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Role of foreign Trade Commission (FTC)
Foreign Trade Commission (FTC) is a US based agency that seeks to protect the consumer from being exploited in the market place either through prices or counterfeit products. Competition is one of the major factors inherent in any organization’s operating environment (FTC, 2011, p.1).
FTC also seeks to promote fair competition in the market place. The role of FTC is to ensure effective law enforcement on consumer interests by provision and sharing of its expertise with the federal state, international agencies and the legislative body in the US (FTC, 2011, p. 1).
It is also instrumental as a research tool through workshops and conferences which aid in creating pragmatic programs suitable for both consumers and businesses in the global marketplace.
FTC Public Policy Considerations
FTC has certain public policies that place it at a position of combating anti competitive behavior in the market place which is detrimental to the consumer. One of its public policies considerations is to eliminate the illegal anti-competitive conducts by organizations operating in the healthcare industry.
For instance, AllCare and BVIPA (Boulder Valley Independent Practice Association) were involved in un-lawful fixation of prices (AOA, 2008, p. 1). Another consideration is that FTC seeks to control scrupulous mergers and acquisitions by rival companies which may have a negative impact on consumers in terms of accessibility and affordability of the organizations’ products.
This has been portrayed in the cases of King Pharmaceuticals Inc and Alpharma Inc. The former wanted to acquire the latter but FTC intersected the move which would have increased the prices of the organization’s drugs especially the chronic ones which were on high demand.
FTC argued that the move was against federal law and the acquisition was geared to reduce competition between King and Alpharma in their relevant markets (FR, 2009, p. 1).
Other distinguished considerations have also been applied. For instance, the physician joint ventures and multi-provider networks which are deemed to be legal only if the integration seeks to produce significant results that are beneficial to consumers. Similarly, payment of performance among physician groups should constitute a form of financial risk sharing.
Clinical integration should also be a contributing factor to improving research and services to the consumer. Hospital mergers should also comply with court’s ruling in terms of geographic markets. In case of mergers between non-profit and for-profit organizations, profit status should not be an impediment.
Thus, merging organizations should not be conformed to monopsony and oligopolistic aims and at the same time, private parties should not engage in anticompetitive behavior (FTC, 2011, p. 1). FTC should always strive to address and resolve matters pertaining collective bargaining between organizations and preventing future anti-competitive conduct (Compliant, 2009, p. 2).
FTC ruling towards IPAMG Conduct
In 2005-2006, the Independent Physician Associates Medical Group Inc. (IPAMG) was doing business as AllCare IPA. IPA is an association of independent Physicians that provides services to managed care organizations on a per capita negotiated rate, flat retainer fee or fee-for-service (FFS) basis (DF, 2011, p. 1). AllCare is multispecialty with approximately 500 physicians based in California (AOA, 2008, p. 1).
Upon its formation, it contracted with Preferred Provider Organization (PPO) to provide FFS care. FFs an insurance plan which gives all holders the right to make healthcare decisions independently where the holder pays for the medical service and then presents the bill to the insurance company which reimburses according to the holder’s policy agreement and specification.
Between the years 2005 to 2006, AllCare were culprit to anticompetitive behavior (Compliant, 2009, p. 1). FTC found AllCare with the following charges:
Illegal price fixing: AllCare restrained competition on fee-for-service (FFS) contracts. This was done through: facilitating, entering and engaging into contractual terms with preferred provider organization (PPO) payers and implementing agreements with an aim of fixing and increasing prices (AOA, 2008, p. 1).
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Collective negotiations: AllCare was engaged into negotiating collectively on the terms and conditions of dealing with payers.
Member negotiation restrictions: AllCare had restrained its group members from entering into negotiations with players other than those who had it approved.
Lack of Consultation: No activity or records had justified AllCare’s consultation with members on price agreements for their services. (Compliant, 2009, p. 3)
Lack of integration and monitoring program: The group physicians did not collaborate in any monitoring and modification clinical practices patterns as required by law upon delivery of their services.
Penalties on AllCare
Upon being found guilty of its conduct against fair competitiveness in the market place, a number of prohibitions were imposed on AllCare Inc. First, AllCare was prohibited from entering into any agreements and engaging in facilitation of the same between or on behalf of its physicians, whereby; it was not allowed to negotiate on behalf of any of the payers.
It was also warned on refusal to accept deals or threats to refrain from deals with any payer. It was also called upon to designate terms, conditions and requirements upon which any physician’s deal or will should be included without limiting price terms and not to individually make any deal with a payer through any other arrangement(s) besides those of of AllCare.
It was also prohibited from exchanging information among other networks from physicians on terms pertaining to contracting a payer. Certain types of arrangements were excluded from its provision especially those in regarding provision of collective bargaining with payers (Compliant, 2009, p. 2 -3). AllCare was also required to notify FTC in time before contracting any health plans on behalf of its physicians.
Justification for the Penalties
The penalty was fairly done on AllCare’s misconduct in its competitive nature. This is so because it dictated every move and price on behalf of its members and payers without putting the consumers’ interests at hand. It acted on a selfish level by orchestrating the whole issue of fixing prices and dictating harsh terms, conditions, requirements and negotiations with payers (AOA, 2008, p. 2).
A Preferred Provider Organization (PPO) also known “as Participating Provider Organization (PPO) is an organization for medical care documents or healthcare providers who are into an agreement with an insurance firm (insurer) or a third party to provide healthcare at reduced rates/ prices to the insurer’s (payers) clients.
But in this case, AllCare had misled the PPO into breaking its basic fundamental laws by acting as an ally to AllCare in the price fixing ordeal (AOA, 2008, p. 1).
The fact that AllCare had also drained the payers’ collective bargaining and negotiating power in the market place also portrays how the organization was un-reasonable to its stake holders in the same industry thus this can be termed as disregard to end consumers for it is to whom all the economic and heath liability is burdened to.
Analysis of Agreement (AOA). (2008). FTC File. No. 0610258. Web.
Compliant. (2009). FTC File. No. 0610258. Web.
Daily Finance (DF). (2011). Is Fee-for-Service What Ails America’s Health Care System? Web.
Federal Trade Commission (FTC). (2011). Protecting America’s Population. Web.