Reference no: EM132203405

Rural Country has a population of 15,000, a small primary care hospital, and ten physicians, including seven general and family practitioners, an obstetrician, a pediatrician, and a general surgeon. All the physicians are solo practitioners. The nearest urban area is about 60 miles away in Big City, which has a population of 300,000, and three major hospitals to which patients from Rural County are referred or transferred from higher levels of hospital care. However, Big City is too far away for most residents of Rural County to use for services available in Rural County. Insurance Company, which operates throughout the state, is attempting to offer “managed care” programs in all areas of the state and has asked the local physicians in Rural County to form an IPA to provide services under the program to covered persons living in the county. No other managed care plan has attempted to enter the county previously. Initially, two of the general practitioners and two of the specialists express interest in forming a network, but Insurance Company says that it intends to market its plan to the larger local employers, who need broader geographic and specialty coverage for their employees. Consequently, Insurance Company needs more of the local general practitioners and the one remaining specialist in the IPA in order to provide adequate geographic, specialty, and backup coverage to subscribers in Rural County.

Eventually, four of the seven general practitioners and the one remaining specialist join the IPA and agree to provide services to Insurance Company’s subscribers under contracts providing for capitation. While the physicians’ participation in the IPA is structured to be non-exclusive, no other managed care plan has yet entered the local market or approached any of the physicians about joining a different provider panel. In discussion the formation of the IPA with the Insurance Company, a number of physicians have made clear their intention to continue to practice outside the IPA and have indicated they would be interested in contracting individually with other managed care plans when those plans expand into Rural County. Insurance Company requests your legal advice about whether this network formation is likely to be challenged by the federal government. Discuss whether the network described in the Problem would likely be challenged by the federal government.

Questions…

1. Why? On what legal basis?

2. What would be your response to a challenge?

3. Would factors increase or decrease your chances of a federal challenge?

Include references.