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UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
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 Defendant Federation of Physicians and Dentists,
Inc. ("the Federation") to prevent and enjoin Defendant's and
its Delaware orthopedic surgeon members' ongoing violation of Section 1
of the Sherman Act. I. INTRODUCTION 1.In
coordination with its member orthopedic surgeons located in
Delaware ("Federation members"), the Federation organized and became
the hub of a conspiracy to oppose and prevent proposed reductions in
payments for orthopedic services by Blue Cross and Blue Shield of
Delaware ("Blue Cross"). The Federation and Federation members reached a
common
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understanding that Federation members would deal and communicate with
Blue Cross only through the Federation's officials, thereby
facilitating a boycott to extract artificially high fees from Blue
Cross and to prevent other health care insurers in Delaware from reducing
the fees they paid to these surgeons. 2.After
meeting in late 1996 with a Federation representative, some
Delaware orthopedic surgeons began to join the Federation and to
encourage other Delaware orthopedic surgeons to join for the purpose of
acting jointly in contract negotiations with health care insurers over
fees or other terms of their individual contracts. By the fall of 1996,
virtually all orthopedic surgeons then in individual or group
independent practice in Delaware had joined the Federation. When
Blue Cross proposed to reduce its payments to orthopedists and other
physicians, to become effective in November 1997, the Federation and
Federation members conspired to resist the orthopedic fee reductions.
3.By
the end of 1997, acting pursuant to the conspiracy, nearly all of the
Federation members had rejected Blue Cross's proposed fee reductions
and had given notice of their intent to terminate their Blue Cross
contracts in 90 days. The Federation members recognized that, if Blue
Cross faced the prospect of losing its panel of orthopedic surgeons in
Delaware as a result of their combined boycott, Blue Cross would be
more likely to agree to pay higher fees to Federation members. 4.Defendant's
unlawful conspiracy with Federation members has blocked Blue Cross's
efforts to reduce the rate of health care cost increases by reducing the
fees paid to Federation members and has disrupted physician-patient
relationships by severely limiting the panel of orthopedic surgeons
participating with Blue Cross. These effects were caused by
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collusive distortion of what should have been independent negotiations
between Blue Cross and each of the several independent orthopedic
surgeon practices in Delaware. The United States, through this suit,
asks this Court to enjoin such illegal behavior promptly, before further
injury to consumers in Delaware and elsewhere occurs. II. DEFENDANT 5.The
Federation is a labor organization with its headquarters in
Tallahassee, Florida. The Federation has traditionally acted, in
employment contract negotiations, as a collective bargaining agent
under federal and state labor law for physicians who are employees
of public hospitals or other health care entities. Recently, however,
the Federation has begun to recruit economically independent physicians
in private practice in many states (including Arizona, California,
Connecticut, Delaware, Florida, Maryland, Nevada, New Jersey,
New Mexico, Ohio, Pennsylvania, Virginia, and Washington) to encourage
these independent physicians to use the Federation in negotiating their
fees and other terms in their contracts with health care
insurers. III. JURISDICTION
AND VENUE 6.The
United States brings this action to prevent and restrain
Defendant's continuing 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. 7.The
Federation transacts business and has committed many of the unlawful acts
at issue in Delaware. Moreover, the Federation has, as members, 44
orthopedic surgeons, as well
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as a number of other physicians, in Delaware. Consequently, this Court
has personal jurisdiction over Defendant, and venue is proper in this
District pursuant to 15 U.S.C. § 1391(b)(2). IV. CO-CONSPIRATORS 8.Various
persons, not named as defendants herein, have participated as
co- conspirators in the offense hereinafter alleged, and have performed
acts and made statements in furtherance thereof. V. EFFECTS
ON INTERSTATE COMMERCE 9.The
activities of Defendant that are the subject of this Complaint are within
the flow of, and have substantially affected, interstate trade and
commerce. 10.Federation
representatives have traveled across state lines to meet with
Delaware orthopedic surgeons and also have communicated with them by
mail and telephone across state lines. Federation members who have
conspired with the Federation have communicated with Federation
representatives and have sent their Federation membership dues across
state lines. 11.Some
health care insurers remit substantial payments across state lines
to Federation members. Some Federation members provide medical services
to patients who live outside Delaware. Federation members also purchase
equipment and supplies that are shipped to Delaware across state lines.
