[Federal Register: August 2, 2005 (Volume 70, Number 147)]
[Notices]
[Page 44376-44387]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02au05-57]
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DEPARTMENT OF JUSTICE
Antitrust Division
Proposed Final Judgment and Competitive Impact Statement; United
States v. Federation of Physicians and Dentists, et al.
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16(b)-(h), that a Complaint, proposed Final
Judgment, Stipulation, and Competitive Impact Statement have been filed
with the United States District Court for the Southern District of Ohio
in United States v. Federation of Physicians and Dentists, et al.,
Civil Case No. 1:05-cv-431. The proposed Final Judgment is subject to
approval by the Court after compliance with the Antitrust Procedures
and Penalties Act, 15 U.S.C. 16(b)-(h), including expiration of the
statutory 60-day public comment period.
On June 24, 2005, the United States filed a Complaint alleging that
the Federation of Physicians and Dentists (``Federation''), Dr. Michael
Karram, Dr. Warren Metherd, and Dr. James Wendel conspired with other
OB-GYN members, to increase fees paid by commercial insurers to
Federation members in violation of Sherman Act section 1.
To help restore competition, the proposed Final Judgment filed with
the Complaint will enjoin Dr. Karram, Dr. Metherd, and Dr. Wendel
(``the Settling Physicians'') from encouraging, facilitating, or
participating in any agreement among competing physicians pertaining to
any contract term, negotiations with any health care payer, or the
provision of consulting, financial, legal, or negotiating services
concerning any payer contract. The Settling Physicians are also not
permitted to use the Federation for contracting and negotiation
services, such as messenger services. The proposed Final Judgment also
prohibits certain communications between any Settling Physician and any
competing physician.
A Competitive Impact Statement, filed by the United States,
describes the Complaint, the proposed Final Judgment, and the remedies
available to private litigants. Copies of the Complaint, proposed Final
Judgment, and Competitive Impact Statement are available for inspection
at the Department of Justice in Washington, DC in Room 215 North, 325
Seventh Street, NW. 20530 (telephone: 202/514-2692), and at the Office
of the Clerk of the United States District Court for the Southern
District of Ohio, Western Division, Potter Stewart U.S.
[[Page 44377]]
Courthouse, Room 103, 100 East Fifth Street, Cincinnati, Ohio 45202.
Public comment is invited within 60 days of the date of this
notice. Such comments, and responses thereto, will be published in the
Federal Register and filed with the Court. Comments should be directed
to Mark J. Botti, Chief, Litigation I Section, Antitrust Division, U.S.
Department of Justice, 1401 H Street, NW., Suite 4000, Washington, DC
20250 (Telephone 202/307-0001).
J. Robert Kramer II,
Director of Operations, United States Department of Justice, Antitrust
Division.
United States District Court for the Southern District of Ohio, Western
Division
United States of America, Plaintiff v. Federation of Physicians and
Dentists, et al., Defendants
Civil No. 1:05CV431.
Chief Judge Beckwith.
United States Magistrate Judge Hogan.
Plaintiff's Competitive-Impact Statement Concerning the Proposed Final
Judgment as to Setting Physician Defendants
The United States, pursuant to Section 2(b) of the Antitrust
Procedures and Penalties Act (``APPA''), 15 U.S.C. 16(b)-(h), files
this Competitive Impact Statement relating to the proposed Final
Judgment as to Settling Physician Defendants (``Final Judgment''). The
proposed Final Judgment was lodged with the Court on June 24, 2005, for
eventual entry in this civil antitrust proceeding, following the
parties' compliance with the APPA, and, if the Court determines,
pursuant to the APPA, that the proposed Final Judgment is in the public
interest.
I. Nature and Purpose of the Proceeding
The plaintiff filed this civil antitrust Complaint on June 24,
2005, in the United States District Court for the Southern District of
Ohio, Western Division, alleging that Drs. Warren Metherd, Michael
Karram, and James Wendel (``the Settling Physician Defendants''),
obstetrician-gynecologist physicians (``OB-GYNs'') practicing in
Cincinnati, Ohio, participated in a conspiracy that has unreasonably
restrained interstate trade and commerce in violation of Section 1 of
the Sherman Act, 15 U.S.C. 1. As alleged in the Complaint, this
agreement has artificially raised fees paid by health insurers to OB-
GYNs in the Cincinnati area that are ultimately borne by employers and
their employees.
The plaintiff and the Settling Physician Defendants have stipulated
that the proposed Final Judgment may be entered upon the Court's
determinations that it serves the public interest and that there is no
just reason to delay its entry while the litigation involving the two
non-settling defendants proceeds. Entry of the proposed Final Judgment
would terminate this action against the Settling Physician Defendants,
except that the Court would retain jurisdiction to construe, modify, or
enforce the provisions of the proposed Final Judgment, and to punish
violations of it.
II. Description of the Events Giving Rise to the Alleged Violation of
the Antitrust Laws
The Complaint in this action includes the following allegations. In
the spring of 2002, the Settling Physician Defendants joined the
Federation of Physician and Dentists (``Federation''), a membership
organization of physicians and dentists, headquartered in Tallahassee,
Florida. The Federation's membership includes economically independent
physicians in private practice in many states, including Ohio. The
Federation offers such member physicians assistance in negotiating fees
and other terms in their contracts with health care insurers.
Cincinnati OB-GYNs became interested in joining the Federation
primarily to negotiate higher fees from health care insurers. The
Settling Physician Defendants assisted the Federation in recruiting
other Cincinnati-area OB-GYNs as members. By June, 2002, the membership
of the Federation had grown to include a large majority of competing
OB-GYN physicians in the Cincinnati area.
With substantial participation by the Settling Physician
Defendants, the Federation coordinated and helped implement its
members' concerted demanded to insurers for higher fees and related
terms, accompanied by threats of contract terminations. From September,
2002, through the fall of 2003, the Settling Physician Defendants
communicated with Federation employees, each other, and other
Cincinnati-area OB-GYN Federation members to assist the Federation in
coordinating members' contract negotiations with health care insurers.
The Settling Physician Defendants' communications included assisting
the Federation in developing a strategy for the Federation to intensify
members' pressure on health insurers to renegotiate their contracts,
apprising each other and other physicians about their own practice
group's negotiations, working primarily through the Federation to
inform Federation members about steps to take to coordinate their
negotiations, and leading a campaign for Federation members to endorse
insurers that agreed to meet all Federation members' contract demands.
The Settling Physician Defendants' and their conspirators'
collusion caused Cincinnati-area health care insurers to raise fees
paid to Federation members OB-GYNs above the levels that would likely
have resulted if Federation members had negotiated competitively with
those insurers. As a result of the Settling Physician Defendants' and
their conspirators' conduct, the three largest Cincinnati-area health
care insurers were each forced to increase fees paid to most Federation
members OB-GYNs by approximately 15-20% starting July 1, 2004, followed
by cumulative increases of 20-25%, starting January 1, 2004, and 25-
30%, effective January 1, 2005. The Settling Physician Defendants' and
their conspirators' conduct also caused other insurers to raise the
fees they paid to Federation members OB-GYNs.
III. Explanation of the Proposed Final Judgment
A. Relief To Be Obtained
The proposed Final Judgment prohibits the Settling Physician
Defendants from encouraging, facilitating, or participating in any
agreement or understanding among competing physicians about any
contract term, about the manner in which those physicians will
negotiate or deal with any health care payer, or about the use of any
person or organization that provides consulting, financial, legal, or
negotiating services concerning any payer contract. The proposed Final
Judgment also enjoins the Settling Physician Defendants from using
Defendant Federation of Physicians and Dentists (``Federation'') for
any messenger, financial, legal, consulting, or negotiating service
concerning any payer contract or contract.
The proposed Final Judgment also prohibits each Settling Physician
Defendant from communicating with any competing physician about his or
his practice group's view or position concerning the negotiation or
acceptability of any proposed or existing payer contract or contract
term, including his or his medical practice group's negotiating or
contracting status with any payer. Each Settling Physician Defendant is
also enjoined from communicating with any competing
[[Page 44378]]
physician about (1) any proposed or existing term of any payer contract
that affects the fees that the Settling Physician Defendant or his
medical practice group contracts for, or accepts from (or considers
contracting for, or accepting from) any payer, (2) the duration,
amendment, or termination of the payer contract; (3) utilization
reviews and pre-certification; or (4) the manner of resolving disputes
between the participating physician or group and the payer.
