[Federal Register Volume 66, Number 224 (Tuesday, November 20, 2001)]
[Notices]
[Pages 58163-58169]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-28888]


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DEPARTMENT OF JUSTICE

Antitrust Division

[Civil Action No. 98-475-JJF]


United States of America v. Federation of Physicians and 
Dentists, Inc.; Proposed Final Judgment and Competitive Impact 
Statement

    Notice is hereby given pursuant to the Antitrust Procedures and 
Penalties Act, 15 U.S.C. section 16(b) through (h), that a proposed 
Final Judgment and Competitive Impact Statement have been filed in a 
civil antitrust case, United States of America v. Federation of 
Physicians and Dentists, Inc., Civil Action No. 98-475JJF, in the 
United States District Court for the District of Delaware.
    The Complaint in the case alleges that the Federation of Physicians 
and Dentists, Inc. (``Federation'') coordinated an understanding among 
its members, Delaware orthopedic surgeons in private practice, to 
negotiate exclusively through the Federation to oppose a proposed fee 
reduction by Blue Cross and Blue Shield of Delaware in violation of 
section 1 of the Sherman Act, 15 U.S.C. 1.
    The proposed Final Judgment eliminates the Federation's illegal 
practices and prevents their renewal, enjoining the Federation from 
engaging in practices that would limit competition among Delaware 
orthopedic surgeons in the sale of orthopedic services.
    Public comment on the proposed Final Judgment is invited within the 
statutory 60-day comment period. Such comments and responses thereto 
will be published in the Federal Register and filed with the Court. 
Comments should be directed to Gail Kursh, Chief; Health Care Task 
Force; Antitrust Division; United States Department of Justice; 325 
Seventh St., NW.; Room 404; Washington, DC 20530 (Tel.: (202) 307-
5799).

Mary Jean Moltenbrey,
Director of Civil Nonmerger Enforcement, Antitrust Division, United 
States Department of Justice.

Stipulation

    It is stipulated by and between the undersigned parties, by their 
respective attorneys, that:
    1. The Court has jurisdiction over the subject matter of this 
action and over both of the parties, and venue of this action is proper 
in the District of Delaware.
    2. The parties consent that a Final Judgment in the form attached 
may be filed and entered by the Court, upon the motion of either party 
or upon the Court's own action, at any time after compliance with the 
requirements of the Antitrust Procedures and Penalties Act (15 U.S.C. 
16), and without further notice to any party or other proceedings, 
provided that plaintiff has not withdrawn its consent, which it may do 
at any time before the entry of the proposed Final Judgment by serving 
notice thereof on defendant and by filing that notice with the Court.

    For Plaintiff:
Charles A. James,
Assistant Attorney General.
R. Hewitt Pate,
Deputy Assistant Attorney General.
Mary Jean Moltenbrey,
Director of Civil Non-Merger, Enforcement, Office of Operations.
Gail Kursh,
Chief, Health Care Task Force.
David C. Jordan,
Assistant Chief, Health Care Task Force, Antitrust Division, Department 
of Justice, Washington, DC 20530.
Steven Kramer,
Richard S. Martin,
Scott Scheele,
Adam Falk,
Attorneys, Antitrust Division, Department of Justice, 325 7th Street, 
NW., Washington, DC 20530, (202) 307-0997.
Colm Connolly,
United States Attorney, District of Delaware.
Virginia Gibson-Mason,
Assistant United States Attorney, 1201 Market Street, Suite 1100, 
Wilmington, DE 19801, Tel.: (302) 573-6277, Facsimile: (302) 573-6220.
    For Defendant:
Perry F. Goldlust (DSB #770),
Heiman, Abner, Goldlust & Baker, First Federal Plaza, Suite 600, P.O. 
Box 1675, Wilmington, DE 19899-1675, Tel.: (302) 658-1800.
Hal K. Litchford,
Donald E. Christopher,
G. Steven Fender,
Litchford & Christopher, 390 N. Orange Avenue, P.O. Box 1549, Orlando, 
FL 32802, Tel.: (407) 422-6600.

Final Judgment

    Plaintiff, the United States of America, having filed its Complaint 
on August 12, 1998, and plaintiff and defendant Federation of 
Physicians and Dentists, by their respective attorneys, having 
consented to the entry of this Final Judgment without trial or 
adjudication of any issue of fact or law, and without this Final 
Judgment constituting any evidence against or an admission by any party 
with respect to any issue of fact or law;
    And Whereas defendant has agreed to be bound by the provisions of 
this Final Judgment.
    Now, Therefore, before the taking of any testimony, and without 
trial or adjudication of any issue of fact or law, and upon consent of 
the plaintiff and defendant, it is hereby Ordered, Adjudged, and 
Decreed:

I. Jurisdiction

    This Court has jurisdiction over the subject matter of and over the 
plaintiff and defendant to, this action. The Complaint states a claim 
upon which relief may be granted against defendant under section 1 of 
the Sherman Act, 15 U.S.C. 1.

