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Health care co-op agrees to antitrust settlement with FTC

A group of doctors and hospitals in southwestern Minnesota has agreed to a settlement with the Federal Trade Commission that prohibits anticompetitive tactics the group allegedly used to increase health insurance reimbursement rates.

Under a proposed settlement order, the Minnesota Rural Health Cooperative will be prohibited from using coercion in its negotiations with health insurers.

The cooperative is made up of approximately 25 hospitals and 70 doctors, representing most of the hospitals and half of the primary care physicians in southwestern Minnesota.

According to the FTC's complaint, when members join the co-op, they agree that the group's board of directors will negotiate and contract with health insurers on their behalf and that they will abide by the cooperative's contracts. The FTC's complaint charges that the Minnesota Rural Health Cooperative eliminated competition between its individual doctors and hospitals by orchestrating illegal agreements to fix the prices at which they contract with health insurance plans. The complaint also alleges that the cooperative refused to deal with health plans that did not go along with its inflated reimbursement rates. Price-fixing agreements among competing sellers are illegal under U.S. antitrust laws.

The FTC complaint also alleges that the Minnesota Rural Health Cooperative used coercive tactics during negotiations. In particular, the complaint alleges that the co-op threatened to terminate contracts with health insurance plans in order to pressure them into increasing payments for physician and hospital services.

In one case, for example, the Minnesota Rural Health Cooperative allegedly coerced a health plan into paying cooperative members 27 percent more than it was paying providers who were not members of the cooperative. The complaint states that the group told health plans that it "expected our group to be accepted or rejected as a group," and informed plans that they could not negotiate individual deals with members of the group.

The proposed settlement order bars the Minnesota Rural Health Cooperative from using coercive tactics to extract favorable contract terms from health plans.

In addition, the order requires the Minnesota Rural Health Cooperative to offer to renegotiate all current contracts with health plans and to submit any revised contracts for state approval. During the FTC's investigation, the Minnesota Legislature enacted legislation under which state officials review and approve contracts negotiated by health care provider cooperatives.

If approved, jointly negotiated contracts may be beyond the reach of the antitrust laws.

The FTC settlement does not prohibit the Minnesota Rural Health Cooperative from negotiating contracts on behalf of its members.

The FTC vote approving the complaint and proposed settlement order was 5-0. The order will be subject to public comment for 30 days, until July 19, after which the Commission will decide whether to make it final. Comments should be sent to: FTC, Office of the Secretary, 600 Pennsylvania Ave. N.W., Washington, D.C. 20580. Comments can be submitted electronically at

The Commission issues a complaint when it has reason to believe the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The issuance of a complaint is not a finding or ruling that the respondent has violated the law. A consent agreement is for settlement purposes only and does not constitute an admission of a law violation.