Subject to the injunctive provisions of the proposed Final
Judgment, the Settling Physician Defendants may discuss with any
competing physician any medical issues relating to the treatment of a
specific patient and may participate in activities of any medical
society. The proposed Final Judgment also does not limit the Settling
Physician Defendants' advocacy or discussion concerning legislative,
judicial, or regulatory actions in accordance with doctrine established
in Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc.,
365 U.S. 127 (1961), and its progeny. The proposed Final Judgment also
allows the Settling Physician Defendants to respond to communications
necessary to participate in lawful activities by clinically or
financially integrated physician network joint ventures and multi-
provider networks, as those terms are used in Statements 8 and 9 of the
1996 Statement of Antitrust Enforcement Policy in Health Care, 4 Trade
Reg. Rep. (CCH) ] 13,153 (``Health Care Policy Statements'').
For a period of ten years following the date of entry of the Final
Judgment, each Settling Physician Defendant must certify to the United
States annually whether he and his agents have complied with the
provisions of the Final Judgment.
B. Anticipated Effects of the Relief To Be Obtained on Competition
The proposed Final Judgment seeks to help restore lost competition,
as alleged in the Complaint, and to help prevent recurrence of the
alleged violation by enjoining the Settling Physician Defendants from
conspiring to increase fees for their services and engaging in conduct
that may facilitate such a conspiracy. The proposed Final Judgment
seeks to achieve these objectives, in part, by prohibiting the Settling
Physician Defendants from engaging in the types of concerted action
that allegedly enabled Federation member OB-GYNs to coordinate their
negotiations with health care payers. The prevention of coordinated
negotiations should reestablish competition between many of the
independent, participating Federation member OB-GYNs who coordinated
their payer negotiations through the Federation. Such competition will
allow purchasers of OB-GYN physician services to negotiate competitive
contract terms with Cincinnati-area OB-GYN physicians, instead of being
forced to pay the higher rates that have allegedly resulted from the
alleged coordination of payer negotiations by the majority of
Cincinnati-area OB-GYN physicians, who were members of the Federation.
To help avoid recurrence of the alleged violation, the proposed Final
Judgment also prohibits the Settling Physician Defendants from using
the Defendant Federation or any other person or organization to
coordinate contract negotiations with payers and from communicating
with competing physicians about competively sensitive contract terms
and about contract negotiations and contract status.
IV. Remedies Available to Potential Private Litigants Damaged by the
Alleged Violation if the Proposed Final Judgment is Entered
Section 4 of the Clayton Act, 15 U.S.C. 15, provides that any
person who has been injured as a result of conduct prohibited by the
antitrust laws may bring suit in federal district court to recover
three times the damages the person has suffered, as well as the costs
of bringing a lawsuit and reasonable attorneys' fees. Entry of the
proposed Final Judgment will neither impair nor assist the bringing of
any private antitrust damage action. Under the provisions of Section
5(a) of the Clayton Act, 15 U.S.C. 16(a), entry of the proposed Final
Judgment also would have no prima facie effect in any subsequent
lawsuits that may be brought against the Settling Physician Defendants
involving their alleged conduct in this action.
V. Procedures Available for Modification of the Proposed Final Judgment
The parties have stipulated that the proposed Final Judgment may be
entered by this Court after compliance with the provisions of the APPA,
provided that the United States has not withdrawn its consent. The APPA
conditions entry of the decree upon this Court's determination that the
proposed Final Judgment is in the public interest.
The APPA provides a period of at least sixty (60) days preceding
the entry of the proposed Final Judgment within which any person may
submit to the United States written comments regarding the proposed
Final Judgment. Any person who wishes to comment should do so within
sixty (60) days of the date of publication of this Competitive Impact
Statement in the Federal Register. The United States will evaluate and
respond to the comments received during this period, and it remains
free to withdraw its consent to the proposed Final Judgment at any time
prior to entry. The comments and the response of the United States will
be filed with this Court and published in the Federal Register. Written
comments should be submitted to: Mark J. Botti, Chief, Litigation I
Section, Antitrust Division, United States Department of Justice, 1401
H Street, NW., Suite 4000, Washington, DC 20530.
The proposed Final Judgment provides that this Court retains
jurisdiction over this action, and the parties may apply to this Court
for any order necessary or appropriate for the modification,
interpretation, or enforcement of the Final Judgment.
VI. Alternatives to the Proposed Final Judgment Actually Considered by
the United States
The United States considered, as an alternative to the proposed
Final Judgment, a full trial on the merits against the Settling
Physician Defendants. The United States is satisfied, however, that the
prohibitions contained in the proposed Final Judgment will more quickly
help achieve the primary objective of a trial on the merits--helping to
reestablish competition among Federation member OB-GYNs and to prevent
recurrence of the alleged violation.
VII. Standard or Review Under the APPA of the Proposed Final Judgment
After the sixty (60)-day comment period and compliance with the
provisions of the APPA, if the United States has not withdrawn its
consent to the proposed Final Judgment, it will move for entry of the
proposed Final Judgment in accordance with Fed. R. Civ. P. 54(b) and
the APPA. Persons considering commenting on the proposed Final Judgment
are advised that, in determining, under the APPA, whether entry of the
proposed Final Judgment is ``in the public interest,'' the Court shall
consider:
(A) The competitive impact of such judgment, including
termination of alleged violations, provisions for enforcement and
modification, duration or relief sought, anticipated effects of
alternative remedies actually considered, whether its terms are
ambiguous, and any other competitive considerations bearing upon the
adequacy of such judgment that the court deems necessary to a
determination of whether the
[[Page 44379]]
consent judgment is in the public interest; and
(B) The impact of entry of such judgment upon competition in the
relevant market or markets, upon the public generally and
individuals alleging specific injury from the violations set forth
in the complaint including consideration of the public benefit, if
any, to be derived from a determination of the issues at trial.
15 U.S.C. 16(e)(1)(A)-(B).
As these statutory provisions suggest, the APPA requires the Court
to consider, among other things, the relationship between the remedy
secured and the specific allegations set forth in the government's
complaint, whether the decree is sufficiently clear, whether
enforcement mechanisms are sufficient, and whether the decree may
positively harm third parties. See United States v. Microsoft Corp., 56
F.3d 1448, 1458-62 (D.C. Cir. 1995). In determining whether the
proposed judgment is in the public interest, ``[n]othing in [the APPA]
shall be construed to require the court to conduct an evidentiary
hearing or to require the court to permit anyone to intervene,'' 15
U.S.C. 16(e)(2), ``which might have the effect of vitiating the
benefits of prompt and less costly settlement through the consent
decree process.'' 119 Cong. Rec. 24,598 (1973) (statement of Senator
Tunney). This caveat is also consistent with the deferential review of
consent decrees under the APPA. See United States v. Microsoft, 56 F.3d
at 1460-62; United States v. BNS, Inc., 858 F.2d 456, 462 (9th Cir.
1988).
VIII. Determinative Documents
There are no determinative materials or documents within the
meaning of the APPA that were considered by the United States in
formulating the proposed Final Judgment.
Dated: July --, 2005.
Respectfully submitted,
For Plaintiff United States of America:
Gregory G. Lockhart,
United States Attorney.
Gerald F. Kaminski,
Assistant United States Attorney.
Bar No. 0012532.
Office of the United States Attorney, 221 E. 4th Street, Suite 400,
Cincinnati, Ohio 45202, (513) 684-3711.
Steven Kramer, John Lohrer, Paul Torzilli,
Attorneys, Antitrust Division, U.S. Department of Justice, 1401 H
Street, NW., Suite 4000, Washington, DC 20530. (202) 307-0997,
steven.kramer@usdoj.gov.
Certificate of Service
I hereby certify that on July --, 2005, copies of the foregoing
Plaintiff's Competitive-Impact Statement Concerning the Final
Judgment as to Settling Physician Defendants were served by
facsimile and first-class regular U.S. mail, postage prepaid, to:
Michael E. DeFrank, Esq., Hemmer Pangburn DeFrank PLLC, Suite 200,
250 Grandview Drive, Fort Mitchell, KY 41017, Fax: 859-578-38679,
Attorney for Defendant Dr. James Wendel.
G. Jack Donson, Jr., Esq., Taft, Stettinius & Hollander, 425 Walnut
Street, Suite 1800, Cincinnati, Ohio 45202, Fax: 513-381-0205,
Attorney for Defendant Dr. Michael Karram.
Jeffrey M. Johnston, Esq., 37 North Orange Avenue, Suite 500,
Orlando, FL 32801, Fax: 407-926-2453, Attorney for Defendant Dr.
Warren Metherd.
Lynda Odenkirk, 43 Burwell Street, New Haven, CT 06513, Fax: 203-
284-0624.
