[Federal Register: January 24, 2008 (Volume 73, Number 16)]
[Notices]
[Page 4268-4285]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24ja08-107]
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DEPARTMENT OF JUSTICE
Antitrust Division
Public Comment and Response on Proposed Final Judgment
Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C.
16(b)-(h), the United States hereby publishes below five comments
received on the proposed Final Judgment in United States v. Federation
of Physicians and Dentists, Case No. 1:05-cv-431, which were filed on
December 17, 2007, in the United States District Court for the Southern
District of Ohio, together with the United States' response to the
comments.
Copies of the comments and the response are available for
inspection at the Department of Justice, Antitrust Division; 325
Seventh Street, NW.; Room 200; Washington, DC 20530 (telephone (202)
514-2481); and at the Office of the Clerk of the United States District
Court for the Southern District of Ohio, Potter Stewart U.S.
Courthouse, Room 103, 100 East Fifth Street, Cincinnati, Ohio 45202
(telephone (513) 564-7500). Copies of any of these materials may be
obtained upon request and payment of a copying fee.
J. Robert Kramer II,
Director of Operations, Antitrust Division.
In the United States District Court for the Southern District of Ohio
Western Division
United States of America, Plaintiff, vs. Federation of Physicians and
Dentists, et al., Defendants.
[Case No. 1:05-cv-431]
Hon. Sandra S. Beckwith, C.J.
Hon. Timothy S. Hogan, M.J.
Plaintiff United States' Response to Public Comments
Pursuant to the requirements of the Antitrust Procedures and
Penalties Act (``APPA'' or ``Tunney Act''), 15 U.S.C. 16(b)-(h), the
United States submits this response to five public comments relating to
the proposed Final Judgment that has been lodged with the Court for
eventual entry in this case. After review of the comments, the United
States continues to believe that the proposed Final Judgment will
provide an effective and appropriate remedy for the antitrust violation
alleged in the Complaint. Following publication of the comments and
this response to them in the Federal Register, pursuant to 15 U.S.C.
16(d), the United States will request that the Court enter the proposed
Final Judgment.
I. Procedural History
On June 24, 2005, the United States filed this civil antitrust
action, alleging that the Federation of Physicians and Dentists
(``Federation'') and Federation employee Lynda Odenkirk, along with
physician co-defendants Drs. Warren Metherd, Michael Karram, and James
Wendel, coordinated a conspiracy
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among about 120 obstetrician-gynecologist physicians (``OB-GYNs'')
practicing in greater Cincinnati, Ohio, that unreasonably restrained
interstate trade and commerce in violation of Section 1 of the Sherman
Act, 15 U.S.C. 1. The physician defendants agreed to a judgment that
was filed concurrently with the Complaint and entered by this Court on
November 14, 2005, as being in the public interest. (Dkt. Entry
36). The Federation and Ms. Odenkirk (the ``Federation
defendants''), however, contested the charges.
On January 26, 2006, the United States filed with the Court a
motion seeking entry of partial summary judgment on liability against
the Federation defendants. (Dkt. entry 40, 47).
After briefing on this motion was completed, the Federation defendants
filed an unopposed motion requesting the Court to order that the case
be referred to mediation. (Dkt. entry 63). On April 14, 2006,
the Court ordered that the case be referred to mediation.
Following two mediation conferences and protracted settlement
negotiations, on June 19, 2007, the United States filed with the Court
a settlement stipulation (Dkt. Entry 81) with the Federation
defendants, consenting to entry of the proposed Final Judgment (Dkt.
entry 81-2), which was lodged with the Court pending the
parties' compliance with the APPA. On July 18, 2007, the United States
published the Stipulation, proposed Final Judgment, and Competitive
Impact Statement (``CIS'') (Dkt. Entry 84) in the Federal
Register 39450 (2007), as required by the APPA to facilitate public
comments on the proposed Final Judgment. A summary of the terms of the
proposed Final Judgment and CIS was published for seven consecutive
days in the Cincinnati Enquirer from July 20 through July 26, 2007, and
in the Washington Post from July 18 through July 24, 2007, also
pursuant to the APPA. The 60-day period for public comments on the
proposed Final Judgment began on July 27, 2007, and expired on
September 24, 2007. During that period, five comments were submitted.
II. Summary of the Complainant's Allegations
The Federation is a membership organization of physicians and
dentists, headquartered in Tallahassee, Florida. the Federation's
membership includes economically independent physician groups in
private practice in many states, including Ohio. The Federation has
offered member physicians assistance in negotiating fees and other
terms in their contracts with health care insurers.
In spring 2002, several Cincinnati OB-GYNs became interested in
joining the Federation to negotiate higher fees from health care
insurers. The 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.
Withe substantial assistance from the physician defendants and Ms.
