[Federal Register Volume 75, Number 108 (Monday, June 7, 2010)]
[Notices]
[Pages 32210-32221]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-13610]
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DEPARTMENT OF JUSTICE
Antitrust Division
United States v. Idaho Orthopaedic Society, Timothy Doerr,
Jeffrey Hessing, Idaho Sports Medicine Institute, John Kloss, David
Lamey, and Troy Watkins; Proposed Final Judgment and Competitive Impact
Statement
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment,
Stipulation, and Competitive Impact Statement have been filed with the
United States District Court for the District of Idaho in United States
of America v. Idaho Orthopaedic Society, Timothy Doerr, Jeffrey
Hessing, Idaho Sports Medicine Institute, John Kloss, David Lamey, and
Troy Watkins, Civil Case No. 10-268. On May 28, 2010, the United States
filed a Complaint alleging that each of the Defendants, and other
competing orthopedists and orthopedic practices in Idaho, formed and
participated in one or more conspiracies to gain more favorable fees
and other contractual terms by agreeing to coordinate their actions,
including denying medical care to injured workers and to threaten to
terminate their contracts with Blue Cross of Idaho, in violation of
Section 1 of the Sherman Act, 15 U.S.C. 1, and Idaho Code Section 48-
101 et seq. of the Idaho Competition Act. The proposed Final Judgment,
filed the same time as the Complaint, enjoins the Defendants from
jointly agreeing with competing physicians regarding the amount of pay
to accept from any payer or groups of payers or jointly boycotting any
payer or group of payers.
Copies of the Complaint, proposed Final Judgment, and Competitive
Impact Statement are available for inspection at the Department of
Justice, Antitrust Division, Antitrust Documents Group, 450 Fifth
Street, NW., Suite 1010, Washington, DC 20530 (telephone: 202-514-
2481), on the Department of Justice's Web site at http://www.justice.gov/atr, and at the Office of the Clerk of the United
States District Court for the District of Idaho. Copies of these
materials may be obtained from the Antitrust Division upon request and
payment of the copying fee set by Department of Justice regulations.
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 Joshua H. Soven, Chief, Litigation I Section, Antitrust
[[Page 32211]]
Division, U.S. Department of Justice, 450 Fifth Street, NW., Suite
4100, Washington, DC 20530 (telephone: 202-307-0827).
J. Robert Kramer II,
Director of Operations and Civil Enforcement.
Christine A. Varney, Assistant Attorney General; Peter J. Mucchetti,
Trial Attorney (DCB No. 463202); U.S. Department of Justice Antitrust
Division, 450 Fifth Street, NW., Suite 4100, Washington, DC 20530,
[email protected]. Telephone: (202) 353-4211. Facsimile:
(202) 307-5802. Attorneys for the United States.
Lawrence Wasden, Attorney General; Brett T. DeLange, Deputy Attorney
General (ISB No. 3628); Consumer Protection Division, Office of the
Attorney General, 954 W. Jefferson St., 2nd Floor, P.O. Box 83720,
Boise, Idaho 83720-0010, [email protected]. Telephone: (208)
334-4114. Facsimile: (208) 334-4151. Attorneys for the State of Idaho.
(See signature page for the complete list of plaintiffs' attorneys).
United States District Court for the District of Idaho
Civil Case No. 10-268
United States of America and the State of Idaho, Plaintiffs, vs.
Idaho Orthopaedic Society, Timothy Doerr, Jeffrey Hessing, Idaho Sports
Medicine Institute, John Kloss, David Lamey, and Troy Watkins,
Defendants; Complaint
The United States of America, acting under the direction of the
Attorney General of the United States, and the State of Idaho, acting
under the direction of the Attorney General of the State of Idaho,
bring this action for equitable and other appropriate relief against
Defendants Idaho Orthopaedic Society, Dr. Timothy Doerr, Dr. Jeffrey
Hessing, Idaho Sports Medicine Institute, Dr. John Kloss, Dr. David
Lamey, and Dr. Troy Watkins, to restrain Defendants' violations of
Section 1 of the Sherman Act and Idaho Code Section 48-101 et seq. of
the Idaho Competition Act. Plaintiffs allege as follows:
I. Nature of the Action
1. Defendants and other competing orthopedists and orthopedic
practices in the Boise, Idaho area formed two conspiracies to deny, or
to threaten to deny, medical care to patients to force those patients'
insurers to increase fees for orthopedic services.
2. In the first conspiracy, Defendants and their co-conspirators
agreed, through a series of meetings and other communications, not to
treat most patients covered by workers' compensation insurance.
Defendants entered into this group boycott to force the Idaho
Industrial Commission to increase the rates at which orthopedists are
reimbursed for treating injured workers. Defendants' group boycott,
which resulted in a shortage of orthopedists willing to treat workers'
compensation patients, caused the Idaho Industrial Commission to
increase rates for orthopedic services substantially above levels set
just a year earlier.
3. In the second conspiracy, Defendants (except for Defendant
Lamey) and other conspirators agreed, through a series of meetings and
other communications, to threaten to terminate their contracts with
Blue Cross of Idaho (``BCI'') to force it to offer better contract
terms to orthopedists. Their collusion caused BCI to offer orthopedists
more favorable contract terms than BCI would have offered but for
Defendants' group boycott of BCI.
4. The United States and the State of Idaho, through this suit, ask
this Court to declare Defendants' conduct illegal and to enter
injunctive relief to prevent further injury to the State of Idaho and
other purchasers of orthopedic services, including self-insured
employers and health and workers' compensation insurers in the Boise,
Idaho area and elsewhere.
II. Defendants
5. The Idaho Orthopaedic Society (``IOS'') is a non-profit
corporation organized and doing business under the laws of the State of
Idaho, with its principal place of business in Boise. The IOS is a
membership organization that, from 2006 to 2008, consisted of
approximately 75 economically independent, competing orthopedists in
solo and group practices in Idaho.
6. Timothy Doerr, MD is an orthopedic surgeon practicing in Boise.
He was at all relevant times a member of the IOS.
7. Jeffrey Hessing, MD is an orthopedic surgeon practicing in
Boise. He was at all relevant times a member of the IOS.
8. Idaho Sports Medicine Institute, P.A. (``ISMI''), an orthopedic
practice group consisting of four physicians, is a corporation
organized and doing business under the laws of the State of Idaho, with
its principal place of business in Boise.
9. John Kloss, MD is an orthopedic surgeon practicing in Boise who
formerly practiced with Orthopedic Centers of Idaho, P.A., d.b.a. Boise
Orthopedic Clinic (``BOC''). He was at all relevant times a member of
the IOS.
10. David Lamey, MD is an orthopedic surgeon practicing in Boise
who formerly practiced with BOC. He was at all relevant times a member
of the IOS.
11. Troy Watkins, MD is an orthopedic surgeon practicing in Boise,
and was from 2006 through 2008 the President of the IOS. He was at all
relevant times a member of the IOS.
III. Jurisdiction and Venue
12. The Court has subject-matter jurisdiction over this action
under 15 U.S.C. 4 and 15 U.S.C. 26, which authorize the United States
and the State of Idaho, respectively, to bring actions in district
courts to prevent and restrain violations of Section 1 of the Sherman
Act, 15 U.S.C. 1. Subject-matter jurisdiction also exists pursuant to
28 U.S.C. 1331, 1337 and 1345.
13. The Court has jurisdiction over the State of Idaho's claim
under Idaho Code Section 48-101 et seq., under the doctrine of pendent
jurisdiction, 28 U.S.C. 1367.
14. The IOS and ISMI are both found, have transacted business, and
committed acts in furtherance of the alleged violations in the District
of Idaho. Defendants Doerr, Hessing, Kloss, Lamey, and Watkins all
provide orthopedic services and reside in Idaho. Consequently, this
Court has personal jurisdiction over Defendants, and venue is proper in
this District pursuant to 28 U.S.C. 1391(b).
