction physically to remove equipment and, often, to administer palliative drugs which may themselves contribute to death. The ending of life by these means is nothing more nor less than assisted suicide. The Second Circuit held that the New York statutory scheme which would allow a physician to disconnect a patient from life-support systems at the patient s request but which would not allow the physician to prescribe life-ending drugs to a terminally ill patient was not rationally related to any legitimate state interest. Thus, insofar as it prohibited physicians willing to do so from prescribing drugs to be self-administered by mentally competent terminally ill patients, the New York statute was invalid under the Equal Protection Clause. Observers of the argument believe the Supreme Court is unlikely to uphold the circuit court decisions. We will continue to monitor this area of the law, and we will report on future developments in coming issues of HealthBrief. Robert Thomas Speaking Engagements Health Care section attorneys are available for seminars or presentations on the issues discussed in this HealthBrief, and many other health care related areas. If you are interested in taking advantage of the expertise of the section s attorneys, please contact Jed Morrison at Jackson Walker L.L.P. - HealthBrief 6 WINTER 1997

7 J FTC Antitrust Guidelines (cont d from pg. 4) that information to prospective payors. The payor then makes a proposal to the physicians and that proposal is transmitted through the messenger to the physicians individually for their acceptance. The FTC previously has declared that the only acceptable true messenger model will be one in which the messenger does not negotiate any of the price terms of the agreement on behalf of the individual physicians. If the messenger model is used, the antitrust agencies have emphasized in the enforcement guidelines, in business review letters, and in consent decrees with networks under investigation, that the messengers must do no more than simply convey pricing offers. The agent cannot negotiate and providers cannot reach any agreement regarding price. The new guidelines offer some additional messenger flexibility. Providers, for example, may give the messenger in advance a fee schedule or conversion factor representing the provider s minimum acceptable fee, authorizing the messenger to accept contracts above that amount. Similarly, the messenger may bind providers to contracts with terms equal to or better than contracts previously accepted by the provider in the recent past. The messenger also may prepare a schedule displaying the numbers or percentages of providers at various price levels who are willing to contract at that level. While modest, the additional flexibility reduces the level of risk for most IPA s utilizing a messenger approach. Thus, a physician network has two options. First, it may solicit and secure contracts for its members through a properly structured messenger model. That exception is a narrow one, and one not particularly attractive to payors who often wish to negotiate through one party, and sign one master contract. Therefore, if a physician network wishes to discuss and negotiate price and price-related terms with payors, it may only do so if it demonstrates it is an integrated joint venture. Up to this point in time, the hallmark of FTC enforcement efforts against physician networks which set or discuss prices has been whether the parties share substantial financial risk. The only realistic way for an IPA to demonstrate such risk sharing has been through exclusive use of capitation agreements, or fee for service contracts with the use of a 15%- 20% withhold. THE NEW GUIDELINES The August 28 Statements modestly broaden the debate, and accomplish two primary purposes. They 1) slightly expand the scope of the current safety zones, providing an expanded definition of substantial financial risk, and 2) more clearly articulate what reasoning the agency will employ in assessing networks falling outside those safety zones. The second purpose will prove to be most useful to providers, as they assess the degree of risk of their own network. Substantial Financial Risk The expanded scope of the definition of substantial financial risk provides that evidence of substantial financial risk within a physician network may include: (1) capitation contracts, (2) percentage of premium contracts, (3) the use of financial incentives such as withholds or rewards or penalties, and (4) global or all inclusive rate contracts. If all of the contracts entered into by a network exhibit one or more of those characteristics, it would be evidence of substantial financial risk, and the FTC would evaluate the transaction under the Rule of Reason. The most intriguing expansion of the safety zone is the concept of financial rewards or penalties evidencing substantial financial risk. The Statements provide that if a substantial withhold is not used, other evidence of risk sharing is: establishing overall cost or utilization targets for the network as a whole, with the network s physician participants subject to subsequent substantial financial rewards or penalties based upon group performance in meeting the targets. It is difficult to understand how the reward/penalty test differs much from the withhold test, except that it appears to allow the network to distribute all income to the physicians in the first instance without a withhold. If targets are not met, physicians presumably would have to come out of their pocket (or out of future payments) for penalties; if targets are met, it s not clear where the rewards would come from, since all monies have already been paid out. At first blush, the new test appears to eliminate the need for withholds, but networks adopting such an approach should be able to demonstrate how penalties will be enforced, and from where rewards will come. (see FTC Antitrust Guidelines on page 8) Jackson Walker L.L.P. - HealthBrief 7 WINTER 1997