Odenkirk, the Federation coordinated and helped implement its members'
concerted demands to insurers for higher fees and related terms,
accompanied by threats of contract terminations. From September 2002
through the fall of 2003, Ms. Odenkirk communicated with the physician
defendants and other cincinnati-area OB-GYN Federation members to
coordinate their contract negotiations with health care insurers. Along
with the physician defendants, Ms. Odenkirk developed a strategy to
intensify Federation member physicians' pressure on health care
insurers to renegotiate their contracts, including informing member
physicians about the status of competing member groups' negotiations
and taking steps to coordinate their negotiations.
The agreement coordinated by the Federation defendants forced
Cincinnati-area health care insurers to raise fees paid to Federation
member OB-GYNs above the levels that would likely have resulted if
Federation members had negotiated competitively with those insurers. As
a result of the conspirators' conduct, the three largest Cincinnati-
area health care insurers each were forced to increase fees paid to
most Federation member 0B-GYNs by approximately 15-20% starting July 1,
2003, followed by cumulative increases of approximately 20-25% starting
January 1, 2004, and approximately 25-30% effective January 1, 2005.
This conduct by Federation member OB-GYNs, coordinated by the
Federation defendants, also caused other insurers to raise the fees
that they paid to Federation OB-GYN members. The increased fees paid by
health care insurers to Federation OB-GYN members in the Cincinnati
area are ultimately borne by employers and their employees.
iii. Summary of Relief to be Obtained Under the Proposed Final Judgment
The proposed Final Judgment is designed to enjoin the Federation
defendants from taking future actions that could facilitate private-
practice physicians in coordinating their dealings with payers for
health care services. It accordingly prohibits the Federation
defendants from being involved in its private-practice members'
negotiations or contracting with health insurers or other payers for
health care services anywhere in the United States.
The proposed Final Judgment prohibits the Federation defendants
from providing any services to any physician in private practice
(defined as an ``independent physician'') regarding such physician's
negotiation, contracting, or other dealings with any payer. The
proposed Final Judgment also prohibits the Federation defendants from
(1) representing any independent physician with any payer (including as
a messenger); (2) reviewing or analyzing, for any such physician, any
proposed or actual contract or contract term between the physician and
any payer; and (3) communicating with any independent physician about
the status of that physician's, or any other physician's, negotiations,
contracting, or participation with any payer. The Federation defendants
are also generally prohibited from communicating about any proposed or
actual contract or contract term between any independent physician and
any payer. In addition, the proposed Final Judgment enjoins the
Federation defendants from responding to any question initiated by any
payer, except to state that the Final Judgment prohibits such a
response. Finally, the proposed Final Judgment generally prohibits the
Federation defendants from training or educating, or attempting to
train or educate, any independent physician in any aspect of
contracting or negotiating with any payer.
The proposed decree includes exceptions to these prohibitions
covering conduct that neither threatens competitive harm nor undermines
the clarity of the prohibitions. For example, the proposed decree
limits its prohibition on training or educating independent physicians
in any aspect of contracting or negotiating with payers by allowing the
Federation defendants to
(1) Speak on general topics (including contracting), when (a)
invited to do so as part of a regularly scheduled medical
educational seminar offering continuing medical education credit,
(b) advance written notice has been given to Plaintiff, and (c)
documents relating to what was said by the Federation defendants are
retained by them for possible inspection by the United States.
(2) Publish articles on general topics (including contracting)
in a regularly disseminated newsletter; and
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(3) Provide education to independent physicians regarding the
regulatory structure (including legislative developments) of workers
compensation, Medicaid, and Medicare, except Medicare Advantage,
provided that such conduct does not violate any other injunctive
provision of the proposed Final Judgment.
In a section titled ``permitted conduct,'' the proposed decree
permits certain other conduct as well:
(1) Federation defendants may engage in activities involving
physician participation in written fee surveys that are covered by
the ``safety zone'' under Statement 6 of the 1996 Statements of
Antitrust Enforcement Policy in Health Care, 4 Trade Reg. Rep. (CCH)
] 13,153, which addresses provider participation in exchanges of
price and cost information;
(2) Federation defendants and Federation members may engage in
lawful union organizational efforts and activities;
(3) Federation defendants may petition governmental entities in
accordance with doctrine established in Eastern Railroad Presidents
Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961), and
its progeny; and
(4) Federation physician members may choose independently, or
with other members or employees of such member's bona fide solo
practice or practice groups, the health insurers with which to
contract, and/or to refuse to enter into discussions or negotiations
with any health care payer.
The proposed Final Judgment clarifies that it does not alter the
Federation's obligations under the decree entered by the district court
in Delaware in a prior, similar case against the Federation, United
States v. Federation of Physicians and Dentists, Inc., CA 98-475 JJF
(D. Del., consent judgment entered Nov. 6, 2002) (the ``Delaware
decree''). If there is any conflict between the injunctive provisions
of the proposed Final Judgment and the injunctive provisions or conduct
permitted by the Delaware decree, the proposed Final Judgment controls.
