[Federal Register Volume 60, Number 111 (Friday, June 9, 1995)]
[Notices]
[Pages 30542-30545]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-14186]
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FEDERAL TRADE COMMISSION
[Dkt. C-2856]
The American Academy of Orthopaedic Surgeons; Prohibited Trade
Practices and Affirmative Corrective Actions
AGENCY: Federal Trade Commission.
ACTION: Set Aside Order.
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SUMMARY: This order reopens a 1976 consent order, that was modified in
1985,--which prohibited the respondent from initiating, publishing or
circulating relative value scales for medical or surgical procedures--
and sets aside the modified consent order based on changed conditions
of facts, such as, the decision by Congress to base reimbursement for
medical services provided under Medicare on resource based relative
value scales.
DATES: Consent order issued December 14, 1976. Set aside order issued
May 4, 1995.
FOR FURTHER INFORMATION CONTACT:
Roberta Baruch, FTC/S-2115, Washington, D.C. 20580. (202) 326-2861.
SUPPLEMENTARY INFORMATION: In the Matter of The American Academy of
Orthopaedic Surgeons. The prohibited trade practices and/or corrective
actions are removed as indicated.
[[Page 30543]] (Sec. 6, 38 Stat. 721; 15 U.S.C. 46. Interprets or
applies sec. 5, 38 Stat. 719, as amended; 15 U.S.C. 45)
In the matter of: The American Academy of Orthopaedic Surgeons,
a corporation.
Order Setting Aside Order
On November 23, 1994, the American Academy of Orthopaedic Surgeons
(``AAOS'') filed a Petition To Reopen and Rescind or Modify Consent
Order (``Petition'') in Docket C-2856 (``Order''), pursuant to Section
5(b) of the Federal Trade Commission Act, 15 U.S.C. Sec. 45(b), and
Section 2.51 of the Commission's Rules of Practice, 16 C.F.R.
Sec. 2.51. In its Petition, AAOS requests that the Commission reopen
the Order and rescind it or, in the alternative, modify provisions of
the Order that restrict the ability of AAOS to develop and distribute a
relative value scale (``RVS''), as defined in the Order.
AAOS asserts in its Petition that changed conditions of law or fact
and the public interest warrant reopening the Order and rescinding or
modifying it. A redacted version of the Petition was placed on the
public record for thirty days; no comments were received. For the
reasons described below, the Commission has determined that the Order
should be reopened and set aside.
I. Background
The Commission's complaint alleged, among other things, that the
preparation and circulation by AAOS of comparative numerical values for
services performed by orthopaedic surgeons had the effect of
establishing or maintaining fees charged by orthopaedic surgeons for
their services, in violation of Section 5 of the FTC Act. The complaint
also alleged that the numerical values were convertible into a monetary
fee by application of a dollar conversion factor. The Order, in
relevant part, requires AAOS to cease initiating, publishing or
circulating, in whole or in part, any relative value scale, as
defined.\1\ The American Academy of Orthopaedic Surgeons, 88 F.T.C. 968
(1976).
\1\ ``Relative value scale'' is defined in the Order as any list
or compilation of surgical or medical procedures that states
comparative numerical values for those procedures or services. Order
Paragraph I.A.
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The Order does not prevent AAOS from exercising rights under the
First Amendment to the Constitution to petition state or federal
government agencies and to participate in federal or state
administrative or judicial proceedings or from providing information or
views to third party payers concerning any issue, including
reimbursement. The American Academy of Orthopaedic Surgeons, 105 F.T.C.
248 (1985) (modifying Order).
II. The Petition
AAOS requests that the Commission reopen the Order and rescind or
modify it to permit the AAOS to provide information concerning Medicare
resource based relative value scales (``RBRVS'') to third party payers,
managed care organizations, other physician organizations and others in
the private sector, including its members. AAOS states that the
information will facilitate the development and adoption of RBRVS that
accurately reflect the values of orthopaedic procedures, resulting in
the efficient allocation of resources. AAOS already has provided
information to government entities involved in medical reimbursement
issues; it wants to provide the information to nongovernment entities
and to its members.
In particular, AAOS wants to be able to circulate the Abt Restudy,
a physician work value scale commissioned by AAOS.\2\ AAOS also wants
to be able to sponsor and disseminate future research projects that
analyze other components of the Medicare RBRVS.
\2\ Noether & Sheehy, The Abt Restudy of Physician Work Values
for Orthopaedic Surgery (Sept. 23, 1992), attached as Exhibit 8 to
the AAOS Petition (hereafter ``Abt Restudy'').
