[Federal Register Volume 70, Number 147 (Tuesday, August 2, 2005)]
[Notices]
[Pages 44376-44387]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-15138]


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DEPARTMENT OF JUSTICE

Antitrust Division


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

    Notice is hereby given pursuant to the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16(b)-(h), that a Complaint, proposed Final 
Judgment, Stipulation, and Competitive Impact Statement have been filed 
with the United States District Court for the Southern District of Ohio 
in United States v. Federation of Physicians and Dentists, et al., 
Civil Case No. 1:05-cv-431. The proposed Final Judgment is subject to 
approval by the Court after compliance with the Antitrust Procedures 
and Penalties Act, 15 U.S.C. 16(b)-(h), including expiration of the 
statutory 60-day public comment period.
    On June 24, 2005, the United States filed a Complaint alleging that 
the Federation of Physicians and Dentists (``Federation''), Dr. Michael 
Karram, Dr. Warren Metherd, and Dr. James Wendel conspired with other 
OB-GYN members, to increase fees paid by commercial insurers to 
Federation members in violation of Sherman Act section 1.
    To help restore competition, the proposed Final Judgment filed with 
the Complaint will enjoin Dr. Karram, Dr. Metherd, and Dr. Wendel 
(``the Settling Physicians'') from encouraging, facilitating, or 
participating in any agreement among competing physicians pertaining to 
any contract term, negotiations with any health care payer, or the 
provision of consulting, financial, legal, or negotiating services 
concerning any payer contract. The Settling Physicians are also not 
permitted to use the Federation for contracting and negotiation 
services, such as messenger services. The proposed Final Judgment also 
prohibits certain communications between any Settling Physician and any 
competing physician.
    A Competitive Impact Statement, filed by the United States, 
describes the Complaint, the proposed Final Judgment, and the remedies 
available to private litigants. Copies of the Complaint, proposed Final 
Judgment, and Competitive Impact Statement are available for inspection 
at the Department of Justice in Washington, DC in Room 215 North, 325 
Seventh Street, NW. 20530 (telephone: 202/514-2692), and at the Office 
of the Clerk of the United States District Court for the Southern 
District of Ohio, Western Division, Potter Stewart U.S.

[[Page 44377]]

Courthouse, Room 103, 100 East Fifth Street, Cincinnati, Ohio 45202.
    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 Mark J. Botti, Chief, Litigation I Section, Antitrust Division, U.S. 
Department of Justice, 1401 H Street, NW., Suite 4000, Washington, DC 
20250 (Telephone 202/307-0001).

J. Robert Kramer II,
Director of Operations, United States Department of Justice, Antitrust 
Division.

United States District Court for the Southern District of Ohio, Western 
Division

United States of America, Plaintiff v. Federation of Physicians and 
Dentists, et al., Defendants

    Civil No. 1:05CV431.
    Chief Judge Beckwith.
    United States Magistrate Judge Hogan.

Plaintiff's Competitive-Impact Statement Concerning the Proposed Final 
Judgment as to Setting Physician Defendants

    The United States, pursuant to Section 2(b) of the Antitrust 
Procedures and Penalties Act (``APPA''), 15 U.S.C. 16(b)-(h), files 
this Competitive Impact Statement relating to the proposed Final 
Judgment as to Settling Physician Defendants (``Final Judgment''). The 
proposed Final Judgment was lodged with the Court on June 24, 2005, for 
eventual entry in this civil antitrust proceeding, following the 
parties' compliance with the APPA, and, if the Court determines, 
pursuant to the APPA, that the proposed Final Judgment is in the public 
interest.

I. Nature and Purpose of the Proceeding

    The plaintiff filed this civil antitrust Complaint on June 24, 
2005, in the United States District Court for the Southern District of 
Ohio, Western Division, alleging that Drs. Warren Metherd, Michael 
Karram, and James Wendel (``the Settling Physician Defendants''), 
obstetrician-gynecologist physicians (``OB-GYNs'') practicing in 
Cincinnati, Ohio, participated in a conspiracy that has unreasonably 
restrained interstate trade and commerce in violation of Section 1 of 
the Sherman Act, 15 U.S.C. 1. As alleged in the Complaint, this 
agreement has artificially raised fees paid by health insurers to OB-
GYNs in the Cincinnati area that are ultimately borne by employers and 
their employees.
    The plaintiff and the Settling Physician Defendants have stipulated 
that the proposed Final Judgment may be entered upon the Court's 
determinations that it serves the public interest and that there is no 
just reason to delay its entry while the litigation involving the two 
non-settling defendants proceeds. Entry of the proposed Final Judgment 
would terminate this action against the Settling Physician Defendants, 
except that the Court would retain jurisdiction to construe, modify, or 
enforce the provisions of the proposed Final Judgment, and to punish 
violations of it.

II. Description of the Events Giving Rise to the Alleged Violation of 
the Antitrust Laws

    The Complaint in this action includes the following allegations. In 
the spring of 2002, the Settling Physician Defendants joined the 
Federation of Physician and Dentists (``Federation''), a membership 
organization of physicians and dentists, headquartered in Tallahassee, 
Florida. The Federation's membership includes economically independent 
physicians in private practice in many states, including Ohio. The 
Federation offers such member physicians assistance in negotiating fees 
and other terms in their contracts with health care insurers.
    Cincinnati OB-GYNs became interested in joining the Federation 
primarily to negotiate higher fees from health care insurers. The 
Settling Physician Defendants assisted the Federation in recruiting 
other Cincinnati-area OB-GYNs as members. By June, 2002, the membership 
of the Federation had grown to include a large majority of competing 
OB-GYN physicians in the Cincinnati area.
    With substantial participation by the Settling Physician 
Defendants, the Federation coordinated and helped implement its 
members' concerted demanded to insurers for higher fees and related 
terms, accompanied by threats of contract terminations. From September, 
2002, through the fall of 2003, the Settling Physician Defendants 
communicated with Federation employees, each other, and other 
Cincinnati-area OB-GYN Federation members to assist the Federation in 
coordinating members' contract negotiations with health care insurers. 
The Settling Physician Defendants' communications included assisting 
the Federation in developing a strategy for the Federation to intensify 
members' pressure on health insurers to renegotiate their contracts, 
apprising each other and other physicians about their own practice 
group's negotiations, working primarily through the Federation to 
inform Federation members about steps to take to coordinate their 
negotiations, and leading a campaign for Federation members to endorse 
insurers that agreed to meet all Federation members' contract demands.
    The Settling Physician Defendants' and their conspirators' 
collusion caused Cincinnati-area health care insurers to raise fees 
paid to Federation members OB-GYNs above the levels that would likely 
have resulted if Federation members had negotiated competitively with 
those insurers. As a result of the Settling Physician Defendants' and 
their conspirators' conduct, the three largest Cincinnati-area health 
care insurers were each forced to increase fees paid to most Federation 
members OB-GYNs by approximately 15-20% starting July 1, 2004, followed 
by cumulative increases of 20-25%, starting January 1, 2004, and 25-
30%, effective January 1, 2005. The Settling Physician Defendants' and 
their conspirators' conduct also caused other insurers to raise the 
fees they paid to Federation members OB-GYNs.