Federation of Physicians and Dentists, c/o Jack Seddon, Executive
Director, 1310 Cross Creek Circle, Suite C2, Tallahassee, FL 32301,
Fax: 850-942-6722.
Paul J. Torzilla,
Attorney, United States Department of Justice.
United States District Court for the District of Southern Ohio Western
Division
United States of America, Plaintiff, vs. The Federation of Physicians
and Dentists, et al., Defendants
Civil Action No. 1:05-cv-431.
Final Judgment as to Settling Physician Defendants
Whereas, Plaintiff, the United States of America, filed its
Complaint on June 24, 2005, alleging that the setting physician
Defendants Dr. Warren Metherd, Dr. Michael Karram, and Dr. James
Wendel, participated in agreements in violation of Section 1 of the
Sherman Act, and the Plaintiff and the settling physician Defendants,
by their respective attorneys, have consented to the entry of this
Final Judgment without trial or adjudication of any issue of fact or
law, and without this Final Judgment constituting any evidence against,
or any admission by the settling physician Defendants that the law has
been violated as alleged in such Complaint, or that the facts alleged
in such complaint, other than the jurisdictional facts, are true;
And whereas the settling physician Defendants agree to be bound by
the provisions of this Final Judgment, pending its approval by this
Court;
And whereas, the essence of this Final Judgment is to restore lost
competition, as alleged in the Complaint, and to enjoin the settling
physician Defendants from conspiring to increase fees for the provision
of obstetrical and gynecological services;
And whereas, the United States requires the settling physician
Defendants to agree to certain procedures and prohibitions for the
purposes of preventing recurrence of the alleged violation and
restoring the loss of competition alleged in the Complaint;
Now therefore, before any testimony is taken, without trial or
adjudication of any issue of fact or law, and upon consent of Plaintiff
and the settling physician Defendants, it is ordered, adjudged and
decreed:
I. Jurisdiction
This Court has jurisdiction over the subject matter of and over the
United States and the settling physician Defendants in this action. The
Complaint states a claim upon which relief may be granted against the
settling physician Defendants under Section 1 of the Sherman Act, 15
U.S.C. 1.
II. Definitions
As used in this Final Judgment:
(A) ``Communicate'' means to discuss, disclose, transfer,
disseminate, or exchange information or opinion, formally or
informally, directly or indirectly, in any manner;
(B) ``Competing physician'' means, in relation to each settling
physician Defendant, any obstetrician-gynecologist in any separate,
private medical practice, other than the settling physician's own
practice, in any of the following counties: Boone and Kenton in
Kentucky, and Hamilton and Butler in Ohio.
(C) ``Messenger service'' means, in relation to Defendant
Federation of Physicians and Dentists or its successors, communicating
to a payer any information the Federation receives from a member
physician or communicating to a member physician any information the
Federation receives from a payer;
(D) ``Payer'' menas any person that purchases or pays for all or
part of a physician's services for itself or any other person and
includes but is not limited to independent practice associations,
individuals, health insurance companies, health maintenance
organizations, preferred provider organizations, and employers;
(E) ``Payer contract'' means a contract between a payer and a
physician by which that physician agrees to provide physician services
to persons designated by the payer;
(F) ``Person'' means any natural person, corporation, firm,
company, sole proprietorship, partnership, joint venture, association,
institute, governmental unit, or other legal entity; and
(G) ``Settling physician Defendants'' means Defendants Dr. Warren
Metherd,
[[Page 44380]]
Dr. Michael Karram, and Dr. James Wendel, who have consented to entry
of this Final Judgment, and all persons acting as agents on behalf of
any settling physician Defendant.
III. Applicability
This Final Judgment applies to the settling physician Defendants
and all other persons in active concert or participation with any of
them who receive actual notice of this Final Judgment by personal
service or otherwise.
IV. Prohibited Conduct
The settling physician Defendants each are enjoined from, in any
manner, directly or indirectly:
(A) Encouraging, facilitating, entering into, or participating in
any actual or potential agreement or understanding between or among
competing physicians about any fee or other payer contract term with
any payer or group of payers, including the acceptability or
negotiation of any fee or other payer contract term with any payer or
group of payers;
(B) Encouraging, facilitating, entering into, or participating in
any actual or potential agreement or understanding between or among
competing physicians about the manner in which those physicians will
negotiate or deal with any payer or group of payers, including
participating in or terminating any payer contract;
(C) Encouraging, facilitating, entering into, or participating in
any actual or potential agreement or understanding between or among
competing physicians about the use of any person or organization that
provides any consulting, financial, legal, or negotiating services
concerning any payer contract, or that in any way communicates with any
payer;
(D) Using Defendant Federation of Physicians and Dentists for any
messenger, financial, legal, consulting, or negotiating service
concerning any payer contract or contract term; or
(E) Communicating with any competing physician about:
(1) The actual or possible view, intention or position of each
settling physician Defendant or his medical practice group, or any
competing physician concerning the negotiation or acceptability of any
proposed or existing payer contract or contract term, including his or
his medical practice group's negotiating or contracting status with any
payer, or
(2) Any proposed or existing term of any payer contract that
affects:
(a) The amount of fees or payment, however determined, that the
settling physician Defendant or his medical practice group charges,
contracts for, or accepts from or considers charging, contracting for,
or accepting from any payer for providing physician services;
(b) The duration, amendment, or termination of the payer contracts;
(c) Utilization review and pre-certification; or
(d) The manner of resolving disputes between the participating
physician or group and the payer.
V. Permitted Conduct
(A) Subject to the prohibitions of Section IV of this Final
Judgment, the settling physician Defendants:
(1) May discuss with any competing physician any medical issues
relating to the treatment of a specific patient; and
(2) May participate in activities of any medical society; and
(B) Nothing in this Final Judgment shall prohibit settling
physician Defendants from:
(1) Advocating or discussing, in accordance with the Noerr-
Pennington doctrine, legislative, judicial, or regulatory actions, or
other governmental policies or actions; or
(2) Responding to communications necessary to participate in lawful
activities by clinically or financially integrated physician network
joint ventures and multi-provider networks, as those terms are used in
Statements 8 and 9 of the 1996 Statements of Antitrust Enforcement
Policy in Health Care, 4 Trade Reg. Rep. (CCH) ] 13,153 (``Health Care
Policy Statements'').
VI. Certification
For a period of ten years following the date of entry of this Final
Judgment, each settling physician Defendant shall certify to the United
States annually on the anniversary date of the entry of this Final
Judgment whether he and his agents have complied with the provisions of
this Final Judgment.
VII. Compliance Inspection
(A) For the purposes of determining or securing compliance with
this Final Judgment or of determining whether the Final Judgment should
be modified or vacated, and subject to any legally recognized
privilege, from time to time, duly authorized representatives of the
United States Department of Justice, including consultants and other
persons retained by the United States, shall, upon the written request
of a duly authorized representative of the Assistant Attorney General
in charge of the Antitrust Division and on reasonable notice to each
settling physician Defendant, be permitted:
(1) Access during each settling physician Defendant's regular
business hours to inspect and copy, or, at the United States' option,
to require that each settling physician Defendant provide copies of all
books, ledgers, accounts, records, and documents in his possession,
custody, or control, relating to any matters contained in this Final
Judgment; and
(2) To interview, either informally or on the record, each settling
physician Defendant, who may have counsel present, regarding such
matters. The interviews shall be subject to the reasonable convenience
of each settling physician Defendant.
(B) Upon the written request of a duly authorized representative of
the Assistant Attorney General in charge of the Antitrust Division,
each settling physician Defendant shall submit written reports, under
oath if requested, relating to any matters contained in this Final
Judgment as may be requested.
(C) No information of documents obtained by the means provided in
this Section shall be divulged by the United States to any person other
than an authorized representative of the Executive Branch of the United
States, except in the course of legal proceedings to which the United
States is a party (including grand jury proceedings), or for the
purpose of securing compliance with this Final Judgment, or as
otherwise required by law.
(D) When a settling Physician Defendant furnishes information or
documents to the United States, if the Defendant represents and
identifies in writing the material in any such information or documents
to which a claim of protection may be asserted under Rule 26(c)(7) of
the Federal Rules of Civil Procedure, and marks each pertinent page of
such material, ``Subject to claim of protection under Rule 26(c)(7) of
the Federal Rules of Civil Procedure,'' then the United States shall
give the Defendant ten (10) calendar days notice prior to divulging
such material in any legal proceeding (other than a grand jury
proceeding) to which such Defendant is not a party.