II. Definitions

    As used in this Final Judgment:
    (A) ``Communicate'' means to discuss, disclose, transfer, 
disseminate, or exchange information or opinion, formally or 
informally, in any manner;
    (B) ``Competing physicians'' or ``competing orthopedic surgeons'' 
means two or more physicians (or two or more orthopedic surgeons, 
respectively) in separate, private medical practices in the same 
specialty in the same country;
    (C) ``Competitively sensitive information'' means:
    (1) Any participating physician's actual or possible view, 
intention, or position concerning the negotiation or acceptability of 
any proposed or existing payer contract or contract term, including the 
physician's negotiating or contracting status with any payer or the 
physician's response to any payer contract or contract term; or
    (2) Any proposed or existing term of any payer contract that 
affects:
    (a) The amount of fees or payment, however determined, that a 
participating physician charges, contracts for, or accepts from, or 
considers charging, contracting for, or accepting from any payer for 
providing physician services;
    (b) The duration, amendment, or termination of the payer contract;
    (c) Utilization review and pre-certification; or
    (d) The manner of resolving disputes between the participating 
physician and the payer;
    (D) ``Defendant'' means the Federation of Physicians and Dentists, 
its directors, officers, agents, representatives, and

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employees; its successors and assigns; and each entity over which it 
has control;
    (E) ``Messenger'' means a person, including defendant or an agent 
for defendant, that communicates to a payer any competitively sensitive 
information it obtains, individually, from a participating physician or 
communicates, individually, to a participating physician any 
competitively sensitive information it obtains from a payer;
    (F) ``Objective information'' or ``objective comparison'' means 
empirical data that are capable of being verified or a comparison of 
such data;
    (G) ``Participating physician'' means a physician who is either in 
solo practice or a group practice, and who participates in a messenger 
arrangement, and any employee of such physician or group practice 
acting on the physician's or group practice's behalf in connection with 
a messenger arrangement; for purposes of this Final Judgment, a 
``participating physician'' does not include physicians or other 
medical professional employees who belong to a recognized or certified 
bargaining unit that is affiliated with the Federation of Physicians 
and Dentists;
    (H) ``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, and employers;
    (I) ``Payer contract'' means a contract between a payer and a 
physician by which that physician agrees to provide physician services 
to persons designated by the payer;
    (J) ``Person'' means any natural person, corporation, firm, 
company, sole proprietorship, partnership, joint venture, association, 
institute, governmental unit, or other legal entity;
    (K) ``Protocols'' means a set of written guidelines, which have 
been adopted by defendant for dissemination to its members to assist in 
the implementation and administration of the terms of the Final 
Judgment and which have been approved by plaintiff for the limited 
purpose of assuring that defendant's existing and future members who do 
not receive a copy of this Final Judgment receive adequate notice of 
its terms. These Protocols shall not diminish defendant's and its 
member's obligation to comply with the terms of this Final Judgment and 
federal antitrust law, which are controlling in the event of any 
conflict or inconsistency; and
    (L) ``Recognized or certified bargaining unit'' means a group of 
physicians that have been recognized or certified pursuant to state or 
federal law to bargain collectively with their common employer over 
wages, terms, and conditions or employment.

III. Applicability

    (A) This Final Judgment applies to defendant and to those persons 
in active concert or participation with defendant, including 
defendant's member physicians in private practice who receive actual 
notice of the Final Judgment by personal service or otherwise.
    (B) This Final Judgment shall not apply to the conduct of any 
physicians or other medical professional employees who belong to 
recognized or certified bargaining units that are affiliated with 
defendant to the extent such conduct is reasonably related to the 
lawful activities of the recognized or certified bargaining unit.
    (C) Nothing contained in this Final Judgment is intended to suggest 
or imply that any provision herein is or has been created or intended 
for the benefit of any third party and nothing herein shall be 
construed to provide any rights to any third party.

