The president of a corporation of critical-care pediatric physicians sent a memo to the doctors in his company urging them to bill insurance companies at or above negotiated rates in order to get the maximum dollars from the insurance companies.

The corporation, Pediatric Faculty Physicians Inc., says it is the only one providing critical subspecialty pediatric care in the region.PFP, a group of University of Utah doctors, has negotiated fixed fees with several insurance companies. The doctors, who also practice at Primary Children's Medical Center, an Intermountain Health Care facility, were told not to negotiate individual contracts with at least one insurance company, documents show. That instruction has since been rescinded, however.

Two insurance companies claim PFP's fee demands are substantially higher than current fee levels paid by those companies and would increase health-care costs for their customers.

In a March 26, 1990, memo obtained by the Deseret News, Dr. Richard Molteni, PFP president, instructed doctors in his corporation to "please be sure your billed charges are equal to or above the highest fee listed for those codes you presently bill for." (Emphasis added by Molteni, not the Deseret News.) Molteni is medical director of Primary Children's newborn intensive-care unit.

"These fees represent the maximum reimbursement. If you charge less, they will pay less," he wrote.

Molteni told the Deseret News Thursday, "You wouldn't want to bill below the rate we agreed upon with insurance companies or the physicians wouldn't be getting the maximum benefit."

PFP has negotiated fixed fees with DMBA, Physicians Health Plan, FHP, IHC Care, IHC Health Choice, Utah Community Health Plan, CAPP Care and Equicorp, according to an earlier statement by Dr. Michael A. Simmons, PFP chairman. Simmons is chairman of the U.'s Department of Pediatrics and medical director at Primary Children's Medical Center.

If any insurance company does not pay a PFP doctor the maximum agreed upon fee, Molteni asked the doctors to refer the problem directly to him or Kathleen Sutton, PFP's secretary/treasurer.

At least two insurance companies - Blue Cross and Blue Shield of Utah and The Travelers Health Network Inc. - questioned the proposed contracts and the fee levels, according to correspondence obtained by the Deseret News.Blue Cross was concerned that PFP's proposed fee increases would increase health-care costs. In addition, Blue Cross raised issues regarding the legality of the entire arrangement, Michael E. Tobin, senior vice president for internal operations and general counsel for Blue Cross Blue Shield of Utah, told the Deseret News. Blue Cross contended PFP's negotiating tactics may violate antitrust laws.

In a Sept. 11 letter to PFP, Blue Cross Assistant Vice President Teresa M. Ellis wrote, "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."

In addition, Sally J. Sjobeck, then director of operations for Travelers, told PFP last fall that her company would not negotiate with PFP because to do so would put its clients "in the awkward position of having to pay substantially more out of pocket for their hospital stay."

In a response dated a week later, Molteni urged Travelers to sign a contract with PFP by telling Sjobeck his group provided the only subspecialty pediatric care in the region. If Travelers didn't sign a contract with PFP, PFP's doctor members would not sign individual contracts with Travelers, he wrote.

"All members of the Faculty Physicians Corp. are members of the department of pediatrics," Molteni wrote Sjobeck. "The members of the department of pediatrics are office-based at both Primary Children's Medical Center and the U."

The stationery he wrote on carried the names and logos of both the University of Utah and Primary Children's Medical Center.

"All house-based pediatric subspecialists at Primary Children's are included in the department and its corporation. Therefore, all subspecialty pediatric services in the region are provided by our faculty members."

He continued, "The inclusion of this service for your subscribers would appear to be a major benefit."

If Travelers did not sign a contract with PFP, "those members of the department who are presently panel physicians (meaning presently working with Travelers) will most likely terminate their individual contract with Travelers," Molteni wrote.

In an earlier letter to Sjobeck, Molteni stated, "We will join or refrain from joining HMOs (health maintenance organizations) and PPO (preferred physicians organizations) as a department and not as individual practitioners."

Molteni told the Deseret News Thursday that his letters to Travelers only attempted to help the insurance company understand the close relationship between the U. and Primary Children's.

Travelers didn't want to negotiate with PFP because the doctors were on faculty at the U. and Travelers didn't have a contract with the University Hospital, Molteni said.

He explained PFP's prominence in the region because "I wanted them to know that it's the same faculty at the U. Hospital and Primary Children's Medical Center," Molteni said. "There is no difference between the two from a faculty standpoint."

Molteni also said individual doctors would refuse to contract with Travelers if PFP did not because a handful of doctors could not guarantee the 365 days of critical pediatric care the contracts would require.

Most of the PFP doctors are academicians who do clinical work only one month a year, Molteni said.

"A contract with an insurance company requires you to cover their patients 365 days a year. But if you have a doctor in academic medicine who only works in clinical medicine one month a year, how can you do that?"

If PFP does not forge a contract with an insurance company, it is not to the individual doctor's advantage to sign with them either, Molteni said.

"I can't make them not sign. I can't make them sign either. All I can do is recommend," he said.

PFP recently softened its recommendations to its doctors about signing individual contracts with insurance companies.

The day after an Oct. 11 Deseret News story reported Blue Cross' concern that PFP's negotiating tactics may have violated antitrust laws, Molteni sent Blue Cross this letter: "In view of the fact that we have been meeting for almost a year with little apparent progress, we have informed the faculty to deal with Blue Cross/Blue Shield directly. We assume that Blue Cross will seek individual contracts with the physicians you wish to have as a part of your panel."

Tobin's response: "We have, in effect, accomplished our objective of dealing with physicians on an individual basis for the moment. But we are mindful of how these physicians will approach Blue Cross in the future."