IV. Conspirators
15. Various persons not named as defendants in this action have
participated as conspirators with Defendants in the offenses alleged
and have performed acts and made statements in furtherance of the
alleged conspiracies.
V. Effects on Interstate and Idaho Commerce
16. The activities of Defendants that are the subject of this
Complaint are within the flow of, and have substantially affected,
interstate trade and commerce.
17. Defendants have treated patients who are not residents of
Idaho. Defendants have also purchased equipment and supplies that were
shipped across state lines.
18. Most Idaho employers provide workers' compensation and health
insurance for their employees. The rates that Idaho employers pay for
providing workers' compensation and health insurance are based in part
on the cost of orthopedic services. Anticompetitive conduct that
increases the cost of
[[Page 32212]]
orthopedic services increases the cost of producing goods and services,
which many Idaho employers sell in interstate commerce.
VI. Idaho Workers' Compensation System Conspiracy
19. The Idaho Workers' Compensation Act, Idaho Code Section 72-101
et seq., requires that most public and private employers in Idaho carry
workers' compensation insurance for their employees.
20. The Idaho Industrial Commission is the state agency responsible
for regulating workers' compensation insurance in Idaho. Since 2006,
the Idaho Industrial Commission has set the fee schedule that
determines the amount that orthopedists and other healthcare providers
usually receive for treating patients covered by workers' compensation
insurance. The fee schedule uses a methodology for determining
physician payments called a Resource-Based Relative Value System or
RBRVS.
21. The RBRVS methodology uses a ``relative value unit'' and a
``conversion factor'' to determine physician payment. The relative
value unit measures the resources necessary to perform a medical
service. For example, a complicated surgical procedure has a higher
relative value unit than a simple office visit. The conversion factor
is a set dollar amount, for example, $100.
22. A physician's payment for any medical service is generally
calculated by multiplying the relative value unit by the conversion
factor. For example, a physician would receive $500 for a medical
service with a relative value unit of 5 and a conversion factor of
$100.
23. In February 2006, the Idaho Industrial Commission announced a
new fee schedule using the RBRVS methodology and setting a conversion
factor of $88 for many orthopedic procedures. The new fee schedule had
an effective date of April 1, 2006. Many orthopedists believed this
conversion factor would result in lower payments to orthopedists. In
response, Defendants and their co-conspirators agreed, through the
actions discussed below, not to treat most patients covered by workers'
compensation insurance.
24. Shortly after the Idaho Industrial Commission announced the
February 2006 fee schedule, many Boise-area orthopedists from competing
practices discussed with one another whether to accept the proposed
rates or, alternatively, to stop treating workers' compensation
patients. For example, at Defendant Doerr's invitation, orthopedists
from several competing practices met on March 2, 2006 to talk about
``the physician response to the new fee schedule.'' Also on March 2,
2006, an orthopedist specializing in hand surgery sent an e-mail to
several competing orthopedic hand surgeons saying that the new
conversion factors represented a severe cut in workers' compensation
payments and that, at Defendant Doerr's meeting that night,
orthopedists would examine their options. On the same day, Defendant
Lamey wrote to a competing orthopedist that he did ``not have much
problem dropping out of work comp.''
25. The day after the March 2, 2006 meeting, orthopedists from two
competing practices sent letters to the Idaho Industrial Commission
announcing their intention to stop treating workers' compensation
patients.
26. Many of the orthopedists who initially boycotted the workers'
compensation system were orthopedists who specialized in hand surgery.
For example, on April 12, 2006, seven hand surgeons met ``to discuss
the various docs' interest in continuing to participate'' in Idaho's
workers' compensation system. An e-mail describing this meeting noted
that Defendant Lamey and a competing orthopedist favored ``ditching''
workers' compensation and that Defendant Kloss agreed but wanted to
negotiate a rate increase with the Idaho Industrial Commission. The day
after that meeting, Defendants Kloss and Lamey stopped treating
workers' compensation patients, with the exception of emergency room
patients.
27. A June 6, 2006 letter from the IOS leadership, including
Defendants Watkins and Kloss, to members instructed them that they ``
`must, indeed, all hang together or, most assuredly, we shall all hang
separately.' '' The letter noted that orthopedists ``must act
together'' concerning the workers' compensation fee schedule and
``collectively join our efforts for our practices'' to negotiate a more
favorable fee schedule.
28. Minutes from a BOC board of directors meeting on June 12, 2006,
state that BOC's president told the board that Boise-area orthopedists
specializing in hand surgery ``have stopped taking new work comp
patients.'' The minutes continue, saying, ``Dr. Kloss confirmed this,
except for [emergency room] call patients. [Defendant Kloss] said there
has been an appeal for orthopedists to support the hand surgeons in
their effort to demonstrate the inadequacy of payment for some
orthopedic procedures.''
29. On September 12, 2006, orthopedists from competing practices
attended a meeting organized by Defendants Doerr and Hessing to discuss
workers' compensation fees. Within ten days of the meeting, ISMI and
two other large orthopedic practices in the Boise area stopped treating
workers' compensation patients.
30. By October 2006, most of the approximately 65 orthopedists in
the Boise area had stopped seeing most workers' compensation patients.
31. Five of the few remaining Boise orthopedists who continued to
care for workers' compensation patients worked at BOC. Other
orthopedists encouraged and pressured those BOC orthopedists to join
the boycott and stop seeing workers' compensation patients. In an
October 24, 2006 e-mail, BOC's president also encouraged these five BOC
orthopedists to join the boycott. He explained that if the doctors were
to stop treating new workers' compensation patients, the workers'
compensation system would ``be brought to a virtual standstill,''
increasing the doctors' negotiating leverage.
32. Over the following months, orthopedists and practice
administrators regularly monitored adherence with the group boycott and
pressured doctors to maintain a disciplined front. For example, on
November 27, 2006, an ISMI administrator assured a competing practice
that although ISMI had recently accepted one workers' compensation
patient to offer a second opinion, it would not do so again, lest it
``risk the rath [sic] of all the orthopedic surgeons because we're
doing this.'' The ISMI administrator assured the competing practice
group that ISMI was ``turning away all other worker's comp cases,'' and
asked the recipient to ``[p]lease tell your docs what we did so it
doesn't come back and sound worse than it already is!''
33. Defendants and their co-conspirators refused to treat most
workers' compensation patients because they believed that if injured
workers were unable to find orthopedists willing to treat them, the
Idaho Industrial Commission would be forced to increase the orthopedist
fee schedule. An ISMI employee explained that her practice's ``lack of
participation, along with others in the area, may cause them [i.e., the
Idaho Industrial Commission] to review their current Proposed Rule,
which also includes the fee schedule.'' A January 2007 IOS newsletter
notes that ``lack of access [to orthopedists] is the key'' to increased
workers' compensation rates.
34. According to the February 5, 2007 minutes of the Idaho House of
Representatives Commerce & Human Resources Committee, Defendant Watkins
openly discussed that
[[Page 32213]]
physicians had agreed not to treat most workers' compensation patients.
The minutes describe Defendant Watkins as stating that ``[a] group of
physicians met and decided that the [fee] table was not satisfactory.
They decided to stop seeing workers' compensation patients [except] in
the emergency room, and stop seeing and giving second opinions until
discussion happened about [the] conversion factor chart.''
35. In the face of an effective and widely adhered to group
boycott, in February 2007, the Idaho Industrial Commission announced
workers' compensation rates that were up to 61% higher than the rates
that the Commission had announced a year earlier.
36. After the new rates were announced, Defendants and their co-
conspirators agreed to end their boycott and accept the new rates. In a
February 13, 2007 letter to IOS membership, Defendant Watkins wrote,
``We * * * all think this [the higher fee schedule] represents a major
accomplishment, and that we should accept it now.'' Shortly thereafter,
Defendants and almost all of the orthopedists who had participated in
the conspiracy resumed participation in the workers' compensation
system.
