Separate Federal Trade Commission investigations of local obstetricians and a physicians' company that does business in Las Vegas and Reno are part of a national strategy to rein in health care costs by discouraging antitrust activities.
It was reported Thursday that the FTC sent a July 19 notice of investigation to the Clark County OB/GYN Society. But the FTC also launched an investigation in June of Pediatrix Medical Group Inc., a Fort Lauderdale, Fla., company that employs doctors in Nevada.
FTC spokesman Mitch Katz declined comment on the two probes. But he said the commission under the Bush administration has become more active in the health care sector, particularly in the areas of physician groups and hospital mergers. That philosophy has been embraced by Timothy Muris, who became chairman of the commission in June 2001.
"Tim Muris has said that this is a topic he's interested in," Katz said. "We're simply in charge of the antitrust aspect."
Pediatrix Medical, a physicians' staffing company that bills itself as the nation's largest provider of maternal, fetal and newborn care, announced that it was under FTC investigation for its May 2001 acquisition of Magella Healthcare Corp. Magella, another provider of neonatal care, also had Las Vegas physicians under contract.
The New York Times reported on Aug. 9 that the FTC "is seeking information about three areas -- Dallas, Austin and Las Vegas -- where the two companies both practiced."
Bob Kneeley, spokesman for Pediatrix Medical, said he didn't know why the FTC is investigating the merger or why Las Vegas is a focus of that probe, other than the fact that both companies had operated here simultaneously. Kneeley also said he did not know the number of Nevada doctors currently affiliated with his company.
"Our doctors are employed by a professional association within the state of Nevada," Kneeley said without elaborating. "We learned on June 6 that we had received a letter from the FTC requesting information on the merger with Magella Healthcare. Magella practiced neonatal medicine in Las Vegas prior to the merger and we merged their Las Vegas practice into ours.
"It's difficult to say what the FTC is looking at. We will cooperate fully."
Pediatrix Medical made the news in November when it announced payment of $145,000 to the state of Nevada to settle over-billing investigations. The probes, launched by the state attorney general's office, were tied to Medicaid reimbursements.
Like Pediatrix Medical, the Clark County OB/GYN Society was notified of an FTC probe without knowing what prompted the investigation. In both cases, the parties were notified that the nonpublic investigations "should not be viewed as an accusation by the Federal Trade Commission or its staff of any wrongdoing."
The five-page FTC letter to Dr. John Nowins, a Las Vegas obstetrician who is the society's president, stated that the commission is investigating whether local obstetricians are collectively negotiating "the prices and terms of third-party payer contracts" or refusing to deal with those payers. Either could be violations of federal antitrust laws, the letter stated.
Nowins said the letter, written by FTC attorney Constance Salemi, caught him by surprise because he knows of no obstetricians in Clark County who are colluding to fix prices. But he said he believes the investigation may have been prompted by one or more Nevada insurers because Nowins and other obstetricians have publicly complained that the reimbursement rates they have received from those companies have not kept pace with their costs of practicing medicine.
"We have heard through the grapevine that insurers contact the FTC when they know doctors need more money," Nowins said. "You can slow the OBs down by causing an FTC audit."
An executive with Sierra Health Services, parent of the state's largest health maintenance organization, said the company had no comment on the probe of the obstetrician society. But Jenny DesVaux Oakes, Sierra Health's assistant vice president, said the company continues to negotiate with obstetricians.
DesVaux Oakes denied allegations that her company has kept reimbursement rates stagnant.
"We have changed rates from time to time," she said. "We constantly review our reimbursement rates to make sure they're consistent with the market."
FTC assistant director Mike Cowie said the commission generally considers doctors to be engaged in price fixing when they conspire to do so without having any financial or clinical relationship to the other physicians involved.
"If they deal as a united front and stick with the same rate to get a better deal, that's cut and dried price fixing because there's no clinical or financial integration," he said.
But that does not preclude doctors from forming groups to negotiate prices with insurers under certain circumstances.
Sierra Health Services, for instance, has negotiated contracts with private practices that involve two or more physicians. Under such contracts, the physicians agree to treat Sierra Health clients in exchange for a lump sum of money that covers the terms of the agreements.
Doctors may also form individual practice associations for purposes of collective bargaining but Cowie said there are restrictions. Such associations often tie the doctors clinically or financially so that they share the risk of their decisions, he said.
They also generally cannot make up more than 20 percent of a particular medical specialty in their community, Cowie said. Otherwise, he said it raises questions about a possible monopoly.
It so happens that the obstetrician society has applied to the FTC to form another type of group Nowins called "an open messenger" association. Under that arrangement, society members would hire a skilled negotiator such as an attorney. The negotiator would then be used by any physician in the association for purposes of negotiating individual reimbursement rates with insurers.
"OBs are leaving Clark County because they can't get paid enough," Nowins said. "The association is in the formation stage. But right now we're just a nonprofit society and we're not negotiating anything. I haven't even had time to talk to any insurance companies. But do I have to get paid more for deliveries? Yes, because I have to offset costs."
The society had 113 dues-paying Clark County obstetricians last year but as of Thursday that number had decreased to 79. The other 34 either closed their doors, retired or stopped taking obstetric patients, all because of rising medical malpractice insurance costs.
The FTC letter to Nowins was dated three days before he testified in front of a state legislative subcommittee that was studying medical malpractice issues. The letter requested numerous society records, including its budget, annual financial statements, names and affiliations of all current and past members, meeting agendas and minutes, and contacts with insurers.
Nowins complained to lawmakers about the reimbursement rates but did not mention the FTC probe.
"I didn't know what to do about this audit," Nowins said. "We've got a bunch of guys in quicksand and doctors are leaving town but the federal government is more interested in knowing how we're negotiating. The FTC is protecting the payers, not the doctors."
The Clark County obstetricians are not alone. The FTC reported in April that it had settled antitrust charges against obstetricians and gynecologists at two hospitals in Napa County, Calif. As a result, the doctors' association known as the Obstetrics & Gynecology Medical Corp. of Napa Valley agreed to disband.
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