VIII. Retention of Jurisdiction
This Court retains jurisdiction to enable any party to this Final
Judgment, but no other person, to apply to this Court at any time for
further orders and directions as may be necessary or appropriate to
carry out or construe this Final Judgment, to modify any of its
provisions, to enforce compliance, and to punish violations of its
provisions.
IX. Expiration of Final Judgment
Unless this Court grants an extension, this Final Judgment shall
expire ten (10) years from the date of its entry.
[[Page 44381]]
X. Public Interest Determination
Entry of this Final Judgment is in the public interest.
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United States District Judge
Certification of Service
I hereby certify that on June 24, 2005, copies of the foregoing
Final Judgment as to Settling Physician Defendants were served by
facsimile and first-class regular U.S. mail, postage prepaid to:
Michael E. DeFrank, Esq., Hemmer Pangburn DeFrank PLLC, Suite 200,
250 Grandview Drive, Fort Mitchell, KY 41017, Fax: 859-344-1188,
Attorney for Defendant Dr. James Wendel.
G. Jack Donson, Jr., Esq., Taft, Stettinius & Hollander, 425 Walnut
Street, Suite 1800, Cincinnati, Ohio 45202, Fax: 513-381-0205,
Attorney for Defendant Dr. Michael Karram.
Jeffrey M. Johnston, Esq., 37 North Orange Avenue, Suite 500,
Orlando, FL 32801, Fax: 407-926-2452, Attorney for Defendant Dr.
Warren Metherd.
Mary Beth Fitzgibbons, Fitsgibbons & Pfister P.L., 20 South Rose
Avenue, Suite 6, Kissimmee, FL 34741, Fax: 407-343-1677, Attorney
for Defendant Federation of Physicians and Dentists, Attorney for
Defendant Lynda Odenkirk.
Paul J. Torzilli,
Attorney, United States Department of Justice.
United States District Court for the Southern District of Ohio, Western
Division
United States of America, Plaintiff, vs., Federation of Physicians and
Dentists, Lynda Odenkirk, Warren Metherd, Michael Karram, and James
Wendel, Defendants
Civil Action No. 1:05-cv-431.
Filed June 24, 2005.
Complaint
The United States of America, acting under the direction of the
Attorney General of the United States, brings this action for equitable
and other relief against Defendants: Federation of Physicians and
Dentists (``Federation''), Federation employee Lynda Odenkirk, and
Federation members Warren Metherd, M.D., Michael Karram, M.D., and
James Wendel, M.D., to restrain Defendants' violations of section 1 of
the Sherman Act in concert with the Federation's other Cincinnati-area
obstetrician and gynecologist (``OB-GYN'') members.
I. Introduction
1. In concert with approximately 120 OB-GYN Federation members
located in the Cincinnati area (``Federation members''), Defendants
participated in a conspiracy to increase fees paid by health care
insurers to Federation members. The Defendant physicians and other
competing Federation members joined the Federation to use its services
to coordinate the renegotiation of their contracts with Cincinnati-area
healthcare insurers. The Federation, with substantial assistance from
the Defendant physicians, coordinated and helped implement its members'
concerted demands to insurers for higher fees and related terms,
accompanied by threats of contract terminations.
2. Defendants' and their conspirators' collusion caused Cincinnati-
area health care insurers to raise fees paid to Federation members
above the levels that would likely have resulted if Federation members
had negotiated competitively with those insurers. As a result of
Defendants' and other Federation members' conduct, the three largest
Cincinnati-area health care insurers were each forced to increase fees
paid to most Federation members by approximately 15-20% starting July
1, 2003, followed by cumulative increases of 20-25%, starting January
1, 2004, and 25-30%, effective January 1, 2005. Defendants' concerted
conduct also caused other insurers to raise the fees they paid to
Federation members.
3. The United States, through this suit, asks this Court to declare
Defendants' conduct illegal and to enter injunctive relief to prevent
further injury to consumers in the Greater Cincinnati area and
elsewhere.
II. Defendants
4. The Federation is a membership organization comprising mostly
physicians and dentists, and is headquartered in Tallahassee, Florida.
The Federation's physician membership includes economically
independent, competing physicians in private practice in localities in
many states, including Cincinnati, Ohio. The Federation offers these
independent physicians assistance in negotiating fees and other terms
in their contracts with health care insurers.
5. Lynda Odenkirk has been employed in Wallingford, Connecticut, by
the Federation since 1997 as a Regional Director and Contract Analyst.
Ms. Odenkirk worked with Cincinnati-area Federation members from May,
2002, through at least 2004.
6. Warren Metherd, M.D., is an OB-GYN presently in a solo practice
in Cincinnati.
7. Michael Karram, M.D., is an OB-GYN practicing in Cincinnati and
is the Chief Executive Officer of Seven Hills Women's Health Centers, a
practice comprising several groups totaling 22 OB-GYNs in Cincinnati.
8. James Wendel, M.D., is an OB-GYN practicing in Cincinnati and is
the Chief Executive Officer of Mount Auburn Obstetrics and Gynecologic
Associates, Inc., group practice of nine OB-GYNs in Cincinnati.
III. Jurisdiction and Venue
9. The United States brings this action to prevent and restrain
Defendants' recurring violations of Section 1 of the Sherman Act. The
Court has subject matter jurisdiction over this action pursuant to 15
U.S.C. 4 and 28 U.S.C. 1331 and 1337.
10. During 2002 and 2003, the Federation's Cincinnati OB-GYN
Chapter enrolled as paid members over 120 OB-GYN physicians, most
practicing in the Southern District of Ohio and some in nearby northern
Kentucky communities. The Federation and Ms. Odenkirk have transacted
business and committed acts in furtherance of the conspiracy in the
Southern District of Ohio. Drs. Metherd, Karram, and Wendel each
provide OB-GYN services in the Southern District of Ohio. Consequently,
this Court has personal jurisdiction over Defendants, and venue is
proper in this District pursuant to 28 U.S.C. 1391(b)(2).
IV. Conspirators
11. Various persons, not named as defendants in this action, have
participated as conspirators with Defendants in the offense alleged and
have performed acts and made statements in furtherance of the alleged
conspiracy.
V. Effects on Interstate Commerce
12. The activities of the Defendants that are the subject of this
Complaint are within the flow of, and have substantially affected,
interstate trade and commerce.
13. Federal representatives have traveled across state lines to
meet with Federation members and also have communicated with them by
mail, e-mail and telephone across state lines. Federation members have
communicated with Federation representatives and have remitted their
Federation membership dues across state lines. Some Federation members
have also traveled from Kentucky to Ohio to attend Federation meetings
and have communicated with other Federation members across the Ohio-
Kentucky state line.
14. Federation members have treated patients who live across state
lines, and Federal members have also purchased
[[Page 44382]]
equipment and supplies that were shipped across state line.
15. Health care insurers operating in the Cincinnati area remit
substantial payments across state lines in Federation members. Health
care insurers' payments to Federation members affect the reimbursements
paid to insurers by self-insurers by self-insured employers, whose
plans they administer, and also affect the premiums for health care
insurance those insurers charge other employers. Many of the affected
employers sell products and services in interstate commerce. The
reimbursements and premiums those health care insurers receive from
employers for administration or coverage of the expenses of their
employees' health care needs, including OB-GYN services, represent a
cost of production for those employers that affects the prices at which
these firms' products are sold in interstate commerce.
VI. Cincinnati Area Health Care Insurers and OB-GYNS
16. At least six major health care insurers provide coverage in the
Cincinnati area: WellPoint Health Networks, which during the events at
issue here was named Anthem, Inc. (``Anthem''), Humana Inc. (``Humana''
or ``ChoiceCare''), United HealthCare Insurance Company (``United''),
Cigna Corp. (``Cigna''), Aetna U.S. Healthcare Inc. (``Aetna''), and
Medical Mutual of Ohio (``Medical Mutual'' or ``MMO'').
17. Anthem, Humana and United, through administration and insurance
of health care benefits, are the three largest private health insurers
operating in the Greater Cincinnati area. On the basis of market share,
Medical Mutual, Aetna, and cigna each insures and administers a
smaller, but still significant, share of privately financed health
coverage in the Greater Cincinnati area. The remainder of the privately
financed health insurance coverage market in the Greater Cincinnati
area consists of a large number of insurers, each with a small share.
18. All of the major health care insurers operating in the
Cincinnati area offer a variety of insurance plans to employers and
their employees, including ``managed care'' plans such as health-
maintenance organizations and preferred provider organizations. To
offer such plans, an insurer typically contracts with participating
providers, including physicians and hospitals, to form a provider
network (or panel). Among other things, such contracts establish the
fees that the providers will accept as payment in full for providing
covered medical care to the insurer's subscribers. All of the major
Cincinnati-area health care insurers consider it necessary to include
in their provider panels a substantial percentage of OB-GYN physicians,
who practice in the Cincinnati area to make their health care plans
marketable to area employers and their employees. Before the formation
of the alleged conspiracy, Federation member groups competed with each
other, in their willingness to accept an insurer's proposed fee levels
and other contractual terms, to be included in these insurers' provider
panels.