III. Explanation of the Proposed Final Judgment

A. Relief To Be Obtained

    The proposed Final Judgment prohibits the Settling Physician 
Defendants from encouraging, facilitating, or participating in any 
agreement or understanding among competing physicians about any 
contract term, about the manner in which those physicians will 
negotiate or deal with any health care payer, or about the use of any 
person or organization that provides consulting, financial, legal, or 
negotiating services concerning any payer contract. The proposed Final 
Judgment also enjoins the Settling Physician Defendants from using 
Defendant Federation of Physicians and Dentists (``Federation'') for 
any messenger, financial, legal, consulting, or negotiating service 
concerning any payer contract or contract.
    The proposed Final Judgment also prohibits each Settling Physician 
Defendant from communicating with any competing physician about his or 
his practice group's view or position concerning the negotiation or 
acceptability of any proposed or existing payer contract or contract 
term, including his or his medical practice group's negotiating or 
contracting status with any payer. Each Settling Physician Defendant is 
also enjoined from communicating with any competing

[[Page 44378]]

physician about (1) any proposed or existing term of any payer contract 
that affects the fees that the Settling Physician Defendant or his 
medical practice group contracts for, or accepts from (or considers 
contracting for, or accepting from) any payer, (2) the duration, 
amendment, or termination of the payer contract; (3) utilization 
reviews and pre-certification; or (4) the manner of resolving disputes 
between the participating physician or group and the payer.
    Subject to the injunctive provisions of the proposed Final 
Judgment, the Settling Physician Defendants may discuss with any 
competing physician any medical issues relating to the treatment of a 
specific patient and may participate in activities of any medical 
society. The proposed Final Judgment also does not limit the Settling 
Physician Defendants' advocacy or discussion concerning legislative, 
judicial, or regulatory actions in accordance with doctrine established 
in Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc., 
365 U.S. 127 (1961), and its progeny. The proposed Final Judgment also 
allows the Settling Physician Defendants to respond to communications 
necessary to participate in lawful activities by clinically or 
financially integrated physician network joint ventures and multi-
provider networks, as those terms are used in Statements 8 and 9 of the 
1996 Statement of Antitrust Enforcement Policy in Health Care, 4 Trade 
Reg. Rep. (CCH) ] 13,153 (``Health Care Policy Statements'').
    For a period of ten years following the date of entry of the Final 
Judgment, each Settling Physician Defendant must certify to the United 
States annually whether he and his agents have complied with the 
provisions of the Final Judgment.

B. Anticipated Effects of the Relief To Be Obtained on Competition

    The proposed Final Judgment seeks to help restore lost competition, 
as alleged in the Complaint, and to help prevent recurrence of the 
alleged violation by enjoining the Settling Physician Defendants from 
conspiring to increase fees for their services and engaging in conduct 
that may facilitate such a conspiracy. The proposed Final Judgment 
seeks to achieve these objectives, in part, by prohibiting the Settling 
Physician Defendants from engaging in the types of concerted action 
that allegedly enabled Federation member OB-GYNs to coordinate their 
negotiations with health care payers. The prevention of coordinated 
negotiations should reestablish competition between many of the 
independent, participating Federation member OB-GYNs who coordinated 
their payer negotiations through the Federation. Such competition will 
allow purchasers of OB-GYN physician services to negotiate competitive 
contract terms with Cincinnati-area OB-GYN physicians, instead of being 
forced to pay the higher rates that have allegedly resulted from the 
alleged coordination of payer negotiations by the majority of 
Cincinnati-area OB-GYN physicians, who were members of the Federation. 
To help avoid recurrence of the alleged violation, the proposed Final 
Judgment also prohibits the Settling Physician Defendants from using 
the Defendant Federation or any other person or organization to 
coordinate contract negotiations with payers and from communicating 
with competing physicians about competively sensitive contract terms 
and about contract negotiations and contract status.

IV. Remedies Available to Potential Private Litigants Damaged by the 
Alleged Violation if the Proposed Final Judgment is Entered

    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 district court to recover 
three times the damages the person has suffered, as well as the costs 
of bringing a lawsuit 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), entry of the proposed Final 
Judgment also would have no prima facie effect in any subsequent 
lawsuits that may be brought against the Settling Physician Defendants 
involving their alleged conduct in this action.

V. Procedures Available for Modification of the Proposed Final Judgment

    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.
    The APPA provides a period of at least sixty (60) days preceding 
the entry 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. The United States will evaluate and 
respond to the comments received during this period, and it remains 
free to withdraw its consent to the proposed Final Judgment at any time 
prior to entry. The comments and the response of the United States will 
be filed with this Court and published in the Federal Register. Written 
comments should be submitted to: Mark J. Botti, Chief, Litigation I 
Section, Antitrust Division, United States Department of Justice, 1401 
H Street, NW., Suite 4000, Washington, DC 20530.
    The proposed Final Judgment provides that this Court retains 
jurisdiction over this action, and the parties may apply to this Court 
for any order necessary or appropriate for the modification, 
interpretation, or enforcement of the Final Judgment.

VI. Alternatives to the Proposed Final Judgment Actually Considered by 
the United States

    The United States considered, as an alternative to the proposed 
Final Judgment, a full trial on the merits against the Settling 
Physician Defendants. The United States is satisfied, however, that the 
prohibitions contained in the proposed Final Judgment will more quickly 
help achieve the primary objective of a trial on the merits--helping to 
reestablish competition among Federation member OB-GYNs and to prevent 
recurrence of the alleged violation.

VII. Standard or Review Under the APPA of the Proposed Final Judgment

    After the sixty (60)-day comment period and compliance with the 
provisions of the APPA, if the United States has not withdrawn its 
consent to the proposed Final Judgment, it will move for entry of the 
proposed Final Judgment in accordance with Fed. R. Civ. P. 54(b) and 
the APPA. Persons considering commenting on the proposed Final Judgment 
are advised that, in determining, under the APPA, whether entry of the 
proposed Final Judgment is ``in the public interest,'' the Court shall 
consider:

    (A) The competitive impact of such judgment, including 
termination of alleged violations, provisions for enforcement and 
modification, duration or 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

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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).
    As these statutory provisions suggest, the APPA requires the Court 
to consider, 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 United States v. Microsoft Corp., 56 
F.3d 1448, 1458-62 (D.C. Cir. 1995). In determining whether the 
proposed judgment is in the public interest, ``[n]othing in [the APPA] 
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), ``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). This caveat is also consistent with the deferential review of 
consent decrees under the APPA. See United States v. Microsoft, 56 F.3d 
at 1460-62; United States v. BNS, Inc., 858 F.2d 456, 462 (9th Cir. 
1988).

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: July --, 2005.

 Respectfully submitted,

For Plaintiff United States of America:

Gregory G. Lockhart,

United States Attorney.

Gerald F. Kaminski,

Assistant United States Attorney.

Bar No. 0012532.

Office of the United States Attorney, 221 E. 4th Street, Suite 400, 
Cincinnati, Ohio 45202, (513) 684-3711.

Steven Kramer, John Lohrer, Paul Torzilli,

Attorneys, Antitrust Division, U.S. Department of Justice, 1401 H 
Street, NW., Suite 4000, Washington, DC 20530. (202) 307-0997, 
[email protected].

Certificate of Service

    I hereby certify that on July --, 2005, copies of the foregoing 
Plaintiff's Competitive-Impact Statement Concerning the Final 
Judgment as to Settling Physician Defendants were served by 
facsimile and first-class regular U.S. mail, postage prepaid, to:

Michael E. DeFrank, Esq., Hemmer Pangburn DeFrank PLLC, Suite 200, 
250 Grandview Drive, Fort Mitchell, KY 41017, Fax: 859-578-38679, 
Attorney for Defendant Dr. James Wendel.
G. Jack Donson, Jr., Esq., Taft, Stettinius & Hollander, 425 Walnut 
Street, Suite 1800, Cincinnati, Ohio 45202, Fax: 513-381-0205, 
Attorney for Defendant Dr. Michael Karram.
Jeffrey M. Johnston, Esq., 37 North Orange Avenue, Suite 500, 
Orlando, FL 32801, Fax: 407-926-2453, Attorney for Defendant Dr. 
Warren Metherd.
Lynda Odenkirk, 43 Burwell Street, New Haven, CT 06513, Fax: 203-
284-0624.
Federation of Physicians and Dentists, c/o Jack Seddon, Executive 
Director, 1310 Cross Creek Circle, Suite C2, Tallahassee, FL 32301, 
Fax: 850-942-6722.

Paul J. Torzilla,

Attorney, United States Department of Justice.

United States District Court for the District of Southern Ohio Western 
Division

United States of America, Plaintiff, vs. The Federation of Physicians 
and Dentists, et al., Defendants

    Civil Action No. 1:05-cv-431.

