Joint contracting under antitrust laws: An overview


  • Describes how joint contracting may be considered lawful via integration
  • Summarizes the two forms of integration: Clinical integration and financial integration
  • Identifies other potential antitrust considerations, specifically the analysis of the joint venture’s impact on competition

Author’s note: This article provides an overview of some key antitrust risk factors based on publicly available guidance from the federal antitrust authorities. This overview is not legal advice. Please consult legal counsel before engaging in any joint contracting activity.

Surgeons who are part of the same practice may lawfully engage in joint contracting as part of their routine course of business. However, joint contracting by independent health care providers, who are otherwise competitors or potential competitors, is typically viewed by the antitrust authorities as per se unlawful. In other words, joint contracting by competing or potentially competing independent physicians is considered unlawful without any evaluation of the competitive impact of the contracting arrangement. In order for the arrangement potentially to be considered lawful, the physicians must integrate. The most complete form of integration is actually to combine into a single practice entity, but joint contracting by independent physicians also may be acceptable if those physicians partially integrate. The acquisition of one practice by another, or the combination of more than one practice, is subject to review under the antitrust laws, and if a single practice has a significant market share, then its actions may also come under antitrust scrutiny.

Two forms of partial integration

The two forms of partial integration are known as clinical integration and financial integration. In either form, independent physicians will usually create a network entity to deliver services, and it is the network entity that actually conducts the joint contracting activity.

If physicians successfully meet the standards for either of these forms of partial integration, then the antitrust authorities will typically analyze their joint contracting arrangement under what is known as the “rule of reason” standard. The rule of reason analysis is a balancing test in which the overall procompetitive and anticompetitive impacts of the contracting are weighed. Qualifying for rule of reason treatment does not completely eliminate antitrust risk, but it does reduce the risk.

Clinical integration requires network physicians to work closely together to coordinate and deliver patient care. A clinically integrated network would normally establish patient care protocols and performance standards and coordinate monitoring, training, disease management, and evaluation to ensure that those protocols and performance standards are being met. In most cases, clinical integration is only available to multispecialty networks in which physicians in multiple disciplines work together to coordinate and deliver care across a range of patient needs.

Financial integration requires physicians to share substantial financial risk. The risk-sharing encourages the physicians to work together more efficiently, with the goal of reducing costs and improving care. In contrast to clinical integration, there are several documented examples of single-specialty physician networks that have been deemed financially integrated by the antitrust authorities for purposes of joint contracting.

Some key details of financial integration follow.

Financial integration

As noted previously, the most complete form of financial integration is when physicians are co-owners of the same practice and share fully in profits and losses of that entity.

Outside of that sort of complete structural integration, partial financial integration can be achieved via a variety of contracting arrangements between the physician contracting entity and the payors. The central requirement of any such arrangement is that it provides strong incentives for the network to institute and implement protocols to increase efficiency and reduce cost.

The most common forms of financial integration accepted by the antitrust authorities include the following:

  • Capitation or case-rate contracts under which the network assumes financial risk for the cost of care
  • Earmarking reimbursement to a percentage of premium or revenue from the plan
  • Withhold arrangements, or bonus, shared savings and other pay-for-performance contracts under which the payor withholds or pays out a substantial share of fees (usually greater than 15 percent), to be paid to the network only if the network meets cost and quality goals

Capitation arrangements

A capitation arrangement is payment based on a fixed, predetermined payment per covered life in exchange for the network (not just an individual physician) providing and guaranteeing provision of a defined set of covered services. Specific criteria are as follows:

  • The capitated rate must be paid to the network itself, rather than to any individual physician, so that all of the physicians bear the risk associated with the performance of the network as a whole.
  • If the network also is negotiating nonrisk-sharing services (for example, fee-for-service contracts), the negotiations of those contracts do not necessarily qualify for rule-of-reason analysis; only the risk-sharing aspects of the network are routinely considered under the financial integration umbrella. In some circumstances, the antitrust authorities may consider it acceptable to jointly negotiate fee-for-service rates on a temporary basis if needed, for example, in order to help determine long-term capitated rates.

Percentage of premium or revenue arrangements

These arrangements are similar to capitation arrangements, except instead of a predetermined fixed amount, the physician network is compensated based on a predetermined percentage of the plan’s premium or revenue. Unlike capitation, the actual amount paid to the providers will vary; other requirements are similar to capitation.

Withholding, penalty, or bonus arrangements

Payor contracts include financial incentives for the network members as a group to achieve specified cost, utilization, or quality containment goals. Specifics of these arrangements are as follows:

  • Goals should be based on the network as a whole and not any individual physician.
  • Payments that are withheld and not earned should be kept by the payor or its designee; they should not be distributed to the physician-controlled network or to any individual physicians.
  • The amount of potential forfeiture must be large enough to create significant incentives for the physicians to meet cost and quality goals. The minimum amount of forfeiture is typically 15 percent, but the appropriate figure is a fact-specific analysis, taking into account the number of physicians in the network and prevailing fee schedules, among other considerations.

Other considerations

Even if independent providers form a financially integrated network and establish a joint-contracting arrangement that qualifies for rule of reason analysis under the antitrust laws, that does not immunize a joint-contracting arrangement from additional antitrust scrutiny. Instead, as noted previously, the legality of the physician network joint venture would then be analyzed based on its impact on competition. This assessment is highly fact-specific based on the market in question and, therefore, often quite complex. This overview addresses some key issues that should be considered, but it is not legal advice and it is not tailored to any particular market. Any Fellows who are interested in further exploring the formation of such an entity for the purposes of potentially jointly contracting with payors would be well advised to obtain competent legal counsel who can provide guidance regarding their particular circumstances before engaging in any joint contracting activity.

In addition, the American College of Surgeons (ACS) would be interested in speaking with any groups of Fellows that are currently competitors in their individual market areas and would be interested in exploring the formation of a physician network joint venture for purposes of joint contracting. For more information, contact Patrick Bailey, MD, MLS, FACS, ACS Medical Director, Advocacy, by phone at 202-337-2701 or by e-mail at

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