[Federal Register Volume 60, Number 17 (Thursday, January 26, 1995)]
[Notices]
[Pages 5210-5217]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-1988]
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DEPARTMENT OF JUSTICE
Antitrust Division
U.S. v. Vision Service Plan; Proposed Final Judgment and
Competitive Impact Statement
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. section 16(b) through (h), that a proposed
Final Judgment, a Stipulation, and a Competitive Impact Statement have
been filed with the United States District Court for the District of
Columbia in United States of America v. Vision Service Plan, Case No.
1:49CV02693.
The Complaint in the case alleges that Vision Service Plan (VSP)
entered into so-called ``most favored nation'' agreements with its
panel doctors in unreasonable restraint of trade, in violation of
section 1 of the Sherman Act, 15 U.S.C. 1, by effectively restricting
the willingness of panel doctors to discount fees for vision care
services and substantially reducing discounted fees for vision care
services.
The proposed Final Judgment eliminates VSP's most favored nation
clause and enjoins VSP from engaging in other actions that would limit
future discounting by its participating doctors.
Public comment on the proposed Final Judgment is invited within the
statutory 60-day comment period. Such comments and responses thereto
will be published in the Federal Register and filed with the Court.
Comments should be directed to Gail Kursh, Chief; Professions &
Intellectual Property Section, Department of Justice, Antitrust
Division; 600 E Street, NW., Room 9300; Washington, DC 20530
(telephone: (202) 307-5799).
Constance K. Robinson,
Director of Operations, Antitrust Division.
In the United States District Court for the District of Columbia
United States of America, c/o Antitrust Division, Department of
Justice, 600 E Street, NW., Washington, DC 20530, Plaintiff, vs.
Vision Service Plan, 3333 Quality Drive, Ranch Cordova, CA 95670,
Defendant. Case Number 1:94CV02693. Judge: Thomas Penfield Jackson.
Deck Type: Antitrust. Date Stamp: 12/15/94.
Complaint
The United States of America, acting under the direction of the
Attorney General of the United States, brings this civil action to
obtain equitable and other relief against the defendant named herein,
and complains and alleges as follows:
I
Jurisdiction and Venue
1. This Complaint is filed by the United States under section 4 of
the Sherman Act, 15 U.S.C. 4, as amended, to prevent and restrain a
continuing violation by the Defendant of section 1 of the Sherman Act,
15 U.S.C. 1.
2. The Defendant transacts business and is found within the
District of Columbia, within the meaning of 15 U.S.C. 22.
II
Defendant
3. Vision Service Plan (``VSP''), is a California not-for-profit
corporation with its principal place of business in Rancho Cordova,
California. The Defendant offers vision care insurance plans. To obtain
services for covered patients, the Defendant enters into agreements
with member optometrists and ophthalmologists in private practice
(panel doctors), that govern their provision of vision care services to
VSP patients.
4. Whenever this Complaint refers to any corporation's act, deed,
or transaction, it means that such corporation engaged in the act,
deed, or transaction by or through its members, officers, directors,
agents, employees, or other representatives while they actively were
engaged in the management, direction, control, or transaction of its
business or affairs.
III
Concerted Action
5. Various firms and individuals, not named as defendants in this
Complaint, have participated with the Defendant in the violation
alleged in this Complaint, and have performed acts and made statements
in furtherance thereof.
IV
Trade and Commerce
6. At material times, the Defendant has engaged in the business of
underwriting or administering vision care insurance plans (``VSP
plans'') in 42 states (46 effective January 1, 1995) and the District
of Columbia. The Defendant obtains vision care services for persons
covered by VSP plans by establishing panels of contracting doctors, who
each sign and agree to comply with the Panel Doctor's Agreement with
VSP, which, among other things, governs payment for covered services
rendered to VSP patients. The Defendant contracts with approximately
17,000 panel doctors.
7. At material times, the Panel Doctor's Agreement between each
panel [[Page 5211]] doctor and the Defendant has contained a ``most
favored nation'' clause, characterized by VSP as a Fee Non-
Discrimination Clause, pursuant to which each panel doctor agrees:
(a) Not to charge fees to VSP that are any higher than those
charged to the doctor's non-VSP patients, nor those that the doctor
accepts from any other non-governmental group, group plan, or panel;
(b) If a published VSP fee schedule would cause payment in excess
of the doctor's usual and customary fee, to notify VSP and accept such
lower fee as is consistent with the doctor's usual and customary fees;
and
(c) If VSP determines that the doctor is charging fees to VSP that
are higher than those charged non-VSP patients, VSP shall reduce the
doctor's fees accordingly.
8. At material times, in all or parts of many states in which the
Defendant does business, it has contracted with a relatively high
percentage of optometrists in private practice. In all or parts of many
states in which the Defendant does business, payments from the
Defendant have constituted a significant portion of most panel doctors'
revenue from the provision of vision care services to patients having
some form of vision care insurance coverage.
9. Vision care insurance plans seeking to market their plans to
employers and other potential patient groups, in competition with the
Defendant, need to attract or retain at competitive prices a
geographically varied panel comprising a substantial number of
qualified optometrists. After the Defendant began actively enforcing
the most favored nation clause in its Panel Doctor's Agreement, in all
or parts of many states in which the Defendant does business, many of
its panel doctors refused to discount their fees to competing vision
care insurance plans or to uninsured patients because VSP's most
favored nation clause would have required them similarly to lower all
of their charges to the Defendant. Because many of the Defendant's
panel doctors receive a substantial portion of their professional
income from serving VSP patients, the costs to the doctors of having to
lower the fees they charge VSP would have been too great. Consequently,
the Defendant's most favored nation clause has, in effect, caused many
of its panel doctors to charge all of their other patients and other
vision care insurance plans, in competition with VSP, fees as high as
or higher than those charged to VSP.
