Physician's Guide to Medicine - Independent Practice Associations (IPAs)

What is an IPA?

An Independent Practice Association is a corporation comprised of physicians who generally wish to negotiate for health care contracts.

IPAs are highly scrutinized by the Federal Trade Commission, which is very concerned an IPA may not be a true entity in which all shareholders share substantial risk.

The Federal Trade Commission has set forth guidelines under which IPAs may be recognized as legitimate contracting entities.

Generally, the criteria are:

(1) The IPA accepts only capitation contracts; or

(2) The members of the IPA are subject to a significant (i.e. not less than twenty percent) withholding from reimbursement, with specific criteria for return of the withholding; and

(3) The IPA is limited to participation of twenty percent of the physicians in a given specialty within a "market area." The precise scope of what a "market area" encompasses has not yet been defined.

A group which has formed an IPA may submit its documents to the Federal Trade Commission, and within ninety days receive an opinion as to whether the IPA meets the required criteria as outlined above.

For purposes of contracting with a Health Maintenance Organization (HMO), Missouri law defines an "individual practice association" as a legal entity which delivers, or arranges for the delivery of health care services, through contracts with physicians and other licensed health care professionals. Participants in such an association agree to provide services according to a compensation arrangement established by the entity, and they must share patient records, equipment and staff to the extent feasible.

It is prudent for physicians forming an IPA to seek legal advice from an attorney experienced in dealing with antitrust laws and the Federal Trade Commission.