VII. Defendants' Unlawful Activities
19. In the spring of 2002, Cincinnati OB-GYNs became interested in
joining the Federation primarily to band together to negotiate higher
fees from health care insurers. Through a series of meetings with and
communications to Cincinnati-area OB-GYNs during the spring, the
Federation-assisted by some local OB-GYNs, including Defendants
Metherd, Karram, and Wendel-recruited Cincinnati-area OB-GYNs as
Federation members and laid the foundation for their coordinated
negotiating positions seeking higher fees from major Cincinnati health
care insurers. At an initial membership recruitment meeting on April
17, 2002, a featured presentation by Jack Seddon, the Federation's
Executive Director, focused on the need for a majority of area OB-GYNs
practices to use the Federation's contract negotiation services to
obtain increased fees from insurers.
20. Ms. Odenkirk, the Federation employee with primary
responsibility for dealing with Federation members in Cincinnati,
attended a second recruitment meeting on May 7, 2002. At this meeting,
the OB-GYNs in attendance decided they needed a 60-70% participation
rate in the Federation by OB-GYN physicians in the Cincinnati area for
their activities as Federation members to have an impact on area
insurance companies. By the end of May 2002, about 75-80% of actively
practicing, Cincinnati-area OB-GYNs had opted to join the Federation.
21. On June 10, 2002, the Cincinnati-area OB-GYN Federation chapter
held its organizational meeting, which was attended by representatives
from many area OB-GYN practices. At the meeting Jack Seddon, the
Federation's Executive Director, told the Federation members that,
although the Federation could legally represent only individual
physicians, all physicians must remember that they are part the
Federation when making any business decisions regarding a contract. He
also explained that, although the Federation could not directly
recommend, through its Negotiation Assistance Program, whether
Federation members should accept or reject a given provider contract,
physicians would be given enough information to allow them to decide
whether or not to sign a contract. At the June 10 meeting, Mr. Seddon
also explained that Federation members could encourage other member
physicians to use the Federation's Negotiation Assistance Program
rather than negotiate on their own without Federation involvement.
22. In June and July 2002, Ms. Odenkirk, in consultation with some
Federation members, established the order, or the ``game plan,'' by
which she would review and coordinate their dealings with the first
five health care insurers contracts: Anthem, ChoiceCare, United, Aetna,
and Medical Mutual.
23. The Federation mailed a newsletter dated September 4, 2002, to
all Federation member practices, notifying them that the Federation had
reviewed their current Anthem contract. Accompanying the newsletter was
the Federation's contract analysis and a set of proposed changes. An
accompanying memorandum addressed to Cincinnati OB-GYN members from Ms.
Odenkirk advised members that her contract analysis and proposed
alternative language could be used to open negotiations with Anthem.
24. The September 4, 2002, newsletter also encouraged Federation
members to use the Federation's ``extremely valuable service'' of
acting as their third-party messenger and as a consultant, touted as
providing the ``advantage of a nationally experienced consultant who
can certainly look out for their best interests when negotiating with
insurance plan executives.'' The newsletter suggested that those
members dissatisfied with their Anthem contracts, as outlined in the
accompanying contract analysis, should copy an enclosed sample ``third
party messenger'' letter onto their practice's letterhead to open a
dialogue with Anthem. The sample letter advised Anthem that the
submitting practice had ``several items of concern'' regarding its
current Anthem contract including ``contract language for various
clauses and reimbursements rates'' and appraised Anthem that ``the
purpose of this letter is to open negotiations with Anthem regarding
the provider agreement.'' The sample letter further informed Anthem
that the practice had decided to used the Federation as a ``third party
messenger'' to facilitate negotiations and that the Federation would be
contacting Anthem to open a dialogue. The sample letter also contained
a thinly veiled warning that
[[Page 44383]]
the practice might resort to contract termination if its concerns were
not addressed and was understood as such as Anthem.
25. Following Ms. Odenkirk's September 4, 2002, communications
regarding the Anthem contract, most Federation member physicians
practice groups copied the sample letter onto their own letterhead,
signed it, and sent it to Anthem.
26. The Federation mailed a newsletter dated September 30, 2002, to
all Federation member practices, informing them that there had been a
significant response to the September 4, 2002, Anthem contract analysis
and that many members had opted to use the ``full services'' of the
Federation.
27. Starting on October 11, 2002, Ms. Odenkirk followed up on the
Federation members' letters to Anthem. She notified Anthem that the
Federation would be facilitating Federation members' discussion of
their Anthem contract. For each such practice, Ms. Odenkirk sent Anthem
a substantively identical letter enclosing a proposed amendment to the
contracts ``that addresses some of their concerns.'' The set of
proposed amendments was essentially the same set that Ms. Odenkirk had
forwarded on September 4, 2002, to all Federation members in connection
with her review of the Anthem contract.
28. Besides reporting to Federation members' on their response to
Anthem, the September 30, 2002, Federation newsletter also focused on
another insurer. The newsletter explained to Federation members that
the Federation had reviewed their current ChoiceCare contract. The
newsletter also included a sample letter to inform ChoiceCare that the
Federation would be representing the medical practice as a third-party
messenger. The process of negotiating with ChoiceCare then began and
tracked the pattern of Federation coordination of negotiations with
Anthem.
29. The Federation mailed a newsletter dated October 31, 2002, to
all Federation member practices, explaining that the Federation had
reviewed the contract of yet another insurer: United. The newsletter
also included a sample letter to inform United that the Federation
would be representing the medical practice as a third-party messenger.
The process of negotiations with United then began and tracked the
pattern of Federation coordination that occurred in negotiations with
Anthem and ChoiceCare.
30. The October 31, 2002, newsletter also noted that 39 OB-GYN
practices had joined the local Federation chapter. The newsletter
recapped members' status with Anthem, noting that the Federation had
initiated contact with Anthem, on behalf of those practices that had
submitted third-party messenger letters to Anthem, and that the
Federation had received a very significant response from the local
chapter practices that had sent Anthem a third-party messenger letter.
The newsletter also reported to Federation members that a significant
proportion of them had provided e-mail addresses to participate in a
``Critical Alert'' mass e-mailing system developed by the Federation
``to avoid any situation where a member might miss critical information
from the Federation.''
31. On November 1, 2002, the day after the October 31, 2002,
newsletter, Ms. Odenkirk e-mailed a ``Critical Federation Alert'' to
member practices. After updating all member practices on the status of
matters involving United, Humana and Anthem, she wrote:
All members are again reminded of their reason for joining the
local chapter of the Federation. The overall purpose of the
Federation is to allow member physicians to deal with the insurance
industry on an equal basis. While the Federation cannot recommend
that physicians sign or not sign a given provider agreement, the
Federation can advise a member when they are being presented with a
bad contract.
32. By letters dated November 14, 2002, sent to each practice,
Anthem responded to the prior correspondence it had received from the
practice and the Federation. The letters expressed Anthem's willingness
to meet with the practices individually to discuss the concerns raised.
Around the same period, Humana communicated to Federation members its
preference to deal directly with each practice, rather than with the
Federation representing the practices.
33. On November 15, 2002, Ms. Odenkirk spoke by telephone with
Anthem representatives. Ms. Odenkirk told the Anthem employees that she
represented a large number of OB-GYN practices in the Cincinnati area.
Anthem told Ms. Odenkirk they would meet and correspond directly with
individual practices. Though noting during the conversation that each
practice would need to speak for itself, Ms. Odenkirk stated generally
that the physicians would be seeking higher fees at 160% of Medicare
levels.
34. Following her telephone conversation with Anthem, Ms. Odenkirk
proceeded to coordinate Federation practices, ``individual'' dealings
with Anthem, Humana, and United. She e-mailed a ``Critical Federation
Alert'' on November 19, 2002, to each practice, addressed to the
attention of ``Office Manager.'' The Alert informed each practice that
the Federation had, in its role as a third-party messenger, notified
Anthem of the practice's desire to initiate negotiations regarding the
current Provider Agreement, and Advised Anthem that the practice had
designated the Federation to represent it and act as its consultant in
this process. The Alert then informed member practices they had two
options: negotiate directly with Anthem (noting that if this option
were selected the practice was encouraged to forward all communication
from Anthem to the Federation), or advise Anthem that the practice
wished to have the Federation speak on its behalf.