10. In all or parts of many states in which the Defendant does
business, the Defendant's most favored nation clause has caused large
numbers of panel doctors, who otherwise would have discounted their
fees to participate in competing vision care insurance plans, to drop
out of such plans or to refuse to join such plans. The Defendant's most
favored nation clause also has caused a large number of panel doctors,
who do contract with vision care insurance plans competing with VSP, to
insist, as a condition of continuing such participation, that the plans
increase their payments to the levels paid by VSP.
11. Because in all or parts of many states in which the Defendant
does business, a relatively large percentage of optometrists in private
practice are VSP panel doctors, and because revenue from serving the
patients covered by VSP plans is a significant portion of many of those
panel doctors' professional income, among other reasons, the
Defendant's most favored nation clause has resulted in many competing
vision care insurance plans being unable to attract or retain
sufficient numbers of panel doctors to serve their members at fee
levels below those paid by VSP. In all or parts of many states in which
the Defendant does business, the Defendant's most favored nation clause
has substantially restricted many competing plans' ability to attract
and serve groups of patients on competitive terms.
12. Many corporate employers remit across state lines not
insubstantial premium payments to the Defendant for underwriting or
administering vision care insurance for their employees.
13. Many corporate employers that remit premiums to the Defendant
are businesses that sell products and services in interstate commerce,
and the premium levels paid by such businesses affect the prices of the
products and services they sell.
14. At material times, the Defendant has used interstate banking
facilities and purchased not insubstantial quantities of goods and
services across state lines, for use in providing vision care insurance
coverage or vision care services to patients.
15. The activities of the Defendant that are the subject of this
Complaint have been within the flow of, and have substantially
affected, interstate trade and commerce.
V
Violation Alleged
16. Beginning at a time unknown to the Plaintiffs and continuing
through at least November, 1994, in all or parts of many states in
which Defendant does business, the Defendant entered into agreements
with its panel doctors 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 recur unless the relief hereinafter sought is
granted.
17. For the purpose of forming and effectuating these agreements,
the Defendant did the following things, among others:
(a) Required panel doctors to agree to the most favored nation
clause in the VSP Panel Doctor Agreement, with the effect of
restricting the willingness of panel doctors to discount fees for
vision care services and substantially reducing discounted fees for
vision care services;
(b) Enforced the most favored nation clause in the VSP Panel Doctor
agreement; and
(c) Coerced many panel doctors into dropping out of, or charging
higher fees to, vision care insurance plans that attempt to compete
with the Defendant.
18. These agreements had the following effects, among others, in
all or parts of many states in which the Defendant does business:
(a) Price competition among vision care insurance plans has been
unreasonably restrained because many competing vision care insurance
plans have been unable to obtain or retain a sufficient number of
optometrists to provide services to their members at competitive prices
because panel doctors have withdrawn from, refused to participate in,
or insisted on higher fees from vision care insurance plans that seek
to pay them less than the Defendant;
(b) Prices for the provision of vision care services to non-VSP
patients and plans in competition with the Defendant have been raised
because many VSP panel doctors have opted not to discount their fees to
competing vision care insurance plans or to uninsured patients; and
(c) Consumers of vision care services have been deprived of the
benefits of free and open competition.
VI
Prayer
Wherefore, the Plaintiff prays:
1. That the Court adjudge and decree that the Defendant entered
into unlawful agreements in unreasonable restraint of interstate trade
and commerce in violation of section 1 of the Sherman Act, 15 U.S.C. 1.
2. That the Defendant, its members, officers, directors, agents,
employees, and successors and all other persons acting or claiming to
act on its behalf be enjoined, restrained and prohibited for
[[Page 5212]] a period of five years from, in any manner, directly or
indirectly, continuing, maintaining, or renewing these agreements, or
from engaging in any other combination, conspiracy, agreement,
understanding, plan, program, or other arrangement having the same
effect as the alleged violation.
3. That the United States have such other relief as the nature of
the case may require and the Court may deem just and proper.
Dated: December 15, 1994.
For Plaintiff:
Anne K. Bingaman,
Assistant Attorney General.
Robert E. Litan,
Deputy Assistant Attorney General.
Mark C. Schechter,
Deputy Director, Office of Operations.
Gail Kursh, D.C. Bar #293118,
Chief, Professions and Intellectual Property Section.
David C. Jordan, D.C. Bar #914093,
Ass't Chief, Professions and Intellectual Property Section, Antitrust
Division, Department of Justice.
Steven Kramer,
Richard S. Martin,
Attorneys, Antitrust Division, U.S. Dept. of Justice, 600 E Street,
NW., Room 9420, Washington, DC 20530, (202) 307-0997.
In the United States District Court for the District of Columbia
United States of America, Plaintiff, vs. Vision Service Plan,
Defendant. Civil Action No. 942693.
Stipulation
It is stipulated by and between the undersigned parties, by their
respective attorneys, that:
1. The Court has jurisdiction over the subject matter of this
action and over each of the parties hereto, and venue of this action is
proper in the Eastern District of California;
2. The parties consent that a Final Judgment in the form hereto
attached may be filed and entered by the Court, upon the motion of any
party or upon the Court's own motion, at any time after compliance with
the requirements of the Antitrust Procedures and Penalties Act (15
U.S.C. 16), and without further notice to any party or other
proceedings, provided that plaintiff has not withdrawn its consent,
which it may do at any time before the entry of the proposed Final
Judgment by serving notice thereof on defendant and by filing that
notice with the Court; and
3. Defendant agrees to be bound by the provisions of the proposed
Final Judgment pending its approval by the Court. If plaintiff
withdraws its consent, or if the proposed Final Judgment is not entered
pursuant to the terms of the Stipulation, this Stipulation shall be of
no effect whatsoever, and the making of this Stipulation shall be
without prejudice to any party in this or in any other proceeding.