12.Health
care insurers' payments to Federation members affect the premiums
those insurers charge for health care coverage to firms that sell
products and services in interstate commerce. The premiums those health
care insurers charge firms for coverage of their
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employees represent a cost of production for those firms and,
therefore, affect the prices at which those firms' products are sold in
interstate commerce. VI. DEFENDANT'S
UNLAWFUL ACTIVITIES A. DELAWARE
HEALTH INSURERS AND ORTHOPEDIC SURGEONS 13.Currently,
there are four major health care insurers operating in Delaware:
Aetna/US Healthcare, AmeriHealth, Blue Cross, and Principal
Healthcare. Blue Cross is the largest insurer of Delaware residents and
covers nearly 200,000 subscribers in its service area (Delaware and
border communities in New Jersey, Pennsylvania, and Maryland), including
20- 30% of Delaware residents with private health care insurance. In
1997, Blue Cross paid approximately $4 million for health care services
rendered by Delaware orthopedic surgeons to Blue Cross
subscribers. 14.Each
of the four major Delaware health care insurers offers 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 forms
networks (or "panels") of participating providers, including physicians
and hospitals, through contracts that, among other things, establish
the fees that these providers will accept as payment in full for
providing covered medical care to the insurer's subscribers. By
so doing, the insurer ensures that its patient-subscribers will not be
billed by the provider, other than for any applicable deductible amount
or co-payment. 15.All
four of the major health care insurers operating in Delaware consider
it necessary to include orthopedic surgeons who practice in Delaware in
their panels to make their
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health care plans marketable to Delaware employers and their employees.
During the period of the conspiracy, approximately 47 orthopedic
surgeons were actively engaged in private practice in Delaware.
Twenty-six of them practice in New Castle County, including 20 who belong
to the County's three major, competing, and independent orthopedic
group practices: Delaware Orthopaedic Center ("Delaware Orthopaedic"),
First State Orthopaedics ("First State"), and Orthopaedic Specialists.
The other 21 practice in Sussex or Kent County ("downstate"), and
all but one of these belong to the seven orthopedic surgical groups
located in Dover, Lewes, Milford, or Seaford. 16.Most
health care insurers offering managed care plans find that it is necessary
to contract with many, but not all, of New Castle County and downstate
orthopedic surgeons to offer a marketable plan in Delaware. The New
Castle County orthopedic surgical groups compete with each other, in
their willingness to accept proposed fee levels and other
contractual terms, to be included in managed care plans' panels.
Likewise, the downstate orthopedic surgeon groups, to the extent that
they serve similar geographic areas, also compete with each other to
be included in managed care plans' panels. B.DELAWARE
ORTHOPEDIC SURGEONS JOIN THE FEDERATION 17.In
the fall of 1996, at the initiative of Dr. William Newcomb ("Dr.
Newcomb"), one of the ten orthopedic surgeons in First State,
Delaware's largest orthopedic surgical group, the Federation began
actively recruiting as members Delaware orthopedic surgeons who
generally compete with each other for patients in their private
practices. As part of that
recruitment drive, the Federation's representatives disseminated
information touting the
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Federation's ability to provide private practice physicians with more
bargaining leverage in their negotiations with health care insurers if
nearly all of them joined the Federation. 18.To
cloak its patently illegal activities, the Federation described its
actions as an effort to implement a "messenger model arrangement,"
purportedly in accordance with the Statements of Antitrust Enforcement
Policy in Health Care issued in August 1996 by the Department of
Justice and the Federal Trade Commission. Department of Justice and
Federal Trade Commission Statements of Antitrust Enforcement Policy in
Health Care, 4 Trade Reg. Rep. (CCH) ¶ 13,153, at 20,831 (August
28, 1996) ("the Statements"). There, federal antitrust authorities,
applying settled antitrust principles, discussed the use of "messenger
model arrangements" in which third parties act merely as efficient
conduits for information and communications between insurers and
individual physicians or physician group practices. But nothing in the
Statements suggests a messenger may negotiate on behalf of
competing independent physicians or may in any way enhance the
bargaining leverage of such physicians. 19.In
mid-November 1996, Dr. Newcomb commenced his efforts by sending a
letter inviting all Delaware orthopedic surgeons in private practice to
attend a Federation meeting in Wilmington on November 21, 1996. The
meeting featured Dr. Michael Connair, a practicing orthopedic surgeon
from Connecticut, who is a "representative" of the Federation and had
been instrumental in recruiting virtually all of the orthopedic
surgeons in New Haven, Connecticut, to join the Federation. According
to Dr. Newcomb's letter inviting the surgeons to the
November 21st meeting, "[t]he Connecticut union has been
very successful in negotiating favorable contracts
with insurance carriers." A number of Delaware orthopedic surgeons
attended the meeting,
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including physicians from all three major orthopedic surgical groups in
New Castle County as well as some downstate orthopedic surgeons.