VII. Blue Cross of Idaho Conspiracy
37. BCI is a not-for-profit mutual insurance company that offers a
wide range of healthcare plans to employers and other groups in Boise
and other areas of Idaho.
38. To offer these plans, BCI contracts with orthopedists and other
physicians to provide medical services. BCI's contracts with
orthopedists set the reimbursement amounts that BCI pays orthopedists
for providing covered health care to BCI's enrollees.
39. In December 2007, BCI informed its network of orthopedists and
other physicians of new rates that would take effect on April 1, 2008.
Some of the Defendants and other orthopedists were concerned that the
new rates were lower than BCI's previous rates.
40. Before the rates became effective, several of the Defendants
and other competing orthopedists communicated with each other their
dissatisfaction with BCI's proposed rates. In addition, on February 22,
2008, Defendant Watkins sent a letter to BCI saying that ``[m]any of
our members are worried that they may not be able to sustain some of
the reductions they are facing with the proposed 2008 rates.''
41. On April 9, 2008--eight days after the new BCI rates took
effect--the IOS sponsored an ``Orthopedic Open House'' at Defendants
Hessing and Doerr's office. At this meeting, the orthopedists discussed
how to respond to BCI's adoption of new rates and encouraged others to
send termination notices to BCI. Defendants Doerr and Hessing
encouraged the orthopedists in attendance to put an ad in the newspaper
to alert their patients and to assure other orthopedists that they were
joining the boycott.
42. Shortly after the Orthopedic Open House, orthopedists began
issuing termination notices to BCI and advertising their intended
withdrawals in local newspapers. Between April and June 2008, twelve
practice groups--representing approximately 31 of 67 orthopedists in
the Boise area at the time--gave BCI notice that they would withdraw
from BCI's network. This group included many IOS practice groups,
including the practice group of Defendants Hessing and Doerr, and ISMI.
43. From April to June 2008, while orthopedic groups were sending
termination notices to BCI, orthopedists communicated with each other
to encourage others to withdraw from the BCI network. As part of this
communication, many practices placed newspaper advertisements
announcing their withdrawal from the BCI network. In addition,
orthopedists discussed how the successful boycott of workers'
compensation patients provided the model for collectively standing up
to BCI and negotiating higher rates.
44. In June 2008, Defendant Watkins attempted to negotiate with BCI
on behalf of competing orthopedists. He asked that BCI representatives
meet with himself, Defendant Hessing, and Defendant Kloss (all of whom
were in competing practices). In a separate June 2008 meeting,
Defendant Watkins told BCI representatives that Idaho's orthopedists
were a ``very cohesive group'' that had been successful in their
efforts related to workers' compensation payments the previous year.
Defendant Watkins also encouraged BCI to negotiate with practices that
had already sent termination notices to BCI because otherwise BCI would
experience a severe shortage of orthopedists in its network.
45. In response to the orthopedists' group boycott, on June 18,
2008, BCI offered orthopedists an additional contracting option to
encourage orthopedists to continue to participate in BCI's provider
network. The new option allowed orthopedists to choose between
continuing to participate in BCI's network at current rates for one
year with the possibility for higher rates the next year or to lock in
existing rates for a three-year period. The new offer from BCI divided
Boise's orthopedists, as several orthopedic practices accepted the new
BCI offer.
46. In July 2008, when the conspirators failed to convince a large
Boise orthopedic practice to join the boycott of BCI and that practice
decided to continue its participation with BCI, BCI was able to
contract with a sufficient number of orthopedists to maintain a viable
physician network. Realizing that no further concessions beyond BCI's
new offer would be forthcoming, practice groups began rescinding their
termination notices. By the end of August 2008, most orthopedic
practices had rescinded their termination notices and remained in the
BCI network.
VIII. No Integration
47. Other than in their separate practices, IOS members do not
share any financial risk in providing physician services, do not
collaborate in a program to monitor and modify their clinical practice
patterns to control costs or ensure quality, and do not otherwise
integrate their delivery of care to patients.
IX. Violations Alleged
A. Claim 1: Conspiracy To Boycott Workers' Compensation Patients
48. Plaintiffs reiterate the allegations contained in paragraphs 1
through 36 and 47.
49. Beginning at least as early as February 2006 and continuing
until at least February 2007, Defendants and their co-conspirators
engaged in a combination or conspiracy in restraint of trade or
commerce, in violation of Section 1 of the Sherman Act, 15 U.S.C. 1,
and Section 48-104 of the Idaho Competition Act, by collectively
refusing to treat workers' compensation patients. The Defendants' group
boycott to refuse to treat workers' compensation patients led to
Defendants' obtaining higher reimbursement rates from the Idaho
Industrial Commission.
B. Claim 2: Conspiracy To Boycott Participation in BCI
50. Plaintiffs reiterate the allegations contained in paragraphs 1
through 47.
51. Beginning in or about January 2008, and continuing through at
least August 2008, the participating Defendants and their co-
conspirators engaged in a combination or conspiracy in restraint of
interstate trade or commerce in violation of Section 1 of the Sherman
Act, 15 U.S.C. 1, and Section 48-104 of the Idaho Competition Act, by
collectively threatening to terminate their contracts with BCI. The
participating Defendants'
[[Page 32214]]
group boycott to terminate their contracts with BCI led to Defendants'
obtaining more favorable contract terms from BCI.
X. Request for Relief
52. To remedy these illegal acts, the United States of America and
the State of Idaho request that the Court:
a. Adjudge and decree that Defendants entered into two unlawful
contracts, combinations, or conspiracies in unreasonable restraint of
interstate trade and commerce in violation of Section 1 of the Sherman
Act, 15 U.S.C. 1, and Idaho Code Section 48-104 of the Idaho
Competition Act;
b. Enjoin the Defendant IOS and its members, officers, agents,
employees and attorneys and their successors; Defendant ISMI; 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 to fix health care services prices,
collectively negotiate on behalf of competing independent physicians or
physician groups, or collectively boycott patients or health care
insurers or other payors of health care services; and
c. Award to plaintiffs their costs of this action and such other
and further relief as may be appropriate and as the Court may deem just
and proper.
DATE: May 28, 2010.
FOR PLAINTIFFS
UNITED STATES OF AMERICA:
CHRISTINE A. VARNEY,
Assistant Attorney General, Antitrust Division.
MOLLY S. BOAST,
Deputy Assistant Attorney General, Antitrust Division.
WILLIAM F. CAVANAUGH, Jr.,
Deputy Assistant Attorney General, Antitrust Division.
J. ROBERT KRAMER II,
Director of Enforcement, Antitrust Division.
JOSHUA H. SOVEN,
Chief, Litigation I, Antitrust Division.
PETER J. MUCCHETTI,
ADAM GITLIN,
BARRY J. JOYCE,
MICHAEL T. KOENIG,
STEVEN KRAMER,
JULIE A. TENNEY,
PAUL J. TORZILLI.
Attorneys, Antitrust Division, United States Department of Justice,
450 Fifth Street, NW., Suite 4100, Washington, DC 20530, Telephone:
(202) 353-4211, Facsimile: (202) 307-5802,
[email protected].
THOMAS E. MOSS,
United States Attorney.
NICHOLAS J. WOYCHICK,
Civil Chief, United States Attorney's Office, 800 Park Boulevard,
Suite 600, Boise, ID 83712-9903, (208) 334-1211.
STATE OF IDAHO:
LAWRENCE WASDEN,
Attorney General.
BRETT DELANGE,
Deputy Attorney General (ISB No. 3628).
Office of the Attorney General, Consumer Protection Division, 954 W.
