Blue Cross and Blue Shield of Utah is questioning whether a group of pediatric physicians at the University of Utah Medical Center and Primary Children's Medical Center may have violated antitrust laws by forming a private corporation that attempts to negotiate fixed physician fees.
Meeting those fees could force Blue Cross, Utah's largest insurance company, to raise its rates.Michael E. Tobin, senior vice president and general counsel for Blue Cross Blue Shield of Utah, said for legal reasons he could not comment on the insurance company's antitrust concerns.
But Tobin did say Blue Cross has been approached by Pediatric Faculty Physicians Inc. about negotiating a contract with the insurance company based on a fee schedule the physician corporation drew up.
PFP Inc. comprises "every full-time faculty member of the department of pediatrics who is a medical doctor," said Dr. Michael A. Simmons, who is chairman of PFP Inc., chairman of the U. pediatric department and medical director of Primary Children's.
Simmons said PFP Inc. does not violate antitrust law. "To the contrary," he said, PFP was formed at the request of insurance companies who would rather deal with groups of doctors than individual doctors.
He estimated between 80 and 85 pediatricians belong to PFP Inc. Those doctors also have staff privileges at Primary Children's and other area hospitals. According to the Utah Department of Business Regulations, PFP Inc. has issued 50,000 shares at $1 a share.
The Utah attorney general's office is investigating the U. Hospital and Primary for possible antitrust violations, according to several physicians at both hospitals. The investigation, they said, focuses on the pediatric care units of both hospitals, plus the U.'s department of pediatrics and its newborn intensive care unit - programs in which members of PFP Inc. are key players.
"Blue Cross is not saying that the physicians group is doing anything illegal. But we want some questions answered before we will contract with them," Tobin said. "We want to know who we are dealing with and whether or not it's legal to even deal with them."
However, the word "antitrust" has shown up in correspondence between PFP Inc. and Blue Cross - and between Blue Cross and an antitrust attorney.
"There appear to be some antitrust concerns raised by your suggestion that Blue Cross should raise its rates at the risk of having your organization withdraw its services," wrote Teresa M. Ellis, assistant vice president for Blue Cross, in a letter to Kathleen A. Sutton, PFP Inc. secretary and treasurer, that was obtained by the Deseret News.
Those concerns were substantiated by a memo to Tobin from William B. Bohling, a local lawyer specializing in antitrust law. Blue Cross had asked Bohling to review PFP's proposal to Blue Cross.
In the memo, Bohling noted that the doctors in PFP Inc. are the only critical pediatric-care physicians in this area. He said the group's threat to withdraw services unless Blue Cross "increases its fees to levels closer to PFP's present fee schedule" raises serious questions under Section 2 of the Sherman Act. That section makes it illegal for a group to attempt to monopolize any part of trade or commerce.
"PFP Inc. appears to be a monopolist in this region for (critical) pediatric care. Moreover, PFP appears to be attempting toexercise this monopoly power to exact higher fees from Blue Cross for the services that the PFP physicians alone offer the community," he said in the memo.
For the past several months, the group has approached numerous Utah insurance companies with a schedule of fees it wants to receive from the companies for its members' services.
The Deseret News received a copy of the eight-page list, which gives prices PFP Inc. doctors plan to charge for an array of services ranging from the freezing of a wart ($37) to the ultrasound of a fetus ($190.50.)
Simmons said that schedule is negotiable. "We have contracts with eight health-care providers. The fee schedule for each one is different," he said.
PFP Inc. has negotiated contracts with DMBA, Physicians Health Plan, FHP, IHC Care, IHC Health Choice, Utah Community Health Plan, CAPP Care and Equicorp, Simmons said.
Those companies that refuse to negotiate a contract risk losing a contractual relationship with the pediatric physicians at both the U. Hospital and Primary Children's. At a PFP Inc. board meeting in February, its directors voted unanimously to withdraw the corporation from membership in The Travelers Health Network.
"We found the plan completely unresponsive to our requests for enrollment as a pediatric group with negotiated reimbursement considerations. We have attempted on numerous occasions to change the plan's decision on this matter," Dr. Richard A. Molteni, PFP Inc. president, said in a memo to board members.
Despite that decision, physicians in the corporation are free to make their own contracts with Travelers, Simmons said.
In addition to the fee schedule, the Deseret News obtained copies of several letters and memos that show PFP Inc.'s attempts to negotiate contracts with insurance companies. None of the documents were obtained from Blue Cross.
Tobin, of Blue Cross, explained contractual relationships with physicians and insurance companies. "We have participating and non-participating providers at Blue Cross and have had them for 50 years. We contract with the doctors. The main term, of course, is the fee we are willing to pay," Tobin said. "If we come to an agreement, then we pay the physician directly. If we can't come to an agreement, then we pay the (patient) up to a certain level."
The patient would then pay the difference between the fee charged by the physician and the fee Blue Cross is willing to pay. This would occur to Blue Cross clients if PFP Inc. and Blue Cross cannot reach an agreement.
Tobin said contracts between Blue Cross and physicians generally are an incentive for the physician to take less money, "which enables Blue Cross to hold down the cost of health-care increases. If a physician contracts with Blue Cross, he knows he is going to get paid."
Tobin said Blue Cross always has taken the position that "we can't negotiate with groups of physicians." PFP is negotiating as a group.
Tobin said while negotiations with PFP Inc. are continuing, Blue Cross still has contracts with individual physicians who are members of PFP Inc. "Very few physicians have broken the contract."