20.Within
a few days of the meeting, Dr. Newcomb reported to his First
State colleagues that Dr. Connair had presented the following "primary
reasons" for Delaware orthopedic surgeons to join the Federation:
The
union would negotiate contracts for all members using the 'messenger
model.' The idea is that an organization representing all
orthopaedic surgeons would have bargaining leverage.
*
**
The
union would defend all anti-trust actions brought by the insurance
carriers. Anti-trust litigation can be very costly so a union
defense is an appealing feature. Dr. Newcomb further informed First
State physicians that "[t]he union has the negotiators and expertise to
negotiate very good contracts," and that "there is momentum and a
groundswell of support for the federation." 21.Accordingly,
at a November 27, 1996 meeting of First State physicians, Dr. Newcomb
encouraged all of his partners to join the Federation. All of the First
State physicians present at the meeting voted "to join the union." At a
December 11, 1996 meeting, a First State physician, who had not
attended the November 27th First State meeting, cautioned
his partners that this proposed use of the Federation is "on the
cutting edge. [First State] could be burned." At this later meeting,
First State reconsidered its previous vote and decided not to join the
Federation at that time.
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22.All
physicians in the second major New Castle County orthopedic group
practice, Delaware Orthopaedic, joined the Federation shortly after the
November 21, 1996 meeting, as did several other orthopedic surgeons
from around the state. 23.In
January 1997, Orthopaedic Specialists, the third major New Castle
County orthopedic group, decided to postpone joining the Federation.
24.At
a February 12, 1997 meeting, First State surgeons again considered joining
the Federation, but upon learning that Orthopaedic Specialists had
decided not to join at that time, they "table[d] . . . membership until
Orthopaedic Specialists joins" because the Federation "will only be
effective if every [orthopedic surgical] group is in." 25.At
their February 12th meeting, First State physicians also
discussed the possible formation of a "management services
organization" ("MSO") among the three major New Castle County groups
(Delaware Orthopaedic, First State and Orthopaedic Specialists) to engage
in several mutually beneficial business activities. The First State
physicians were informed, however, that Delaware Orthopaedic was
"making their participation in the MSO contingent upon all [orthopedic
surgical] groups joining the Federation of Physicians and Dentists."
26.On
June 11, 1997, two of Orthopaedic Specialists' physicians attended a
First State doctors' meeting to discuss the prospects for forming the
MSO. It was mentioned at that meeting that Delaware Orthopaedic was
continuing to resist joining the MSO until the physicians in First
State and Orthopaedic Specialists also became members of the Federation.
Dr. Newcomb commented that "the Federation will not be effective unless
all 3 [orthopedic surgical]
groups join."
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27.On
July 21, 1997, Delaware Orthopaedic doctors reaffirmed their refusal to
join the MSO unless First State and Orthopaedic Specialists joined the
Federation. At that time, Dr. Newcomb reiterated that First State would
join the Federation if Orthopaedic Specialists also joined. 28.By
the end of July 1997, all of the physicians in Orthopaedic Specialists
agreed to join the Federation, and the Delaware Orthopaedic physicians
agreed, in turn, to join the MSO. At the same time, all First State
physicians decided to "join the Federation for one year so that
all [New Castle County] orthopedic groups are members." On August 13,
1997, Dr. Newcomb was able to report to his First State colleagues that
First State, Delaware Orthopaedic, and Orthopaedic Specialists had all
joined the Federation, along with additional orthopedic surgeons in New
Castle County and downstate Delaware. C.THE
FEDERATION MEMBERS' CONCERTED RESPONSE TO BLUE CROSS'S
FEE PROPOSAL
29.While
the Federation was creating the combination of Delaware
orthopedic surgeons, Blue Cross sought to lower the fees it paid to
physician specialists (including orthopedic surgeons) in order to
remain competitive in the health care insurance marketplace. In effect,
Blue Cross sought to bring the fees it paid to orthopedic surgeons in
Delaware into line with the fee levels -- calculated as a percentage of
Medicare rates for a specialty -- applicable to other specialists in
the state. On August 29, 1997, Blue Cross notified its
participating orthopedic surgeons and other specialists that its
proposed fee schedule would become effective November 1, 1997.