Jefferson St., 2nd Floor, P.O. Box 83720, Boise, Idaho 83720-0010,
Telephone: (208) 334-4114, Facsimile: (208) 334-4151,
[email protected].
United States District Court for the District of Idaho
Civil Case No. 10-268-S.EJL
United States of America and the State of Idaho, Plaintiffs, v.
Idaho Orthopaedic Society, Timothy Doerr, Jeffrey Hessing, Idaho Sports
Medicine Institute, John Kloss, David Lamey, and Troy Watkins,
Defendants; Final Judgment.
Whereas, Plaintiffs, the United States of America and the State of
Idaho, filed their joint Complaint on May 28, 2010, alleging that the
defendants, the Idaho Orthopaedic Society, Dr. Timothy Doerr, Dr.
Jeffrey Hessing, Idaho Sports Medicine Institute, Dr. John Kloss, Dr.
David Lamey, and Dr. Troy Watkins, participated in agreements in
violation of Section 1 of the Sherman Act, and the State of Idaho has
also alleged in the Complaint that the defendants violated Idaho Code
Section 48-104 of the Idaho Competition Act; and the Plaintiffs and the
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 whereas this Final Judgment does not constitute any admission
by the defendants that the law has been violated or of any issue of
fact or law, other than that the jurisdictional facts as alleged in the
Complaint are true;
And whereas the defendants agree to be bound by the provisions of
this Final Judgment, pending its approval by this Court;
And whereas, the United States requires the 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
plaintiffs and the defendants, it is ordered, adjudged and decreed:
I. Jurisdiction
This Court has jurisdiction over the subject matter of and each of
the parties to this action. The Complaint states a claim upon which
relief may be granted against the defendants under Section 1 of the
Sherman Act, 15 U.S.C. 1, and Idaho Code Section 48-101 et seq. of the
Idaho Competition Act.
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 any orthopedist and orthopedic
practice other than the defendant's practice, physicians in that
practice, or that practice's employees or agents, in any of the
following counties: Ada, Boise, Canyon, Gem, and Owyhee, Idaho;
(C) ``Defendants'' means the Idaho Orthopaedic Society, Dr. Timothy
Doerr, Dr. Jeffrey Hessing, Idaho Sports Medicine Institute, Dr. John
Kloss, Dr. David Lamey, and Dr. Troy Watkins, who have consented to
entry of this Final Judgment, and all persons acting as agents on
behalf of any of them;
(D) ``On-call coverage'' means any arrangement between a hospital
and physicians whereby the physicians agree to provide medical services
on an as needed basis to the hospital's emergency department;
(E) ``Payer'' means 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, employers, and
governmental or private workers' compensation insurers;
(F) ``Payer contract'' means a contract between a payer and a
physician or physician practice by which that physician or physician
practice agrees to provide physician services to persons designated by
the payer; and
(G) ``Person'' means any natural person, corporation, firm,
company, sole proprietorship, partnership, joint venture, association,
institute, governmental unit, organization, or other legal entity.
III. Applicability
This Final Judgment applies to the 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.
[[Page 32215]]
IV. Prohibited Conduct
The defendants each are enjoined from, in any manner, directly or
indirectly:
(A) Encouraging, facilitating, entering into, participating in, or
attempting to engage in any actual or potential agreement or
understanding with, between, or among competing physicians about:
(1) Any fee, or other payer contract term or condition, 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;
(2) The manner in which the defendant or any competing physician
will negotiate with, contract with, or otherwise deal with any payer or
group of payers, including participating in or terminating any payer
contract; or
(3) Any refusal to deal or threatened refusal to deal with any
payer; or
(B) Communicating with any competing physician or facilitating the
exchange of information between or among competing physicians about:
(1) The actual or possible view, intention, or position of any
defendant or his or her medical practice group, or any competing
physician concerning the negotiation or acceptability of any proposed
or existing payer contract or contract term, including the negotiating
or contracting status of the defendant, his or her medical group, or
any competing physician with any payer or group of payers, or
(2) Any proposed or existing term of any payer contract that
affects:
(a) The amount of fees or payment, however determined, that the
defendant, his or her medical practice group, or any competing
physician charges, contracts for, or accepts from or considers
charging, contracting for, or accepting from any payer or group of
payers for providing physician services;
(b) The duration, amendment, or termination of any payer contract;
or
(c) The manner of resolving disputes between any parties to any
payer contract.
V. Permitted Conduct
(A) Subject to the prohibitions of Section IV of this Final
Judgment, the defendants:
(1) May discuss with any competing physician any medical topic or
medical issue relating to patient care; and
(2) May participate in activities of any medical society.
(B) Nothing in this Final Judgment shall prohibit the defendants
from:
(1) Advocating or discussing, in accordance with the Noerr-
Pennington doctrine, legislative, judicial, or regulatory actions, or
other governmental policies or actions;
(2) Participating, or engaging in communications necessary to
participate, in lawful surveys or activities by clinically or
financially integrated physician network joint ventures and multi-
provider networks as those terms are used in Statements 5, 6, 8, and 9
of the 1996 Department of Justice and Federal Trade Commission
Statements of Antitrust Enforcement Policy in Health Care, 4 Trade Reg.
Rep. (CCH) ] 13,153; or
(3) Engaging in conduct solely related to the administrative,
clinical, financial, or other terms of providing on-call coverage at a
hospital or hospital system. Section V(B)(3) of this Final Judgment is
not a determination that such conduct does not violate any law enforced
by the United States Department of Justice or the Office of the Idaho
Attorney General.
VI. Required Conduct
(A) Within 60 days from the entry of this Final Judgment, each
defendant shall distribute a copy of this Final Judgment and the
Competitive Impact Statement in the following manner:
(1) In the case of individual defendants Drs. Doerr, Hessing,
Kloss, Lamey, and Watkins, to their respective practices' chief
administrative employee and to all physicians that practice or have
practiced in the same practice group as that defendant since January 1,
2006;
(2) In the case of Idaho Sports Medicine Institute, to its
practice's chief administrative employee and physicians that practice
or have practiced with that practice group since January 1, 2006; and
(3) In the case of the Idaho Orthopaedic Society, to all members of
that organization since January 1, 2006.
(B) For a period of ten years following the date of entry of this
Final Judgment, each defendant shall certify to the United States
annually on the anniversary date of the entry of this Final Judgment
whether the defendant has 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 whether the Final Judgment should be modified or
vacated, and subject to any legally recognized privilege, authorized
representatives of the United States Department of Justice or the
Office of the Idaho Attorney General (including their consultants and
other retained persons) shall, upon the written request of an
authorized representative of the Assistant Attorney General in charge
of the Antitrust Division or the Office of the Idaho Attorney General
and on reasonable notice to each defendant, be permitted:
(1) Access during each defendant's office hours to inspect and
copy, or, at the United States' or the State of Idaho's option, to
require that each defendant provide hard or electronic copies of all
books, ledgers, accounts, records, data, and documents in the
possession, custody, or control of defendants, relating to any matters
contained in this Final Judgment; and
(2) To interview, either informally or on the record, defendants
and their officers, employees, or agents, who may have their individual
counsel present, regarding such matters. The interviews shall be
subject to the reasonable convenience of the interviewee without
restraint or interference by defendants.
(B) Upon the written request of an authorized representative of the
Assistant Attorney General in charge of the Antitrust Division or the
Office of the Idaho Attorney General, each defendant shall submit
written reports or a response to written interrogatories, under oath if
requested, relating to any of the matters contained in this Final
Judgment as may be requested.
(C) No information or 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) No information or documents obtained by the means provided in
this section shall be divulged by the State of Idaho to any person
other than an authorized representative of the executive branch of the
State of Idaho, except in the course of legal proceedings to which the
State of Idaho is a party, or for the purpose of securing compliance
with this Final Judgment, or as otherwise required by law.