IV. Injunctive Relief

    (A) The defendant and all other persons in active concert or 
participation with defendant who receive actual notice of the Final 
Judgment by personal service or otherwise are enjoined from directly or 
indirectly:
    (1) Participating in, encouraging, or facilitating any agreement or 
understanding between competing physicians about any actual or proposed 
payer contract or contract term:
    (2) Participating in, encouraging, or facilitating any agreement or 
understanding between competing physicians to deal with any payer 
exclusively through a messenger rather than individually or through 
other channels;
    (3) Negotiating, collectively or individually, on behalf of 
competing physicians any actual or proposed payer contract or contract 
term with any payer;
    (4) Making any recommendation to competing physicians about any 
actual or proposed payer contract or contract term or whether to accept 
or reject any such payer contract or contract term;
    (5) Communicating any competitively sensitive information to or in 
the presence of, competing physicians;
    (6) Communicating to competing physicians any subjective opinion or 
subjective analysis, evaluation, or assessment about competitively 
sensitive information;
    (7) Precluding or discouraging any competing physicians from 
exercising his, her, or their own independent business judgment in 
determining whether to negotiate, contract, or deal directly with any 
payer; and
    (8) Acting as a messenger for any competing physicians unless:
    (a) Defendant informs each participating physician of any payer's 
decision not to communicate or to discontinue communicating with that 
participating physician through defendant;
    (b) Defendant communicates all competitively sensitive information 
that it receives from any payer separately to each participating 
physician designated by the payer;
    (c) Defendant obtains individually from each participating 
physician any competitively sensitive information that it communicates 
to any payer;
    (d) Defendant does not communicate any competitively sensitive 
information obtained from any participating physician to anyone other 
than to payers designated by the participating physician;
    (e) Defendant does not violate any of the provisions of Paragraph 
IV(A)(1)-(7) of this Final Judgment;
    (f) For five (5) years from the date of entry, at the outset of its 
involvement with any payer as a messenger (or within 30 days of the 
entry of this Final Judgment for any ongoing involvement, on behalf of 
a participating physician, with a payer), defendant informs the payer 
in writing that, at any time, (i) payer is free to decline to 
communicate with any participating through defendant, and (ii) any 
participating physician is free to communicate with the payer 
individually without defendant's involvement;
    (g) For five (5) years from the date of entry, when first 
designated by any participating physician as a messenger (or within 30 
days of the entry of this Final Judgment for any ongoing involvement on 
behalf of a participating physician, with a payer), defendant informs 
the participating physician in writing that he or she is free at any 
time communicate with any payer individually without defendant's 
involvement;
    (h) For five (e) years from the date of entry, when first 
designated by any participating physician as a messenger, and at the 
outset of its involvement with any payer as a messenger (or within 30 
days of the entry of this Final Judgment for any ongoing involvement, 
on behalf of a participating physician, with a

[[Page 58165]]

payer), defendant informs the participating physician and any payer 
with whom it communicates as a messenger of behalf of the participating 
physician in writing that it cannot negotiate, collectively, for any 
participating physician any payer contract or contract term but can act 
only as a messenger; and
    (i) For five (5) years from the date of entry, defendant ensures 
that (i) any oral communication between it and any payer or any 
participating physician is contemporaneously memorialized in writting 
or by recording sufficient to show the date, participants to, and 
substance of the communication and the person making the writing or 
recording; (ii) such memorialization or recording and any written 
communication between defendant and any payer or participating 
physician are preserved for two years; (iii) any correspondence 
containing competitively sensitive information is addressed 
individually to each participating physician; and (iv) no 
correspondence between defendant and a payer that includes the 
competitively sensitive information of a physician is sent to any other 
competing physician.
    (B) The defendant's member physicians, who participate in any 
messenger or any other arrangement provided by defendant, are enjoined 
from directly or indirectly:
    (1) Participating in, encouraging, or facilitating any agreement or 
understanding among competing physicians about any competitively 
sensitive information;
    (2) Participating in, encouraging, or facilitating any agreement or 
understanding among competing physicians about using a messenger;
    (3) Communicating or facilitating the communication of any 
competively sensitive information to, or in the presence of, competing 
physicians; and
    (4) Participating in, encouraging, or facilitating any agreement or 
understanding among any competing physicians that any of defendant's 
physician members will deal with a payer only through a messenger or 
other agent or representative.

V. Permitted Conduct

    (A) Subject to the provisions of Section IV of this Final Judgment;
    (1) At a participating physician's request, defendant may 
communicate to the participating physician accurate, factual, and 
objective information about a proposed payer contract offer or contract 
terms, including, if requested, objective comparisons with terms to 
that participating physician by other payer;
    (2) Defendant may engage in activities reasonably necessary to 
facilitate lawful activities by physician network joint ventures and 
multi-provider networks as those terms are used in Statements 8 and 9 
of the 1996 Statements of Antitrust Enforcement Policy in Health Care, 
4 Trade Reg. Rep. (CCH) para. 13.153 (``Health Care Policy 
Statements'') and in activities that are lawful under Statement 6 of 
the Health Care Policy Statement; and
    (3) Defendant may objectively review and analyze terms and 
conditions of any proposed or actual payer contract that do not 
constitute competitively sensitive information and may convey or 
publish the results of such review and analysis to its members in a 
manner that does not constitute a recommendation or suggestion as to 
whether any term or condition of the payer contract should be accepted 
or rejected.
    (B) Nothing in this Final Judgment shall prohibit defendant, or any 
one or more of its members from:
    (1) Engaging or participating in lawful union organizational 
efforts and activities;
    (2) Advocating or discussing, in accordance with the doctrine 
established in Eastern Railroad Presidents Conference v. Noerr Motor 
Freight, Inc., 365 U.S. 127 (1961), United Mine Workers v. Pennington, 
381 U.S. 657 (1965), and their progeny, legislative, judicial, or 
regulatory actions, or other governmental policies or actions; and
    (3) Exercising rights protected by the National Labor Relations Act 
or any state collective bargaining laws.
    (C) Nothing in this Final Judgment shall prohibit
    (1) Any of defendant's members from engaging solely with other 
members or employees of such member's bona fide solo practice or 
practice group in activities otherwise prohibited herein; and
    (2) Any physician member of defendant (or the bona fide practice 
group that employs such physician), acting along in the exercise of 
his, her or its own independent business judgment, from choosing the 
payer or payers with which to contract, and/or refusing to enter into 
discussion or negotiations with any payer.
    (D) Nothing in this Final Judgment shall prohibit or impair the 
right of defendant (or any affiliate thereof) as a labor organization 
from communicating with other labor organizations concerning the 
identity of payers who are considered pro- or anti-union, provided such 
activity is consistent with Sec. 8(b)(4) of the National Labor 
Relations Act, 29 U.S.C. 158(b)(4), and to the extent it does not 
constitute a secondary boycott.