Thereafter, when explaining to Delaware orthopedic surgeons the reasons
for proposing to
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reduce their fees, Blue Cross emphasized that its new fee schedule
would bring their fees closer to the lower fees paid to orthopedic
surgeons in nearby areas, including metropolitan Philadelphia. 30.The
Federation members, by then poised to act jointly, responded promptly
to Blue Cross's fee proposal. On September 12, 1997, Dr. Newcomb of
First State wrote to ten orthopedic surgeons who practiced in the
competing Delaware Orthopaedic and Orthopaedic Specialists groups and
in four downstate Delaware orthopedic surgical groups. The recipients
of Dr. Newcomb's letter represented all of the Delaware orthopedic
surgical groups whom Dr. Newcomb then believed to be Federation
members. In his letter, Dr. Newcomb instructed Federation members on
how to respond to Blue Cross's proposed fee reduction and provided
a sample letter for this purpose. Dr. Newcomb urged the physicians not
to follow the sample too closely, so that all of the letters would
appear to be different. Dr. Newcomb wrote: Now
that most orthopedic surgeons are members of the Federation of
Physicians and Dentists, it is appropriate to initiate the 'Third Party
Messenger' model. We would like to use the 'Third Party Messenger'
to communicate with Blue Cross Blue Shield about the proposed
November 1, 1997 fee reduction.
I
am attaching a sample letter to Paul King notifying him that Jack Seddon
[John J. ("Jack") Seddon, the executive director of the Federation]
has been selected as the 'Third Party Messenger' for your
practice. Please use the sample letter as a guide only. We prefer
that all of the letters be different.
Please
send your letters with a copy to Jack Seddon as soon as possible.
Remember that the 'Third Party Messenger' approach will
only be effective if everyone participates. (emphasis
added).
31.The
Federation members shared a common concern that if Blue Cross
succeeded in lowering the fees it paid to New Castle County orthopedic
surgeons, not only would the
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Federation members suffer lost income from Blue Cross, other managed
care plans that competed with Blue Cross might also seek to reduce the
fees they paid to orthopedic surgeons. For example, a September 19,
1997 letter from First State's office manager to Mr.
Seddon (Defendant's executive director) stated: Blue
Cross represents the linch pin for New Castle County. If they can
impose these fees on providers, the entire managed care market in
New Castle County will collapse. This will be the defining battle
for orthopaedics. . . . This is the test case for the third party messenger.
32.Federation
members responded quickly and uniformly to Dr. Newcomb's September
12th letter. Over the next three weeks, all three of the major
orthopedic surgical groups in New Castle County designated Mr. Seddon
as their "third-party messenger" by letters addressed to Paul King,
vice-president of Blue Cross. The letters further stated that Mr.
Seddon would be dealing with Blue Cross on their behalf. Within the
same period, three of the seven downstate Delaware orthopedic surgical
groups submitted similar letters to Blue Cross. 33.Dr.
Newcomb kept himself and his First State colleagues informed about
other Federation members' responses to Blue Cross's proposed fee
reduction. At a September 24, 1997 meeting of First State doctors, Dr.
Newcomb reported that "[a]ll Federation members are sending letters to
Paul King appointing Jack Seddon as the 'Third Party Messenger'
for orthopaedics." 34.Recognizing
the need to present a united front against Blue Cross to resist
the proposed fee reduction, Federation members intensified their
efforts to recruit the few remaining downstate Delaware orthopedic
surgeons who had not yet joined the Federation. A letter invitation to
a meeting to be held in Dover on September 18, 1997, was sent to all
Delaware
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orthopedic surgeons. The letter pointed out that essentially all of the
orthopedic surgeons in Wilmington, Lewes, Seaford, and Milford had
already joined the Federation, but that some of the orthopedic surgeons
in Dover had not yet become members. The letter also exhorted
the orthopedic surgeons to "stand united" in their dealings with
insurance companies and posited the Federation as "the forum" for doing
so, noting, "[a] collective voice is far more likely to [e]ffect change
than any one of us separately." The letter also urged Federation members
to work actively to recruit the few physicians who had not yet
joined: [T]hose
Union members in Wilmington, Lewes, Seaford, Milford and
Dover, please show support and help us convince the few orthopedists
in the State of Delaware that are not yet union members
of the benefit of the Orthopedic Surgeons Union.