(E) If at the time information or documents are furnished by
defendants to the United States or the State of Idaho, defendants
represent and identify in writing the material in any such information
or documents to which a claim of protection may be asserted under Rule
26(c)(1)(G) of the Federal Rules of Civil Procedure, and defendants
mark each pertinent page of such material, ``Subject to claim of
[[Page 32216]]
protection under Rule 26(c)(1)(G) of the Federal Rules of Civil
Procedure,'' then the United States and the State of Idaho shall give
defendants ten calendar days' notice prior to divulging such material
in any legal proceeding (other than a grand jury proceeding).
VIII. Retention of Jurisdiction
This Court retains jurisdiction to enable any party to this Final
Judgment 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 years from the date of its entry.
X. Public Interest Determination
Entry of this Final Judgment is in the public interest. The parties
have complied with the requirements of the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16, including making copies available to the
public of this Final Judgment, the Competitive Impact Statement, any
comments thereon, and plaintiff United States's response to comments.
Based upon the record before the Court, which includes the Competitive
Impact Statement and any comments and response to comments filed with
the Court, entry of this Final Judgment is in the public interest.
Court approval subject to procedures of Antitrust Procedures and
Penalties Act, 15 U.S.C. 16, and pursuant to Idaho Code Sec. 48-108(3)
of the Idaho Competition Act
Dated:-----------------------------------------------------------------
United States District Judge
Peter J. Mucchetti (DCB No. 463202);
U.S. Department of Justice Antitrust Division, 450 Fifth Street, NW,
Suite 4100, Washington, DC 20530, [email protected],
Telephone: (202) 353-4211, Facsimile: (202) 307-5802, Attorneys for
the United States.
United States District Court for the District of Idaho
Civil Case No. 10-268-S.EJL
United States of America and the State of Idaho, Plaintiffs, vs.
Idaho Orthopaedic Society, Timothy Doerr, Jeffrey Hessing, Idaho Sports
Medicine Institute, John Kloss, David Lamey, and Troy Watkins,
Defendants; Competitive Impact Statement.
Plaintiff United States of America (``United States''), pursuant to
Section 2(b) of the Antitrust Procedures and Penalties Act (``APPA'' or
``Tunney Act''), 15 U.S.C. 16(b)-(h), files this Competitive Impact
Statement relating to the proposed Final Judgment submitted for entry
in this civil antitrust proceeding.
I. Nature and Purpose of the Proceeding
On May 28, 2010, the United States and the State of Idaho filed a
civil antitrust Complaint, alleging that the Defendants Idaho
Orthopedic Society (``IOS''), Dr. Timothy Doerr, Dr. Jeffrey Hessing,
Idaho Sports Medicine Institute (``ISMI''), Dr. John Kloss, Dr. David
Lamey, and Dr. Troy Watkins violated Section 1 of the Sherman Act and
Idaho Code Section 48-101 et seq. of the Idaho Competition Act. The
Defendants and other competing orthopedists in the Boise, Idaho, area
formed two conspiracies to gain more favorable fees and other
contractual terms by agreeing to coordinate their actions, including
denying medical care to injured workers.
The Complaint alleges that, in the first conspiracy, Defendants and
their co-conspirators agreed, through a series of meetings and other
communications, not to treat most patients covered by workers'
compensation insurance. Defendants entered into this group boycott to
force the Idaho Industrial Commission to increase the rates at which
orthopedists are reimbursed for treating injured workers. Defendants'
group boycott, which resulted in a shortage of orthopedists willing to
treat workers' compensation patients, caused the Idaho Industrial
Commission to increase rates for orthopedic services substantially
above levels set just a year earlier.
In a second conspiracy, the Complaint alleges that Defendants
(except for Defendant Lamey) and other conspirators agreed, through a
series of meetings and other communications, to threaten to terminate
their contracts with Blue Cross of Idaho (``BCI'') to force it to offer
better contract terms to orthopedists. Their collusion caused BCI to
offer orthopedists more favorable contract terms than BCI would have
offered but for the participating Defendants' group boycott of BCI.
With the Complaint, the United States and the State of Idaho filed
a proposed Final Judgment that enjoins the Defendants from agreeing
with competing physicians to threaten to terminate contracts with
payers or deny medical care to patients, as more fully explained below.
The United States, the State of Idaho, and Defendants have stipulated
that the proposed Final Judgment may be entered after compliance with
the APPA, unless the United States withdraws its consent. Entry of the
proposed Final Judgment would terminate this action, except that the
Court would retain jurisdiction to construe, modify, or enforce the
provisions of the proposed Final Judgment and to punish violations
thereof.
II. Description of the Events Giving Rise to the Alleged Violations of
the Antitrust Laws
A. The Defendants
The IOS is a membership organization that, from 2006 to 2008,
consisted of approximately 75 orthopedists, each of whom practiced in a
solo or group practice. These solo and group practices were
economically independent of, and competed with, each other. Defendants
Doerr, Hessing, Kloss, Lamey, and Watkins are physicians who provide
orthopedic services in the Boise, Idaho, area and who were members of
the IOS. Defendants Kloss and Lamey formerly practiced with Orthopedic
Centers of Idaho, P.A., d.b.a. Boise Orthopedic Clinic (``BOC''). ISMI
is an orthopedic practice group in Boise. Most of the orthopedists that
practice with ISMI were members of the IOS. The Defendants were the
principal actors in the boycotts of Idaho's workers' compensation
system and BCI.
B. The Alleged Violations
1. Idaho Workers' Compensation System Conspiracy
The Idaho Workers' Compensation Act, Idaho Code Section 72-101 et
seq., requires that most public and private employers in Idaho carry
workers' compensation insurance for their employees. The Idaho
Industrial Commission is the state agency responsible for regulating
workers' compensation insurance in Idaho.
Since 2006, the Idaho Industrial Commission has set the fee
schedule that determines the amount that orthopedists and other
healthcare providers usually receive for treating patients covered by
workers' compensation insurance. The fee schedule uses a methodology
for determining physician payments called a Resource-Based Relative
Value System or RBRVS. The RBRVS methodology uses a ``relative value
unit'' and a ``conversion factor'' to determine physician payment. The
relative value unit measures the resources necessary to perform a
medical service. For example, a complicated surgical procedure has a
higher relative value unit than a simple office visit. The conversion
factor is a set dollar amount, for example, $100. A physician's payment
for any medical
[[Page 32217]]
service is generally calculated by multiplying the relative value unit
by the conversion factor. For example, a physician would receive $500
for a medical service with a relative value unit of 5 and a conversion
factor of $100.
In February 2006, the Idaho Industrial Commission announced a new
fee schedule using the RBRVS methodology and setting a conversion
factor of $88 for many orthopedic procedures. The new fee schedule had
an effective date of April 1, 2006. Many orthopedists believed this
conversion factor would result in lower payments to orthopedists. In
response to the Idaho Industrial Commission's new fee schedule,
Defendants and their co-conspirators agreed, through a series of
meetings and other communications that took place over a year-long
period, not to treat most patients covered by workers' compensation
insurance.
Shortly after the Idaho Industrial Commission announced the
February 2006 fee schedule, many Boise-area orthopedists from competing
practices discussed with one another whether to accept the proposed
rates or, alternatively, to stop treating workers' compensation
patients. For example, at Defendant Doerr's invitation, orthopedists
from several competing practices met on March 2, 2006, to talk about
``the physician response to the new fee schedule.'' Also on March 2,
2006, an orthopedist specializing in hand surgery sent an e-mail to
several competing orthopedic hand surgeons saying that the new
conversion factors represented a severe cut in workers' compensation
payments and that, at Defendant Doerr's meeting that night,
orthopedists would examine their options. On the same day, Defendant
Lamey wrote to a competing orthopedist that he did ``not have much
problem dropping out of work comp.'' The day after the March 2, 2006
meeting, orthopedists from two competing practices sent letters to the
Idaho Industrial Commission announcing their intention to stop treating
workers' compensation patients.