4. Defendant agrees to send, within 15 days of the filing of the
proposed Final Judgment, a copy of the attached letter, which has been
approved by the Antitrust Division, by first-class mail to every VSP
Panel Doctor participating at any time since January 1, 1993.
5. Defendant agrees to provide to plaintiff a certificate of
compliance with the preceding paragraph within 20 days of the filing of
the proposed Final Judgment.
For Plaintiff:
Anne K. Bingaman,
Assistant Attorney General.
Robert E. Litan,
Deputy Assistant Attorney General.
Mark C. Schechter,
Deputy Director, Office of Operations.
Gail Kursh, D.C. Bar #293118,
Chief.
David C. Jordan, D.C. Bar #914093,
Ass't. Chief, Professions and Intellectual Property Section, Antitrust
Division, Department of Justice.
For Defendant:
John J. Miles,
D.C. Bar #364054, Ober, Kaler, Grimes & Shriver, Fifth Floor, 1401
Floor, 1401 H Street, NW., Washington, DC 20005-2202, (202) 326-5008.
Steven Kramer,
Richard S. Martin,
Attorneys, Antitrust Division, U.S. Dept. of Justice, 600 E Street,
NW., Room 9420, BICN Bldg. Washington, DC 20530, (202) 307-0997.
Barclay L. Westerfeld,
General Counsel, Vision Service Plan, 3333 Quality Drive, Rancho
Cordova, CA 95670, (916) 851-5000.
In the United States District Court for the District of Columbia
United States of America, Plaintiff, vs. Vision Service Plan,
Defendant. Civil Action No. 94 2693.
Final Judgment
Plaintiff, United States of America, filed its Complaint on
December 15, 1994. Plaintiff and Defendant, by their respective
attorneys, have consented to the entry of this Final Judgment without
trial or adjudication of any issue of fact or law. This Final Judgment
shall not be evidence against or an admission by any party about any
issue of fact or law or that any violation of law has occurred.
Therefore, before the taking of any testimony and without trial or
adjudication of any issue of fact or law herein, and upon consent of
the parties, it is hereby
Ordered, Adjudged, and Decreed, as follows:
I
Jurisdiction
This Court has jurisdiction over the subject matter of this action
and over each of the parties consenting hereto. The Complaint states a
claim upon which relief may be granted against the Defendant under
section 1 of the Sherman Act, 15 U.S.C. 1.
II
Definitions
As used herein, the term:
(A) ``Defendant'' or ``VSP'' means Vision Service Plan;
(B) ``Panel Doctor's Agreement'' means the VSP Panel Member
Agreement by which Defendant contracts with optometrists or
ophthalmologists, including all amendments and additions, in effect at
any time since January 1, 1992, and during the term of this Final
Judgment;
(C) ``Most Favored Nation Clause'' means:
(1) The clause characterized as a Fee Non-Discrimination Clause in
paragraph 6 of the VSP Panel Doctor's Agreement, pursuant to which each
VSP member doctor agrees:
(a) Not to charge fees to VSP that are any higher than those
charged to the doctor's non-VSP patients, nor those that the doctor
accepts from any other non-governmental group, group plan, or panel;
(b) If a published VSP fee schedule would cause payment in excess
of the doctor's usual and customary fee, to notify VSP and accept such
lower fee as is consistent with the doctor's usual and customary fees;
and
(c) If VSP determines that the doctor is charging fees to VSP that
are higher than those charged non-VSP patients, VSP shall reduce the
doctor's fees accordingly; or
(2) Any other existing or future clause in the VSP Panel Doctor's
Agreement, VSP policy, or VSP practice having the same purpose or
effect, in whole or in part.
(D) ``Non-VSP patients'' means patients who are not members of a
plan insured or administered by VSP.
(E) ``Non-VSP plan'' means any plan (other than VSP) responsible
for all or part of any expense for vision care services, provided to
plan members, pursuant to contractual terms with providers of vision
services limiting the fees that providers collect for serving the
plan's members. [[Page 5213]]
(F) ``Modal fee'' means the fee charged most frequently during a
calendar year by a VSP panel doctor for each service rendered to non-
VSP patients and for each service rendered to VSP patients that is not
covered by a plan insured or administered by VSP. For example, if in
1993, a VSP panel doctor performed a total of 12 eye examinations on
non-VSP patients and charged 3 of those patients $40, 5 of those
patients $50, and 4 of those patients $60 for the eye examination, the
doctor's modal fee for eye examinations provided to non-VSP patients
would be $50.
(G) ``Median fee'' means, considering all fees charged in a
calendar year for each service rendered to non-VSP patients and for
each service rendered to VSP patients that is not covered by a plan
insured or administered by VSP, the fee below and above which there are
an equal number of fees (or, if there are an overall equal number of
fees under consideration, the fee that is the arithmetic mean of the
tow middle fees.)
III
Applicability
This Final Judgment applies to:
(A) The Defendant and to its successors and assigns, and to all
other persons (including VSP panel doctors) in active concert or
participation with any of them, who have received actual notice of the
Final Judgment by personal service or otherwise; and
(B) The Most Favored Nation Clause, as defined in Section II(C) of
this Final Judgment, but to no other clause of the VSP Panel Doctor's
Agreement, VSP policy, or VSP practice.