VI. Compliance Program

    Defendant shall maintain an antitrust compliance program, which 
shall include:
    (A) Distributing within 60 days from the entry of this Final 
Judgment.
    (1) A copy of the Final Judgment and Competitive Impact Statement 
to all of the defendant's officers, directors, employees, agents, and 
representatives, who provide, or supervise the provision of, services 
to competing physicians, and to all existing orthopedic surgeon members 
practicing in Delaware; Connecticut; the greater Dayton, Ohio area, 
including Montgomery County; and the greater Tampa, Florida area, 
including Hillsborough, Pinellas, and Pasco Counties; and
    (2) A copy of the Protocols to all of defendant's physician members 
who are in private practice and not part of a recognized or certified 
bargaining unit;
    (B) Distributing in a timely manner,
    (1) A copy of the Final Judgment and Competitive Impact Statement 
to any person who succeeds to a position with the Federation, as 
described in Paragraph VI(A)(1);
    (2) A copy of the Protocols to any physician who is in private 
practice and not part of a recognized or certified bargaining unit and 
who becomes a Federation member;
    (C) Holding an annual seminar explaining to all of defendant's 
officers, directors, employees, agents, and representatives who 
provide, or supervise the provision of, services to competing 
physicians, the antitrust principles applicable to their work, the 
restrictions contained in this Final Judgment, and the implications of 
violating the Final Judgment;
    (D) Maintaining an internal mechanism by which questions from any 
of defendant's officers, directors, employees, agents, and 
representatives about the application of the antitrust laws to the 
representation of competing physicians, whether as a messenger or as 
some other representative, can be answered by counsel as the need 
arises;
    (E) Obtaining, within 120 days from the entry of this Final 
Judgment, and retaining for the duration of this Final Judgment, a 
certificate from:
    (1) Each of defendant's officers, directors, employees, agents, and 
representatives, who provide, or supervise the provision of, services 
to competing physicians, and from each of defendant's physician members 
who receives, pursuant to Paragraph VI(A)(1), a copy of the Final 
Judgment and Competitive Impact Statement, that

[[Page 58166]]

he or she has received, read, and understands this Final Judgment, and 
that he or she has been advised and understands that he or she must 
comply with the Final Judgment and may be held in civil or criminal 
contempt for failing to do so;
    (2) Each of defendant's physician members who is in private 
practice and not part of a recognized or certified bargaining unit and 
who receives, pursuant to Paragraph VI(A)(2), a copy of the Protocols, 
that he or she has received, read, and understands the Protocols;
    (F) Obtaining, within 60 days following distribution, pursuant to 
Paragraph VI(B), and retaining for the duration of this Final Judgment, 
a certificate from:
    (1) Each person who succeeds to a position with the Federation as 
described in Paragraph VI(A)(1), that he or she has received, read, and 
understands this Final Judgment, and that he or she has been advised 
and understands that he or she must comply with the Final Judgment and 
may be held in civil or criminal contempt for failing to do so; and
    (2) Any physician who is in private practice and not part of a 
recognized or certified bargaining unit and who becomes a member, that 
he or she has received, read, and understands the Protocols; and
    (G) Maintaining for inspection by plaintiff a record of recipients 
to whom the Final Judgment. Competitive Impact Statement, or Protocols 
have been distributed and from whom written certifications pursuant to 
Paragraph VI(E) or (F), have been received.

VII. Certification

    (A) Within 75 days after entry of this Final Judgment defendant 
shall certify to plaintiff that it has distributed the Final Judgment 
Competitive Impact Statement and Protocols as required by Paragraph 
VI(A).
    (B) For a period of ten years following the date of entry of this 
Final Judgment, defendant shall certify annually on the anniversary 
date of the entry of this Final Judgment to plaintiff that it has 
complied with the provisions of this Final Judgment.