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AAOS cites as changed conditions the adoption and implementation by
the federal government of resource based relative value scales for
purposes of physician reimbursement under Medicare. In 1986, Congress
created the Physician Payment Review Commission (``PPRC'') to make
recommendations regarding physician reimbursement under Medicare. At
that time, physician reimbursement was determined by the ``customary,
prevailing and reasonable'' (``CPR'') method, which relied on
historical fees. The PPRC concluded that the CPR method increased costs
under Medicare and recommended adopting instead a relative value scale
based on resource costs.\3\ In 1989, Congress enacted the Omnibus
Budget Reconciliation Act of 1989, which, among other things, requires
use of resource based relative value scales for purposes of physician
reimbursement under Medicare.\4\ The Act provides for consultations
with ``organizations representing physicians'' to develop relative
values for medical services.\5\
\3\ See Physician Payment Review Commission, Annual Report to
Congress (1988); Physician Payment Review Commission, Medicare
Physician Payment: An Agenda for Reform (1987).
\4\ Section 6102 of the Omnibus Budget Reconciliation Act of
1989, 42 U.S.C. Sec. 1395w-4. Medicare RBRVS bases physician
reimbursement on (1) a relative value unit for the medical service,
which is based on physician work, practice costs and professional
liability costs; (2) a geographic adjustment factor; and (3) a
conversion factor. Components of the RBRVS are to be updated
periodically. Payment is based on the lesser of the RBRVS amount and
the physician's actual fee. Petition at 12-13.
\5\ 42 U.S.C. Sec. 1395w-4(c)(2)(B)(iii).
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According to AAOS, the Abt Restudy was commissioned to respond to
perceived shortcomings in Medicare RBRVS for orthopaedic services. See
Petition at 13-15; Abt Restudy at 1. Providing the Abt Restudy to
government entities is consistent with the proviso to the Order,\6\
which permits AAOS to petition government agencies and legislatures.
AAOS would like to distribute the Abt Restudy to third party payers and
other nongovernment entities, such as other medical societies, and to
individual members of AAOS, at least for the limited purpose of
preparing AAOS representatives to lobby state government bodies
regarding physician reimbursement practices. AAOS also would like to
sponsor future research projects analyzing other components of Medicare
RBRVS. According to AAOS, to the extent that it is precluded by the
Order from providing information concerning reimbursement levels, the
efficiency of RBRVS-based systems is lessened, ``payers who would
benefit from more efficient payment mechanisms are hindered in their
ability to compete, and physicians and patients are given distorted
incentives, and market signals for production and consumption of
resources.'' \7\
\6\ 105 F.T.C. at 249; see letter from Roberta S. Baruch, Deputy
Assistant Director, Bureau of Competition, FTC, to Richard N.
Peterson, General Counsel, American Academy of Orthopaedic Surgeons
(May 12, 1993) (``staff advisory opinion''), Petition Exhibit 16.
\7\ Petition at 25-26.
III. Standard for Reopening a Final Order of the Commission
Section 5(b) of the Federal Trade Commission Act, 15 U.S.C.
Sec. 45(b), provides that the Commission shall reopen an order to
consider whether it should be modified if the respondent ``makes a
satisfactory showing that changed conditions of law or fact'' so
required. A satisfactory showing sufficient to require reopening is
made when a request to reopen identifies significant changes in
circumstances and shows that the changes eliminate the need for the
order or make continued application of it inequitable or harmful to
competition. S. Rep. No. 96-500, 96th Cong., 2d Sess. 9 (1979)
(significant changes or changes causing [[Page 30544]] unfair
disadvantage); Louisiana-Pacific Corp., Docket No. C-2956, Letter to
John C. Hart (June 5, 1986), at 4 (unpublished) (``Hart Letter'').\8\
\8\ See also United States v. Louisiana-Pacific Corp., 967 F.2d
1372, 1376-77 (9th Cir. 1992) (``A decision to reopen does not
necessarily entail a decision to modify the order. Reopening may
occur even where the petition itself does not plead facts requiring
modification.'').