Final Judgment as to Settling Physician Defendants

    Whereas, Plaintiff, the United States of America, filed its 
Complaint on June 24, 2005, alleging that the setting physician 
Defendants Dr. Warren Metherd, Dr. Michael Karram, and Dr. James 
Wendel, participated in agreements in violation of Section 1 of the 
Sherman Act, and the Plaintiff and the settling physician 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 without this Final Judgment constituting any evidence against, 
or any admission by the settling physician Defendants that the law has 
been violated as alleged in such Complaint, or that the facts alleged 
in such complaint, other than the jurisdictional facts, are true;
    And whereas the settling physician Defendants agree to be bound by 
the provisions of this Final Judgment, pending its approval by this 
Court;
    And whereas, the essence of this Final Judgment is to restore lost 
competition, as alleged in the Complaint, and to enjoin the settling 
physician Defendants from conspiring to increase fees for the provision 
of obstetrical and gynecological services;
    And whereas, the United States requires the settling physician 
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 Plaintiff 
and the settling physician Defendants, it is ordered, adjudged and 
decreed:

I. Jurisdiction

    This Court has jurisdiction over the subject matter of and over the 
United States and the settling physician Defendants in this action. The 
Complaint states a claim upon which relief may be granted against the 
settling physician Defendants 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, directly or indirectly, in any manner;
    (B) ``Competing physician'' means, in relation to each settling 
physician Defendant, any obstetrician-gynecologist in any separate, 
private medical practice, other than the settling physician's own 
practice, in any of the following counties: Boone and Kenton in 
Kentucky, and Hamilton and Butler in Ohio.
    (C) ``Messenger service'' means, in relation to Defendant 
Federation of Physicians and Dentists or its successors, communicating 
to a payer any information the Federation receives from a member 
physician or communicating to a member physician any information the 
Federation receives from a payer;
    (D) ``Payer'' menas 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;
    (E) ``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;
    (F) ``Person'' means any natural person, corporation, firm, 
company, sole proprietorship, partnership, joint venture, association, 
institute, governmental unit, or other legal entity; and
    (G) ``Settling physician Defendants'' means Defendants Dr. Warren 
Metherd,

[[Page 44380]]

Dr. Michael Karram, and Dr. James Wendel, who have consented to entry 
of this Final Judgment, and all persons acting as agents on behalf of 
any settling physician Defendant.

III. Applicability

    This Final Judgment applies to the settling physician 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.

IV. Prohibited Conduct

    The settling physician Defendants each are enjoined from, in any 
manner, directly or indirectly:
    (A) Encouraging, facilitating, entering into, or participating in 
any actual or potential agreement or understanding between or among 
competing physicians about any fee or other payer contract term 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;
    (B) Encouraging, facilitating, entering into, or participating in 
any actual or potential agreement or understanding between or among 
competing physicians about the manner in which those physicians will 
negotiate or deal with any payer or group of payers, including 
participating in or terminating any payer contract;
    (C) Encouraging, facilitating, entering into, or participating in 
any actual or potential agreement or understanding between or among 
competing physicians about the use of any person or organization that 
provides any consulting, financial, legal, or negotiating services 
concerning any payer contract, or that in any way communicates with any 
payer;
    (D) Using Defendant Federation of Physicians and Dentists for any 
messenger, financial, legal, consulting, or negotiating service 
concerning any payer contract or contract term; or
    (E) Communicating with any competing physician about:
    (1) The actual or possible view, intention or position of each 
settling physician Defendant or his medical practice group, or any 
competing physician concerning the negotiation or acceptability of any 
proposed or existing payer contract or contract term, including his or 
his medical practice group's negotiating or contracting status with any 
payer, or
    (2) Any proposed or existing term of any payer contract that 
affects:
    (a) The amount of fees or payment, however determined, that the 
settling physician Defendant or his medical practice group 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 contracts;
    (c) Utilization review and pre-certification; or
    (d) The manner of resolving disputes between the participating 
physician or group and the payer.

V. Permitted Conduct

    (A) Subject to the prohibitions of Section IV of this Final 
Judgment, the settling physician Defendants:
    (1) May discuss with any competing physician any medical issues 
relating to the treatment of a specific patient; and
    (2) May participate in activities of any medical society; and
    (B) Nothing in this Final Judgment shall prohibit settling 
physician Defendants from:
    (1) Advocating or discussing, in accordance with the Noerr-
Pennington doctrine, legislative, judicial, or regulatory actions, or 
other governmental policies or actions; or
    (2) Responding to communications necessary to participate in lawful 
activities by clinically or financially integrated 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) ] 13,153 (``Health Care 
Policy Statements'').

VI. Certification

    For a period of ten years following the date of entry of this Final 
Judgment, each settling physician Defendant shall certify to the United 
States annually on the anniversary date of the entry of this Final 
Judgment whether he and his agents have 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 of determining whether the Final Judgment should 
be modified or vacated, and subject to any legally recognized 
privilege, from time to time, duly authorized representatives of the 
United States Department of Justice, including consultants and other 
persons retained by the United States, shall, upon the written request 
of a duly authorized representative of the Assistant Attorney General 
in charge of the Antitrust Division and on reasonable notice to each 
settling physician Defendant, be permitted:
    (1) Access during each settling physician Defendant's regular 
business hours to inspect and copy, or, at the United States' option, 
to require that each settling physician Defendant provide copies of all 
books, ledgers, accounts, records, and documents in his possession, 
custody, or control, relating to any matters contained in this Final 
Judgment; and
    (2) To interview, either informally or on the record, each settling 
physician Defendant, who may have counsel present, regarding such 
matters. The interviews shall be subject to the reasonable convenience 
of each settling physician Defendant.
    (B) Upon the written request of a duly authorized representative of 
the Assistant Attorney General in charge of the Antitrust Division, 
each settling physician Defendant shall submit written reports, under 
oath if requested, relating to any matters contained in this Final 
Judgment as may be requested.
    (C) No information of 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) When a settling Physician Defendant furnishes information or 
documents to the United States, if the 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 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 the United States shall 
give the Defendant ten (10) calendar days notice prior to divulging 
such material in any legal proceeding (other than a grand jury 
proceeding) to which such Defendant is not a party.

VIII. Retention of Jurisdiction

    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 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 (10) years from the date of its entry.

[[Page 44381]]

X. Public Interest Determination

    Entry of this Final Judgment is in the public interest.

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United States District Judge

Certification of Service

    I hereby certify that on June 24, 2005, copies of the foregoing 
Final Judgment as to Settling Physician Defendants were served by 
facsimile and first-class regular U.S. mail, postage prepaid to:

Michael E. DeFrank, Esq., Hemmer Pangburn DeFrank PLLC, Suite 200, 
250 Grandview Drive, Fort Mitchell, KY 41017, Fax: 859-344-1188, 
Attorney for Defendant Dr. James Wendel.
G. Jack Donson, Jr., Esq., Taft, Stettinius & Hollander, 425 Walnut 
Street, Suite 1800, Cincinnati, Ohio 45202, Fax: 513-381-0205, 
Attorney for Defendant Dr. Michael Karram.
Jeffrey M. Johnston, Esq., 37 North Orange Avenue, Suite 500, 
Orlando, FL 32801, Fax: 407-926-2452, Attorney for Defendant Dr. 
Warren Metherd.
Mary Beth Fitzgibbons, Fitsgibbons & Pfister P.L., 20 South Rose 
Avenue, Suite 6, Kissimmee, FL 34741, Fax: 407-343-1677, Attorney 
for Defendant Federation of Physicians and Dentists, Attorney for 
Defendant Lynda Odenkirk.

Paul J. Torzilli,

Attorney, United States Department of Justice.

United States District Court for the Southern District of Ohio, Western 
Division

United States of America, Plaintiff, vs., Federation of Physicians and 
Dentists, Lynda Odenkirk, Warren Metherd, Michael Karram, and James 
Wendel, Defendants

    Civil Action No. 1:05-cv-431.
    Filed June 24, 2005.

Complaint

    The United States of America, acting under the direction of the 
Attorney General of the United States, brings this action for equitable 
and other relief against Defendants: Federation of Physicians and 
Dentists (``Federation''), Federation employee Lynda Odenkirk, and 
Federation members Warren Metherd, M.D., Michael Karram, M.D., and 
James Wendel, M.D., to restrain Defendants' violations of section 1 of 
the Sherman Act in concert with the Federation's other Cincinnati-area 
obstetrician and gynecologist (``OB-GYN'') members.