IV
Prohibited Conduct
Except as permitted in Section V, Defendant is enjoined and
restrained from:
(A) Maintaining, adopting, or enforcing a Most Favored Nation
Clause in any VSP Panel Doctor's Agreement, corporate bylaws, policies,
rules, regulations, or by any other means or methods;
(B) Maintaining, adopting, or enforcing any policy or practice
linking payments made by VSP to any VSP panel doctor to fees charged by
the doctor to any non-VSP patient or any non-VSP plan;
(C) Differentiating VSP's payments to, or other treatment of, any
VSP panel doctor because the doctor charges any fee lower than that
charged by the doctor to VSP, to any non-VSP patient or to any non-VSP
plan;
(D) Taking any action to discourage any VSP panel doctor from
participating in any non-VSP plan or from offering or charging any fee
lower than that paid to the doctor by VSP to any non-VSP patient or any
non-VSP plan;
(E) Monitoring or auditing the fees any VSP panel doctor charges
any non-VSP patient or any non-VSP plan; and
(F) Communicating in any fashion with any VSP panel doctor
regarding the doctor's participation in any non-VSP plan or regarding
the doctor's fees charged to any non-VSP patient or to any non-VSP
plan.
V
Permitted Activities
Despite any prohibition contained in Section IV of this Final
Judgment,
(A) For the purpose of calculating payments to be made to its panel
doctors, defendant may request annually that a VSP panel doctor report
sufficient information--provided such information is requested
uniformly from all panel doctors within a meaningful geographic area
comprising zip codes--from which Defendant is able to calculate either
the doctor's modal or median fee, for each applicable service, provided
by the doctor during the preceding calendar year;
(B) Defendant may calculate the fees that it pays to a VSP panel
doctor for services rendered to VSP patients based on either the panel
doctor's modal or median fees, provided that Defendant employs a
uniform method of calculation at least within each meaningful
geographic area, comprising zip codes, in which it does business;
(C) Only for the purposes of verifying whether the information
reported by a VSP panel doctor, pursuant to Section V(A), is accurate
or of investigating a VSP panel doctor's suspected excessive billing to
VSP, upon reasonable belief that the reported fees may be inaccurate or
excessive, and subject to the reasonable convenience of the VSP panel
doctor, Defendant may audit the VSP panel doctor's charges to non-VSP
patients;
(D) Consistently with Sections IV(C) and (D), Defendant may devise
and utilize a fee system for doctors who apply for VSP panel membership
after the date of this Final Judgment that is different from the system
used to compensate current panel doctors, and that system may be based
on the average fees VSP pays in a meaningful geographic area comprising
zip codes;
(E) Consistently with Sections IV(C) and (D), Defendant may elect
to maintain current fees for panel doctors at their existing levels and
may base any future fee increases on the Consumer Price Index, VSP`s
own financial growth, or any other meaningful economic indicator; and
(F) Consistently with Sections IV(C) and (D), Defendant may impose
penalties on panel doctors who have misrepresented their fees or the
frequency with which they charge those fees.
VI
Nullification
The Most Favored Nation Clause shall be null and void and Defendant
shall impose no further obligation arising from it on any VSP panel
doctor. Within 60 days of entry of this Final Judgment, Defendant shall
disseminate to each present VSP panel doctor an addendum to the Panel
Doctor's Agreement, nullifying the Most Favored Nation Clause, and
Defendant shall eliminate the Most Favored Nation Clause from all Panel
Doctor's Agreements entered into after entry of this Final Judgment.
VII
Complance Measures
The Defendant shall:
(A) Distribute, within 60 days of the entry of this Final Judgment,
a copy of this Final Judgment to: (1) All VSP officers and directors;
(2) VSP employees who have any responsibility for approving,
disapproving, monitoring, recommending, or implementing any provisions
in agreements with VSP panel doctors; and (3) all present VSP panel
doctors and all former VSP panel doctors whom VSP should reasonably
know have resigned because of the Most Favored Nation Clause;
(B) Distribute in a timely manner a copy of this Final Judgment to
any officer, director, or employee who succeeds to a position described
in Section VII(A) (1) or (2);
(C) Obtain from each present or future officer, director, or
employee designated in Section VII(A) (1) or (2), within 60 days of
entry of this Final Judgment or of the person's succession to a
designated position, a written certification that he or she: (1) Has
read, understands, and agrees to abide by the terms of this Final
Judgment; and (2) has been advised and understands that his or her
failure to comply with this Final Judgment may result in conviction for
criminal contempt of court;
(D) Maintain a record of persons to whom the Final Judgment has
been distributed and from whom, pursuant to Section VI(D), the
certification has been obtained;
(E) The Defendant shall notify all former VSP panel doctors whom it
should reasonably know have resigned [[Page 5214]] because of the Most
Favored Nation Clause, that they are reinstated, on terms and
conditions that VSP may establish consistently with this Final
Judgment, unless they do not desire reinstatement; and
(F) Report to the Plaintiff any violation of the Final Judgment.
VIII
Certification
(A) Within 75 days of the entry of this Final Judgment, the
Defendant shall certify to the Plaintiff whether it has: (1)
Disseminated contractual addenda pursuant to Section VI, (2)
distributed the Final Judgment in accordance with Section VII(A), and
(3) obtained certifications in accordance with Section VII(C).
(B) For five years after the entry of this Final Judgment, on or
before its anniversary date, the Defendant shall file with the
Plaintiff an annual Declaration as to the fact and manner of its
compliance with the provisions of Sections IV, V, VI, and VII.
IX
Plaintiff's Access
(A) To determine or secure compliance with this Final Judgment and
for no other purpose, duly authorized representatives of the Plaintiff,
upon written request of the Assistant Attorney General in charge of the
Antitrust Division and on reasonable notice to the Defendant made to
its principal office, shall be permitted, subject to any legally
recognized privilege.
(1) Access during the Defendant's office hours to inspect and copy
all documents in the possession or under the control of the Defendant,
who may have counsel present, relating to any matters contained in this
Final Judgment; and
(2) subject to the reasonable convenience of the Defendant and
without restraint or interference from it, to interview officers,
employees or agents of the Defendant, who may have Defendant's counsel
and/or their own counsel present, regarding such matters.