Many of the orthopedists that initially boycotted the workers'
compensation system were orthopedists who specialized in hand surgery.
For example, on April 12, 2006, seven hand surgeons met ``to discuss
the various docs' interest in continuing to participate'' in Idaho's
workers' compensation system. An e-mail describing this meeting noted
that Defendant Lamey and a competing orthopedist favored ``ditching''
workers' compensation and that Defendant Kloss agreed but wanted to
negotiate a rate increase with the Idaho Industrial Commission. The day
after that meeting, Defendants Kloss and Lamey stopped treating
workers' compensation patients, with the exception of emergency room
patients.
A June 6, 2006 letter from the IOS leadership, including Defendants
Watkins and Kloss, to members instructed them that they `` `must,
indeed, all hang together or, most assuredly, we shall all hang
separately.' '' The letter noted that orthopedists ``must act
together'' concerning the workers' compensation fee schedule and
``collectively join our efforts for our practices'' to negotiate a more
favorable fee schedule.
Minutes from a BOC board of directors meeting on June 12, 2006,
state that BOC's president told the board that Boise-area orthopedists
specializing in hand surgery ``have stopped taking new work comp
patients.'' The minutes continue, saying, ``Dr. Kloss confirmed this,
except for [emergency room] call patients. [Defendant Kloss] said there
has been an appeal for orthopedists to support the hand surgeons in
their effort to demonstrate the inadequacy of payment for some
orthopedic procedures.''
On September 12, 2006, orthopedists from competing practices
attended a meeting organized by Defendants Doerr and Hessing to discuss
workers' compensation fees. Within ten days of the meeting, ISMI and
two other large orthopedic practices in the Boise area stopped treating
workers' compensation patients.
By October 2006, most of the approximately 65 orthopedists in the
Boise area had stopped seeing most workers' compensation patients. Five
of the few remaining Boise orthopedists who continued to care for
workers' compensation patients worked at BOC. Other orthopedists
encouraged and pressured those BOC orthopedists to join the boycott and
stop seeing workers' compensation patients. The October 9, 2006 BOC
board of directors meeting minutes report that BOC's president also
encouraged these five BOC orthopedists to join the boycott. He
explained that if the doctors were to stop treating new workers'
compensation patients, the workers' compensation system would ``be
brought to a virtual standstill,'' increasing the doctors' negotiating
leverage.
Over the following months, orthopedists and practice administrators
regularly monitored adherence with the group boycott and pressured
doctors to maintain a disciplined front. For example, on November 27,
2006, an ISMI administrator assured a competing practice that although
ISMI had recently accepted one workers' compensation patient to offer a
second opinion, it would not do so again, lest it ``risk the rath [sic]
of all the orthopedic surgeons because we're doing this.'' The ISMI
administrator assured the competing practice group that ISMI was
``turning away all other worker's comp cases,'' and asked the recipient
to ``[p]lease tell your docs what we did so it doesn't come back and
sound worse than it already is!''
Defendants and their co-conspirators refused to treat most workers'
compensation patients because they believed that if injured workers
were unable to find orthopedists willing to treat them, the Idaho
Industrial Commission would be forced to increase the orthopedist fee
schedule. An ISMI employee explained that her practice's ``lack of
participation, along with others in the area, may cause them [i.e., the
Idaho Industrial Committee] to review their current Proposed Rule,
which also includes the fee schedule.'' A January 2007 IOS newsletter
notes that ``lack of access [to orthopedists] is the key'' to increased
workers' compensation rates.
According to the February 5, 2007 minutes of the Idaho House of
Representatives Commerce & Human Resources Committee, Defendant Watkins
openly discussed that physicians had agreed not to treat most workers'
compensation patients. The minutes describe Dr. Watkins as stating that
``[a] group of physicians met and decided that the [fee] table was not
satisfactory. They decided to stop seeing workers' compensation
patients [except] in the emergency room, and stop seeing and giving
second opinions until discussion happened about [the] conversion factor
chart.''
In the face of an effective and widely adhered to group boycott, in
February 2007, the Idaho Industrial Commission announced workers'
compensation rates that were up to 61% higher than the rates that the
Commission had announced a year earlier. After the new rates were
announced, the Defendants and their co-conspirators agreed to end their
boycott and accept the new rates. In a February 13, 2007 letter to IOS
membership, Defendant Watkins wrote, ``We * * * all think this [the
higher fee schedule] represents a major accomplishment, and that we
should accept it now.'' Shortly thereafter, Defendants and almost all
of the orthopedists who had participated in the conspiracy resumed
participation in the workers' compensation system.
[[Page 32218]]
2. Blue Cross of Idaho Conspiracy
BCI is a not-for-profit mutual insurance company that offers a wide
range of healthcare plans to employers and other groups in Boise and
other areas of Idaho. To offer these plans, BCI contracts with
orthopedists and other physicians to provide medical services. BCI's
contracts with orthopedists set the reimbursement amounts that BCI pays
orthopedists for providing covered health care to BCI's enrollees.
In December 2007, BCI informed its network of orthopedists and
other physicians of new rates that would take effect on April 1, 2008.
Some of the Defendants and other orthopedists were concerned that the
new rates were lower than BCI's previous rates. Before the rates became
effective, several of the Defendants and other competing orthopedists
communicated with each other their dissatisfaction with BCI's proposed
rates. In addition, on February 22, 2008, Defendant Watkins sent a
letter to BCI saying that ``[m]any of our members are worried that they
may not be able to sustain some of the reductions they are facing with
the proposed 2008 rates.''
On April 9, 2008--eight days after the new BCI rates took effect--
the IOS sponsored an ``Orthopedic Open House'' at Defendants Hessing
and Doerr's office. At this meeting, the orthopedists discussed how to
respond to BCI's adoption of new rates and encouraged others to send
termination notices to BCI. Defendants Doerr and Hessing encouraged the
orthopedists in attendance to put an ad in the newspaper to alert their
patients and to assure other orthopedists that they were joining the
boycott. Shortly after the Orthopedic Open House, orthopedists began
issuing termination notices to BCI and advertising their intended
withdrawals in local newspapers. Between April and June 2008, twelve
practice groups--representing approximately 31 of 67 orthopedists in
the Boise area at the time--gave BCI notice that they would withdraw
from BCI's network. This group included many IOS practice groups,
including the practice group of Defendants Hessing and Doerr, and ISMI.
From April to June 2008, while orthopedic groups were sending
termination notices to BCI, orthopedists communicated with each other
to encourage others to withdraw from the BCI network. As part of this
communication, many practices placed newspaper advertisements
announcing their withdrawal from the BCI network. In addition,
orthopedists discussed how the successful boycott of workers'
compensation patients provided the model for collectively standing up
to BCI and negotiating higher rates.
In June 2008, Defendant Watkins attempted to negotiate with BCI on
behalf of competing orthopedists. He asked that BCI representatives
meet with himself, Defendant Hessing and Defendant Kloss (all of whom
were in competing practices). In a separate June 2008 meeting,
Defendant Watkins told BCI representatives that Idaho's orthopedists
were a ``very cohesive group'' that had been successful in their
efforts related to workers' compensation payments the previous year.
Defendant Watkins also encouraged BCI to negotiate with practices that
had already sent termination notices to BCI because otherwise BCI would
experience a severe shortage of orthopedists in its network.
In response to the orthopedists' group boycott, on June 18, 2008,
BCI offered orthopedists an additional contracting option to encourage
orthopedists to continue to participate in BCI's provider network. The
new option allowed orthopedists to choose between continuing to
participate in BCI's network at current rates for one year with the
possibility for higher rates the next year or to lock in existing rates
for a three-year period.
