New Millennium Orthopaedics, LLC, et al.; Analysis of Agreement Containing Consent Order to Aid Public Comment, 24588-24590 [05-9300]

Agencies

• FEDERAL TRADE COMMISSION

[Federal Register Volume 70, Number 89 (Tuesday, May 10, 2005)]
[Notices]
[Pages 24588-24590]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-9300]


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FEDERAL TRADE COMMISSION

[File No. 031 0087]


New Millennium Orthopaedics, LLC, et al.; Analysis of Agreement 
Containing Consent Order to Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of Federal law prohibiting unfair or deceptive acts or 
practices or unfair methods of competition. The attached Analysis to 
Aid Public Comment describes both the allegations in the draft 
complaint and the terms of the consent order--embodied in the consent 
agreement--that would settle these allegations.

DATES: Comments must be received on or before May 31, 2005.

ADDRESSES: Interested parties are invited to submit written comments. 
Comments should refer to ``New Millennium Orthopaedics, LLC, et al., 
File No. 031 0087,'' to facilitate the organization of comments. A 
comment filed in paper form should include this reference both in the 
text and on the envelope, and should be mailed or delivered to the 
following address: Federal Trade Commission/Office of the Secretary, 
Room 159-H, 600 Pennsylvania Avenue, NW., Washington, DC 20580. 
Comments

[[Page 24589]]

containing confidential material must be filed in paper form, must be 
clearly labeled ``Confidential,'' and must comply with Commission Rule 
4.9(c). 16 CFR 4.9(c) (2005).\1\ The FTC is requesting that any comment 
filed in paper form be sent by courier or overnight service, if 
possible, because U.S. postal mail in the Washington area and at the 
Commission is subject to delay due to heightened security precautions. 
Comments that do not contain any nonpublic information may instead be 
filed in electronic form as part of or as an attachment to e-mail 
messages directed to the following e-mail box: 
consentagreement@ftc.gov.
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    \1\ The comment must be accompanied by an explicit request for 
confidential treatment, including the factual and legal basis for 
the request, and must identify the specific portions of the comment 
to be withheld from the public record. The request will be granted 
or denied by the Commission's General Counsel, consistent with 
applicable law and the public interest. See Commission Rule 4.9(c), 
16 CFR 4.9(c).
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    The FTC Act and other laws the Commission administers permit the 
collection of public comments to consider and use in this proceeding as 
appropriate. All timely and responsive public comments, whether filed 
in paper or electronic form, will be considered by the Commission, and 
will be available to the public on the FTC Web site, to the extent 
practicable, at https://www.ftc.gov. As a matter of discretion, the FTC 
makes every effort to remove home contact information for individuals 
from the public comments it receives before placing those comments on 
the FTC Web site. More information, including routine uses permitted by 
the Privacy Act, may be found in the FTC's privacy policy, at https://
www.ftc.gov/ftc/privacy.htm.

FOR FURTHER INFORMATION CONTACT: Gwen Fanger, FTC Western Region, San 
Francisco (415) 848-5196.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Sec.  2.34 of 
the Commission Rules of Practice, 16 CFR 2.34, notice is hereby given 
that the above-captioned consent agreement containing a consent order 
to cease and desist, having been filed with and accepted, subject to 
final approval, by the Commission, has been placed on the public record 
for a period of thirty (30) days. The following Analysis to Aid Public 
Comment describes the terms of the consent agreement, and the 
allegations in the complaint. An electronic copy of the full text of 
the consent agreement package can be obtained from the FTC Home Page 
(for May 2, 2005), on the World Wide Web, at https://www.ftc.gov/os/
2005/05/index.htm. A paper copy can be obtained from the FTC Public 
Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW., Washington, 
DC 20580, either in person or by calling (202) 326-2222.
    Public comments are invited, and may be filed with the Commission 
in either paper or electronic form. All comments should be filed as 
prescribed in the ADDRESSES section above, and must be received on or 
before the date specified in the DATES section.