8 FTC Antitrust Guidelines (cont d from pg. 7) Moving Outside the Zone If the network does not utilize any of the financial risk sharing models described above, it cannot qualify for a safety zone. The network still can obtain rule of reason treatment, however, if other significant indications of integration are present. The Agencies offer helpful insight into the analysis they will employ in evaluating networks which don t fit into the safety zone. As primary principles, the Agencies note: In accord with general antitrust principles, physician network joint ventures will be analyzed under the rule of reason, and will not be viewed as per se illegal, if the physicians integration through the network is likely to produce significant efficiencies that benefit consumers, and any price agreements (or other agreements that would otherwise be per se illegal) by the network physicians are reasonably necessary to realize those efficiencies. * * * * * Such integration can be evidenced by the network implementing an active and ongoing program to evaluate and modify practice patterns by the networks physician participants and create a high degree of interdependence and cooperation among the physicians to control costs and insure quality. This program may include: (1) establishing mechanisms to monitor and control utilization of health care services that are designed to control costs and insure quality of care; (2) selectively choosing network physicians who are likely to further these efficiency objects; and (3) a significant investment of capital, both monetary and human, in the necessary infrastructure and capability to realize the claimed efficiencies. Clinical Integration The Agencies discuss at length a model that merits rule of reason treatment even though it does not involve the sharing of financial risk among its participants. This so called clinical integration test is a strict one. It cannot be used by sham networks as a means to avoid substantial financial risk sharing. In a hypothetical example cited by the Agencies as an acceptable clinically integrated network, the Statements find numerous characteristics of a non-financial risk sharing IPA as justifying rule of reason treatment. Such an IPA must perform some or many of the fol- lowing functions: 1) implement systems to establish goals relating to quality and appropriate utilization of services by IPA participants, 2) regularly evaluate both individual participants and the network s aggregate performance with respect to those goals, 3) modify individual participants actual practices where necessary, 4) engage in case management, 5) provide preauthorization of some services, 6) engage in concurrent and retrospective review of inpatient stays, 7) develop practice standards and protocols, 8) actually review care in light of standards and protocols, 9) make a significant investment in information systems to gather data, measure performance against cost and quality benchmarks, and monitor patient satisfaction, 10) provide payors with detailed reports on cost and utilization, and success of meeting network goals, 11) hire a medical director and support staff, and 12) doctors must invest appreciable time in developing standards and protocols and will actively monitor care rendered through the network. Probably few IPA s in the country have all the attributes described above. Probably few group practices or even HMO networks could measure up to the FTC clinical integration model. Nonetheless, it gives physicians a laundry list of factors to be considered in setting up their network. The greater number of the above functions that an IPA conducts, the greater likelihood of acceptance by the FTC. SUMMARY The 1996 Antitrust Enforcement Statements were not the hoped for breakthrough in health care antitrust enforcement policy. They do not apply rule of reason treatment across the board to physician networks. While the safety zones for physician networks were expanded slightly, and additional analysis and guidance were offered to assist providers and their advisors in complying with antitrust laws, the result (see FTC Antitrust Guidelines on page 10) Jackson Walker L.L.P. - HealthBrief 8 WINTER 1997

9 J Physician Patient Relationship (cont d from pg. 1) patient be transferred to a hospital with a neurosurgeon on call. Thereafter, the patient s wife took her husband home from the hospital against medical advice. Later, a lumbar puncture revealed that the patient was suffering from meningitis, from which he ultimately developed several permanent disabilities. The Texas Supreme Court upheld the trial court s grant of a summary judgment in favor of the on call physician, holding that he had evaluated the patient s condition only to determine whether he should take the case, and not for diagnosis. The Court noted that a physician is not obligated to render services to everyone who asks, and that a physician may decline treatment even on the basis of an erroneous conclusion that the patient s condition is beyond his or her ability to treat. The Pope decision is in accord with established precedent and is entirely correct. The mere fact that a doctor is on call does not, in and of itself, create a physician-patient relationship. As we pointed out in our last issue, however, certain language in the decision indicates a need for concern on the part of the on call physician who, either individually or as part of a group, has contracted to provide medical services to members of a health care plan. The Court in Pope cautioned that the mere fact that a physician does not deal directly with the patient does not necessarily preclude the existence of a physician-patient relationship (the fact that a doctor contracts with another doctor to perform services does not negate the physician-patient relationship where the services are for the benefit of the patient and were contracted with the patient s implied consent). The Court also noted that there may be cases in which the physician agrees in advance to the creation of a physician-patient relationship, such as where the physician is contractually obligated to be on call or where the physician s agreement with a hospital leaves the physician no discretion to decline treatment of the hospital s patients. Several courts have held that a physician-patient relationship is created when a physician (or group of physicians) agrees to provide medical treatment to the members of a health care plan. Many such plans provide that a primary care physician must be contacted before a plan member may be admitted to a hospital. It is not uncommon for the on call member of a group that has contracted to provide services to the members of a health care plan to