Washington State

Office of the Attorney General

Attorney General

Bob Ferguson

Sep 24 2003

OLYMPIA -- The Attorney General's Office and the Federal Trade Commission (FTC) have filed consent orders that will change the way some Yakima physicians negotiate with private insurance plans over reimbursement rates for physician services.

The settlement is with a physicians' group called Surgical Specialists of Yakima (SSY), which has approximately 24 physician members, including nine of the 11 general surgeons in the greater Yakima area.

A local complaint about the physicians' business practices was brought to the attention of federal and state authorities, who commenced investigations.

The investigation resulted in a consent order the Attorney General's Office filed today in U.S. District Court in Yakima naming SSY and two member groups of Yakima surgeons. The consent order will need to be reviewed and approved by a judge before becoming final.

A similar proposed consent order has been filed with the FTC by commission staff.

The investigation led by the FTC and joined by the Attorney General's Office concluded that the physicians' method of negotiating reimbursement rates violated state and federal antitrust laws by restraining competition, increasing the price of physician services and depriving health plans, employers and individual consumers of the benefits of competition among physicians.

"The practice of medicine is a noble calling, and it is a business," Attorney General Christine Gregoire said. "We have joined the FTC in taking this action to ensure that people who need to pay for the services of a physician continue to benefit from competition among the doctors who can provide those services." According to a complaint filed with the state's consent order, Yakima physicians founded SSY in 1996 in an attempt to prevent health plans from decreasing reimbursement rates to physicians.

State and federal officials maintain that the practice constituted anticompetitive conduct in violation of antitrust laws because the physicians were still competitors when they were jointly negotiating rates. In addition, SSY included Cascade Surgical Partners and Yakima Surgical Associates, two general-surgery practices that had nine of the Yakima area's 11 general surgeons. The two surgeons' groups are named with SSY as defendants in the case.

The state and federal consent orders bar the defendants from joining to negotiate reimbursement rates, or refusing to deal with insurance plans based on reimbursements paid to other physicians. SSY will have to divest itself of one of the two general surgery practices in order to reduce its market power in the Yakima area.

The orders also require the defendants to notify insurance plans of the orders, and to terminate without penalty the existing contracts with any plans that make such a request.

In addition to the antitrust actions by the FTC and the state, two private lawsuits have also been filed in Yakima County as a result of alleged conduct by SSY.

A class action suit alleging price fixing by SSY sought damages on behalf of individuals and businesses that directly paid SSY for services provided by the physicians. SSY has also been sued by a Yakima physician who claims SSY retaliated against him after he left the group.

Some physicians indicated that negotiating rates through SSY was necessitated because of a concern that low Medicare and Medicaid reimbursement rates would make it impossible to recruit and maintain skilled doctors in the area.

"I too am concerned about the level of Medicare and Medicaid rates, but that is not a legal justification to engage in these business practices," Gregoire said. "The solution is to get Congress to fix the federal programs."