The recruiting drive was a success. Dr. Newcomb, who spoke at the
meeting in Dover, told his First State colleagues a few days later that
"[t]he Dover orthopaedic surgeons are enthusiastic about joining up."
35.By
early November 1997, nearly all of Delaware's orthopedic surgical groups
in active private practice, including all three of the New Castle
County orthopedic surgical groups and all of the downstate groups, had
become Federation members. All of them had also officially issued
written notices to Blue Cross appointing Mr. Seddon as their "third-party
messenger" for all Blue Cross contractual negotiations. D. THE
FEDERATION FACILITATES DELAWARE ORTHOPEDIC SURGEONS'
UNITED POSITION ON BLUE CROSS'S FEE PROPOSAL
36.While
Federation members were sending letters to Blue Cross designating
Jack Seddon as their "messenger," and within a few days after the
September 18th meeting of Federation members in Dover, Mr.
Seddon initiated several steps to ensure a unified response to
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Blue Cross's fee proposal. In a September 23, 1997 memorandum -- the
first of a series of memoranda addressed collectively to Federation
members -- Mr. Seddon suggested that Federation members reject Blue
Cross's fee proposal and made clear to them that all
were simultaneously receiving the same advice. Couching the concern
about fees as a "standard of care" issue, in that memorandum, addressed
and sent to "All Delaware Federation Members," Mr. Seddon
suggested: If
reductions in reimbursement will sacrifice 'standard of care' and force
medicine by the numbers, th[e]n Provider Agreements and amendments
to those agreements, such as that proposed by Blue Cross/Blue
Shield, should be rejected.
37.Then,
on October 10, 1997, Mr. Seddon sent substantively identical letters to
Blue Cross vice-president Paul King on behalf of all Delaware
orthopedic surgeons or groups of surgeons who had then designated him
as their "messenger." In each letter, Mr. Seddon echoed his own earlier
recommendation, stating: The
named physicians are concerned with the proposed fee schedules
to be enacted on November 1, 1997; and, the negative impact
such change will have in regard to maintaining office standards
and quality care. Therefore, this is again notice that the unilateral
proposed schedule changes are not acceptable and continued
participation with Blue Cross/Blue Shield may require reconsideration
if the changes take place.
38.On
October 22, 1997, the office manager for First State, at Dr.
Newcomb's direction, organized a meeting of New Castle County
Federation members, in part to introduce Lynda Odenkirk, whom the
Federation had recently employed to help coordinate
Federation activities in the Northeast, including Delaware. Consulting
with First State's office manager and Mr. Seddon, Ms. Odenkirk arranged
for Dr. Connair (the orthopedic surgeon from Connecticut
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who had spoken at the first organizational meeting) to speak to the
Federation again at this meeting. In planning for the meeting, Ms.
Odenkirk noted its purpose: "Blue Cross/Blue Shield-- have to hold
ground [with] fee schedule." Ms. Odenkirk also noted in her preparations
for the meeting: "Explain the importance of 'sticking' together: HMO will
have to come to the bargaining table if they have a threat of losing an
entire panel of specialists." The meeting was attended by
representatives of the three large orthopedic surgical groups in New
Castle County. 39.
Both before and after the October 22, 1997 meeting, on October
15th and October 31st, Blue Cross told Mr. Seddon
that it would not deal with him as a "messenger" for nearly all of
Delaware's orthopedic surgeons. Blue Cross also notified the Federation
members, in letters faxed and mailed to them on October 29, 1997, that
it sought to deal with them directly, rather than through Mr.
Seddon. 40.Mr.
Seddon, however, took quick and repeated steps to thwart Blue
Cross's efforts to negotiate with Federation members separately and
without his involvement. On October 31, 1997, Mr. Seddon directed Ms.
Odenkirk to telephone several Federation members to reemphasize the
importance of refusing to deal directly with Blue Cross, and to ask them
to direct Blue Cross to deal with them only through Mr. Seddon. Ms.