(B) Upon the written request of the Assistant Attorney General in
charge of the Antitrust Division made to the Defendant's principal
office, the Defendant shall submit such written reports, under oath if
requested, relating to any matters contained in this Final Judgment as
may be reasonably requested, subject to any legally recognized
privilege.
(C) No information or documents obtained by the means provided in
Section IX shall be divulged by the Plaintiff to any person other than
duly authorized representatives of the Executive Branch of the United
States, except in the course of legal proceedings to which the United
States is a party, or for the purpose of securing compliance with this
Final Judgment, or as otherwise required by law.
(D) If at the time information or documents are furnished by the
Defendant to Plaintiff, 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 the Defendant marks each pertinent page
of such material, ``subject to claim of protection under Rule 26(c)(7)
of the Federal Rules of Civil Procedure,'' then 10 days notice shall be
given by Plaintiff to the Defendant prior to divulging such material in
any legal proceeding (other than a grand jury proceeding) to which the
Defendant is not a party.
X
Further Elements of the Final Judgment
(A) This Final Judgment shall expire five years from the date of
its entry.
(B) Jurisdiction is retained by this Court for the purpose of
enabling either of the parties to this Final Judgment, but no other
person, to apply to this Court at any time for further orders and
directions as may be necessary or appropriate to carry out or construe
this Final Judgment, to modify or terminate any of its provisions, to
enforce compliance, and to punish violations of its provisions.
(C) Entry of this Final Judgment is in the public interest.
----------------------------------------------------------------------
United States District Judge
In the United States District Court for the District of Columbia
United States of America, Plaintiff, vs. Vision Service Plan,
Defendant. Case No. 1:94CV02693 TPJ.
Competitive Impact Statement
Pursuant to Section 2(b) of the Antitrust Procedures and Penalties
Act, 15 U.S.C. 16(b)-(h), the United States submits this Competitive
Impact Statement relating to the proposed Final Judgment submitted for
entry in this civil antitrust proceeding.
I
Nature and Purpose of the Proceeding
On December 15, 1994, the United States filed a civil antitrust
Complaint alleging that Vision Service Plan (VSP), in all or parts of
many states in which VSP does business, entered into agreements with
its panel doctors that unreasonably restrain competition by restraining
discounting of fees for vision care services in violation of section 1
of the Sherman Act, 15 U.S.C. 1. The Complaint seeks injunctive relief
to enjoin continuance of the violation.
Entry of the proposed Final Judgment will terminate this action,
except that the Court will retain jurisdiction over the matter for
further proceedings that may be required to interpret, enforce or
modify the Judgment or to punish violations of any of its provisions.
II
Practices Giving Rise to the Alleged Violation
Defendant VSP is a California not-for-profit corporation
headquartered in Rancho Cordova, California. It controls the operations
of vision care insurance plans, operated under the name of Vision
Service Plan, in 46 states and the District of Columbia. VSP contracts
with businesses, government agencies, health care insurers, and other
organizations to provide pre-paid vision care coverage to their
employees or beneficiaries. In 1994, VSP plans covered about 15 million
persons; VSP revenues in 1994 totalled about $650 million.
VSP contracts directly with doctors--primarily optometrists but
also with a relatively small number of ophthalmologists--in private
practice, whom it refers to as panel doctors, to provide vision care
services--consisting essentially of diagnostic and dispensing services
and optical materials, such as corrective lenses and frames--to
patients covered by VSP plans. VSP's agreements with its panel doctors
(termed the Panel Doctor's Agreement) require its panel doctors to
report to VSP periodically a listing of the doctor's usual and
customary fees charged to non-VSP patients. VSP typically has paid
panel doctors fees that are derived from those usual and customary
fees, subject to a discount and area-specific fee caps that VSP
imposes.
During 1994, VSP contracted with about 17,000 panel doctors. In all
or parts of many states in which VSP does business, it contracts with a
high percentage of an area's optometrists. For example, in 1993, VSP
reported that 98% of all optometrists licensed in Nevada were VSP panel
doctors. In California, VSP contracts with approximately 4,000 panel
doctors, constituting about 90% of California optometrists in
independent private practice. Moreover, in all or parts of many states,
VSP's payments to optometrists constitute a significant part
[[Page 5215]] of their professional income. In California, for example,
VSP plans cover over 5.7 million members accounting for total annual
revenue of approximately $200 million.
Against this background, Defendant VSP's Panel Doctor's Agreement
contains a so-called fee non-discrimination clause, which is similar,
in substance, to clauses commonly characterized in the health care
industry as most favored nation (MFN) clauses. VSP's MFN clause
requires that each panel doctor charge VSP no more than the lowest
price that the doctor charges any non-VSP patient or any other vision
care group or insurance plan. Accordingly, if a VSP panel doctor wishes
to reduce the fees that the doctor charges to any non-VSP plan or
patient below the amounts that VSP pays the doctor, the MFN requires
the doctor to reduce to that same level the fees the doctor charges to
VSP. For the reasons described below, however, VSP's MFN clause has
actually caused many doctors not to reduce their fees to VSP, but
instead to charge other vision care insurance plans and non-VSP
patients fees that are at least as high as those paid to the doctor by
VSP.
The Complaint alleges that, beginning at a time unknown to
Plaintiff and continuing through at least November, 1994, in all or
parts of many states in which VSP does business, VSP entered into
agreements with its panel doctors that had the effect of unreasonably
restraining optometrists' discounting of fees for vision care services
to vision care insurance plans competing with VSP or to other
purchasers of vision care services, in violation of section 1 of the
Sherman Act. The Complaint alleges that, for the purpose of forming and
effectuating these agreements, (1) VSP required its panel doctors to
agree to the MFN clause in VSP's Panel Doctor's Agreement, which had
the effect of restricting the willingness of its panel doctors to
discount fees for vision care services and substantially reducing
discounted fees for vision care services; (2) VSP enforced the MFN
clause; and (3) VSP coerced many panel doctors into dropping out of, or
charging higher fees to, vision care insurance plans that compete with
VSP.