I. Introduction

    1. In concert with approximately 120 OB-GYN Federation members 
located in the Cincinnati area (``Federation members''), Defendants 
participated in a conspiracy to increase fees paid by health care 
insurers to Federation members. The Defendant physicians and other 
competing Federation members joined the Federation to use its services 
to coordinate the renegotiation of their contracts with Cincinnati-area 
healthcare insurers. The Federation, with substantial assistance from 
the Defendant physicians, coordinated and helped implement its members' 
concerted demands to insurers for higher fees and related terms, 
accompanied by threats of contract terminations.
    2. Defendants' and their conspirators' collusion caused Cincinnati-
area health care insurers to raise fees paid to Federation members 
above the levels that would likely have resulted if Federation members 
had negotiated competitively with those insurers. As a result of 
Defendants' and other Federation members' conduct, the three largest 
Cincinnati-area health care insurers were each forced to increase fees 
paid to most Federation members by approximately 15-20% starting July 
1, 2003, followed by cumulative increases of 20-25%, starting January 
1, 2004, and 25-30%, effective January 1, 2005. Defendants' concerted 
conduct also caused other insurers to raise the fees they paid to 
Federation members.
    3. The United States, through this suit, asks this Court to declare 
Defendants' conduct illegal and to enter injunctive relief to prevent 
further injury to consumers in the Greater Cincinnati area and 
elsewhere.

II. Defendants

    4. The Federation is a membership organization comprising mostly 
physicians and dentists, and is headquartered in Tallahassee, Florida. 
The Federation's physician membership includes economically 
independent, competing physicians in private practice in localities in 
many states, including Cincinnati, Ohio. The Federation offers these 
independent physicians assistance in negotiating fees and other terms 
in their contracts with health care insurers.
    5. Lynda Odenkirk has been employed in Wallingford, Connecticut, by 
the Federation since 1997 as a Regional Director and Contract Analyst. 
Ms. Odenkirk worked with Cincinnati-area Federation members from May, 
2002, through at least 2004.
    6. Warren Metherd, M.D., is an OB-GYN presently in a solo practice 
in Cincinnati.
    7. Michael Karram, M.D., is an OB-GYN practicing in Cincinnati and 
is the Chief Executive Officer of Seven Hills Women's Health Centers, a 
practice comprising several groups totaling 22 OB-GYNs in Cincinnati.
    8. James Wendel, M.D., is an OB-GYN practicing in Cincinnati and is 
the Chief Executive Officer of Mount Auburn Obstetrics and Gynecologic 
Associates, Inc., group practice of nine OB-GYNs in Cincinnati.

III. Jurisdiction and Venue

    9. The United States brings this action to prevent and restrain 
Defendants' recurring violations of Section 1 of the Sherman Act. The 
Court has subject matter jurisdiction over this action pursuant to 15 
U.S.C. 4 and 28 U.S.C. 1331 and 1337.
    10. During 2002 and 2003, the Federation's Cincinnati OB-GYN 
Chapter enrolled as paid members over 120 OB-GYN physicians, most 
practicing in the Southern District of Ohio and some in nearby northern 
Kentucky communities. The Federation and Ms. Odenkirk have transacted 
business and committed acts in furtherance of the conspiracy in the 
Southern District of Ohio. Drs. Metherd, Karram, and Wendel each 
provide OB-GYN services in the Southern District of Ohio. Consequently, 
this Court has personal jurisdiction over Defendants, and venue is 
proper in this District pursuant to 28 U.S.C. 1391(b)(2).

IV. Conspirators

    11. Various persons, not named as defendants in this action, have 
participated as conspirators with Defendants in the offense alleged and 
have performed acts and made statements in furtherance of the alleged 
conspiracy.

V. Effects on Interstate Commerce

    12. The activities of the Defendants that are the subject of this 
Complaint are within the flow of, and have substantially affected, 
interstate trade and commerce.
    13. Federal representatives have traveled across state lines to 
meet with Federation members and also have communicated with them by 
mail, e-mail and telephone across state lines. Federation members have 
communicated with Federation representatives and have remitted their 
Federation membership dues across state lines. Some Federation members 
have also traveled from Kentucky to Ohio to attend Federation meetings 
and have communicated with other Federation members across the Ohio-
Kentucky state line.
    14. Federation members have treated patients who live across state 
lines, and Federal members have also purchased

[[Page 44382]]

equipment and supplies that were shipped across state line.
    15. Health care insurers operating in the Cincinnati area remit 
substantial payments across state lines in Federation members. Health 
care insurers' payments to Federation members affect the reimbursements 
paid to insurers by self-insurers by self-insured employers, whose 
plans they administer, and also affect the premiums for health care 
insurance those insurers charge other employers. Many of the affected 
employers sell products and services in interstate commerce. The 
reimbursements and premiums those health care insurers receive from 
employers for administration or coverage of the expenses of their 
employees' health care needs, including OB-GYN services, represent a 
cost of production for those employers that affects the prices at which 
these firms' products are sold in interstate commerce.

VI. Cincinnati Area Health Care Insurers and OB-GYNS

    16. At least six major health care insurers provide coverage in the 
Cincinnati area: WellPoint Health Networks, which during the events at 
issue here was named Anthem, Inc. (``Anthem''), Humana Inc. (``Humana'' 
or ``ChoiceCare''), United HealthCare Insurance Company (``United''), 
Cigna Corp. (``Cigna''), Aetna U.S. Healthcare Inc. (``Aetna''), and 
Medical Mutual of Ohio (``Medical Mutual'' or ``MMO'').
    17. Anthem, Humana and United, through administration and insurance 
of health care benefits, are the three largest private health insurers 
operating in the Greater Cincinnati area. On the basis of market share, 
Medical Mutual, Aetna, and cigna each insures and administers a 
smaller, but still significant, share of privately financed health 
coverage in the Greater Cincinnati area. The remainder of the privately 
financed health insurance coverage market in the Greater Cincinnati 
area consists of a large number of insurers, each with a small share.
    18. All of the major health care insurers operating in the 
Cincinnati area offer a variety of insurance plans to employers and 
their employees, including ``managed care'' plans such as health-
maintenance organizations and preferred provider organizations. To 
offer such plans, an insurer typically contracts with participating 
providers, including physicians and hospitals, to form a provider 
network (or panel). Among other things, such contracts establish the 
fees that the providers will accept as payment in full for providing 
covered medical care to the insurer's subscribers. All of the major 
Cincinnati-area health care insurers consider it necessary to include 
in their provider panels a substantial percentage of OB-GYN physicians, 
who practice in the Cincinnati area to make their health care plans 
marketable to area employers and their employees. Before the formation 
of the alleged conspiracy, Federation member groups competed with each 
other, in their willingness to accept an insurer's proposed fee levels 
and other contractual terms, to be included in these insurers' provider 
panels.