35. Responding promptly, as requested, to Ms. Odenkirk's November
19, 2002, Critical Federal Alert, most Federation member practices
notified the Federal in writing that they wanted the Federation to
speak on their behalf as their third-party messenger for contract
negotiations with Anthem.
36. On Saturday morning, December 14, 2002, Ms. Odenkirk and most
Federation members attended a membership meeting. The meeting was
called amid apprehension among Federation members that large Federation
member groups might make individual deals with insurers without regard
to the interests of small Federation groups and solo practitioners.
Federation members' discussion at the meeting informed the strategy
that Ms. Odenkirk and the Defendant physicians developed for the
Federation to coordinate Federation members' contract negotiations with
Anthem, ChoiceCare, and United. The strategy employed the Federation's
collective knowledge and consultation with Federation members as the
``key'' to ensuring that small groups were not ``left behind'' in
negotiation with insurers.
37. Following up promptly on the sense of the December 14 meeting,
Dr. Metherd, in coordination with Drs. Wendel and Karram, prepared a
draft of a letter for Ms. Odenkirk to send to Federation members. The
letter suggested that Federation members again send letters to Anthem
demanding higher fees and contract amendments. Reviewing a redraft of
the letter by Ms. Odenkirk on December 17, 2003, Dr. Wendel e-mailed
Dr. Metherd: ``Have reviewed the letter and changes from Lynda
[Odenkirk], I also think that we need to also send similar letters to
[C]hoice[C]are and [U]nited. It[']s time to carpet bomb them with these
letters and demand responses in a timely fashion. This may be a way for
the
[[Page 44384]]
[F]ederation to help to facilitate the process.''
38. On December 20, 2002, Ms. Odenkirk sent to all Federation
member practices the final version of the letter implementing the
coordinated strategy developed from the December 14 membership meeting.
The letter reviewed the status of the Federation's dealings with Anthem
on members' behalf to discuss ``problems in the provider agreement.''
The letter apprised Federation members that Anthem had ``become
recalcitrant'' toward the Federation's attempts to attend meetings on
behalf of multiple physician groups and that ``[c]onsequently, the
Federation [wa]s recommending another tactic by which you may negotiate
with Anthem. '' The letter sought to provide Federation members ``with
a clear set of guidelines * * * that w[ould] hopefully lead to a
productive set of discussions.'' The ``guidelines'' set forth a number
of steps for member groups to follow, which the Federation touted as
``the means by which you are most likely to achieve your goals.'' The
letter also noted: ``If this tactic is UNSUCCESSFUL in achieving a
contract with Anthem that meets your concerns, then the Federation will
so notify you that you are continuing to work under a bad contract and
that you are now left with two options. You may: (1) Continue to work
under this bad contract or (2) Terminate the contract.''
39. Beginning in January 2003, and following up on the steps Ms.
Odenkirk had outlined in her December 20, 2002, letter to Federation
practices, most Federation member practices sent substantively
identical letters to Anthem enclosing proposed contractual changes
styled as ``necessary to achieve an equitable business relationship
between Anthem and this OB/GYN practice.'' The letters sought a
response from Anthem within two weeks of receipt and advised that ``all
responses from Anthem will be forwarded to the Federation of Physicians
and Dentists for review, interpretation and consultation.'' The letters
closed with a slightly adapted version of the thinly veiled threat of
termination first raised in the wave of September and October 2002
third-party messenger letters sent by Federation member practices to
Anthem: ``This practice truly desires to avoid any interruption of
obstetrical and gynecological services to Anthem's customers. Such a
circumstance can be avoided by a meaningful and productive written
response from Anthem regarding the issues raised herein no later than
the aforementioned date.''
40. Proceeding over the next several months, Federation member
practices--in close coordination with the Federation and with some
additional direct coordination among Drs. Karram, Wendel, and Metherd--
negotiated contracts with Anthem that provided for a substantial
increase in fees. While targeting Anthem initially, the Federation,
with encouragement and assistance from the Defendant physicians, also
coordinated member groups' efforts to pressure ChoiceCare and United to
renegotiate their contracts.
41. Implementing Federation members' similar strategy toward
ChoiceCare, Ms. Odenkirk sent to ChoiceCare letters dated January 27-
31, 2003, on behalf of 30 member practices. The letters reviewed the
history of Humana's discussions with each practice, and included each
practice's desired fee amounts. The letters asked for a response by
February 14, 2003, and notified Humana that the practice ``still
intends to forward any and all responses from Humana to the Federation
of Physicians and Dentists for review, interpretation and consultation,
as they have every right to do.'' Each letter again noted, as had the
practices' third-party messenger letters sent to Humana in the fall of
2002, that a service interruption could be avoided by Humana's prompt
and meaningful written response.
42. From December 2002, through March 2003, Dr. Karram's and Dr.
Wendel's large OB-GYM groups spearheaded Federation member groups'
attempts to renegotiate their contracts with Anthem and Humana. By a
letter dated March 4, 2003, Humana proposed to Dr. Wendel's group a 30-
month contract increasing fee levels substantially, in stages, over
existing fees. According to the proposal, the terms were discussed and
agreed upon in a telephone conversation on March 4. The next day, Dr.
Wendel's office faxed Humana's proposal to Ms. Odenkirk.
43. On March 7, 2003, Ms. Odenkirk sent by e-mail and regular mail
a Critical Federation Alert that had been prepared by Dr. Metherd in
consultation with Drs. Karram and Wendel and edited and approved by Ms.
Odenkirk and Mr. Seddon. The Alert encouraged Federation members to
meet as soon as possible with Anthem and Humana to discuss proposed
contract changes because the companies ``seem to legitimately desire
discussions.'' Accompanying the Alert were negotiations guidelines to
use in meetings, including advice to tell the health plan ``that you
are seeking a fair contract both in language and reimbursements'' The
guidelines also suggested to members, in part, that
(3) You may explain to the health plan that you are, or will be,
reviewing all of your major contracts and negotiating fairer terms
for all, and that you are not just focusing on any one particular
health plan. One particular concern a health plan may have is that
they will be `out front' if they were, for instance, to increase
reimbursements thereby placing them at a disadvantage with their
competitors in their markets.
44. As negotiations progressed, Ms. Odenkirk became active in
advising groups how to proceed. Dr. Metherd also coordinated with Dr.
Wendel and other physicians regarding the status of Federation members'
negotiations with Anthem.
45. On April 1, 2003, Dr. Metherd e-mailed to Ms. Odenkirk and Mr.
Seddon proposed additions to a draft Critical Federation Alert that Dr.
Metherd had begun drafting with them in mid-March. Dr. Metherd proposed
adding two paragraphs to a draft he had received from Mr. Seddon and
explained the reason for his additions:
It is becoming extremely important to somehow inform the smaller
groups and solo practitioners that the large groups are not
achieving favorable contracts at the expense of the small groups. *
* * It's also important to somehow explain that the physicians are
not going to get 170-180% of Medicare and that 30-35% is a more
realistic number. Finally, from my personal discussions with the
insurance companies, the members need to emphasize that all major
plans are going to be looked at by the physicians. This seems to be
critical for the insurance companies to hear.
46. By mid-April 2003, ChoiceCard had reached agreement with
several of the larger Federation member groups. ChoiceCare continued
making offers of varying fee amounts to other groups, which, in turn,
forwarded them to, or discussed them with, Ms. Odenkirk to obtain her
thoughts. In April 16, 2003, e-mail, Dr. Metherd updated Ms. Odenkirk
and suggested how she should advise the smaller Federation member
groups regarding ChoiceCare:
Since you know what everyone is getting we need you to make sure
that the small groups are pushing to end up in reasonable proximity
(5% for example) to the larger groups in regards to reimbursements.
The larger groups need to know that they can utilize [the
Federation's] guidelines that we sent out on April 3 * * * as a way
to pressure ChoiceCare to minimize variations in their
reimbursements.
Since you are the only one who, as the third party messenger,
can know all the facts, it is imperative that you use the knowledge
to push all of us in the same direction. * * * It is absolutely
critical that one segment of the Federation here not feel that it
has gained a significant advantage or suffered a
[[Page 44385]]
significant disadvantage at another's expense * * * especially as we
will soon be moving onto United, Aetna, etc.
47. By May 1, 2003, Anthem had sent to all Federation members a
contract amendment raising fees over a three-year period to 120% of
Medicare fees, as of July, 2003; 125% as of January, 2004; and 130%, as
of January, 2005.