The Complaint further alleges that, in all or parts of many states,
the challenged agreements have had the effect of (1) unreasonably
restraining price competition among vision care insurance plans because
many competing vision care insurance plans have been unable to obtain
or retain a sufficient number of optometrists to provide services to
their members at competitive prices because panel doctors have
withdrawn from, refused to participate in, or insisted on higher fees
from vision care insurance plans that seek to pay them less than the
Defendant; and (2) raising prices for the provision of vision care
services to non-VSP patients and plans in competition with VSP because,
as a result of the MFN, many VSP panel doctors have opted not to
discount their fees to competing vision care insurance plans or to
uninsured patients.
VSP's adoption and enforcement of the MFN in its Panel Doctor's
Agreement has reduced the willingness of many optometrists to discount
their fees for the following reasons. Since many VSP panel doctors in
all or parts of many states receive a significant portion of their
professional income from treating VSP patients, they have found that
discounting their fees below VSP payments to non-VSP patients or
competing vision care programs, and consequently reducing their income
from VSP by virtue of the MFN clause, is unprofitable. For the same
reason, VSP panel doctors are unwilling to drop their participation in
VSP to avoid the MFN and be able to discount their fees to competing
discount vision care plans.
In a number of reported situations, optometrists had reduced their
fees in a range of 20-40% below their usual fees to participate in
vision care insurance plans competing with VSP. Subsequently, fearing
VSP's enforcement of the MFN clause, however, many VSP panel doctors
resigned from such competing plans or insisted that the plans pay them
fees that are at least as high as VSP's to avoid having to lower their
fees charged to VSP. Consequently, VSP's MFN clause has substantially
restrained both discounting arrangements that were already in place and
potential discounting that otherwise would have occurred but for the
MFN. Thus, VSP's MFN clause has severely hampered competing vision care
insurance plans' efforts to attract or retain, at competitive prices, a
sufficient, geographically dispersed panel of qualified optometrists to
make their plans commercially marketable.
In all or parts of many states, VSP's MFN clause has effectively
deprived vision care consumers of the benefits of free and open
competition. VSP's MFN clause has deprived uninsured patients of price
competition among optometrists who--because of the MFN clause--are
unwilling to discount their fees below VSP levels. VSP's MFN clause has
also reduced purchasers' opportunities to choose among competing vision
care insurance plans offering different combinations of optometrists
and prices. This reduction in the scope of vision care coverage
alternatives, such as managed care and other discount plans, has
substantially reduced the cost savings to consumers that such competing
plans could provide if they were able to contract for optometrists'
services at fees below VSP levels. Indeed, claims data suggest
generally that average claims, based on panel doctor's usual charges,
filed with VSP for services rendered in all or parts of many states
where VSP contracts with a substantial percentage of optometrists in
private practice and does a substantial amount of business range
between $95-110, compared to $70-80 in some other areas where VSP has
less of a market presence.
III
Explanation of the Proposed Final Judgment
The Plaintiff and VSP have stipulated that the Court may enter the
proposed Final Judgment after compliance with the Antitrust Procedures
and Penalties Act, 15 U.S.C. 16(b)-(h). The proposed Final Judgment
provides that its entry does not constitute any evidence against or
admission of any party concerning any issue of fact or law.
Under the provisions of section 2(e) of the Antitrust Procedures
and Penalties Act, 15 U.S.C. 16(e), the proposed Final Judgment may not
be entered unless the Court finds that entry is in the public interest.
Section X(C) of the proposed Final Judgment sets forth such a finding.
The proposed Final Judgment is intended to ensure that VSP
eliminates its MFN clause and stops all similar practices that
unreasonably restrain competition among optometrists and vision care
insurance plans.
A. Scope of the Proposed Final Judgment
Section III (A) of the proposed Final Judgment provides that the
Final Judgment shall apply to VSP and to its successors and assigns,
and to all other persons (including VSP panel doctors) in active
concert or participation with any of them, who shall have received
actual notice of the Final Judgment by personal service or otherwise.
Section III(B) of the proposed Final Judgment limits application of the
Judgment to VSP's MFN clause, as defined in Section II(C) of the
Judgment, but to no other clause in the VSP Panel Doctor's Agreement,
VSP policy, or VSP practice.
In the Stipulation to the proposed Final Judgment, VSP has agreed
to be bound by the provisions of the proposed Final Judgment, pending
its approval by the Court. VSP has also agreed to send,
[[Page 5216]] within 15 days of the filing of the proposed Final
Judgment, a copy of the attached letter, which has been approved by the
Antitrust Division, to every VSP panel doctor participating at any time
since January 1, 1993.
B. Prohibitions and Obligations
Under Section IV(A) of the proposed Final Judgment, VSP is enjoined
and restrained for a period of five years from maintaining, adopting,
or enforcing an MFN clause in any VSP Panel Doctor's Agreement, or in
its corporate by-laws, policies, rules, regulations, or by any other
means or methods.