Odenkirk enlisted the office managers of several Federation members'
practice groups to help her emphasize to other Federation members the
importance of Mr. Seddon's instructions. 41.For
example, letters sent on October 31, 1997, at Ms. Odenkirk's request, by
one orthopedic group's office manager to several other orthopedic
groups stated: Word
has been received that Paul King is reluctant to speak to Jack Seddon
regarding negotiating fees. Jack [Seddon] has asked that if Paul
King, or anyone else for [Blue Cross], contact us to negotiate,
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we
are to refer them to Jack Seddon at 1-800-373-5777. It is Jack's
belief that this is the only effective way to get [Blue Cross] to
negotiate. (emphasis added).
42.At
Dr. Newcomb's request, Dr. Connair, who had encouraged
Delaware orthopedic surgeons to join the Federation, also telephoned
several Federation members in early November 1997 to emphasize the
importance of dealing with Blue Cross exclusively through
Mr. Seddon. 43.On
November 3, 1997, Mr. Seddon informed each Federation member of the
joint negotiating position that the Federation was advancing on behalf
of all Federation members by sending them a notice via facsimile
addressed to "Delaware Doctors," together with a copy of a November
3rd letter that Mr. Seddon had written to Blue Cross
vice-president Paul King. In his letter to Mr. King, Mr. Seddon
admonished: Keep
in mind that those physicians which have notified your office of
my 'third party' role have indicated, in writing, that the unilateral
changes are unacceptable. Implementation of unilateral amendments,
including fee schedule reduction, without written agreement
of individual physicians is therefore unacceptable.
44.Two
days later, on November 5, 1997, Mr. Seddon further instructed
Federation members about how to sustain their joint position in
negotiations with Blue Cross. Specifically, in a memorandum addressed
to "Delaware Federation Physicians," Mr. Seddon recommended to all
Federation members that they: Immediately
notify Mr. King that any unilateral adjustment is unacceptable.
Furthermore, specific instruction should be given to Mr.
King to not contact your office except through your 'third party'
messenger. Furthermore, notification should be given to Mr. King
that failure to abide by your request may place you in a position
to reconsider any relationship with Blue Cross/Blue Shield
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of
Delaware.
In addition, Mr. Seddon requested all Federation members to, "[p]lease
FAX and forward a hard copy of any correspondence to Mr. King to my
office." Most Federation members sent letters to Blue Cross on November
5th or 6th, restating that Blue Cross was to deal
with Mr. Seddon as their "third-party messenger." 45.In
letters faxed on behalf of Federation members to Blue Cross on November
18, 1997, Mr. Seddon again reemphasized the position of all Federation
members. These letters, which were substantively similar in content,
each stated that Blue Cross should not directly contact the Federation
member or the member's staff, that Blue Cross's proposed fees
were unacceptable, and that the Federation member was giving immediate
consideration to terminating its contract with Blue Cross. 46.One
week later, Mr. Seddon carried through on the contract termination threats
he had issued on behalf of the Federation members. By letters dated
November 25, 1997, he gave Blue Cross 90-day contract termination
notices on behalf of approximately 30 of the Federation's 44 Delaware
members. By early December 1997, the Federation had obtained approvals to
send termination notices to Blue Cross on behalf of nearly all
remaining Federation members. The Federation sent the remaining
termination notices to Blue Cross before the end of December
1997. 47.Starting
in November 1997, and continuing into early 1998, some
Federation members, in coordination with Mr. Seddon and collectively
with other Federation representatives, formulated and distributed
notices to patients and referring physicians stating that these
Federation members would soon cease to participate in Blue Cross plans.
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Coordination of the notices was important to the conspiracy because, as
reflected in the minutes of a First State doctors' meeting on January
14, 1998, "[p]atient letters have been very effective in other states
in bringing pressure on insurance carriers." 48.From
January through March 1998, Federation members uniformly
rebuffed overtures by Blue Cross to reopen negotiations without their
collective agent, Mr. Seddon. Thus, by the end of February 1998, Blue
Cross was left with an extremely limited panel of
participating orthopedic surgeons. By the beginning of April 1998, the
terminations of nearly all of the Federation members had taken effect.