48. By early May 2003, the large OB-GYN practice groups shifted
their focus to United Healthcare. At a May 8 meeting with United,
called by Dr. Wendel to discuss OB-GYN fees in Cincinnati, Dr. Wendel
informed United that his group had been able to negotiate new deals
with the other two top payers in Cincinnati. During the meeting, Dr.
Wendel threatened that his group would terminate its contract if United
did not offer it a satisfactory deal. At a meeting on the same day with
United, Dr. Karram conveyed a similar message on behalf of his group.
49. Dr. Metherd communicated several times in May 2003 with Drs.
Karram and Wendel concerning his negotiations on fees with ChoiceCare.
On May 12, 2003, Dr. Metherd responded to ChoiceCare and attempted to
leverage Federation members' contract renegotiations, with Anthem and
suggested that ChoiceCare would face a boycott if it did not meet his
and other OB-GYN's fee demands.
50. On May 11, 2003, Dr. Metherd sent an e-mail to Drs. Karram,
Wendel:
As per our discussions on Friday [May 9], I think we need to do
some ``campaigning'' so to speak. We need to educate the members and
encourage them to do four things.
(1) They need to accept the contract from Anthem. While not
perfect, it's actually pretty good and Lynda [Odenkirk] also feels
the same based on my discussions with her this week. Apparently she
is quite surprised that we have done as well as we have. * * *
(2) They need to negotiate with ChoiceCare. * * *
(3) Everyone needs to do the above so we can all move onto
United next especially given the promising discussions that you have
just had.
(4) Finally, membership dues for the Federation are here and we
need to convince the members that this is worth doing again this
next year. * * *
51. Prompted by Dr. Metherd, on May 16, 2003, Ms. Odenkirk sent to
essentially all Cincinnati Federation members a ``Federation Alert--
Update.'' Ms. Odenkirk's Alert opined that the revised Anthem contract
was ``as good as it's going to get at this point in time'' and
suggesting it was ready to be signed. Ms. Odenkirk's Federation Alert
also posed the Anthem contract to Federation members as a ``benchmark
to follow'' when negotiating with other comparable health plans.
52. On May 20, 2003, Dr. Metherd sent to Federation members a
proposal to endorse a ``large insurance company'' that had recently
provided a contract with ``physician-friendly'' changes. Dr. Metherd
explained that the other insurers could also be endorsed if they
offered similar contracts and expressed the hope that ``this would then
offer all companies an incentive to work with member physicians to
achieve physician-friendly agreements.'' The proposal also noted,
``This concept has been reviewed and approved by the Federation
leadership.''
53. At a May 28, 2003, meeting with United representatives, Dr.
Metherd threatened to terminate his contract with United if it did not
offer him satisfactory terms. After the meeting, he sent an e-mail to a
United representative to emphasize the need for United to ``offer an
acceptable contract to all members'' and complete fee negotiations
promptly if it wished to participate in the ``endorsement'' program
that had also been discussed at the meeting.
54. By May 30, 2003, United had met with about six Federation
member groups. Each group conveyed that they wanted essentially the
same deal and would terminate their contracts if they did not get it.
55. On May 29, 2003, Dr. Metherd sent an e-mail to all Federation
members requesting their attention to ``some extremely important
issues,'' including the need for doctors to keep the Federation
informed of their negotiation status with various insurers. On May 29,
Dr. Karram e-mailed Ms. Odenkirk and stated, ``I agree with Warren. We
need to get everyone moving faster and to become more persistent
otherwise they will not get increases in 03. I am sure that is what
[ChoiceCare] is doing. Just think of the money they will save if they
keep delaying people till 04.'' Dr. Karram's e-mail also asked Ms.
Odenkirk: ``Are we ready to move on to the next player. I think that is
Medical Mutual of Ohio.''
56. During June and July 2003, Ms. Odenkirk continued to advise
Federation members concerning their contract negotiations with
ChoiceCare, United, and, to a lesser extent, Anthem.
57. By letters dated June 13, 2003, Ms. Odenkirk sent to United
proposed contractual amendments for nearly all Federation member
groups. On June 17, 2003, she apprised the groups of the communications
to United on their behalf. In a July 9, 2003, Federation Alert, Ms.
Odenkirk suggested that all Federation members persist in negotiations
with United and let United ``know that you have been able to achieve a
significantly better agreement with one of their competitors, and are
currently in discussions with another competitor, so if they want to
remain competitive they need to answer you.'' She reiterated
essentially the same message to Federation members in an August 1,
2003, Critical Federation Alert. By November 24, 2003, United had
signed contracts, calling for substantially increased reimbursements,
with 33 OB-GYN practice groups or solo practitioners, representing the
vast majority of Federation member physicians.
58. On June 23, 2003, ChoiceCare representatives met with Drs.
Karram, Metherd, and Wendel to learn more about the ``endorsement
campaign'' Federation OB-GYNs were planning. Dr. Metherd described the
endorsement as both public and private support of those managed-care
organizations that had met the OB-GYN's established minimum fee levels.
No physician articulated any criterion for being included in the
endorsement other than meeting their fee demands, despite repeated
questions about any other criteria. All three physicians confirmed that
all physicians affiliated with the Federation would have to receive
fees at or above the fee threshold to receive the endorsement.
59. On august 10, 2003, Dr. Metherd sent an e-mail survey to
Federation member practices, inquiring as to the status of negotiations
with their top three insurance companies. On September 12, 2003, Dr.
Metherd faxed the results of his August 10 e-mail survey to Ms.
Odenkirk. The results included the status of negotiations with their
top three insurance companies for each of the 31 (out of 43) practices
that responded.
60. In a September 18, 2003, memo addressed to Cincinnati area
members, Ms. Odenkirk advised members that
Cincinnati OB/GYNs have been discussing their issues with
several health plans and have been reaching successful outcomes.
Therefore, I continue to encourage you to hav[e] dialogues with
various health plans. I am in the process [o]f reviewing the Aetna
and Medical Mutual of Ohio (``MMO'') agreements, so if you're
interested in opening a dialogue with either of these companies,
please feel free to use the enclosed sample third party letters.
The enclosed sample letters, addressed to Aetna and Medical Mutual,
appointed the Federation as the practice's third-party messenger,
raised concerns about contract language and fees, and contained the
usual language threatening contract termination.
61. At an October 7, 2003, Federation membership meeting, which Ms.
[[Page 44386]]
Odenkirk attended, both Dr. Wendel and Dr. Metherd announced to
competing physicians that they had terminated their respective
unfavorable contracts with Aetna because of Aetna's refusal to discuss
the contracts.
62. In an October 17, 2003, Critical Federation Alert, Ms. Odenkirk
updated members on the status of negotiations with Aetna and Medical
Mutual. The Alert evaluated Aetna's new fee schedule as ``NOT
`reasonable for the Cincinnati market' '' and gave Federation members
specific instructions on how to respond to Aetna's and Medical Mutual's
fee proposals.
63. On October 21, 2003, Dr. Metherd e-mailed the entire Cincinnati
membership to inform them that his practice had terminated Aetna.
Although written under the pretense only of informing OB-GYNs not to
refer Aetna patients to him, Dr. Metherd prefaced his message with an
account of his reason for termination, decrying Aetna's fees as
``significantly lower than the current market level in the Cincinnati-
Northern Kentucky area'' and Aetna's refusal to renegotiate his
contract.
64. On October 29, 2003, Dr. Metherd e-mailed Lynda Odenkirk,
reporting on strategizing at a meeting that day of the recently formed
local Federation Chapter Executive Committee, with copies to the
Executive Committee, which included Drs. Karram and Wendel:
The meeting went well * * * we're still waiting to see whether
and how Aetna responds to Seven Hills. Thus far no one else is
getting any attention from them and, apparently, they are not being
all that friendly with Seven Hills. We'll just have to wait and see
* * * all of us at the meeting are aware of the goals of the entire
Federation and will, hopefully, not forget them. [Dr. Wendel] and I
are hoping everyone will react to Aetna as we had to [terminating
their contracts] * * * time will tell. As for endorsing United * * *
the message back to them is that they still haven't provided ``fair
and equitable'' contracting (i.e., the language issues) and that
they will receive no endorsement as a result. They will be told this
by Dr. Karram, and, that, if they do better in 2005 when we come
back to them, then, perhaps they will be endorsed. (all ellipses in
original)
65. In an October 29, 2003, memo to Cincinnati area members, Ms.
Odenkirk noted that a new fee schedule from Cigna represented a
reduction in rates, and, in her opinion, did not meet the notice
requirements in the members' contracts with Cigna. Ms. Odenkirk's memo
included an attached sample letter, addressed to Cigna, which not only
raised the concerns noted in her memo, but also appointed the
Federation as the practice's third-party messenger.