VIII. Plaintiff's Access

    (A) For the purposes of determining or securing compliance with 
this Final Judgment or determining whether this Final Judgment should 
be modified or terminated, and subject to any legally recognized 
privilege, authorized representatives of the Antitrust Division of the 
United States Department of Justice, shall upon written request of a 
duly authorized representative of the Assistant Attorney General in 
charge of the Antitrust Division and on reasonable notice to defendant, 
be permitted.
    (1) Access during regular business hours to inspect and copy all 
records and documents in the possession, custody, or control of 
defendant, which may have counsel present, relating to any matters 
contained in this Final Judgment:
    (2) To interview defendant's officers, directors, employees, 
agents, and representatives, who may have individual counsel present, 
concerning such matters; and
    (3) To obtain written reports from defendant, under oath if 
requested, relating to any matters contained in this Final Judgment.
    (B) The defendant shall have the right to be represented by counsel 
in any proceeding under this Section.
    (C) No information or documents obtained by the means provided in 
this Section shall be divulged by plaintiff to any person other than 
duly authorized representatives 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) If, at the time information or documents are furnished by 
defendant to plaintiff, defendant represents and identifies, in 
writing, the material in any such information or documents to which a 
claim of protection may be asserted under Rule 26(c)(7) of the Federal 
Rules of Civil Procedure, and defendant marks each pertinent page of 
such material, ``subject to claim of protection under Rule 26(c)(7) of 
the Federal Rules of Civil Procedure,'' then 10 days' notice shall be 
given by plaintiff to defendant prior to divulging such material in any 
legal proceeding (other than a grant jury proceeding) to which 
defendant is not a party.
    (E) The provisions of Paragraph VIII(A) do not apply to any 
Federation member or to any member's group practice.

IX. Jurisdiction Retained

    (A) This Court retains jurisdiction to enable any party to this 
Final Judgment, but no other person, to apply to this Court at any time 
for further orders and directions as may be necessary or appropriate to 
carry out or construe this Final Judgment, to modify or terminate any 
of its provisions, to enforce compliance, and to punish violations of 
its provisions.
    (B) If federal or state legislation enacted after the entry of this 
Final Judgment permits conduct prohibited by this Final Judgment, 
defendant may move for and plaintiff will reasonably consider an 
appropriate modification of this Final Judgment.

X. Expiration of Final Judgment

    This Final Judgment shall expire ten (10) years from the date of 
entry.

XI. Public Interest Determination

    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.

United States District Judge

Competitive Impact Statement

    Pursuant to section 2(b) of the Antitrust Procedures and Penalties 
Act (``APPA''), 15 U.S.C. 16(b)-(h), the United States 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 August 12, 1998, the United States filed a civil antitrust 
Complaint alleging that the defendant. Federation of Physicians and 
Dentists, Inc. (``Federation''), restrained competition in violation of 
section 1 of the Sherman Act, 15 U.S.C. 1.
    The Complaint alleged that the Federation coordinated an 
understanding among certain members--competing Delaware orthopedic 
surgeons in private practice--that they would seek to negotiate 
exclusively through the Federation to oppose Blue Cross and Blue Shield 
of Delaware's (``Blue Cross'') proposed reduction in fees and to 
inhibit other health care insurers in Delaware from reducing the fees 
paid to these surgeons.
    The Complaint seeks injunctive relief to enjoin continuance and 
prevent recurrence of the violation. Entry of the proposed Final 
Judgment will terminate this action, except that the Court will retain 
jurisdiction to construe, modify, or enforce its provisions and to 
punish violations thereof.

II. Practices Giving Rise to the Alleged Violation

A. Background

    During the period of the alleged violation, four major health care 
insurers operated in Delaware. Of these four, Blue Cross was the 
largest, covering nearly 200,000 Delaware residents. All of the 
insurers had formed

[[Page 58167]]

``networks'' of participating providers, contracting with hospitals and 
physicians to provide medical care to their subscribers. To increase or 
retain patient volume, participating providers agreed to accept the 
fees paid by an insurer as full payment (plus any applicable deductible 
amount or co-payment paid by the patient) for their services. To make 
their networks marketable to Delaware employers and their employees, 
insurers needed to include a number of the orthopedic surgeons who 
practiced in various areas in Delaware as participating providers.
    From late 1996 through early 1998, approximately 47 orthopedic 
surgeons were actively engaged in private practice in Delaware; most 
belonged to competing independent practice groups. Twenty-six practiced 
in New Castle County, including 20 who belonged to the County's three 
major orthopedic practice groups. The remaining surgeons practiced in 
``downstate'' Delaware communities. Prior to the violation alleged in 
the Complaint, all 47 Delaware orthopedic surgeons were participating 
providers in Blue Cross's provider network.
    The Federation is a labor organization with its headquarters in 
Tallahassee, Florida. The Federation has traditionally acted, in 
employment contract negotiations, as a collective bargaining agent 
under federal and state labor law for physicians who are employees of 
public hospitals or other health care entities. For several years, 
however, the Federation has recruited economically independent 
physicians in private practice in many states to encourage these 
independent physicians to use the Federation in negotiating their fees 
and other terms in their contracts with health care insurers.