VII. Defendants' Unlawful Activities

    19. In the spring of 2002, Cincinnati OB-GYNs became interested in 
joining the Federation primarily to band together to negotiate higher 
fees from health care insurers. Through a series of meetings with and 
communications to Cincinnati-area OB-GYNs during the spring, the 
Federation-assisted by some local OB-GYNs, including Defendants 
Metherd, Karram, and Wendel-recruited Cincinnati-area OB-GYNs as 
Federation members and laid the foundation for their coordinated 
negotiating positions seeking higher fees from major Cincinnati health 
care insurers. At an initial membership recruitment meeting on April 
17, 2002, a featured presentation by Jack Seddon, the Federation's 
Executive Director, focused on the need for a majority of area OB-GYNs 
practices to use the Federation's contract negotiation services to 
obtain increased fees from insurers.
    20. Ms. Odenkirk, the Federation employee with primary 
responsibility for dealing with Federation members in Cincinnati, 
attended a second recruitment meeting on May 7, 2002. At this meeting, 
the OB-GYNs in attendance decided they needed a 60-70% participation 
rate in the Federation by OB-GYN physicians in the Cincinnati area for 
their activities as Federation members to have an impact on area 
insurance companies. By the end of May 2002, about 75-80% of actively 
practicing, Cincinnati-area OB-GYNs had opted to join the Federation.
    21. On June 10, 2002, the Cincinnati-area OB-GYN Federation chapter 
held its organizational meeting, which was attended by representatives 
from many area OB-GYN practices. At the meeting Jack Seddon, the 
Federation's Executive Director, told the Federation members that, 
although the Federation could legally represent only individual 
physicians, all physicians must remember that they are part the 
Federation when making any business decisions regarding a contract. He 
also explained that, although the Federation could not directly 
recommend, through its Negotiation Assistance Program, whether 
Federation members should accept or reject a given provider contract, 
physicians would be given enough information to allow them to decide 
whether or not to sign a contract. At the June 10 meeting, Mr. Seddon 
also explained that Federation members could encourage other member 
physicians to use the Federation's Negotiation Assistance Program 
rather than negotiate on their own without Federation involvement.
    22. In June and July 2002, Ms. Odenkirk, in consultation with some 
Federation members, established the order, or the ``game plan,'' by 
which she would review and coordinate their dealings with the first 
five health care insurers contracts: Anthem, ChoiceCare, United, Aetna, 
and Medical Mutual.
    23. The Federation mailed a newsletter dated September 4, 2002, to 
all Federation member practices, notifying them that the Federation had 
reviewed their current Anthem contract. Accompanying the newsletter was 
the Federation's contract analysis and a set of proposed changes. An 
accompanying memorandum addressed to Cincinnati OB-GYN members from Ms. 
Odenkirk advised members that her contract analysis and proposed 
alternative language could be used to open negotiations with Anthem.
    24. The September 4, 2002, newsletter also encouraged Federation 
members to use the Federation's ``extremely valuable service'' of 
acting as their third-party messenger and as a consultant, touted as 
providing the ``advantage of a nationally experienced consultant who 
can certainly look out for their best interests when negotiating with 
insurance plan executives.'' The newsletter suggested that those 
members dissatisfied with their Anthem contracts, as outlined in the 
accompanying contract analysis, should copy an enclosed sample ``third 
party messenger'' letter onto their practice's letterhead to open a 
dialogue with Anthem. The sample letter advised Anthem that the 
submitting practice had ``several items of concern'' regarding its 
current Anthem contract including ``contract language for various 
clauses and reimbursements rates'' and appraised Anthem that ``the 
purpose of this letter is to open negotiations with Anthem regarding 
the provider agreement.'' The sample letter further informed Anthem 
that the practice had decided to used the Federation as a ``third party 
messenger'' to facilitate negotiations and that the Federation would be 
contacting Anthem to open a dialogue. The sample letter also contained 
a thinly veiled warning that

[[Page 44383]]

the practice might resort to contract termination if its concerns were 
not addressed and was understood as such as Anthem.
    25. Following Ms. Odenkirk's September 4, 2002, communications 
regarding the Anthem contract, most Federation member physicians 
practice groups copied the sample letter onto their own letterhead, 
signed it, and sent it to Anthem.
    26. The Federation mailed a newsletter dated September 30, 2002, to 
all Federation member practices, informing them that there had been a 
significant response to the September 4, 2002, Anthem contract analysis 
and that many members had opted to use the ``full services'' of the 
Federation.
    27. Starting on October 11, 2002, Ms. Odenkirk followed up on the 
Federation members' letters to Anthem. She notified Anthem that the 
Federation would be facilitating Federation members' discussion of 
their Anthem contract. For each such practice, Ms. Odenkirk sent Anthem 
a substantively identical letter enclosing a proposed amendment to the 
contracts ``that addresses some of their concerns.'' The set of 
proposed amendments was essentially the same set that Ms. Odenkirk had 
forwarded on September 4, 2002, to all Federation members in connection 
with her review of the Anthem contract.
    28. Besides reporting to Federation members' on their response to 
Anthem, the September 30, 2002, Federation newsletter also focused on 
another insurer. The newsletter explained to Federation members that 
the Federation had reviewed their current ChoiceCare contract. The 
newsletter also included a sample letter to inform ChoiceCare that the 
Federation would be representing the medical practice as a third-party 
messenger. The process of negotiating with ChoiceCare then began and 
tracked the pattern of Federation coordination of negotiations with 
Anthem.
    29. The Federation mailed a newsletter dated October 31, 2002, to 
all Federation member practices, explaining that the Federation had 
reviewed the contract of yet another insurer: United. The newsletter 
also included a sample letter to inform United that the Federation 
would be representing the medical practice as a third-party messenger. 
The process of negotiations with United then began and tracked the 
pattern of Federation coordination that occurred in negotiations with 
Anthem and ChoiceCare.
    30. The October 31, 2002, newsletter also noted that 39 OB-GYN 
practices had joined the local Federation chapter. The newsletter 
recapped members' status with Anthem, noting that the Federation had 
initiated contact with Anthem, on behalf of those practices that had 
submitted third-party messenger letters to Anthem, and that the 
Federation had received a very significant response from the local 
chapter practices that had sent Anthem a third-party messenger letter. 
The newsletter also reported to Federation members that a significant 
proportion of them had provided e-mail addresses to participate in a 
``Critical Alert'' mass e-mailing system developed by the Federation 
``to avoid any situation where a member might miss critical information 
from the Federation.''
    31. On November 1, 2002, the day after the October 31, 2002, 
newsletter, Ms. Odenkirk e-mailed a ``Critical Federation Alert'' to 
member practices. After updating all member practices on the status of 
matters involving United, Humana and Anthem, she wrote:

    All members are again reminded of their reason for joining the 
local chapter of the Federation. The overall purpose of the 
Federation is to allow member physicians to deal with the insurance 
industry on an equal basis. While the Federation cannot recommend 
that physicians sign or not sign a given provider agreement, the 
Federation can advise a member when they are being presented with a 
bad contract.

    32. By letters dated November 14, 2002, sent to each practice, 
Anthem responded to the prior correspondence it had received from the 
practice and the Federation. The letters expressed Anthem's willingness 
to meet with the practices individually to discuss the concerns raised. 
Around the same period, Humana communicated to Federation members its 
preference to deal directly with each practice, rather than with the 
Federation representing the practices.
    33. On November 15, 2002, Ms. Odenkirk spoke by telephone with 
Anthem representatives. Ms. Odenkirk told the Anthem employees that she 
represented a large number of OB-GYN practices in the Cincinnati area. 
Anthem told Ms. Odenkirk they would meet and correspond directly with 
individual practices. Though noting during the conversation that each 
practice would need to speak for itself, Ms. Odenkirk stated generally 
that the physicians would be seeking higher fees at 160% of Medicare 
levels.
    34. Following her telephone conversation with Anthem, Ms. Odenkirk 
proceeded to coordinate Federation practices, ``individual'' dealings 
with Anthem, Humana, and United. She e-mailed a ``Critical Federation 
Alert'' on November 19, 2002, to each practice, addressed to the 
attention of ``Office Manager.'' The Alert informed each practice that 
the Federation had, in its role as a third-party messenger, notified 
Anthem of the practice's desire to initiate negotiations regarding the 
current Provider Agreement, and Advised Anthem that the practice had 
designated the Federation to represent it and act as its consultant in 
this process. The Alert then informed member practices they had two 
options: negotiate directly with Anthem (noting that if this option 
were selected the practice was encouraged to forward all communication 
from Anthem to the Federation), or advise Anthem that the practice 
wished to have the Federation speak on its behalf.
    35. Responding promptly, as requested, to Ms. Odenkirk's November 
19, 2002, Critical Federal Alert, most Federation member practices 
notified the Federal in writing that they wanted the Federation to 
speak on their behalf as their third-party messenger for contract 
negotiations with Anthem.
    36. On Saturday morning, December 14, 2002, Ms. Odenkirk and most 
Federation members attended a membership meeting. The meeting was 
called amid apprehension among Federation members that large Federation 
member groups might make individual deals with insurers without regard 
to the interests of small Federation groups and solo practitioners. 
Federation members' discussion at the meeting informed the strategy 
that Ms. Odenkirk and the Defendant physicians developed for the 
Federation to coordinate Federation members' contract negotiations with 
Anthem, ChoiceCare, and United. The strategy employed the Federation's 
collective knowledge and consultation with Federation members as the 
``key'' to ensuring that small groups were not ``left behind'' in 
negotiation with insurers.
    37. Following up promptly on the sense of the December 14 meeting, 
Dr. Metherd, in coordination with Drs. Wendel and Karram, prepared a 
draft of a letter for Ms. Odenkirk to send to Federation members. The 
letter suggested that Federation members again send letters to Anthem 
demanding higher fees and contract amendments. Reviewing a redraft of 
the letter by Ms. Odenkirk on December 17, 2003, Dr. Wendel e-mailed 
Dr. Metherd: ``Have reviewed the letter and changes from Lynda 
[Odenkirk], I also think that we need to also send similar letters to 
[C]hoice[C]are and [U]nited. It[']s time to carpet bomb them with these 
letters and demand responses in a timely fashion. This may be a way for 
the