Analysis of Agreement Containing Consent Order To Aid Public Comment

    The Federal Trade Commission has accepted, subject to final 
approval, an agreement containing a proposed Consent Order with New 
Millennium Orthopaedics, LLC (``NMO''), Orthopaedic Consultants of 
Cincinnati, Inc., dba Wellington Orthopaedics & Sports Medicine 
(``Wellington''), and Beacon Orthopaedics & Sports Medicine, Ltd. 
(``Beacon'') (collectively, ``Respondents''). The agreement settles 
charges that Wellington and Beacon, through NMO, violated Section 5 of 
the Federal Trade Commission Act, 15 U.S.C. 45, by orchestrating and 
implementing agreements between competing orthopaedic physician groups 
to fix prices charged to health plans, and to refuse to deal with such 
health plans except on collectively-determined terms. The proposed 
Consent Order has been placed on the public record for 30 days to 
receive comments from interested persons. Comments received during this 
period will become part of the public record. After 30 days, the 
Commission will review the agreement and the comments received, and 
will decide whether it should withdraw from the agreement or make the 
proposed Consent Order final.
    The purpose of this analysis is to facilitate public comment on the 
proposed Consent Order. The analysis is not intended to constitute an 
official interpretation of the agreement and proposed Consent Order or 
to modify their terms in any way. Further, the proposed Consent Order 
has been entered into for settlement purposes only and does not 
constitute an admission by any respondent that said respondent violated 
the law or that the facts alleged in the Complaint (other than 
jurisdictional facts) are true.

The Complaint

    The allegations of the Complaint are summarized below.
    NMO is a single-specialty independent practice association 
consisting of two orthopaedic physician groups, Wellington and Beacon. 
Both Wellington, a twenty-two member orthopaedic physician group, and 
Beacon, a ten-member orthopaedic group, provide orthopaedic physician 
services, including surgical and non-surgical services, in the 
Cincinnati, Ohio area.
    In 2002, Wellington and Beacon formed NMO to act as their 
negotiating agent with health plans. Through NMO, they agreed on the 
prices to propose to health plans in negotiating their reimbursement 
rates. Beginning in August, 2002, representatives of NMO sent letters 
to representatives of the four major health plans in the Cincinnati 
area. They proposed an arrangement that would implement a guaranteed 
base fee schedule and a bonus scheme. Under the bonus scheme, all NMO 
physicians would receive higher reimbursement rates for all services 
provided that NMO, as a whole, met established performance targets for 
increasing the percentage of surgical procedures performed at 
ambulatory surgery centers (``ASCs'').
    The ASC bonus scheme solely targeted outpatient surgery, which was 
only one aspect of the practices of some NMO physicians. Under the ASC 
bonus scheme, the measured change in the physicians' behavior was 
limited to the movement of patients to ASCs. Non-surgeon members of 
NMO, who accounted for approximately 30% of NMO physicians, lacked the 
ability to change practice patterns related to ASCs. Thus, the ASC 
bonus scheme did not act as a substantial incentive for all of the NMO 
physicians to work together to achieve significant efficiencies for all 
of their services, which had jointly negotiated rates.
    The Complaint alleges that NMO performed no role in enhancing the 
ability of the physicians to increase the number of procedures 
performed at ASCs instead of at hospitals. NMO did not implement any 
enforcement mechanisms to monitor and control the physicians' 
compliance with the bonus scheme. The bonus scheme, alone, did not 
affect the NMO physicians' ability to work together to control costs or 
to improve quality for all jointly negotiated services, including 
office-based, non-surgical procedures. To a large extent, the scheme 
was a reward for the physicians' pre-existing practice patterns. For 
example, prior to signing the agreement, Wellington physicians 
performed over 50% of their procedures at ASCs without the incentive of 
the bonus scheme.
    Only one health plan agreed to NMO's terms. Nonetheless, NMO 
continued to attempt to negotiate agreements with the other health 
plans into 2004.

[[Page 24590]]

    NMO also enforced its joint negotiation efforts with one health 
plan by a concerted refusal to deal in the absence of contract terms 
agreeable to NMO. In response to one health plan's refusal to negotiate 
with NMO during the original negotiations in 2002, NMO's Board agreed 
that both Wellington and Beacon should terminate their existing, 
separate agreements with the health plan in order to seek contracts 
with the health plan through NMO. Both groups subsequently jointly 
terminated their individual agreements with the health plan at the 
direction of NMO's Board.
    Respondents' collective negotiation of fees and other competitively 
significant contract terms was not reasonably necessary to achieving 
any efficiency-enhancing integration. Thus, they violated Section 5 of 
the FTC Act by orchestrating agreements between competing orthopaedic 
physician groups to fix prices with health plans, and by refusing to 
deal with one of the health plans that would not meet those terms.