The new offer from BCI divided Boise's orthopedists. In July 2008,
when the conspirators failed to convince a large Boise orthopedic
practice to join the boycott of BCI and that practice decided to
continue its participation with BCI, BCI was able to contract with a
sufficient number of orthopedists to maintain a viable physician
network. Realizing that no further concessions beyond BCI's new offer
would be forthcoming, practice groups began rescinding their
termination notices. By the end of August 2008, most orthopedic
practices had rescinded their termination notices and remained in the
BCI network.
III. Explanation of the Proposed Final Judgment
The proposed Final Judgment will prevent the recurrence of the
violations alleged in the Complaint and preserve competition for
patients and other purchasers of orthopedic services, including self-
insured employers and health and workers' compensation insurers in the
Boise, Idaho area and elsewhere.
Under the proposed Final Judgment, the Defendants each are enjoined
from, in any manner, directly or indirectly:
(A) Encouraging, facilitating, entering into, participating, or
attempting to engage in any actual or potential agreement or
understanding with, between or among competing physicians about:
(1) Any fee, or other payer contract term or condition, 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;
(2) The manner in which the defendant or any competing physician
will negotiate with, contract with, or otherwise deal with any payer or
group of payers, including participating in or terminating any payer
contract; or
(3) Any refusal to deal or threatened refusal to deal with any
payer; or
(B) Communicating with any competing physician or facilitating the
exchange of information between or among competing physicians about:
(1) The actual or possible view, intention, or position of any
defendant or his or her medical practice group, or any competing
physician concerning the negotiation or acceptability of any proposed
or existing payer contract or contract term, including the negotiating
or contracting status of the defendant, his or her medical group, or
any competing physician with any payer or group of payers, or
(2) Any proposed or existing term of any payer contract that
affects:
(a) The amount of fees or payment, however determined, that the
defendant, his or her medical practice group or any competing physician
charges, contracts for, or accepts from or considers charging,
contracting for, or accepting from any payer or group of payers for
providing physician services;
(b) The duration, amendment, or termination of any payer contract;
or
(c) The manner of resolving disputes between any parties to any
payer contract.
Subject to these restrictions, Section V of the proposed Final
Judgment permits Defendants to discuss with any competing physician any
medical topic or medical issue relating to patient care and participate
in activities of any medical society. Moreover, nothing in the proposed
Final Judgment prohibits Defendants from advocating or discussing, in
accordance with the Noerr-Pennington doctrine, legislative, judicial,
or regulatory actions, or other governmental policies or actions;
participating, or engaging in communications necessary to participate,
in lawful surveys or activities by clinically or financially integrated
physician network joint ventures and multi-provider networks as those
terms are used in Statements 5, 6, 8 and 9 of the 1996 Department of
Justice and Federal Trade Commission
[[Page 32219]]
Statements of Antitrust Enforcement Policy in Health Care, 4 Trade Reg.
Rep. (CCH) ] 13,153.
Finally, Section V(B)(3) of the proposed Final Judgment does not
prohibit Defendants from engaging in conduct solely related to the
administrative, clinical, financial, or other terms of providing on-
call coverage at a hospital or hospital system. Such conduct might not
violate the antitrust laws if it creates significant efficiencies and,
on balance, is not anticompetitive.\1\ However, the proposed Final
Judgment makes clear that Section V(B)(3) of the proposed Final
Judgment is not a determination that such conduct does not violate any
law enforced by the United States Department of Justice or the Office
of the Idaho Attorney General. Rather, the United States has made no
determination with respect to the legality of any such conduct. The
United States retains its ability to challenge any conduct related to
providing on-call coverage if it later determines that such a challenge
is warranted under the law.
---------------------------------------------------------------------------
\1\ See Dep't of Justice and Federal Trade Comm'n, Statements of
Antitrust Enforcement Policy in Health Care Sec. 8(B) (1996).
---------------------------------------------------------------------------
To promote compliance with the decree, the proposed Final Judgment
also requires that the Defendants provide to their respective
practices' chief administrative employee, other physicians in their
practices, and/or members, copies of the Final Judgment and this
Competitive Impact Statement. For a period of ten years following the
date of entry of the Final Judgment, the Defendants separately must
certify annually to the United States whether they have complied with
the provisions of the Final Judgment.
IV. Remedies Available to Potential Private Litigants
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 court to recover three times
the damages the person has suffered, as well as costs 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), the proposed Final Judgment has no prima facie effect in any
subsequent private lawsuit that may be brought against Defendants.
V. Procedures Available for Modification of the Proposed Final Judgment
The United States and Defendants have stipulated that the proposed
Final Judgment may be entered by the Court after compliance with the
provisions of the APPA, provided that the United States has not
withdrawn its consent. The APPA conditions entry upon the 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 effective date 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, or the last date of
publication in a newspaper of the summary of this Competitive Impact
Statement, whichever is later. All comments received during this period
will be considered by the United States Department of Justice, which
remains free to withdraw its consent to the proposed Final Judgment at
any time prior to the Court's entry of judgment. The comments and the
response of the United States will be filed with the Court and
published in the Federal Register.
Written comments should be submitted to: Joshua H. Soven, Chief,
Litigation I Section, Antitrust Division, United States Department of
Justice, 450 Fifth Street, NW., Suite 4100, Washington, DC 20530.
The proposed Final Judgment provides that the Court retains
jurisdiction over this action, and the parties may apply to the Court
for any order necessary or appropriate for the modification,
interpretation, or enforcement of the Final Judgment.
VI. Alternatives to the Proposed Final Judgment
The United States considered, as an alternative to the proposed
Final Judgment, a full trial on the merits against Defendants. The
United States is satisfied, however, that the relief in the proposed
Final Judgment will prevent the recurrence of the violations alleged in
the Complaint and preserve competition for patients and other
purchasers of orthopedic services in Idaho. Thus, the proposed Final
Judgment would achieve all or substantially all of the relief the
United States would have obtained through litigation, but avoids the
time, expense, and uncertainty of a full trial on the merits of the
Complaint.
VII. Standard of Review Under the APPA for the Proposed Final Judgment
The Clayton Act, as amended by the APPA, requires that proposed
consent judgments in antitrust cases brought by the United States be
subject to a sixty-day comment period, after which the court shall
determine whether entry of the proposed Final Judgment ``is in the
public interest.'' 15 U.S.C. 16(e)(1). In making that determination,
the court, in accordance with the statute as amended in 2004, is
required to consider:
(A) The competitive impact of such judgment, including termination
of alleged violations, provisions for enforcement and modification,
duration of 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
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). In considering these statutory factors,
the court's inquiry is necessarily a limited one as the government is
entitled to ``broad discretion to settle with the defendant within the
reaches of the public interest.'' United States v. Microsoft Corp., 56
F.3d 1448, 1461 (DC Cir. 1995); see generally United States v. SBC
Commc'ns, Inc., 489 F. Supp. 2d 1 (D.D.C. 2007) (assessing public
interest standard under the Tunney Act); United States v. InBev N.V./
S.A., 2009-2 Trade Cas. (CCH) ] 76,736, 2009 U.S. Dist. LEXIS 84787,
No. 08-1965 (JR), at *3, (D.D.C. Aug. 11, 2009) (noting that the
court's review of a consent judgment is limited and only inquires
``into whether the government's determination that the proposed
remedies will cure the antitrust violations alleged in the complaint
was reasonable, and whether the mechanism to enforce the final judgment
are clear and manageable.'') \2\
---------------------------------------------------------------------------
\2\ The 2004 amendments substituted ``shall'' for ``may'' in
directing relevant factors for court to consider and amended the
list of factors to focus on competitive considerations and to
address potentially ambiguous judgment terms. Compare 15 U.S.C.
16(e) (2004), with 15 U.S.C. 16(e)(1) (2006); see also SBC Commc'ns,
489 F. Supp. 2d at 11 (concluding that the 2004 amendments
``effected minimal changes'' to Tunney Act review).
