Last week, the Federal Trade Commission granted a Norman, Okla., physician hospital group rare approval to negotiate with payers collectively. The FTC said the Norman Physician Hospital Organization's proposal to transition to a clinically integrated network from a messenger model would provide better quality care and reduce costs. This benefit, it said, outweighed the fact that the PHO could now collectively negotiate higher prices because care coordination would require more physician resources.

The main issue is that Norman Physician Hospital Organization and its part owner Norman Regional Health System are the only physician group and hospital system in the Norman area, a suburb south of Oklahoma City where the University of Oklahoma resides. While the PHO presented itself to the FTC as one of many providers in the greater Oklahoma City area, the reality is that Norman residents are not likely to drive 30 minutes to Oklahoma City (especially the north side of the market where most hospitals are located) for care. The idea that such marketing power could give the Norman PHO an effective monopoly concerned the FTC, but was mitigated by the fact that the PHO said it would allow physicians to contract independently with payers who chose not to contract with the network.

The FTC did say that it was important that the PHO be clear in its communication to payers and providers that the network is non-exclusive. If, however, the PHO started to operate in a way that was a ?de facto exclusive network,? the FTC would need to revisit the opinion based on the PHO's market power.

The opinion is a win for Norman PHO and Norman Regional Health System, which operates three hospitals in the Norman area and includes 280 physicians. The health system has been one of the most aggressive in the Oklahoma City market at adopting electronic medical records and meeting meaningful use standards, and with this transformation to a clinically integrated network, has positioned itself well for accountable care organization arrangements in the future.

Nationally, the case could be a blueprint for how hospitals and providers will set up similar arrangements in the future. As payers, physicians and health systems nationwide structure new alliances, it may be time to throw out the old rule book and witness healthcare reform working in surprising ways.

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