FOR IMMEDIATE RELEASE                                          AT
MONDAY, NOVEMBER 3, 1997                           (202) 616-2771
                                               TDD (202) 514-1888

       JUSTICE DEPARTMENT WILL NOT CHALLENGE JOINT VENTURE
     BETWEEN HMO AND PHYSICIAN ORGANIZATION IN NORTHEASTERN
                          PENNSYLVANIA


     WASHINGTON, D.C. -- The Department of Justice said today
that it would not challenge a proposed joint venture between an
HMO and a physician organization in Northeastern Pennsylvania.

     Under the proposal, First Priority Health (FPH), an HMO and
subsidiary of Blue Cross of Northeastern Pennsylvania, and NEPPO
Ltd., a limited partnership of 166 specialists and primary
physicians, would join together to form First Priority Health
System (FPHS), a risk-bearing service delivery organization that
will provide and manage medical services for the HMO enrollees in
Scranton, Pennsylvania and surrounding counties.

     In a Business Review Letter issued by the Department's
Antitrust Division, Assistant Attorney General Joel I. Klein
said, the proposed joint venture of First Priority Health and
NEPPO Ltd. is an "innovative and potentially procompetitive
venture."  Klein explained that, although it will create a
competitive challenge to other area managed care plans, it will
not likely foreclose them from competing with adequate physician
panels to serve their enrollees in the area.

      NEPPO has agreed that FPHS will be the only managed care
plan for most of its primary care physicians who will serve as
"gatekeepers." 

     A gatekeeper plan is one in which enrollees must obtain a
referral from a primary care physician (gatekeeper) to see a
specialist.

     Some area employers and competing HMO's expressed concern
that most NEPPO primary care physicians could not participate as
gatekeepers in other plans.  However,  the Department's
investigation concluded that nearly 70 percent of area primary
physicians would likely be available to contract with other
plans.
  
     The FPHS gatekeeper exclusivity arrangement, which applies
to 38 NEPPO primary physicians, does not affect other NEPPO or
non-NEPPO physicians.  All specialists contracting with FPHS and
all primary care physicians not participating in NEPPO will be
free to contract with other payers.  In addition, all NEPPO
primary care physicians will be able to contract freely with non-
gatekeeper-type plans.

     Prices for all physicians serving FPHS will be determined by
a Reimbursement Committee of FPHS made up entirely of members of
the FPHS Board of Directors appointed by FPH, the payer.  No
physicians will be involved in setting the prices to be paid by
FPHS for physician services.

     The Department has no present intention of challenging the
formation or operation of FPHS.  However, should FPHS's
activities prove to be anticompetitive in purpose or effect, the
Department remains free to bring whatever action or proceeding it
believes is required by the public interest. 
     
     Under the Department's business review procedure, an
organization may submit a proposed action to the Antitrust
Division and receive a statement whether the Division will
challenge the action under the antitrust laws.
 
     A file containing the business review request and the
Department's response may be examined in the Legal Procedure Unit
of the Antitrust Division, Room 215 North, Liberty Place
Building, Department of Justice, Washington, D.C. 20530.  After a
30-day waiting period, the documents supporting the business
review will be added to the file.

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