49.As
a result, Blue Cross was forced to direct many of its subscribers to
non- participating orthopedic surgeons -- often those same orthopedic
surgeons who had terminated their participation through the Federation.
These patients have been, and still are, at risk of being billed by
their surgeons for additional, unexpected charges because these physicians
no longer participate in Blue Cross's plans. 50.In
some instances, Federation members who have terminated their Blue
Cross contracts have required Blue Cross patients to pay them more than
the amount Blue Cross has reimbursed the patients. In other instances,
some Federation members who formerly participated with Blue Cross have
forgone billing charges in excess of Blue Cross's reimbursement
while under investigation by the Department of Justice. 51.Aware
of the Federation's activities on behalf of its orthopedic surgeon
members, other specialists in Delaware have joined the Federation.
Still others have been awaiting the outcome of the Department of
Justice's investigation before deciding whether to join. Some of those
who have joined have recently designated Mr. Seddon to act as their
representative in
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dealing with Blue Cross. VII. VIOLATION
ALLEGED 52.Beginning
at least as early as November 1996, and continuing to date,
Defendant and its co-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. 53.The
combination and conspiracy consisted of an understanding and concert
of action among Defendant and its co-conspirators that Federation
members would negotiate their contractual fees with Blue Cross only
through the Federation's executive director, Mr. Seddon, for the
purpose of collusively resisting any reductions in fees paid by Blue Cross
for their provision of medical services to its plan
subscribers. 54.For
the purpose of forming and effectuating this combination and conspiracy,
Defendant and its co-conspirators did the following things, among
others: (a)Successfully
recruited as members of the Federation nearly all competing orthopedic
surgeons practicing in Delaware; (b)Designated
Mr. Seddon to represent nearly all Federation members in their
fee negotiations with Blue Cross; (c)Reached
an understanding to refuse, and did refuse, to negotiate except
through Mr. Seddon; and (d)Through
Mr. Seddon, jointly rejected Blue Cross's fee proposals and
ultimately terminated their contracts with Blue Cross.
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55.This
combination and conspiracy has had the following effects, among
others: (a)Price
competition among independent and competing Federation
member physicians in Delaware has been restrained; (b)Blue
Cross and its subscribers have been denied the benefits of free and
open competition in the purchase of orthopedic surgical services in
Delaware; and (c)Some
Blue Cross subscribers have paid higher prices for orthopedic
surgery services in Delaware than they would have paid in the absence
of this restraint of trade. VIII. REQUEST
FOR RELIEF 56.To
remedy these illegal acts, the United States of America requests that the
Court: (a)Adjudge
and decree that Defendant 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
Defendant and its members, officers, agents, servants, employees
and attorneys and their successors, 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;
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(c)Declare
null and void all termination notices sent to Blue Cross by the
Federation on behalf of any of the Federation members; (d)Enjoin
the Federation and any Federation representative, from serving as a
"third- party messenger" or from directly or indirectly communicating
with any physician about any
actual or proposed payer contract or
contract term or about the use of the Federation, or any other person
or entity, to communicate with any payer; and (e)Award
to plaintiff its costs of this action and such other and further relief as
may be required and the Court may deem just and proper.
Page 22
DATED: AUGUST 12, 1998
FOR PLAINTIFF UNITED STATES OF AMERICA:
/s/
/s/
JOEL
I. KLEIN
GREGORY M. SLEET Assistant Attorney General
United States Attorney
By: VIRGINIA GIBSON-MASON
Assistant United States Attorney
/s/
Delaware Bar No. 3699 DONNA E. PATTERSON
1201 Market
St. Deputy Assistant Attorney
Suite
1100 General
Wilmington, DE 19801
Tel.: (302) 573-6277
/s/
Facsimile: (302) 573-6220 REBECCA P. DICK Director of
Civil Non-Merger
Enforcement
/s/
/s/
STEVEN KRAMER GAIL KURSH
RICHARD S. MARTIN Chief
DENISE E. BIEHN Health Care Task Force
MICHAEL D.
FARBER
Attorneys
/s/
U.S. Dept. of Justice DAVID C.
JORDAN
325
Seventh Street, NW, Suite 400 Assistant
Chief
Washington, D.C. 20530 Health Care Task Force
Tel.: (202) 307-0997
Facsimile: (202) 514-1517
/s/
MELVIN A. SCHWARZ Special Counsel
for Civil Enforcement
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