Subject to activities permitted in Section V of the proposed Final
Judgment, other provisions of the Final Judgment seek to ensure that
the MFN clause's anticompetitive effects cannot be achieved in other
ways. Specifically, Section IV(B) enjoins VSP from maintaining,
adopting, or enforcing any policy or practice linking payments made by
VSP to any VSP panel doctor to fees charged by the doctor to any non-
VSP patient or any non-VSP plan; Section IV(C) enjoins VSP from
differentiating VSP's payments to, or other treatment of, any VSP panel
doctor because the doctor charges any fee lower than that charged by
the doctor to VSP, to any non-VSP patient or to any non-VSP plan;
Section IV(D) enjoins VSP from taking any action to discourage any VSP
panel doctor from participating in any non-VSP plan or from offering or
charging any fee lower than that paid to the doctor by VSP to any non-
VSP patient or any non-VSP plan; Section IV(E) enjoins VSP from
monitoring or auditing the fees any VSP panel doctor charges to any
non-VSP patient or any non-VSP plan; and Section IV(F) enjoins VSP from
communicating in any fashion with any VSP panel doctor regarding the
doctor's participation in any non-VSP plan or regarding the doctor's
fees charged to any non-VSP patient or to any non-VSP plan.
Section V of the Proposed Final Judgment describes several
activities that VSP may elect to undertake in calculating the payments
it makes in the future to its panel doctors that, if carried out
consistently with the restrictions of Section V and applicable
injunctive provisions contained in Section IV, will not constitute a
violation of the Judgment. Essentially, the restrictions of Section V
seek to ensure that VSP does not discriminate against VSP panel doctors
who choose to discount fees to non-VSP insurance plans or to uninsured
patients, with the effect of discouraging such discounting. Section
V(A) allows VSP to request annually sufficient information to enable
VSP to calculate either a doctor's modal fee (the doctor's most
frequently charged fee) or median fee (the fee above and below which
the doctor charges other fees an equal number of times) for each
service provided by all VSP panel doctors in a meaningful geographic
area specified by zip codes; Section V(C) allows VSP to verify, through
reasonable audit procedures, the information provided to it by its
panel doctors pursuant to Section V(A) and to check into any reasonable
suspicions VSP might have of excessive billings by panel doctors; and
under Section V(F), VSP may impose penalties in a nondiscriminatory
manner on panel doctors for billing misrepresentations.
Section V(D) permits VSP, if it chooses, to devise and use a new
fee system for doctors who become VSP panel doctors after the entry of
the Judgment, based on the average fees that VSP pays its existing
panel doctors within a meaningful area specified by zip codes. Under
Section V(E), VSP also may elect to maintain its current fee levels for
its current panel doctors and base any future fee increases on the
Consumer Price Index, VSP's own financial growth or any other
meaningful economic indicator.
Section VI of the Final Judgment declares that VSP's MFN clause, or
any future clause, policy or practice having the same purpose or
effect, null and void.
Section VII of the Final Judgment sets forth several compliance
measures that VSP must fulfill. Section VII(A) requires that, within 60
days of entry of the Final Judgment, VSP provide a copy of the Final
Judgment to all VSP officers and directors, VSP employees having
responsibility for VSP Panel Doctor Agreements, and all present VSP
panel doctors or former panel doctors whom VSP reasonably believes
resigned from the VSP plan because of the MFN. Sections VII(B), (C) and
(D) require VSP to provide a copy of the Final Judgment to future
officers, directors and employees having responsibility for VSP Panel
Doctor Agreements and to obtain and maintain records of such persons'
written certifications that they have read, understand and will abide
by the terms of the Final Judgment. Section VII(E) requires VSP to
notify all former VSP panel doctors whom VSP reasonably believes
resigned from a VSP plan because of the MFN and to reinstate them as
panel doctors if they so desire; Section VII(F) obligates VSP to report
to Plaintiff any violation of the Final Judgment.
The Final Judgment also contains provisions, in Section VIII,
obligating VSP to certify its compliance with specified obligations of
Sections IV, V, VI and VII of the Final Judgment. In addition, Section
IX of the Final Judgment sets forth a series of measures by which the
Plaintiff may have access to information needed to determine or secure
VSP's compliance with the Final Judgment.
C. Effect of the Proposed Final Judgment on Competition
By eliminating the MFN clause, the relief ordered by the proposed
Final Judgment will enjoin and eliminate a substantial restraint on
price competition between VSP and other vision care insurance plans and
among optometrists, in all or parts of many states. It will do so by
eliminating the disincentives created by the MFN clause that inhibit
optometrists' willingness to discount their fees and to join non-VSP
plans offering payments below VSP levels. The Judgment also prevents
VSP from taking any other action to dissuade or discourage optometrists
from discounting or participating in competing vision care insurance
plans. Consequently, non-VSP plans' efforts to attract and maintain
viable panels of optometrists to serve their members will no longer be
hampered.
On the other hand, VSP will be able to compete on the same terms
with other vision care insurance plans because it will not be
restricted from seeking and obtaining lower fees through activities
permitted in Section V of the Judgment or by other means, such as a fee
schedule--an approach used by other vision care insurance plans--that
are unlikely to have anticompetitive effects. Though Section V does not
allow VSP routinely to base its payments on the lowest fee charged by
its panel doctors to any non-VSP plan or patient--as VSP has done
through its MFN clause--Section V does permit VSP to base its payments
to panel doctors on their median or modal fees charged to non-VSP plans
and patients, two measures of usual and customary fees that are not
linked directly to the lowest fee charged.
In view of the substantial percentage of vision care patients who
are not covered by a vision care insurance plan, a VSP panel doctor's
median or modal fee is not likely to be the lowest fee charged by the
doctor to any non-VSP plan or patient. Thus, VSP's possible use of
median or modal fees, to set payments to panel doctors, is unlikely to
create disincentives to discount. The activities that Section V permits
VSP to engage in are unlikely, therefore, to replicate the effects of
VSP's MFN clause or consequently to perpetuate the
[[Page 5217]] competitive concerns raised by the MFN clause.
