Federal Trade Commission staff has advised Otolaryngology Specialty Providers of Georgia (OSPOG) that its plan to provide specialty medical services to managed care health plans does not appear to violate federal antitrust laws.

OSPOG is a corporation whose members comprise fewer than 29 per cent of otolaryngologists in the Atlanta area and 20 per cent in the city of Rome, Georgia. Otolaryngologists are physicians who treat ear, nose and throat conditions.

OSPOG proposes a two-phase plan for providing otolaryngology services to health care providers. In its first phase, it will act as a messenger, soliciting reimbursement schedules from insurance and managed care companies that may want to include OSPOG's physicians in their plans, and providing that information to OSPOG physicians. Each OSPOG member will have the opportunity to choose whether to accept the payment schedule offered, but will not have access to data from OSPOG about whether other OSPOG members have accepted the fees or joined the plan.

In a letter from Mark J. Horoschak, Assistant Director for Health Care of the FTC's Bureau of Competition, the Commission staff observed that the OSPOG messenger approach would avoid concerns about price fixing and collusion, stating, "[t]he approach contemplated by OSPOG in its initial phase of operation appears to conform to the messenger model described in . . . the Health Care Statements which were jointly issued by the Commission and the Department of Justice last September. The messenger model, if properly implemented, avoids a horizontal agreement on price, and thus does not raise concerns about price fixing among the participating physicians through the network joint venture," the letter says.

The second phase of the plan would call for OSPOG to contract with insurance and managed care companies to provide otolaryngology services on a "capitated" basis -- that is, a flat, per-person fee for all services rendered. Under this arrangement, OSPOG physicians would bear the risk that the cost of services would exceed the capitation payments.

The staff letter points out that the joint Health Care Statements created a "safety zone" from antitrust enforcement for non-exclusive physician network joint ventures "comprising 30 percent or less of the physicians in each physician specialty with active hospital staff privileges who practice in the relevant geographic market and share substantial risk."

The capitation arrangement, the letter notes, would appear to constitute a sharing of substantial risk. Furthermore, physician participation in OSPOG is non-exclusive; OSPOG physicians have the ability to join other networks and to market their practices outside of OSPOG. "Thus, OSPOG would appear to qualify for "safety zone" treatment," according to the staff letter.

"For these reasons, the formation and operation of OSPOG would not appear to violate any law enforced by the Federal Trade Commission," the letter concludes.

NOTE: This letter sets out the views of the staff of the Bureau of Competition, as authorized by the Commission's Rules of Practice. As the Commission's rules explain, the staff's advice is rendered "without prejudice to the right of the Commission later to rescind the advice and, where appropriate, to commence an enforcement proceeding." Staff advice concerning issues covered by the Federal Trade Commission/Department of Justice Health Care Policy Statements will be given within 90 to 120 days (depending on the topic) after all necessary information is provided.

Copies of staff letter and the original inquiry, as well as the DOJ/FTC Statements of Antitrust Enforcement Policy in the Health Care Area, are available from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest FTC news as it is announced, call the FTC's NewsPhone recording at 202-326-2710. FTC news releases and other materials also are available on the Internet at the FTC's World Wide Web Site at: http://www.ftc.gov