[[Page 44384]]

[F]ederation to help to facilitate the process.''
    38. On December 20, 2002, Ms. Odenkirk sent to all Federation 
member practices the final version of the letter implementing the 
coordinated strategy developed from the December 14 membership meeting. 
The letter reviewed the status of the Federation's dealings with Anthem 
on members' behalf to discuss ``problems in the provider agreement.'' 
The letter apprised Federation members that Anthem had ``become 
recalcitrant'' toward the Federation's attempts to attend meetings on 
behalf of multiple physician groups and that ``[c]onsequently, the 
Federation [wa]s recommending another tactic by which you may negotiate 
with Anthem. '' The letter sought to provide Federation members ``with 
a clear set of guidelines * * * that w[ould] hopefully lead to a 
productive set of discussions.'' The ``guidelines'' set forth a number 
of steps for member groups to follow, which the Federation touted as 
``the means by which you are most likely to achieve your goals.'' The 
letter also noted: ``If this tactic is UNSUCCESSFUL in achieving a 
contract with Anthem that meets your concerns, then the Federation will 
so notify you that you are continuing to work under a bad contract and 
that you are now left with two options. You may: (1) Continue to work 
under this bad contract or (2) Terminate the contract.''
    39. Beginning in January 2003, and following up on the steps Ms. 
Odenkirk had outlined in her December 20, 2002, letter to Federation 
practices, most Federation member practices sent substantively 
identical letters to Anthem enclosing proposed contractual changes 
styled as ``necessary to achieve an equitable business relationship 
between Anthem and this OB/GYN practice.'' The letters sought a 
response from Anthem within two weeks of receipt and advised that ``all 
responses from Anthem will be forwarded to the Federation of Physicians 
and Dentists for review, interpretation and consultation.'' The letters 
closed with a slightly adapted version of the thinly veiled threat of 
termination first raised in the wave of September and October 2002 
third-party messenger letters sent by Federation member practices to 
Anthem: ``This practice truly desires to avoid any interruption of 
obstetrical and gynecological services to Anthem's customers. Such a 
circumstance can be avoided by a meaningful and productive written 
response from Anthem regarding the issues raised herein no later than 
the aforementioned date.''
    40. Proceeding over the next several months, Federation member 
practices--in close coordination with the Federation and with some 
additional direct coordination among Drs. Karram, Wendel, and Metherd--
negotiated contracts with Anthem that provided for a substantial 
increase in fees. While targeting Anthem initially, the Federation, 
with encouragement and assistance from the Defendant physicians, also 
coordinated member groups' efforts to pressure ChoiceCare and United to 
renegotiate their contracts.
    41. Implementing Federation members' similar strategy toward 
ChoiceCare, Ms. Odenkirk sent to ChoiceCare letters dated January 27-
31, 2003, on behalf of 30 member practices. The letters reviewed the 
history of Humana's discussions with each practice, and included each 
practice's desired fee amounts. The letters asked for a response by 
February 14, 2003, and notified Humana that the practice ``still 
intends to forward any and all responses from Humana to the Federation 
of Physicians and Dentists for review, interpretation and consultation, 
as they have every right to do.'' Each letter again noted, as had the 
practices' third-party messenger letters sent to Humana in the fall of 
2002, that a service interruption could be avoided by Humana's prompt 
and meaningful written response.
    42. From December 2002, through March 2003, Dr. Karram's and Dr. 
Wendel's large OB-GYM groups spearheaded Federation member groups' 
attempts to renegotiate their contracts with Anthem and Humana. By a 
letter dated March 4, 2003, Humana proposed to Dr. Wendel's group a 30-
month contract increasing fee levels substantially, in stages, over 
existing fees. According to the proposal, the terms were discussed and 
agreed upon in a telephone conversation on March 4. The next day, Dr. 
Wendel's office faxed Humana's proposal to Ms. Odenkirk.
    43. On March 7, 2003, Ms. Odenkirk sent by e-mail and regular mail 
a Critical Federation Alert that had been prepared by Dr. Metherd in 
consultation with Drs. Karram and Wendel and edited and approved by Ms. 
Odenkirk and Mr. Seddon. The Alert encouraged Federation members to 
meet as soon as possible with Anthem and Humana to discuss proposed 
contract changes because the companies ``seem to legitimately desire 
discussions.'' Accompanying the Alert were negotiations guidelines to 
use in meetings, including advice to tell the health plan ``that you 
are seeking a fair contract both in language and reimbursements'' The 
guidelines also suggested to members, in part, that

    (3) You may explain to the health plan that you are, or will be, 
reviewing all of your major contracts and negotiating fairer terms 
for all, and that you are not just focusing on any one particular 
health plan. One particular concern a health plan may have is that 
they will be `out front' if they were, for instance, to increase 
reimbursements thereby placing them at a disadvantage with their 
competitors in their markets.

    44. As negotiations progressed, Ms. Odenkirk became active in 
advising groups how to proceed. Dr. Metherd also coordinated with Dr. 
Wendel and other physicians regarding the status of Federation members' 
negotiations with Anthem.
    45. On April 1, 2003, Dr. Metherd e-mailed to Ms. Odenkirk and Mr. 
Seddon proposed additions to a draft Critical Federation Alert that Dr. 
Metherd had begun drafting with them in mid-March. Dr. Metherd proposed 
adding two paragraphs to a draft he had received from Mr. Seddon and 
explained the reason for his additions:

    It is becoming extremely important to somehow inform the smaller 
groups and solo practitioners that the large groups are not 
achieving favorable contracts at the expense of the small groups. * 
* * It's also important to somehow explain that the physicians are 
not going to get 170-180% of Medicare and that 30-35% is a more 
realistic number. Finally, from my personal discussions with the 
insurance companies, the members need to emphasize that all major 
plans are going to be looked at by the physicians. This seems to be 
critical for the insurance companies to hear.

    46. By mid-April 2003, ChoiceCard had reached agreement with 
several of the larger Federation member groups. ChoiceCare continued 
making offers of varying fee amounts to other groups, which, in turn, 
forwarded them to, or discussed them with, Ms. Odenkirk to obtain her 
thoughts. In April 16, 2003, e-mail, Dr. Metherd updated Ms. Odenkirk 
and suggested how she should advise the smaller Federation member 
groups regarding ChoiceCare:

    Since you know what everyone is getting we need you to make sure 
that the small groups are pushing to end up in reasonable proximity 
(5% for example) to the larger groups in regards to reimbursements. 
The larger groups need to know that they can utilize [the 
Federation's] guidelines that we sent out on April 3 * * * as a way 
to pressure ChoiceCare to minimize variations in their 
reimbursements.
    Since you are the only one who, as the third party messenger, 
can know all the facts, it is imperative that you use the knowledge 
to push all of us in the same direction. * * * It is absolutely 
critical that one segment of the Federation here not feel that it 
has gained a significant advantage or suffered a

[[Page 44385]]

significant disadvantage at another's expense * * * especially as we 
will soon be moving onto United, Aetna, etc.

    47. By May 1, 2003, Anthem had sent to all Federation members a 
contract amendment raising fees over a three-year period to 120% of 
Medicare fees, as of July, 2003; 125% as of January, 2004; and 130%, as 
of January, 2005.
    48. By early May 2003, the large OB-GYN practice groups shifted 
their focus to United Healthcare. At a May 8 meeting with United, 
called by Dr. Wendel to discuss OB-GYN fees in Cincinnati, Dr. Wendel 
informed United that his group had been able to negotiate new deals 
with the other two top payers in Cincinnati. During the meeting, Dr. 
Wendel threatened that his group would terminate its contract if United 
did not offer it a satisfactory deal. At a meeting on the same day with 
United, Dr. Karram conveyed a similar message on behalf of his group.
    49. Dr. Metherd communicated several times in May 2003 with Drs. 
Karram and Wendel concerning his negotiations on fees with ChoiceCare. 
On May 12, 2003, Dr. Metherd responded to ChoiceCare and attempted to 
leverage Federation members' contract renegotiations, with Anthem and 
suggested that ChoiceCare would face a boycott if it did not meet his 
and other OB-GYN's fee demands.
    50. On May 11, 2003, Dr. Metherd sent an e-mail to Drs. Karram, 
Wendel:

    As per our discussions on Friday [May 9], I think we need to do 
some ``campaigning'' so to speak. We need to educate the members and 
encourage them to do four things.
    (1) They need to accept the contract from Anthem. While not 
perfect, it's actually pretty good and Lynda [Odenkirk] also feels 
the same based on my discussions with her this week. Apparently she 
is quite surprised that we have done as well as we have. * * *
    (2) They need to negotiate with ChoiceCare. * * *
    (3) Everyone needs to do the above so we can all move onto 
United next especially given the promising discussions that you have 
just had.
    (4) Finally, membership dues for the Federation are here and we 
need to convince the members that this is worth doing again this 
next year. * * *

    51. Prompted by Dr. Metherd, on May 16, 2003, Ms. Odenkirk sent to 
essentially all Cincinnati Federation members a ``Federation Alert--
Update.'' Ms. Odenkirk's Alert opined that the revised Anthem contract 
was ``as good as it's going to get at this point in time'' and 
suggesting it was ready to be signed. Ms. Odenkirk's Federation Alert 
also posed the Anthem contract to Federation members as a ``benchmark 
to follow'' when negotiating with other comparable health plans.
    52. On May 20, 2003, Dr. Metherd sent to Federation members a 
proposal to endorse a ``large insurance company'' that had recently 
provided a contract with ``physician-friendly'' changes. Dr. Metherd 
explained that the other insurers could also be endorsed if they 
offered similar contracts and expressed the hope that ``this would then 
offer all companies an incentive to work with member physicians to 
achieve physician-friendly agreements.'' The proposal also noted, 
``This concept has been reviewed and approved by the Federation 
leadership.''
    53. At a May 28, 2003, meeting with United representatives, Dr. 
Metherd threatened to terminate his contract with United if it did not 
offer him satisfactory terms. After the meeting, he sent an e-mail to a 
United representative to emphasize the need for United to ``offer an 
acceptable contract to all members'' and complete fee negotiations 
promptly if it wished to participate in the ``endorsement'' program 
that had also been discussed at the meeting.
    54. By May 30, 2003, United had met with about six Federation 
member groups. Each group conveyed that they wanted essentially the 
same deal and would terminate their contracts if they did not get it.
    55. On May 29, 2003, Dr. Metherd sent an e-mail to all Federation 
members requesting their attention to ``some extremely important 
issues,'' including the need for doctors to keep the Federation 
informed of their negotiation status with various insurers. On May 29, 
Dr. Karram e-mailed Ms. Odenkirk and stated, ``I agree with Warren. We 
need to get everyone moving faster and to become more persistent 
otherwise they will not get increases in 03. I am sure that is what 
[ChoiceCare] is doing. Just think of the money they will save if they 
keep delaying people till 04.'' Dr. Karram's e-mail also asked Ms. 
Odenkirk: ``Are we ready to move on to the next player. I think that is 
Medical Mutual of Ohio.''
    56. During June and July 2003, Ms. Odenkirk continued to advise 
Federation members concerning their contract negotiations with 
ChoiceCare, United, and, to a lesser extent, Anthem.
    57. By letters dated June 13, 2003, Ms. Odenkirk sent to United 
proposed contractual amendments for nearly all Federation member 
groups. On June 17, 2003, she apprised the groups of the communications 
to United on their behalf. In a July 9, 2003, Federation Alert, Ms. 
Odenkirk suggested that all Federation members persist in negotiations 
with United and let United ``know that you have been able to achieve a 
significantly better agreement with one of their competitors, and are 
currently in discussions with another competitor, so if they want to 
remain competitive they need to answer you.'' She reiterated 
essentially the same message to Federation members in an August 1, 
2003, Critical Federation Alert. By November 24, 2003, United had 
signed contracts, calling for substantially increased reimbursements, 
with 33 OB-GYN practice groups or solo practitioners, representing the 
vast majority of Federation member physicians.
    58. On June 23, 2003, ChoiceCare representatives met with Drs. 
Karram, Metherd, and Wendel to learn more about the ``endorsement 
campaign'' Federation OB-GYNs were planning. Dr. Metherd described the 
endorsement as both public and private support of those managed-care 
organizations that had met the OB-GYN's established minimum fee levels. 
No physician articulated any criterion for being included in the 
endorsement other than meeting their fee demands, despite repeated 
questions about any other criteria. All three physicians confirmed that 
all physicians affiliated with the Federation would have to receive 
fees at or above the fee threshold to receive the endorsement.
    59. On august 10, 2003, Dr. Metherd sent an e-mail survey to 
Federation member practices, inquiring as to the status of negotiations 
with their top three insurance companies. On September 12, 2003, Dr. 
Metherd faxed the results of his August 10 e-mail survey to Ms. 
Odenkirk. The results included the status of negotiations with their 
top three insurance companies for each of the 31 (out of 43) practices 
that responded.
    60. In a September 18, 2003, memo addressed to Cincinnati area 
members, Ms. Odenkirk advised members that

    Cincinnati OB/GYNs have been discussing their issues with 
several health plans and have been reaching successful outcomes. 
Therefore, I continue to encourage you to hav[e] dialogues with 
various health plans. I am in the process [o]f reviewing the Aetna 
and Medical Mutual of Ohio (``MMO'') agreements, so if you're 
interested in opening a dialogue with either of these companies, 
please feel free to use the enclosed sample third party letters.

The enclosed sample letters, addressed to Aetna and Medical Mutual, 
appointed the Federation as the practice's third-party messenger, 
raised concerns about contract language and fees, and contained the 
usual language threatening contract termination.
    61. At an October 7, 2003, Federation membership meeting, which Ms.

[[Page 44386]]

Odenkirk attended, both Dr. Wendel and Dr. Metherd announced to 
competing physicians that they had terminated their respective 
unfavorable contracts with Aetna because of Aetna's refusal to discuss 
the contracts.
    62. In an October 17, 2003, Critical Federation Alert, Ms. Odenkirk 
updated members on the status of negotiations with Aetna and Medical 
Mutual. The Alert evaluated Aetna's new fee schedule as ``NOT 
`reasonable for the Cincinnati market' '' and gave Federation members 
specific instructions on how to respond to Aetna's and Medical Mutual's 
fee proposals.
    63. On October 21, 2003, Dr. Metherd e-mailed the entire Cincinnati 
membership to inform them that his practice had terminated Aetna. 
Although written under the pretense only of informing OB-GYNs not to 
refer Aetna patients to him, Dr. Metherd prefaced his message with an 
account of his reason for termination, decrying Aetna's fees as 
``significantly lower than the current market level in the Cincinnati-
Northern Kentucky area'' and Aetna's refusal to renegotiate his 
contract.
    64. On October 29, 2003, Dr. Metherd e-mailed Lynda Odenkirk, 
reporting on strategizing at a meeting that day of the recently formed 
local Federation Chapter Executive Committee, with copies to the 
Executive Committee, which included Drs. Karram and Wendel:

    The meeting went well * * * we're still waiting to see whether 
and how Aetna responds to Seven Hills. Thus far no one else is 
getting any attention from them and, apparently, they are not being 
all that friendly with Seven Hills. We'll just have to wait and see 
* * * all of us at the meeting are aware of the goals of the entire 
Federation and will, hopefully, not forget them. [Dr. Wendel] and I 
are hoping everyone will react to Aetna as we had to [terminating 
their contracts] * * * time will tell. As for endorsing United * * * 
the message back to them is that they still haven't provided ``fair 
and equitable'' contracting (i.e., the language issues) and that 
they will receive no endorsement as a result. They will be told this 
by Dr. Karram, and, that, if they do better in 2005 when we come 
back to them, then, perhaps they will be endorsed. (all ellipses in 
original)

    65. In an October 29, 2003, memo to Cincinnati area members, Ms. 
Odenkirk noted that a new fee schedule from Cigna represented a 
reduction in rates, and, in her opinion, did not meet the notice 
requirements in the members' contracts with Cigna. Ms. Odenkirk's memo 
included an attached sample letter, addressed to Cigna, which not only 
raised the concerns noted in her memo, but also appointed the 
Federation as the practice's third-party messenger.
    66. On November 5, 2003, Ms. Odenkirk prepared a sample letter for 
Federation members to send Aetna regarding its revised fee schedule. 
The sample letter advised Aetna that the sender had ``recently 
negotiated far better reimbursements with several of your competitors, 
which has significantly changed the Cincinnati market. Therefore we 
find that your fee schedule is not reasonable for this area.''
    67. Dr. Metherd commented to Ms. Odenkirk on her sample letter to 
Aenta, in a November 5, 2003, e-mail, which he copied to the Cincinnati 
Chapter Executive Committee:

    The letter looks good * * * Both [another physician] and [Dr.] 
Wendel are making overtures to Aetna as I did in order to judge 
Aetna's reaction. Before we put this out there, let's see what they 
hear as well. * * * If Aetna responds to [another physician] and 
[Dr.] Wendel with a willingness to consider a proposal as they did 
with me, then we can encourage current Aetna providers (and those of 
us that just recently terminated) to renew contact with them via 
both phone and your letter.

