FTC TO LET DOCTORS COMPETE WITH HMOS.

Byline: Robert Pear The New York Times

With huge mergers changing the face of the health-care industry, the Federal Trade Commission plans to make it easier for doctors to band together, coordinate prices and form networks to compete with insurance companies and health-maintenance organizations.

The policy change would come as many members of Congress are pressing the FTC and the Justice Department to relax their rules on physicians' joint ventures. The House Judiciary Committee recently approved a bill that would allow doctors to exchange information about their costs, fees and profits for the purpose of establishing a network to sell health care to patients or employers.

Acknowledging criticism that the commission's policy toward doctors might have been too restrictive, the FTC says it is now trying to identify factors that would justify ``more lenient antitrust treatment'' of physician networks.

Doctors contend that such networks, rather than restraining competition, could actually encourage it by providing alternatives to HMOs, which offer comprehensive medical services in return for fixed monthly premiums. Enrollment in HMOs and other forms of managed care is soaring, partially because employers see them as a way to control costs.

Robert Pitofsky, chairman of the FTC, said he and other commissioners have agreed that the guidelines for physician networks ``ought to be eased some.''

Under current policy, a group of doctors may legally agree on prices if they share financial risk, as in a clinic or a group practice. But Pitofsky said the government also should consider the possibility that a network of doctors might improve the quality of care or help control costs, even if the doctors do not share the financial risk by accepting a flat payment for each subscriber.

``Doctors ought to be able to collaborate in their dealings with insurers and HMOs, which are themselves very strong in the marketplace,'' Pitofsky said in an interview. ``HMOs are tough bargainers, and some of them have very substantial market power.''

Physician networks can take many forms. Groups of doctors can jointly market their services to employers, patients, HMOs or other insurers. A network may charge a set monthly fee for each patient or a discounted fee for each service.

Doctors often want to collaborate and share information about prices without sharing financial risk or fully merging their office practices. The FTC and the Justice Department, which share responsibility for enforcing the antitrust laws, have previously laid out specific conditions that must be met by such physician groups for collaboration without illegal price-fixing conspiracy.

The guidelines have said that doctors in physician networks ``must share substantial financial risk'' to be legally safe. One of the best ways for them to do that is by accepting a payment or premium for each subscriber. Under this arrangement, known as capitation, the doctors or their joint venture must absorb any costs that exceed the premium payments.

For decades, the Supreme Court has held that price-fixing agreements are so harmful to competition that they should be automatically treated as antitrust violations. Not all doctor networks would be approved by the government under the new policy, but it would give many doctors a fuller opportunity to make their case by showing that their networks would benefit consumers and buyers of health care.

Federal antitrust officials say they will issue the new policy by the end of August. Doctors and federal officials say the change will have immediate practical consequences because doctors and their advisers pay close attention to signals from Washington and alter their business decisions accordingly.

Clark C. Havighurst, a law professor at Duke University long known as an advocate for aggressive enforcement of the antitrust laws against doctors, said he believes that the current federal policy is too rigid and does not serve the best interests of consumers.

``Federal agencies appear to be anticipating where they think the health-care marketplace is, or should be headed, and attempting to steer physician-sponsored networks in that direction,'' he said. ``They run the risk of substituting their own judgments and preferences for those of purchasers. The agencies have become regulators, displacing the very marketplace they are charged with protecting.''

Increasingly, doctors want to band together and sell their services directly to employers, without using an insurance company or an HMO as an intermediary. Doctors say they are forming their own plans so they can regain control of medical decision-making and make patients' interests a priority, without having to earn profits for the shareholders of a big corporation. Doctors say that when they own the company, they can keep all the premium income in their community, rather than paying 20 percent or more to a distant insurance company.

Many HMOs use financial rewards and penalties to discourage doctors from ordering excessive tests and procedures or referring patients unnecessarily to specialists. Havighurst said consumers usually have had no way to monitor the rationing of care so they ``may feel safer dealing with plans that do not put physicians at financial risk.''