[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, 
<a href="/cdn-cgi/l/email-protection#c4b4a1b0a1b6eaaeeaa9b1a7a7aca1b0b0ad84b1b7a0abaeeaa3abb2"><span class="__cf_email__" data-cfemail="2555405140570b4f0b485046464d4051514c655056414a4f0b424a53">[email protected]</span></a>. 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, <a href="/cdn-cgi/l/email-protection#6604140312124802030a07080103260701480f02070e0948010910"><span class="__cf_email__" data-cfemail="cdafbfa8b9b9e3a9a8a1aca3aaa88dacaae3a4a9aca5a2e3aaa2bb">[email protected]</span></a>. 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, 
<a href="/cdn-cgi/l/email-protection#f18194859483df9bdf9c8492929994858598b18482959e9bdf969e87"><span class="__cf_email__" data-cfemail="7b0b1e0f1e09551155160e1818131e0f0f123b0e081f1411551c140d">[email protected]</span></a>.

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, 
<a href="/cdn-cgi/l/email-protection#6b09190e1f1f450f0e070a050c0e2b0a0c45020f0a0304450c041d"><span class="__cf_email__" data-cfemail="ec8e9e899898c28889808d828b89ac8d8bc285888d8483c28b839a">[email protected]</span></a>.

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, <a href="/cdn-cgi/l/email-protection#86f6e3f2e3f4a8eca8ebf3e5e5eee3f2f2efc6f3f5e2e9eca8e1e9f0"><span class="__cf_email__" data-cfemail="90e0f5e4f5e2befabefde5f3f3f8f5e4e4f9d0e5e3f4fffabef7ffe6">[email protected]</span></a>, 
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 
---------------------------------------------------------------------------
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).
---------------------------------------------------------------------------

    \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\
---------------------------------------------------------------------------

    \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, 
<a href="/cdn-cgi/l/email-protection#0b7b6e7f6e79256125667e6868636e7f7f624b7e786f6461256c647d"><span class="__cf_email__" data-cfemail="f9899c8d9c8bd793d7948c9a9a919c8d8d90b98c8a9d9693d79e968f">[email protected]</span></a>.

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, <a href="/cdn-cgi/l/email-protection#adc0cfc2d9d9c4edccc6c4c3cad8c0dd83cec2c0"><span class="__cf_email__" data-cfemail="3d505f524949547d5c5654535a48504d135e5250">[email protected]</span></a>.

For Defendant David Lamey:

Steven J. Hippler, Givens Pursley LLP, 601 W. Bannock St., Boise, Idaho 
83702, <a href="/cdn-cgi/l/email-protection#e4978e8ca4838d92818a979491969788819dca878b89"><span class="__cf_email__" data-cfemail="f380999bb3949a85969d80838681809f968add909c9e">[email protected]</span></a>.

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, 
<a href="/cdn-cgi/l/email-protection#5222372637207c387c3f2731313a3726263b122721363d387c353d24"><span class="__cf_email__" data-cfemail="68180d1c0d1a460246051d0b0b000d1c1c01281d1b0c0702460f071e">[email protected]</span></a>.

[FR Doc. 2010-13610 Filed 6-4-10; 8:45 am]
BILLING CODE P


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