The proposed Final Judgment's elimination of VSP's MFN clause will
restore to vision care insurance plans and consumers, in all or parts
of many states, the benefits of free and open competition.
Consequently, vision care insurance plans should be able to achieve
cost savings that they can pass on to consumers, and consumers should
have access to a more competitive selection of vision care insurance
alternatives and optometrists.
IV
Alternatives to the Proposed Final Judgment
The alternative to the proposed Final Judgment would be a full
trial on the merits of the case. In the view of the Department of
Justice, such a trial would involve substantial costs to both the
United States and VSP and is not warranted because the proposed Final
Judgment provides all of the relief that appears necessary to remedy
the violations of the Sherman Act alleged in the Complaint.
V
Remedies Available to Private Litigants
Section 4 of the Clayton Act, 15 U.S.C. 15, provides that any
person who has been injured as a result of conduct prohibited by the
antitrust laws may bring suit in federal court to recover three times
the damages suffered, as well as costs and reasonable attorney's fees.
Entry of the proposed Final Judgment will neither impair nor assist in
the bringing of such actions. Under the provisions of Section 5(a) of
the Clayton Act, 15 U.S.C. 16(a), the Final Judgment has no prima facie
effect in any subsequent lawsuits that may be brought against the
Defendant in this matter.
VI
Procedures Available for Modification of the Proposed Final Judgment
As provided by the Antitrust Procedures and Penalties Act, any
person believing that the proposed Judgment should be modified may
submit written comments to Gail Kursh, Chief; Professions &
Intellectual Property Section, Department of Justice; Antitrust
Division, 600 E Street, NW., Room 9300; Washington, DC 20530, within
the 60-day period provided by the Act. Comments received, and the
Government's responses to them, will be filed with the Court and
published in the Federal Register. All comments will be given due
consideration by the Department of Justice, which remains free,
pursuant to Paragraph 2 of the Stipulation, to withdraw its consent to
the proposed Final Judgment at any time before its entry if the
Department should determine that some modification of the Judgment is
necessary to the public interest. The proposed Judgment itself provides
that the Court will retain jurisdiction over this action, and that the
parties may apply to the Court for such orders as may be necessary or
appropriate for the modification, interpretation, or enforcement of the
Judgment.
VII
Determinative Documents
No materials and documents of the type described in section 2(b) of
the Antitrust Procedures and Penalties Act, 15 U.S.C. 16(b), were
considered in formulating the proposed Judgment. Consequently, none are
filed herewith.
Dated: January 13, 1995.
Respectfully submitted,
Steven Kramer,
Richard S. Martin,
Attorneys, Antitrust Division, U.S. Dept. of Justice, 600 E Street,
NW., Room 9420, Washington, DC 20530, (202) 307-0997.
Attachment
Vision Service Plan,
3333 Quality Drive, Rancho Cordova, CA 95670-7985, (916) 851-5000--
(800) 852-7600, Telefax (916) 851-4855
Dear VSP Doctor: VSP has entered into an agreement with the
United States Department of Justice which will require VSP to
eliminate its fee non-discrimination (FND) policy. This is the
policy which is sometimes called a most favored nations clause and
prohibits a member doctor from charging VSP more for services than
the doctors accepts from any other source for the same services. As
you know, VSP has always contended it has consistently enforced the
fee non-discrimination policy to ensure our groups are provided the
most cost effective services that may be obtained from VSP member
doctors. Without cost effectiveness, the groups have little
incentive to buy from Vision Service Plan.
Effective immediately, VSP will no longer reduce a doctor's fee
because that doctor accepts a lower fee for the same service from
another source and, your Panel Doctor's Agreement with Vision
Service Plan is amended to eliminate Paragraph 6. Please keep this
letter with your VSP agreement and consider it as an addendum. The
Justice Department has agreed that existing fees may stay at their
current levels until a new fee payment mechanism can be put in
place. In the future, VSP's payments will be based on the range of
fees the doctor accepts, rather than the lowest fee.
We have agreed to eliminate the FND policy to avoid long and
expensive litigation with the United States Department of Justice.
We feel our resources need to be maintained to support our mission
of providing our member doctors with more VSP patients and providing
the best vision care in the nation. The vision care market is
changing rapidly. Institutions like insurance companies, HMOs,
Medicaid and the government in general are having a tremendous
effect on health care and its costs. VSP is striving, more than any
other organization, to look out for the interests of our member
doctors and their patients. VSP is, and will continue to be, the
best source of patients for our member doctors.
This policy change may have significant impact on some VSP
member doctors. We will need to develop new fee-setting systems
which will make VSP more competitive but are not based on the lowest
fee which a doctor accepts.
We will be in further communication with you when a new fee
system has been established. Our Board is confident we will be able
to devise a system which will meet your needs and meet VSP's
competitive needs for the future while satisfying the Justice
Department's guidelines.
Thank you for your patience, understanding and continued support
of VSP.
Denis Humphreys,
Chairman of the Board.
In the United States District Court for the District of Columbia
United States of America, Plaintiff, vs. Vision Service Plan,
Defendant. Civil Action No. .
Certificate of Service
I certify that I caused a copy of the United States' Competitive
Impact Statement to be served on January 13, 1995, by Federal Express
to:
Barclay L. Westerfeld, General Counsel, Vision Service Plan, 3333
Quality Drive, Rancho Cordova, California 95670
and by courier to:
John J. Miles, Ober, Kaler, Grimes & Shriver, 1401 H Street NW., Fifth
Floor, Washington, DC 20005-2110
Dated: January 13, 1995.
Steven Kramer,
Attorney, Antitrust Division, Department of Justice, 600 E Street NW.,
Room 9420, Washington, DC 20530, (202) 307-1029.
[FR Doc. 95-1988 Filed 1-25-95; 8:45 am]
BILLING CODE 4410-01-M