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Section 5(b) also provides that the Commission may modify an order
when, although changed circumstances would not require reopening, the
Commission determines that the public interest so requires. Respondents
are therefore invited in petitions to reopen to show how the public
interest warrants the requested modification. Hart Letter at 5; 15
C.F.R. Sec. 2.51. In such a case, the respondent must demonstrate as a
threshold matter some affirmative need to modify the order. Damon
Corp., Docket No. C-2916, Letter to Joel E. Hoffman, Esq. (March 29,
1983), at 2 [1979-1983 Transfer Binder] Trade Reg. Rep. (CCH) para.
22,207 (``Damon Letter''). For example, it may be in the public
interest to modify an order ``to relieve any impediment to effective
competition that may result from the order.'' Damon Corp., 101 F.T.C.
689, 692 (1983). Once such a showing of need is made, the Commission
will balance the reasons favoring the requested modification against
any reasons not to make the modification. Damon Letter at 2. The
Commission also will consider whether the particular modification
sought is appropriate to remedy the identified harm. Damon Letter at 4.
The language of Section 5(b) plainly anticipates that the burden is
on the petitioner to make a ``satisfactory showing'' of changed
conditions to obtain reopening of the order. The legislative history
also makes clear that the petitioner has the burden of showing, other
than by conclusory statements, why an order should be modified. The
Commission ``may properly decline to reopen an order if a request is
merely conclusory or otherwise fails to set forth specific facts
demonstrating in detail the nature of the changed conditions and the
reasons why these changed conditions require the requested modification
of the order.'' S. Rep. No. 96-500, 96th Cong., 1st Sess. 9-10 (1979);
see also Rule 2.51(b) (requiring affidavits in support of petitions to
reopen and modify). If the Commission determines that the petitioner
has made the necessary showing, the Commission must reopen the order to
consider whether modification is required and, if so, the nature and
extent of the modification. The Commission is not required to reopen
the order, however, if the petitioner fails to meet its burden of
making the satisfactory showing required by the statute. The
petitioner's burden is not a light one in view of the public interest
in response and the finality of Commission orders. See Federated
Department Stores, Inc. v. Moitie, 425 U.S. 394 (1981) (strong public
interest considerations support repose and finality).
IV. The Order Should Be Reopened
AAOS has shown changed conditions of fact that require the Order to
be reopened to consider modification.\9\ The decision by Congress to
base reimbursement for medical services provided under Medicare on
resource based relative value scales, with the participation of
physicians and medical professional societies in identifying and
modifying RBRVS for Medicare purposes, is a changed condition that
makes application of the order inequitable.
\9\ AAOS also cited changed conditions of law and the public
interest. Because the Order is set aside on the ground of changed
conditions of fact, the Commission need not and does not consider
the additional alleged grounds.
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The Order bars AAOS from ``directly or indirectly initiating,
originating, developing, publishing, or circulating, the whole or any
part of any proposed or existing relatives value scales,'' while the
Omnibus Budget Reconciliation Act of 1989, among other things, requires
use of resource based relative value scales for purposes of physician
reimbursement under Medicare and contemplates professional
participation in the development of RBRVS. The Act requires the
Department of Health and Human Services (``HHS'') to consult with
physician organizations in developing and modifying Medicare RBRVS. The
Order addressed conduct that allegedly contributed to the unlawful
maintenance of fees by orthopaedic surgeons. It now appears that the
Order may inhibit participation by AAOS in the development and revision
of RBRVS systems of reimbursement and thus may harm competition.
Accordingly, the Order should be reopened to consider modification.
V. The Order Should Be Set Aside
AAOS requests that the Order be set aside or modified to permit
AAOS to distribute the Abt Restudy and similar information to third
party payers, other medical societies and its members.
The Order, as modified in 1985, permits AAOS to ``discuss[]
relative value scales with governmental entities and third-party
payers.'' 105 F.T.C. at 248. The Commission, in modifying the Order in
1985, concluded that the Order's ``restriction on [AAOS]'s ability to
discuss relative value scales with third-party payers and governmental
entities * * * caused injury to [AAOS] and the public that outweighed
any benefit that might be derived from the restriction.'' Id. The
Commission also observed that the modification was consistent with its
opinion in Michigan State Medical Society, 105 F.T.C. 191 (1983)
(``MSMS''). Also consistent with MSMS, AAOS is not limited under the
Order to responding to requests from government and third party
payers.\10\ AAOS ``may have a useful role to play in offering
suggestions and advice to third payers on a wide variety of issues,
including reimbursement. * * * [T]he potential value of this role is
not limited to responsive communications but extends * * * to similar
communications initiated by'' AAOS. 105 F.T.C. at 308.\11\
\10\ The Order, as modified in 1985, permits AAOS to discuss
relative value guides with third party payers, but the staff of the
Commission construed the Order as barring AAOS from providing
relative value guides to third party payers. See Staff advisory
opinion at 3 (``[B]ased on the information we now have, we cannot
conclude that it would be consistent with the Order for AAOS to
publish or circulate the Abt Restudy to the AAOS membership or to
any non-governmental entity.'').