66. On November 5, 2003, Ms. Odenkirk prepared a sample letter for
Federation members to send Aetna regarding its revised fee schedule.
The sample letter advised Aetna that the sender had ``recently
negotiated far better reimbursements with several of your competitors,
which has significantly changed the Cincinnati market. Therefore we
find that your fee schedule is not reasonable for this area.''
67. Dr. Metherd commented to Ms. Odenkirk on her sample letter to
Aenta, in a November 5, 2003, e-mail, which he copied to the Cincinnati
Chapter Executive Committee:
The letter looks good * * * Both [another physician] and [Dr.]
Wendel are making overtures to Aetna as I did in order to judge
Aetna's reaction. Before we put this out there, let's see what they
hear as well. * * * If Aetna responds to [another physician] and
[Dr.] Wendel with a willingness to consider a proposal as they did
with me, then we can encourage current Aetna providers (and those of
us that just recently terminated) to renew contact with them via
both phone and your letter.
68. On November 7, 2003, Lynda Odenkirk e-mailed a Critical
Federation Alert updating Federation members on the status of
negotiations with Medical Mutual, Cigna, and Aetna. Ms. Odenkirk's
Alert reported about ``multiple terminations of the Aetna agreement by
Cincinnati-Northern Kentucky OB/GYN physicians'' and that Aetna had now
indicated a willingness to negotiate with area OB-GYNs. She strongly
encouraged Federation members--even those that had noticed termination
of their Aetna contracts--to negotiate with Aetna. Ms. Odenkirk also
advised Federation members that Medical Mutual had been advised that
part of its fee schedule offer was ``unacceptable.''
69. On November 17, 2003, Medical Mutual mailed proposed agreements
offering substantially increased fees to nearly all Federation member
practices. On November 19, 2003, Ms. Odenkirk e-mailed a Critical
Federation Alert that informed Federation members that Medical Mutual's
new ``proposal is, for all points and purposes, fair and reasonable, as
it is now in line with agreements you've recently negotiated with other
companies.'' By early 2004, most of the Federation member practices had
signed and returned the contracts.
70. Ms. Odenkirk's November 19, 2003, Critical Federation Alert
also gave Federation members specific instructions to persist in
negotiations with Aetna, noting that its fee schedule was
``considerably below'' current levels. In the same November 19, 2003,
Critical Federation Alert, Ms. Odenkirk instructed members that ``[b]y
now you should have sent your third party letter to CIGNA'' and added
that members should use with Cigna all of the points mentioned
concerning Aetna. The Alert also included a general comment regarding
the smaller insurers in the area, such as Aetna, Cigna, and Medical
Mutual: ``Consequently, you should make these calls and make it plainly
known to each that you will NOT settle for anything less than a `fair
and equitable' contract from each. Moreover, you are in such a position
with the bigger companies that you NO LONGER have to accept UNFAIR
contracts from these smaller companies.''
71. Coordinated by the Federation, using the Anthem agreement as a
benchmark, as Ms. Odenkirk had urged, and using threats of terminating
their services, Federation members were able to force ChoiceCare,
United, and Medical Mutual to offer all Federation OB-GYN practices new
contracts at fees and terms substantially equivalent to those in their
Anthem contracts.
72. Most of the contracts between Federation member OB-GYNs and the
major insurers run through, at least, the end of 2005. The Federation
continues to have Cincinnati-area member OB-GYNs. Although some OB-GYNs
have discontinued their membership in the Federation, the Cincinnati
chapter of the Federation continues to exist and is available to
coordinate another round of collectively negotiated contracts when the
current contracts approach expiration.
VIII. Violation Alleged
73. Beginning at least as early as April, 2002, and continuing to
date, Defendants and their conspirators have engaged in a combination
and conspiracy in unreasonable restraint of interstate trade and
commerce in violation of Section 1 of the Sherman Act, 15 U.S.C. 1.
This offense is likely to continue and recur unless the relief
requested is granted.
74. The combination and conspiracy consisted of an understanding
and concert of action among Defendants and their conspirators that the
Federation's Cincinnati Chapter members would coordinate their
negotiations with health care insurance companies operating in the
Cincinnati area to enable the collective negotiation of higher fees
from these health care insurers.
75. For the purpose of forming and effectuating this combination
and
[[Page 44387]]
conspiracy, Defendants and their conspirators did the following things,
among others:
(a) Successfully recruited as members of the Federation a high
percentage of competing OB-GYNs practicing in the Cincinnati area.
(b) Designated the Federation to represent most Federation members
in their fee negotiations with Anthem, Humana, United, Medical Mutual,
Aetna, and Cigna;
(c) Reached an understanding to coordinate their negotiations
through the Federation; and
(d) In coordination with the Federation demanded new, substantially
higher fees from each insurer while threatening termination of their
contracts if satisfactory results were not obtained.
76. This combination and conspiracy has had the following effects,
among others:
(a) Price competition among independent and competing OB-GYNs in
the Cincinnati area who became Federation members has been retrained;
(b) Health care insurance companies in the Cincinnati area and
their subscribers have been denied the benefits of free and open
competition in the purchase of OB-GYN services in the Cincinnati area;
and
(c) Self insured employers and their employees have paid
significantly higher prices for OB-GYN services in the Cincinnati area
than they would have paid in the absence of this restraint of trade.
IX. Request for Relief
77. To remedy these illegal acts, the United States of America
requests that the Court:
(a) Adjudge and decree that Defendants entered into an unlawful
contract, combination, or conspiracy in unreasonable restraint of
interstate trade and commerce in violation of Section 1 of the Sherman
Act, 15 U.S.C. 1;
(b) Enjoin the Defendant Federation and its members, officers,
agents, servants, employees and attorneys and their successors, the
individual physician Defendants, and all other persons acting or
claiming to act in active concert or participation with one or more of
them, from continuing, maintaining, or renewing in any manner, directly
or indirectly, the conduct alleged herein or from engaging in any other
conduct, combination, conspiracy, agreement, understanding, plan,
program, or other arrangement having the same effect as the alleged
violations or that otherwise violates Section 1 of the Sherman Act, 15
U.S.C. 1, through price fixing of medical services, collective
negotiation on behalf of competing independent physicians or physician
groups, or group boycotts of the purchasers of health care services;
(c) Enjoin the Federation and any Federation representative from
representing or providing consulting services of any kind to any
medical practice group, or any self-employed physician; and
(d) Award to plaintiff its costs of this action and such other and
further relief as may be appropriate and as the Court may deem just and
proper.
Dated: June 24, 2005.
For Plaintiff, United States of America:
R. Hewitt Pate,
Assistant Attorney General, Antitrust Division.
J. Bruce McDonald,
Deputy Assistant Attorney General, Antitrust Division.
J. Robert Kramer II,
Director of Enforcement, Antitrust Division.
Mark J. Botti,
Chief, Litigation I, Antitrust Division.
Joseph Miller
Assistant Chief, Litigation I, Antitrust Division.
Gregory G. Lockhart,
United States Attorney.
Gerald F. Kaminski,
(Bar No. 0012532)
Assistant United States Attorney. Office of the United States
Attorney, 221 E. 4th Street, Suite 400, Cincinnati, Ohio 45202,
(513) 684-3711.
Steven Kramer,
John Lohrer,
Paul Torzilli,
Attorneys, Antitrust Division, United States Department of Justice,
1401 H Street, NW., Suite 4000, Washington, DC 20530, (202) 307-
0997, steven.kramer@usdoj.gov.
Certificate of Service
I hereby certify that on June 24, 2005, copies of the foregoing
Complaint were served by facsimile and first-class regular U.S. mail,
postage prepaid, to:
Michael E. DeFrank, Esq., Hemmer Pangburn DeFrank PLLC, Suite 200, 250
Grandview Drive, Fort Mitchell, KY 41017, Fax: 859-344-1188, Attorney
for Defendant Dr. James Wendel.
G. Jack Donson, Jr., Esq., Taft, Stettinius & Hollander, 425 Walnut
Street, Suite 1800, Cincinnati, Ohio 45202, Fax: 513-381-0205, Attorney
for Defendant Dr. Michael Karram.
Jeffrey M. Johnston, Esq., 37 North Orange Avenue, Suite 500, Orlando,
FL 32801, Fax: 407-926-2452, Attorney for Defendant Dr. Warren Metherd.
Paul J. Torzille,
Attorney, United States Department of Justice.
[FR Doc. 05-15138 Filed 8-1-05; 8:45 am]
BILLING CODE 4410-11-M