B. Illegal Agreement To Negotiate With Blue Cross Exclusively Through 
the Federation

    The Federation and its Delaware orthopedic surgeon members 
conspired to restrain competition in the sale of orthopedic physicians 
services in various areas of Delaware. This conspiracy developed in the 
fall of 1996 when the Federation began recruiting orthopedic surgeons 
in Delaware, touting itself as a vehicle for increasing their 
bargaining leverage with insurers in fee negotiations. During 1997, the 
Federation succeeded in recruiting nearly all of the orthopedic 
surgeons in private practice in Delaware.
    In August 1997, Blue Cross notified all of its network physicians, 
including orthopedic physicians, of a planned fee reduction. By this 
action, Blue Cross sought to set the fees for Delaware orthopedic 
surgeons at levels closer to those paid to orthopedic surgeons in 
nearby areas, such as metropolitan Philadelphia. To resist Blue Cross's 
proposed fee reductions, the Federation and its orthopedic-surgeon 
members reached an understanding that Federation members would 
negotiate fees with Blue Cross solely through the Federation's 
executive director John ``Jack'' Seddon.
    During the fall of 1997 and continuing through early 1998, the 
Federation and its Delaware orthopedic-surgeon members coordinated 
efforts to ensure a unified response to Blue Cross's proposed fee 
reduction. Acting on the advice of one member, nearly all Federation 
members designated Jack Seddon to represent them in fee negotiations 
with Blue Cross. Mr. Seddon subsequently recommended that Federation 
members should reject Blue Cross's fee reduction, and he informed 
Federation members that other Federation members were simultaneously 
receiving the same recommendation.
    Thereafter, Mr. Seddon and others, acting on behalf of themselves 
and the Federation, instructed Federation members how to sustain their 
coordinated negotiating position with Blue Cross. In doing so, they 
impressed upon members the importance of jointly resisting Blue Cross's 
fee proposal by demanding that Blue Cross deal exclusively with them 
through the Federation. Federation members carried out Mr. Seddon's 
recommendations, ultimately submitting contract termination notices 
when Blue Cross refused to accede to their demand that it negotiate 
with them through Mr. Seddon. Confronted with this concerted resistance 
by Federation members, Blue Cross modified, but refused to rescind, its 
proposed fee reduction.

C. Improper Use of the ``Messenger Model'' by the Federation and Its 
Members

    In establishing their illegal agreement, the Federation and its 
members claimed that they were acting as a legitimate ``third-party 
messenger,'' as described in Statements 8 and 9 of the Department of 
Justice and Federal Trade Commission Statements of Antitrust 
Enforcement Policy in Healthcare, 4 Trade Reg. Rep. (CCH) para.13,153 
at 20.831 (August 28, 1996) (``Health Care Policy Statements''). The 
conduct of the Federation and its members, however, failed to conform 
to a legitimate messenger model, which may facilitate contracting 
between providers and payers. A legitimate messenger arrangement, 
however, may not collectively negotiate for providers, enhance their 
bargaining power, organize a refusal to deal, or facilitate the sharing 
of price and other competitively sensitive information among them.

D. Effect of the Agreement

    As a result of the illegal agreement to negotiate with Blue Cross 
only through the Federation, virtually all Federation members had 
rejected Blue Cross's proposed fee schedule and had given notice of 
their intent to terminate their Blue Cross contracts within 90 days. In 
further coordination with the Federation, members also notified 
patients and referring physicians of the impending termination of their 
participation with Blue Cross. These notices sought to prompt employers 
and patients to pressure Blue Cross to meet the Federation members' 
price demands.
    Although Blue Cross attempted to reopen negotiations with 
individual physicians in early 1998, Federation members uniformly 
rejected such efforts. Consequently, by the end of February 1998, Blue 
Cross had only a few participating orthopedic surgeons in its physician 
network, impairing its ability to offer a provider network that 
included an adequate number of orthopedic surgeons.
    The purpose of the Federation's and its members' agreement was to 
force Blue Cross to rescind the proposed fee reduction for orthopedic 
surgeons and to inhibit Blue Cross's effort to contract with those 
surgeons at reduced fees. In some cases, Blue Cross subscribers who 
needed to receive orthopedic services either paid higher prices to 
receive care from their former physicians as non-participating 
providers or had to forego or delay receiving such care.

III. Explanation of the Proposed Final Judgment

    The proposed Final Judgment seeks to eliminate defendant and its 
members' illegal practices in Delaware, and elsewhere, and to prevent 
their renewal. As discussed in further detail below, it seeks to 
achieve these goals by prohibiting the Federation and its members from 
engaging in specified activities and by requiring the Federation to 
establish an antitrust compliance program. The proposed Final Judgment 
applies to defendant's conduct not only in Delaware but nationwide.

A. Prohibitions

    In general, the proposed Final Judgment prohibits the Federation 
from participating, encouraging, or

[[Page 58168]]

facilitating any agreement or understanding between competing 
physicians, or from negotiating, collectively or individually, on 
behalf of competing physicians, about any actual or proposed payer 
contract or contract term. In addition, defendant is prohibited from 
making any recommendation to competing physicians about any actual or 
proposed payer contract or contract term or about whether to accept or 
reject any such payer contract or contract term.
    The proposed Final Judgment also enjoins the Federation from 
communicating any competitively sensitive information to, or in the 
presence of, competing physicians, and from communicating to competing 
physicians any subjective opinion or subjective analysis, evaluation, 
or assessment about competitively sensitive information. It enjoins the 
Federation from precluding or discouraging any competing physicians 
from exercising their independent business judgment in determining 
whether to negotiate, contract, or deal directly with any payers. It 
also enjoins the Federation from participating in, encouraging, or 
facilitating any agreement or understanding between competing 
physicians to deal with any payer exclusively through a messenger 
rather than individually or through other channels.
    In addition to enjoining certain conduct by the Federation, the 
proposed Final Judgment also prohibits certain conduct by Federation 
member physicians who participate in any messenger or any other 
arrangement provided by defendant. Defendant's members are prohibited 
from participating in, encouraging, or facilitating any agreement or 
understanding among competing physicians about: (1) Any competitively 
sensitive information; (2) using a messenger; or (3) requiring that a 
payer deal with them only through a messenger or other agent or 
representative. They are also prohibited from communicating or 
facilitating the communication of any competitively sensitive 
information to, or in the presence of, competing physicians.

