This article examines Federal Trade Commission (FTC) policy—in particular, the agency's controversial 1996 statements on clinical integration—toward joint negotiations for nonrisk contracts with health plans by physicians organized into independent practice associations (IPAs) and (with hospitals) into physician-hospital organizations (PHOs). The article concludes that the policy is consistent with anti-trust principles, consistent with current thinking on the use of organized processes to improve medical care quality, specific enough to provide guidance to physicians wanting to integrate clinically, and general enough to encourage ongoing innovations in physician organization. The FTC should consider stronger sanctions for IPAs and PHOs whose clinical integration is nothing more than a sham intended to provide cover for joint negotiations, should give the benefit of the doubt to organizations whose clinical integration appears to be reasonably consonant with the statements, and should clarify several ambiguities in the statements. Health plans should facilitate IPA and PHO efforts to improve care by rewarding quality and efficiency and by providing clinically integrated organizations with claims information on individual patients. Though creating clinically integrated organizations is difficult and expensive, physicians should recognize that clinical integration can help them both to gain some negotiating leverage with health plans and to improve the quality of care for their patients.

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