VALDOSTA — South Georgia Health Partners, five physician-hospital organizations and three independent practice associations, which include 15 hospitals and more than 500 physicians in South Georgia, have violated federal anti-trust legislation for price fixing and restraint of trade, resulting in higher health care costs across the region.

Concluding a year-long investigation into the matter, the Federal Trade Commission issued a consent order Tuesday and a complaint, stating the nine named organizations, which include South Georgia Medical Center and about 90 percent of all physicians in the region, “have agreed to restrain competition by collectively setting the price and other terms of contracts that they enter into with employers, health insurers, and others that seek to provide health care coverage in that area. These price-fixing agreements and concerted refusals to deal among competing hospitals and competing physicians have raised the cost of health care in South Georgia.”

The FTC has also issued a consent order to cease and desist dictating all future contract negotiations with third party payors, which include insurance companies and business coalitions, which prohibits “exchanging or facilitating in any manner the exchange or transfer of information” among physicians or among hospitals concerning their willingness to deal with a payor, or the terms or conditions, including price terms, on which they are willing to deal with a payor.

The consent order also states that the respondents waive, among other provisions, all rights to seek judicial review or otherwise challenge or contest the validity of the decision and order.

In anticipation of the ruling, SGHP sent a letter to its members on May 12, 2003, stating it is ceasing operations as of Dec. 31, 2003. The letter reads, “In the very near future, we expect to sign a settlement agreement that will, in effect, prohibit SGHP from negotiating contracts and prices.”

SGHP, headquartered in Tifton, describes itself on its Web site as “a network of physicians and hospitals that provide citizens and employers of South Georgia access to a comprehensive, high quality, cost effective Managed Healthcare System” which covers 35 counties in South Georgia.

Employers and health insurers negotiate directly with hospitals and physicians to gain favorable pricing for health services for employees and member businesses. According to the FTC, SGHP negotiated all contracts for its member hospitals and physicians, and members were discouraged from negotiating contracts independently.

The FTC states in the complaint that SGHP maintained a single price list for its member physicians and if payors did not agree to pay the prices on the list, they forfeited their ability to enter into a contract with the physicians. The FTC also determined that the prices represented, at 187 percent of RBRVS (Medicare’s Resource Based Relative Value Scales, a system used to determine the amount paid to physicians for the services rendered to Medicare patients) are a “substantially higher rate than payors elsewhere in Georgia.”

In addition, SGHP negotiated all payor contracts for its member hospitals and “fixed the maximum allowable percentage discount from member hospital price lists. SGHP has fixed the discount at a level not to exceed 10 percent and has refused repeated payor requests for deeper discounts for … all member hospitals,” according to the complaint.

The FTC provided several examples of entities attempting to negotiate more favorable health care prices, but who were unsuccessful, including the City of Valdosta, United Health Group, Coventry Health Care, South Georgia Purchasing Alliance and CIGNA Health Care.

In CIGNA’s case, “SGHP insisted that CIGNA pay its physicians according to SGHP’s physician services price list, which contained, on average, the highest prices in Georgia.” As a result, CIGNA stopped selling its low-cost health plan in South Georgia.

Jim Railey, president of South Georgia Purchasing Alliance, which represents more than 20 companies in seeking affordable health care, said it’s taken the group more than two years to reach a contractual agreement with SGMC and will negotiate with individual physicians next. “We are encouraged by this order. We feel there’s been a disparity in the pricing of healthcare and are hopeful (the prices) will be more competitive.”

Railey said the issue “has been more pronounced on the physician side” and the FTC order “is an extremely big deal and should be taken very seriously. The action was taken in the consumer’s best interest.”

Railey represents a group of businesses in his hometown of Columbus as well and stated the norm for RBRVS there is 140 percent. “The bench mark for a second tier city like Valdosta, Thomasville or Tifton would be 130 to 150, so 187 is a significant difference.”

All groups that the hospitals and physicians have current contracts with will be sent a copy of the order and given the option to terminate at this time.

Dr. Roy Swindle, chief of staff at SGMC, said when each physician’s group has to negotiate individually with insurance providers, “it’s very time consuming.” He said area physicians thought they might be able to fight the FTC findings and win, “but they have an unlimited source of funds and we don’t.”

Swindle added that this is a frustrating time for physicians with malpractice insurance costs rising 44 percent this year. “We can’t pass those costs on to our individual patients.”

In response to questioning concerning the pricing disparity between South Georgia and the rest of the state, Swindle said it is difficult to attract physicians to the area. “We have to have incentives to bring physicians into this area (which might include) an increase in pay.”

James McGahee, chief executive officer of SGMC, stated that the hospital’s lawyers need to review the FTC documents but indicated his willingness to discuss the order at that time.

Frank Riley, chief executive officer of SGHP, was unavailable for comment Tuesday but issued a press release calling the FTC allegations “groundless.”

In addition to SGMC, affected hospitals include Tift Regional Medical Center, Louis Smith Memorial in Lakeland, John Archbold Memorial Hospital in Thomasville, Brooks County Hospital, Memorial Hospital of Adel, Bacon County Hospital of Alma, Berrien County Hospital, Colquitt Regional Medical Center, Dorminy Medical Center in Fitzgerald, Donalsonville Hospital, Early Memorial Hospital in Blakely, Grady General in Cairo, Mitchell County Hospital, and Satilla Regional Medical Center in Waycross.

Affected physicians are those who participated in the following independent physician associations: Colquitt County Physicians, Qualicare Physicians and South Georgia Physicians Network, which includes approximately 90 percent of all physicians in Lowndes County.