    68. On November 7, 2003, Lynda Odenkirk e-mailed a Critical 
Federation Alert updating Federation members on the status of 
negotiations with Medical Mutual, Cigna, and Aetna. Ms. Odenkirk's 
Alert reported about ``multiple terminations of the Aetna agreement by 
Cincinnati-Northern Kentucky OB/GYN physicians'' and that Aetna had now 
indicated a willingness to negotiate with area OB-GYNs. She strongly 
encouraged Federation members--even those that had noticed termination 
of their Aetna contracts--to negotiate with Aetna. Ms. Odenkirk also 
advised Federation members that Medical Mutual had been advised that 
part of its fee schedule offer was ``unacceptable.''
    69. On November 17, 2003, Medical Mutual mailed proposed agreements 
offering substantially increased fees to nearly all Federation member 
practices. On November 19, 2003, Ms. Odenkirk e-mailed a Critical 
Federation Alert that informed Federation members that Medical Mutual's 
new ``proposal is, for all points and purposes, fair and reasonable, as 
it is now in line with agreements you've recently negotiated with other 
companies.'' By early 2004, most of the Federation member practices had 
signed and returned the contracts.
    70. Ms. Odenkirk's November 19, 2003, Critical Federation Alert 
also gave Federation members specific instructions to persist in 
negotiations with Aetna, noting that its fee schedule was 
``considerably below'' current levels. In the same November 19, 2003, 
Critical Federation Alert, Ms. Odenkirk instructed members that ``[b]y 
now you should have sent your third party letter to CIGNA'' and added 
that members should use with Cigna all of the points mentioned 
concerning Aetna. The Alert also included a general comment regarding 
the smaller insurers in the area, such as Aetna, Cigna, and Medical 
Mutual: ``Consequently, you should make these calls and make it plainly 
known to each that you will NOT settle for anything less than a `fair 
and equitable' contract from each. Moreover, you are in such a position 
with the bigger companies that you NO LONGER have to accept UNFAIR 
contracts from these smaller companies.''
    71. Coordinated by the Federation, using the Anthem agreement as a 
benchmark, as Ms. Odenkirk had urged, and using threats of terminating 
their services, Federation members were able to force ChoiceCare, 
United, and Medical Mutual to offer all Federation OB-GYN practices new 
contracts at fees and terms substantially equivalent to those in their 
Anthem contracts.
    72. Most of the contracts between Federation member OB-GYNs and the 
major insurers run through, at least, the end of 2005. The Federation 
continues to have Cincinnati-area member OB-GYNs. Although some OB-GYNs 
have discontinued their membership in the Federation, the Cincinnati 
chapter of the Federation continues to exist and is available to 
coordinate another round of collectively negotiated contracts when the 
current contracts approach expiration.

VIII. Violation Alleged

    73. Beginning at least as early as April, 2002, and continuing to 
date, Defendants and their conspirators have engaged in a combination 
and conspiracy in unreasonable restraint of interstate trade and 
commerce in violation of Section 1 of the Sherman Act, 15 U.S.C. 1. 
This offense is likely to continue and recur unless the relief 
requested is granted.
    74. The combination and conspiracy consisted of an understanding 
and concert of action among Defendants and their conspirators that the 
Federation's Cincinnati Chapter members would coordinate their 
negotiations with health care insurance companies operating in the 
Cincinnati area to enable the collective negotiation of higher fees 
from these health care insurers.
    75. For the purpose of forming and effectuating this combination 
and

[[Page 44387]]

conspiracy, Defendants and their conspirators did the following things, 
among others:
    (a) Successfully recruited as members of the Federation a high 
percentage of competing OB-GYNs practicing in the Cincinnati area.
    (b) Designated the Federation to represent most Federation members 
in their fee negotiations with Anthem, Humana, United, Medical Mutual, 
Aetna, and Cigna;
    (c) Reached an understanding to coordinate their negotiations 
through the Federation; and
    (d) In coordination with the Federation demanded new, substantially 
higher fees from each insurer while threatening termination of their 
contracts if satisfactory results were not obtained.
    76. This combination and conspiracy has had the following effects, 
among others:
    (a) Price competition among independent and competing OB-GYNs in 
the Cincinnati area who became Federation members has been retrained;
    (b) Health care insurance companies in the Cincinnati area and 
their subscribers have been denied the benefits of free and open 
competition in the purchase of OB-GYN services in the Cincinnati area; 
and
    (c) Self insured employers and their employees have paid 
significantly higher prices for OB-GYN services in the Cincinnati area 
than they would have paid in the absence of this restraint of trade.

IX. Request for Relief

    77. To remedy these illegal acts, the United States of America 
requests that the Court:
    (a) Adjudge and decree that Defendants entered into an unlawful 
contract, combination, or conspiracy in unreasonable restraint of 
interstate trade and commerce in violation of Section 1 of the Sherman 
Act, 15 U.S.C. 1;
    (b) Enjoin the Defendant Federation and its members, officers, 
agents, servants, employees and attorneys and their successors, 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 having the same effect as the alleged 
violations or that otherwise violates Section 1 of the Sherman Act, 15 
U.S.C. 1, through price fixing of medical services, collective 
negotiation on behalf of competing independent physicians or physician 
groups, or group boycotts of the purchasers of health care services;
    (c) Enjoin the Federation and any Federation representative from 
representing or providing consulting services of any kind to any 
medical practice group, or any self-employed physician; and
    (d) Award to plaintiff its costs of this action and such other and 
further relief as may be appropriate and as the Court may deem just and 
proper.

Dated: June 24, 2005.

For Plaintiff, United States of America:

R. Hewitt Pate,

Assistant Attorney General, Antitrust Division.

J. Bruce McDonald,

Deputy Assistant Attorney General, Antitrust Division.

J. Robert Kramer II,

Director of Enforcement, Antitrust Division.

Mark J. Botti,

Chief, Litigation I, Antitrust Division.

Joseph Miller

Assistant Chief, Litigation I, Antitrust Division.

Gregory G. Lockhart,

United States Attorney.

Gerald F. Kaminski,
(Bar No. 0012532)

Assistant United States Attorney. Office of the United States 
Attorney, 221 E. 4th Street, Suite 400, Cincinnati, Ohio 45202, 
(513) 684-3711.

Steven Kramer,
John Lohrer,
Paul Torzilli,

Attorneys, Antitrust Division, United States Department of Justice, 
1401 H Street, NW., Suite 4000, Washington, DC 20530, (202) 307-
0997, [email protected].

Certificate of Service

    I hereby certify that on June 24, 2005, copies of the foregoing 
Complaint were served by facsimile and first-class regular U.S. mail, 
postage prepaid, to:

Michael E. DeFrank, Esq., Hemmer Pangburn DeFrank PLLC, Suite 200, 250 
Grandview Drive, Fort Mitchell, KY 41017, Fax: 859-344-1188, Attorney 
for Defendant Dr. James Wendel.
G. Jack Donson, Jr., Esq., Taft, Stettinius & Hollander, 425 Walnut 
Street, Suite 1800, Cincinnati, Ohio 45202, Fax: 513-381-0205, Attorney 
for Defendant Dr. Michael Karram.
Jeffrey M. Johnston, Esq., 37 North Orange Avenue, Suite 500, Orlando, 
FL 32801, Fax: 407-926-2452, Attorney for Defendant Dr. Warren Metherd.

Paul J. Torzille,

Attorney, United States Department of Justice.

[FR Doc. 05-15138 Filed 8-1-05; 8:45 am]
BILLING CODE 4410-11-M