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[[Page 32220]]
Under the APPA, a court considers, 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 Microsoft, 56
F.3d at 1458-62. With respect to the adequacy of the relief secured by
the decree, a court may not ``engage in an unrestricted evaluation of
what relief would best serve the public.'' United States v. BNS, Inc.,
858 F.2d 456, 462 (9th Cir. 1988) (citing United States v. Bechtel
Corp., 648 F.2d 660, 666 (9th Cir. 1981)); see also Microsoft, 56 F.3d
at 1460-62; United States v. Alcoa, Inc., 152 F. Supp. 2d 37, 40
(D.D.C. 2001); InBev, 2009 U.S. Dist. LEXIS 84787, at *3. Courts have
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held that:
[t]he balancing of competing social and political interests
affected by a proposed antitrust consent decree must be left, in the
first instance, to the discretion of the Attorney General. The
court's role in protecting the public interest is one of insuring
that the government has not breached its duty to the public in
consenting to the decree. The court is required to determine not
whether a particular decree is the one that will best serve society,
but whether the settlement is ``within the reaches of the public
interest.'' More elaborate requirements might undermine the
effectiveness of antitrust enforcement by consent decree.
Bechtel, 648 F.2d at 666 (emphasis added) (citations omitted).\3\ In
determining whether a proposed settlement is in the public interest, a
district court ``must accord deference to the government's predictions
about the efficacy of its remedies, and may not require that the
remedies perfectly match the alleged violations.'' SBC Commc'ns, 489 F.
Supp. 2d at 17; see also Microsoft, 56 F.3d at 1461 (noting the need
for courts to be ``deferential to the government's predictions as to
the effect of the proposed remedies''); United States v. Archer-
Daniels-Midland Co., 272 F. Supp. 2d 1, 6 (D.D.C. 2003) (noting that
the court should grant due respect to the United States' prediction as
to the effect of proposed remedies, its perception of the market
structure, and its views of the nature of the case).
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\3\ Cf. BNS, 858 F.2d at 464 (holding that the court's
``ultimate authority under the [APPA] is limited to approving or
disapproving the consent decree''); United States v. Gillette Co.,
406 F. Supp. 713, 716 (D. Mass. 1975) (noting that, in this way, the
court is constrained to ``look at the overall picture not
hypercritically, nor with a microscope, but with an artist's
reducing glass''). See generally Microsoft, 56 F.3d at 1461
(discussing whether ``the remedies [obtained in the decree are] so
inconsonant with the allegations charged as to fall outside of the
`reaches of the public interest' '').
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Courts have greater flexibility in approving proposed consent
decrees than in crafting their own decrees following a finding of
liability in a litigated matter. ``[A] proposed decree must be approved
even if it falls short of the remedy the court would impose on its own,
as long as it falls within the range of acceptability or is `within the
reaches of public interest.''' United States v. Am. Tel. & Tel. Co.,
552 F. Supp. 131, 151 (D.D.C. 1982) (citations omitted) (quoting United
States v. Gillette Co., 406 F. Supp. 713, 716 (D. Mass. 1975)), aff'd
sub nom. Maryland v. United States, 460 U.S. 1001 (1983); see also
United States v. Alcan Aluminum Ltd., 605 F. Supp. 619, 622 (W.D. Ky.
1985) (approving the consent decree even though the court would have
imposed a greater remedy). To meet this standard, the United States
``need only provide a factual basis for concluding that the settlements
are reasonably adequate remedies for the alleged harms.'' SBC Commc'ns,
489 F. Supp. 2d at 17.
Moreover, the court's role under the APPA is limited to reviewing
the remedy in relationship to the violations that the United States has
alleged in its Complaint, and does not authorize the court to
``construct [its] own hypothetical case and then evaluate the decree
against that case.'' Microsoft, 56 F.3d at 1459; see also InBev, 2009
U.S. Dist. LEXIS 84787, at *20 (``the `public interest' is not to be
measured by comparing the violations alleged in the complaint against
those the court believes could have, or even should have, been
alleged''). Because the ``court's authority to review the decree
depends entirely on the government's exercising its prosecutorial
discretion by bringing a case in the first place,'' it follows that
``the court is only authorized to review the decree itself,'' and not
to ``effectively redraft the complaint'' to inquire into other matters
that the United States did not pursue. Microsoft, 56 F.3d at 1459-60.
As the United States District Court for the District of Columbia
recently confirmed in SBC Communications, courts ``cannot look beyond
the complaint in making the public interest determination unless the
complaint is drafted so narrowly as to make a mockery of judicial
power.'' SBC Commc'ns, 489 F. Supp. 2d at 15.
In its 2004 amendments, Congress made clear its intent to preserve
the practical benefits of utilizing consent decrees in antitrust
enforcement, adding the unambiguous instruction that ``[n]othing in
this section 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). This language effectuates what
Congress intended when it enacted the Tunney Act in 1974, as Senator
Tunney explained: ``[t]he court is nowhere compelled to go to trial or
to engage in extended proceedings 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). Rather, the procedure for the public interest
determination is left to the discretion of the court, with the
recognition that the court's ``scope of review remains sharply
proscribed by precedent and the nature of Tunney Act proceedings.'' SBC
Commc'ns, 489 F. Supp. 2d at 11.\4\
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\4\ See United States v. Enova Corp., 107 F. Supp. 2d 10, 17
(D.D.C. 2000) (noting that the ``Tunney Act expressly allows the
court to make its public interest determination on the basis of the
competitive impact statement and response to comments alone'');
United States v. Mid-Am. Dairymen, Inc., 1977-1 Trade Cas. (CCH) ]
61,508, at 71,980 (W.D. Mo. 1977) (``Absent a showing of corrupt
failure of the government to discharge its duty, the Court, in
making its public interest finding, should * * * carefully consider
the explanations of the government in the competitive impact
statement and its responses to comments in order to determine
whether those explanations are reasonable under the
circumstances.''); S. Rep. No. 93-298, 93d Cong., 1st Sess., at 6
(1973) (``Where the public interest can be meaningfully evaluated
simply on the basis of briefs and oral arguments, that is the
approach that should be utilized.'').
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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: May 28, 2010
Respectfully submitted,
Peter J. Mucchetti,
Julie A. Tenney,
United States Department of Justice, Antitrust Division, Litigation
I Section, 450 Fifth Street, NW., Suite 4100, Washington, DC 20530,
Telephone: (202) 353-4211, Facsimile: (202) 307-5802,
[email protected].
Certificate of Service
I hereby certify that on May 28, 2010, I filed the foregoing
Complaint, Explanation of Consent Decree Procedures, Stipulation,
proposed Final Judgment, and Competitive Impact Statement
electronically through the CM/ECF system and that on this date, I
served the following non-CM/ECF Registered Participants in the manner
indicated:
[[Page 32221]]
Via first class mail, postage prepaid and e-mail addressed as
follows:
For Defendants Idaho Orthopaedic Society, Timothy Doerr, Jeffrey
Hessing, Idaho Sports Medicine Institute, John Kloss, and Troy Watkins:
Mark J. Botti, Akin Gump Strauss Hauer & Feld, LLP, 1333 New Hampshire
Ave., NW., Washington, DC 20036-1564, [email protected].
For Defendant David Lamey:
Steven J. Hippler, Givens Pursley LLP, 601 W. Bannock St., Boise, Idaho
83702, [email protected].
Peter J. Mucchetti,
United States Department of Justice, Antitrust Division, Litigation
I Section, 450 Fifth Street, NW., Suite 4100, Washington, D.C.
20530, Telephone: (202) 353-4211, Facsimile: (202) 307-5802,
[email protected].
[FR Doc. 2010-13610 Filed 6-4-10; 8:45 am]
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