receive a call from a hospital emergency room concerning a patient who is a member of the health care plan, but who has never been seen by the on call physician or perhaps by any other member of the group. In Hand v. Tavera, a patient went to a San Antonio hospital emergency room complaining of a three-day headache. The emergency room physician was told that the patient had a history of high blood pressure and that his father had died of an aneurism. The emergency room physician decided that the patient should be admitted to the hospital. However, since the patient had presented a health care plan card when he arrived at the emergency room, it was determined that the decision to hospitalize him must be approved by one of the health plan doctors. The emergency room physician called the health care plan doctor responsible that evening for authorizing such admissions. The on call physician disagreed with the assessment of the emergency room doctor, and determined that the patient should be treated as an outpatient. The patient was sent home, where he suffered a stroke a few hours later. In the resulting lawsuit, the on call physician moved for summary judgment on the sole ground that he and the patient had never established a physician-patient relationship and, therefore, that he owed no duty of care to the patient. The court of appeals disagreed, saying that the health care plan had brought the patient and the doctor together just as surely as though they had met directly and entered the physician-patient relationship. The patient paid premiums to the health care plan to purchase medical care in advance of need; the health care plan met its obligation to the patient and its other enrollees by employing the on call physician s group to treat them; and the medical group agreed to treat the health care plan enrollees in exchange for the fees received from the health care plan. The court held that when the health care plan s insured shows up at a participating hospital emergency room and the plan s doctor on call is consulted about treatment or admission, there is a (see Physician-Patient Relationship on page 10) Jackson Walker L.L.P. - HealthBrief 9 WINTER 1997

10 Physician Patient Relationship (cont d from pg. 9) physician-patient relationship between the doctor and the insured.... [W]hen a patient who has enrolled in a prepaid medical plan goes to a hospital emergency room and the plan s designated doctor is consulted, the physician-patient relationship exists and the doctor owes the patient a duty of care. As other cases like Tavera indicate, the physicianpatient relationship does exist when the on call physician is consulted with regard to a patient who is a member of a pre-paid medical plan that is serviced by the doctor or his or her group. The on call physician who receives a telephone call from a hospital emergency room for a contractual health plan patient owes that patient the duty to render proper professional care, whether or not the on call doctor or any other member of the practice group has ever treated the patient before, and whether or not the on call doctor or any other member of the group has ever met the patient before. FTC Antitrust Guidelines (cont d from pg. 8) for physicians forming contracting networks is that antitrust laws must still scrupulously be observed, and naked attempts to jointly set prices without significant evidence of integration through financial risk sharing or substantial clinical integration, will be treated as per se violations of the law. Networks whose real underlying purpose is to enhance the bargaining abilities of their participants, preserve existing market share, or keep other competitors from entering the market or increasing their market share, are likely to draw antitrust scrutiny and sanction. Networks wishing to avoid such exposure should 1) utilize a pure messenger model, 2) make financial risk sharing a centerpiece of their network, or 3) provide a real and significant clinical integration likely to benefit patients and payors. In the end, the question for all such network participants is how well do you want to sleep at night? HealthBriefTM The duty of professional care arises from the physician-patient relationship. A physician-patient relationship may be created by virtue of the contract between the doctor and the health care plan and the contract between the health care plan and the patient. Taken together, those agreements may create a contractual relationship between the physician and the patient, creating the physician-patient relationship just as surely as though they had met directly. Texas law is increasingly clear that a physician-patient relationship exists when a member of a health care plan arrives at a hospital emergency room and a call is made to an on call physician who has contracted to provide medical services to the members of the health care plan. In such a case, the on call physician has a duty to treat the patient with proper professional skill, even though neither he nor any other member of his practice group may have seen the patient previously. Robert Thomas 1 The FTC and the Department of Justice jointly share responsibility for enforcing federal antitrust laws; the FTC primarily operates in the civil enforcement context, while Justice handles criminal investigations and complaints. The agencies work hand in hand, however, and the 1996 Statements continue the FTC practice of issuing antitrust guidelines in conjunction with the Department of Justice. 2 The exclusivity of a network - whether a physician legally can and actually will sign payor contracts outside of the network - is one of the most important factors from an antitrust perspective. 3 Of course, compliance with the FTC s Safety Zone does not ensure protection against a suit by a private litigant. Jed Morrison HealthBrief is published periodically by the law firm of Jackson Walker L.L.P. to inform readers of recent developments in health law and related areas. It is not intended nor should it be used as a substitute for legal advice or opinion which can be rendered only when related to specific fact situations. For more information, please contact Jed Morrison at JACKSON WALKER L.L.P. Austin (512) Dallas (214) A Health Care Law Update Fort Worth (817) Houston (713) San Antonio (210) Jackson Walker L.L.P. - HealthBrief 10 WINTER 1997