The proposed Final Judgment embodies more stringent relief than that
provided by the Delaware decree because it prohibits the Federation,
for example, from representing physicians in their dealings with payers
as a messenger and reviewing and analyzing physician contracts with any
payer. The Delaware decree had permitted such conduct in limited
circumstances.
IV. Summary of Public Comments and the United States' Responses to Them
During the 60-day public comment period, the United States received
comments from one individual and four medical societies. Upon review,
the United States believes that nothing in the comments warrants a
change in the proposed Final Judgment or suggests that the proposed
Final Judgment is not in the public interest. None of the comments
contend that the proposed decree fails adequately to redress the
violations and competitive harm alleged in the Complaint. Rather, two
of the comments contend that the proposed Final Judgment is too
stringent, and another implies the same point. Two other comments
contend that this case resulted from an unfair application of the
antitrust laws to physicians in their dealings with insurers. The
remaining comment generally criticizes what is characterized as an
unreasonably aggressive antitrust enforcement policy by the Department
of Justice and Federal Trade Commission with respect to physicians. The
United States addresses these concerns below and explains why the
proposed Final Judgment is appropriate.
A. Comments Questioning the Charges Brought Against the Federation
Defendants
1. Summary of Comments Submitted by Dr. Michael Connair and the
American Academy of Orthopaedic Surgeons
Dr. Michael Connair, an orthopedic surgeon in Connecticut and a
Vice President of the defendant Federation of Physicians and dentists,
has submitted a comment (attachment 1) that criticizes the United
States' Competitive Impact Statement (``CIS'') (Dkt. Entry
84) as ``reflect[ing] a misguided DOJ enforcement policy that ignores
antitrust principles and that encourages anticompetitive behavior by
insurers.'' According to Dr. Connair, the CIS ignores that Cincinnati
``physicians were forced to react to anti-competitive behaviors by
Cincinnati insurers because the Department of Justice did not enforce
antitrust principles against those insurers.''
Similarly, the American Academy of Orthopaedic Surgeons' comment
(Attachment 2) expresses the Academy's belief that this case ``is the
result of the antitrust laws not being applied equally to the insurance
industry as they are to physicians or other professions,'' which
``would reduce competition in the insurance industry and, ultimately,
harm consumers.'' The Academy's comment also asserts that ``[i]n this
case, the physicians appeared to be reacting to anticompetitive
behaviors by Cincinnati insurers which artifically lowered prices below
Medicare levels.''
2. United States' Response to Comments Submitted by Dr. Michael Connair
and the American Academy of Orthopaedic Surgeons
Dr. Connair's and the Academy's comments challenge the United
States' decision to prosecute the defendants' alleged anticompetitive
conduct, rather than alleged anticompetitive actions by health
insurers. Such an argument is outside the scope of this APPA proceeding
because the APPA does not permit the Court to review the efficacy or
``correctness'' of the United States' enforcement policy or its
determination to pursue--or not pursue--a particular claim in the first
instance. As explained by the District Court for the District of
Columbia, in a Tunney Act ``public interest'' proceeding, the district
court should not second-guess the prosecutorial decisions of the
Antitrust Division regarding the nature of the claims brought in the
first instance; ``rather, the court is to compare the complaint filed
by the United States with the proposed consent decree and determine
whether the proposed decree clearly and effectively addresses the
anticompetitive harms initially identified.'' United States v. The
Thomson Corp, 949 F. Supp. 907, 913 (D.D.C. 1996); accord, United
States v. Microsoft Corp., 56 F.3d 1448, 1459 (D.C. Cir. 1995) (in APPA
proceeding, ``district court is not empowered to review the actions or
behavior of the Department of Justice; the court is only authorized to
review the decree itself'').
Although the comments of Dr. Connair and the Academy are beyond the
scope of an APPA proceeding, the United States nevertheless observes
that their comments are incorrect as a matter of fact and law. The
United States believes that the uncontested evidence and law presented
in support of its motion for summary judgment, which the Court was not
called on to decide in view of the parties' proposed settlement,
strongly supports the Complaint's allegations that the Federation
defendants violated the antitrust laws. (Dkt. Entry
1, 47). Further, even if the Federation defendants believed that
Cincinnati insurers had colluded on payments made to OB-GYNs, as the
comments imply, such circumstances would provide no defense for the
Federation defendants' coordination of Cincinnati OB-GYNs price fixing.
Controlling law is clear ``[t]hat a particular practice may be unlawful
is not, in itself, a sufficient justification for collusion among
competitors to prevent it.'' FTC v. Indiana Fed'n of Dentists, 476 U.S.
