[Federal Register Volume 73, Number 16 (Thursday, January 24, 2008)]
[Notices]
[Pages 4268-4285]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 08-227]


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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 
<greek-i>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 <greek-i><greek-i> 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 <greek-i> 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 <greek-i> 81) with the Federation 
defendants, consenting to entry of the proposed Final Judgment (Dkt. 
entry <greek-i> 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 <greek-i> 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

[[Page 4270]]

    (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 <greek-i> 
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 <greek-i><greek-i> 
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 <greek-i> 1) and demonstrated in its summary 
judgment brief (Dkt. Entry <greek-i> 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, <a href="/cdn-cgi/l/email-protection#abd8dfceddcec585c0d9cac6ced9ebded8cfc4c185ccc4dd"><span class="__cf_email__" data-cfemail="8dfef9e8fbe8e3a3e6ffece0e8ffcdf8fee9e2e7a3eae2fb">[email protected]</span></a>.
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[FR Doc. 08-227 Filed 1-23-08; 8:45 am]
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