The Proposed Consent Order

    The proposed Consent Order is designed to prevent the continuance 
and recurrence of the illegal conduct alleged in the complaint while, 
allowing Wellington and Beacon to engage in legitimate, joint conduct.
    The proposed Consent Order's specific provisions are summarized 
below.
    Paragraph II.A prohibits Respondents from entering into or 
facilitating agreements between or among any health care providers: (1) 
To negotiate on behalf of any physician with any payor; (2) to deal, 
refuse to deal, or threaten to refuse to deal with any payor; (3) 
regarding any term, condition, or requirement upon which any physician 
deals, or is willing to deal, with any payor, including, but not 
limited to price terms; or (4) not to deal individually with any payor, 
or not to deal with any payor through any arrangement other than 
Respondent NMO.
    The other parts of Paragraph II reinforce these general 
prohibitions. Paragraph II.B prohibits the Respondents from 
facilitating exchanges of information between health care providers 
concerning whether, or on what terms, to contract with a payor. 
Paragraph II.C bars attempts to engage in any action prohibited by 
Paragraph II.A or II.B, and Paragraph II.D proscribes encouraging, 
suggesting, advising, pressuring, inducing, or attempting to induce any 
person to engage in any action that would be prohibited by Paragraphs 
II.A. through II.C.
    As in other Commission orders addressing health care providers' 
collective bargaining with health care purchasers, certain kinds of 
agreements are excluded from the general bar on joint negotiations. 
Paragraph II does not preclude Wellington and Beacon from engaging in 
conduct that is reasonably necessary to form or participate in 
legitimate ``qualified risk-sharing'' or ``qualified clinically-
integrated'' joint arrangements, as defined in the proposed Consent 
Order. Also, Paragraph II would not bar agreements that only involve 
physicians who are part of the same medical group practice, defined in 
Paragraph I.E, because it is intended to reach agreements among 
independent competitors.
    Paragraph III requires the dissolution of NMO.
    Paragraph IV contains filing and notification requirements related 
to the dissolution of NMO.
    Paragraph V applies only to Wellington and Beacon. It contains 
notification requirements for Wellington and Beacon. Paragraph V.A 
requires Wellington and Beacon to send a copy of the Complaint and 
Consent Order to their physician members who participated in NMO, their 
management and staff who had any responsibility regarding NMO, and any 
payors who communicated with NMO, or with whom NMO communicated, with 
regard to any interest in contracting for physician services. Paragraph 
V.A.3 also requires Wellington and Beacon to send these payors notice 
of their right to terminate their agreements with Wellington and 
Beacon.
    Paragraph V.B allows for contract termination if a payor 
voluntarily submits a request to Wellington and Beacon to terminate its 
contract. Pursuant to such a request, Paragraph V.B requires Wellington 
and Beacon to terminate, without penalty, any payor contracts that they 
had entered into during the collusive period. This provision is 
intended to eliminate the effects of NMO's joint, price setting 
behavior. Paragraph V.C requires that Wellington and Beacon each send a 
copy of any payor's request for termination to every physician who 
participates in each group.
    Paragraph V.D contains notification provisions relating to future 
contact with physicians, payors, management and staff of each group. 
Paragraph V.D requires Wellington and Beacon to distribute a copy of 
the Complaint and Consent Order to each physician who begins 
participating in each group; each payor who contacts each group 
regarding the provision of physician services; and each person who 
becomes an officer, director, manager, or employee of each group for 
three years after the date on which the Consent Order becomes final.
    Paragraph V.E requires Wellington and Beacon to publish a copy of 
the Complaint and Consent Order, for three years, in any official 
publication that they send to their participating physicians.
    Paragraphs VI-VIII impose various obligations on Wellington and 
Beacon to report or provide access to information to the Commission to 
facilitate monitoring their compliance with the Consent Order.
    The proposed Consent Order will expire in 20 years from the date it 
is issued.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 05-9300 Filed 5-9-05; 8:45 am]
BILLING CODE 6750-01-P