B. Permitted Conduct

    During the first five years that the Final Judgment is in effect, 
the proposed Final Judgment permits the Federation to act as a 
messenger for competing physicians only under certain enumerated 
conditions.\1\ For that five-year period, the Federation is enjoined 
from acting as a messenger for any competing physicians unless it 
informs the payer and participating physicians in writing that the 
payer may decline to communicate through the Federation and that the 
payer and participating physicians may communicate with each other 
without defendant's involvement. During that period, the Final Judgment 
also requires the Federation, when acting as a messenger to inform 
payers and its member physicians in writing that it cannot negotiate, 
collectively or individually, for any such physician about any contract 
or contract term.
    Subject to other provisions of the Final Judgment, at a 
participating physician's request, the Federation may communicate to 
the requesting physician accurate, factual, and objective information 
about a proposed payer contract offer or contract terms, including, if 
requested, objective comparisons with terms offered to that physician 
by other payers. If conducted appropriately, these activities will 
likely facilitate, rather than impair, competition.
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    \1\ By Stipulation, defendant has agreed, until the end of 2001, 
not to act as a messenger, nor to negotiate any actual or proposed 
payer contract or contract term with any payer, on behalf of any 
orthopedic surgeons practicing in Delaware, except with a payer that 
has, in writing, authorized such activity and if the activity 
otherwise complies with the Final Judgment. In addition, defendant 
has agreed by stipulation to notify, in writing within 30 days from 
the filing of the Stipulation, each of its orthopedic surgeon 
members in Delaware and each payer doing business in Delaware with 
which defendant has communicated on behalf of any orthopedic 
surgeon, that defendant is prohibited during 2001 from acting as a 
messenger or negotiating on behalf of any orthopedic surgeons 
practicing in Delaware unless the payer has, in writing, authorized 
such activity, and the activity otherwise complies with the Final 
Judgment.
---------------------------------------------------------------------------

    The Federation may also engage in activities reasonably necessary 
to facilitate lawful activities by physician network joint ventures and 
multi-provider networks as those terms are used in Statements 8 and 9 
of the Health Care Policy Statements and in activities involving 
physician participation in writing fee surveys that are lawful under 
Statement 6 of the Health Care Policy Statements. In addition, 
Federation physician members may continue to engage independently, or 
solely with other members or employees of such member's bona fide solo 
practice or practice groups, in activities otherwise prohibited by the 
Final Judgment, such as choosing the payer or payers with which to 
contract, and/or refusing to enter into discussion or negotiations with 
any payer.
    Under the proposed Final Judgment, the Federation may also continue 
to engage in lawful union organizational efforts and activities. The 
proposed Final Judgment also does not limit the Federation's rights to 
petition in accordance with doctrine established in Eastern Railroad 
Presidents Conference v. Noerr Motor Feight, Inc., 365 U.S. 127 (1961), 
and its progeny.

C. Compliance Program

    The proposed Final Judgment requires the Federation to maintain an 
antitrust compliance program to help prevent recurrence of the actions 
that facilitated the antitrust violation alleged in the Complaint. As 
part of the compliance program, the Federation must distribute a copy 
of the proposed Final Judgment and Competitive Impact Statement to all 
of its present and succeeding personnel, including officers, directors, 
employees, agents, representatives who provide or supervise services to 
competing physicians and to all existing orthopedic-surgeon members 
practicing in Delaware. In addition, the Federation has agreed to 
distribute copies of the Final Judgment and Competitive Impact 
Statement to competing physicians and orthopedic surgeon members 
practicing in Connecticut: the greater Dayton, Ohio area, including 
Montgomery County; and the greater Tampa, Florida area, including 
Hillsborough, Pinellas, and Pasco Counties, areas where the United 
States has pending investigations involving the Federation. For all 
other present and future physician members, the Federation must 
distribute a copy of its Protocols, which are a set of written 
guidelines developed and adopted by defendant for dissemination to its 
members that have been approved by plaintiff for the limited purpose of 
assuring that defendant's existing and future members who do not 
receive a copy of this Final Judgment receive adequate notice of its 
terms. The Federation must also obtain from each person who receives 
the proposed Final Judgment and Competitive Impact Statement a 
certification that he or she has been advised and understands that he 
or she must comply with the Final Judgment; and similarly, the 
Federation must obtain from each person who receives a copy of the 
Protocols, a certification that he or she has received, read, and 
understands the Protocols.
    Further, the Federation must also hold an annual seminar explaining 
to its officers, directors, employees, agents, and representatives who 
provide or supervise services to competing physicians, the applicable 
antitrust principles, the restrictions contained in the Final Judgment, 
and the implications of violating the Final Judgment. The proposed 
Final Judgment further requires the Federation to maintain an internal 
mechanism whereby questions about the application

[[Page 58169]]

of the antitrust laws to the representation of competing physicians can 
be answered by counsel.
    To facilitate monitoring of compliance with the Final Judgment, the 
Federation must make available, upon request, records and documents in 
their possession, custody, or control relating to matters contained in 
the Final Judgment. The Federation must also make its personnel 
available for interviews regarding such matters. In addition, the 
Federation must prepare written reports relating to the Final Judgment 
upon request.