447, 465 (1986).
[[Page 4271]]
B. Comments Arguing that the Proposed Final Judgment is Overly
Restrictive
1. Summary of Comments Submitted by the Connecticut State Medical
Society, Connecticut Orthopedic Society, and Utah State Orthopaedic
Society
The Connecticut State Medical Society (CSMS) comments (Attachment
3) that the proposed Final Judgment is ``unnecessarily restrictive and
more onerous than final decrees typically proposed by both the
[Department of Justice] and the Federal Trade Commission (FTC) under
similar circumstances in that it precludes the Federation from engaging
in lawful conduct including representing physicians in their dealing
with payers as messengers and from reviewing and analyzing physician
contracts with any third-party payer.'' The CSMS asks the United States
to modify the proposed Final Judgment to allow the defendant Federation
to participate in (1) qualified risk-sharing and qualified clinically
integrated joint arrangements, (2) messenger-model arrangements, and
(3) communications with physicians about insurer contracts. The
Connecticut Orthopedic Society comments (Attachment 4) in support of
the letter submitted by the CSMS.
The Utah State Orthopaedic Society's (``USOS's'') comment
(Attachment 5) states that the defendant Federation has served as a
messenger for orthopedists in Utah with productive results. Based on
the Utah experience, the comment ``presume[s] that the activities in
Cincinnati have been handled in a similar fashion by the Federation.''
The USOS's comment further expresses the ``hope * * * [that] the
`messenger model' throughout the country is managed legally by those
that employ it.''
2. United States' Response to Comments Submitted by the Connecticut
State Medical Society, Connecticut Orthopedic Society, and Utah State
Orthopaedic Society
These comments seek entry of a decree that essentially tracks the
Delaware decree. The United States had agreed to resolve its earlier
case against the Federation, in part, to give the Federation an
opportunity to conduct some of its activities in a lawful manner that
should not have led to anticompetitive results. The Federation
defendants' actions in Cincinnati, as alleged in the United States'
Complaint (Dkt. Entry 1) and demonstrated in its summary
judgment brief (Dkt. Entry 47), however, have shown that such
a decree is insufficient to prevent the Federation defendants from
engaging in substantial anticompetitive conduct and, therefore, that a
more restrictive decree is appropriate. The Federation defendants'
alleged conduct in Cincinnati demonstrates that the USOS's expressed
``hope'' that the Federation defendants have employed the ``messenger
model'' appropriately elsewhere has not been realized.
Had the Federation defendants' complied with the Delaware decree,
it plainly would have prevented them from coordinating Cincinnati OB-
GYNs' fee negotiations with health insurers. The Federation defendants
nonetheless have steadfastly maintained that their conduct challenged
in this matter complied with the Delaware decree, which--like the
proposed Final Judgment--is nationwide in scope. Accordingly, the
United States decided in this matter to negotiate a more restrictive
proposed Final Judgment with the Federation defendants that assures
that the Federation will not again engage in conduct that has the
anticompetitive effect alleged in the complaint. The proposed Final
Judgment thus provides appropriate additional assurance that the type
of conduct that occurred in Cincinnati, despite the Delaware decree,
will not recur.
In short the orthopedic groups' comments fail to recognize that the
Federation defendants' conduct in Cincinnati has shown that the
Delaware decree is insufficient to prevent their recurrent
anticompetitive conduct and, therefore, that a more stringent decree is
required. ``While the resulting [proposed Final Judgment] may curtail
the exercise of liberties that the [Federation defendants] might
otherwise enjoy, that is a necessary and, in cases such as this,
unavoidable consequence of the [recurrent] violation.'' Nat'l Soc'y of
Prof'l Eng'rs v. United States, 435 U.S. 679, 697 (1978). Although the
proposed Final Judgment ``goes beyond a simple proscription against the
precise conduct previously pursued[,] that is entirely appropriate''
under the circumstances. Id. at 698.
Conclusion
After considering the five comments received, the United States
continues to believe that the proposed Final Judgment reasonably and
appropriately addresses the harm alleged in the Complaint. Therefore,
following publication of this response to comments in the Federal
Register and submission of the United States' certification of
compliance with the APPA, the United States intends to request entry of
the proposed Final Judgment once the Court determines that entry is in
the public interest.
Dated: December 17, 2007.
Respectfully submitted,
For Plaintiff United States of America
Gregory G. Lockhart,
United States Attorney.
/s/ Gerald F. Kaminski
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.
/s/ Steven Kramer
Steven Kramer
Attorney, Antitrust Division.
U.S. Department of Justice, 1401 H Street, NW., Suite 4000,
Washington, DC 20530, (202) 307-0997, steven.kramer@usdoj.gov.
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[FR Doc. 08-227 Filed 1-23-08; 8:45 am]
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