D. Anticipated Effects of the Proposed Final Judgment on Competition

    The proposed Final Judgment prohibits the Federation from 
coordinating, and its members from participating in, any joint action 
in regard to a payer contract or contract term, including any boycott 
of an insurer or other payer. Consequently, a payer's ability to 
maintain a comprehensive panel of competing physicians should no longer 
be hampered by the Federation and its members, and payers' subscribers 
should benefit from free and open competition in the purchase of 
physician services, including orthopedic surgical services, in Delaware 
and elsewhere.
    By appropriate restrictions on the conduct of the Federation and 
its members, the relief imposed by the proposed Final Judgment will 
eliminate a substantial restraint on price competition among competing 
orthopedic surgeons in Delaware and elsewhere. It will do so by 
prohibiting the Federation from negotiating on behalf of its member 
physicians or acting anticompetitively in concert toward Blue Cross or 
any other insurer.
    The proposed Final Judgment will thus restore the benefits of free 
and open competition to the provision of orthopedic physician services 
in Delaware and enjoin continuation or prevent replication of similar 
violations in areas outside Delaware. Unrestrained competition among 
orthopedic surgeons and other physicians who contract to participate in 
insurers' networks should benefit insurers and their subscribers.

IV. 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 defendant 
Federation. The United States is satisfied, however, that the 
requirements and prohibitions contained in the proposed Final Judgment 
will restore and preserve viable competition for the provision of 
physician services among competing Federation members. To this end, the 
United States expects that the proposed relief, once implemented by the 
Court, will likely prevent the Federation from engaging in conduct that 
has significant adverse competitive effects.
    The Department also considered a final judgment that would have 
flatly prohibited the Federation from acting as a third-party messenger 
nationwide. Other prohibitions considered were limitations on the areas 
and specialities for which the Federation would be allowed to function 
as a third-party messenger. As part of the process of compromise by 
both parties during settlement discussions, the Department ultimately 
did not insist on these alternative forms of relief following 
consideration of litigation risk, the likelihood of obtaining such 
relief through litigation, and the effectiveness of the relief 
obtained.

V. Remedies Available to 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 suffered, as well as costs and reasonable attorney's fees.
    Entry of the proposed Final Judgment will neither impair nor assist 
in the bringing of such actions. Under the provisions of section 5(a) 
of the Clayton Act, 15 U.S.C. 16(a), the Final Judgment has no prima 
facie effect in any subsequent lawsuits that may be brought against the 
Federation in this matter.

VI. Procedures Available for Modification of the Proposed Final 
Judment

    The parties have stipulated that the proposed Final Judgment may be 
entered by this Court after compliance with the provisions of the APPA, 
provided that the United States has not withdrawn its consent. The APPA 
conditions entry of the decree upon this Court's determination that the 
proposed Final Judgment is in the public interest.
    As provided by sections 2(b) and (d) of the APPA, 15 U.S.C. para. 
16(b) and (d), 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 days of publication of this 
Competitive Impact Statement in the Federal Register.
    The United States will evaluate and respond to the comments. All 
comments will be given due consideration by the Department of Justice, 
which remains free to withdrawn its consent to the Final Judgment at 
any time prior to entry. The comments and the responses of the United 
States will be filed with the Court and published in the Federal 
Register.
    Written comments should be submitted to: Gail Kursh, Chief, Health 
Care Task Force, Antitrust Division, U.S. Department of Justice, 325 
Seventh St., NW., Rm. 404, 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 modification, 
interpretation, or enforcement of the Final Judgment. The proposed 
Final Judgment would expire ten (10) years from the date of its entry.

VII. Determinative Documents

    No materials and documents of the type described in section 2(b) of 
the APPA were considered in formulating the proposed Final Judgment. 
Consequently, none are being filed with this Competitive Impact 
Statement.

    Dated: October 22, 2001.

Respectfully submitted,
Steven Kramer, Richard S. Martin, Scott Scheele, Adam J. Falk,
Attorneys, Antitrust Division, Department of Justice, Washington, DC 
20530, Tel: (202) 307-0997, Fax: (202) 514-1517.
Virginia Gibson-Mason,
Assistance U.S. Attorney, Chief, Civil Division, 1201 Market Street, 
Suite 1100, Wilmington, DE 19801, (302) 573-6277.
[FR Doc. 01-28888 Filed 11-01-01; 8:45 am]
BILLING CODE 4410-11-M