\11\ See also Advisory Opinion in American Society of Internal
Medicine, 105 F.T.C. 505, 510-11 (1985).
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As the Commission recognized in MSMS, ``there is some inherent
danger in allowing any collective dialogue with third party payers on
questions directly related to reimbursement amounts or policies.'' \12\
Similarly, in modifying the Order in AAOS, the Commission cautioned
that ``serious antitrust concerns would arise were AAOS to negotiate or
attempt to negotiate an agreement with any such party or engage in any
type of coercive activity to effect such an agreement.'' \13\ Such
actions concerning terms of reimbursement could be examined under
Section 5 of the Federal Trade Commission Act.\14\
\12\ The Order in MSMS permitted the dialogue and addressed the
risk by barring the medical society from entering into unlawful
agreements with third party payers regarding reimbursement. 101
F.T.C. at 308.
\13\ 105 F.T.C. at 249.
\14\ See, e.g., Department of Justice and FTC Statements of
Enforcement Policy and Analytical Principles Relating to Health Care
and Antitrust, Statements 5 & 6, reprinted in 4 Trade Reg. Rep.
(CCH) para. 13,152, at 20, 782-785 (1994) (``Health Care Policy
Statements'').
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AAOS also would like to provide copies of the Abt Restudy to other
medical professional societies. The process of establishing and
refining [[Page 30545]] Medicare RBRVS involves consideration of
recommendations from the AMA/Specialty Society RVS Update Committee
(``RUC''),\15\ which is composed of representatives of major medical
societies, including AAOS. The Abt Restudy could be useful to the RUC
and ultimately to the Health Care Financing Administration (``HCFA''),
which administers the Medicare program, in the review and refinement of
Medicare RBRVS.\16\ The inability of AAOS under the Order to
disseminate the Abt Restudy to members of the RUC appears likely to
hinder participation in the process sponsored by HCFA for identifying
information relevant to revising Medicare RBRVS and could increase the
costs to HCFA in obtaining such information. Such inhibitions resulting
from the Order would be inconsistent with federal policy as expressed
in the Omnibus Budget Reconciliation Act of 1989 and the implementing
regulations. The Order should be modified to permit AAOS to disseminate
the Abt Study to other medical professional societies.
\15\ Petition at 13, citing 59 Fed. Reg. 32,754 & 32,760 (1994).
\16\ See Petition at 18-19.
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Finally, AAOS would like to provide copies of the Abt Restudy to
its members, at least for the ``limited purpose of furthering the
Academy's efforts to persuade government bodies to modify their own
physician payment practices.'' For example, according to AAOS, ``in
virtually all states, the Academy has no members who have ever seen the
[Abt] Restudy, and therefore no one to meet with interested state
officials responsible for compensation issues in Medicaid, workers'
compensation or other medical programs.'' \17\
\17\ Petition at 26.
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The prohibition on distribution by AAOS of relative value scales to
its members is at the core of the Order, because of the alleged effect
of maintaining the prices charged by its members.\18\ Given the federal
policy to rely on RBRVS for Medicare reimbursement and the increasing
interest on the part of state governments and third party payers in
relative value guides as a basis for physician reimbursement, however,
the prohibition in the Order on dissemination by AAOS may inhibit the
contributions of its members to the development of RBRVS and increase
the costs of disseminating the information.\19\ Allowing AAOS to
distribute the Abt Restudy to its members would allow them to
participate in an informed manner in lobbying activities before state
government agencies. Accordingly, AAOS should be permitted to
distribute the Abt Restudy to its members.
\18\ See also Advisory Opinion in American Society of Internal
Medicine, 105 F.T.C. 505, 510 (1985) (``[A]lthough the Commission
cannot * * * predict that widespread concerted conformance to the
RVG would necessarily result from its dissemination * * * the
available information on this specific RVG proposal indicates that
this type of agreement in restraint of trade is a substantial
danger.'').
\19\ As a practical matter, material submitted to the Health
Care Financing Administration on the public record presumably is
available to members of AAOS on request.
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The danger that AAOS members will use the Abt Restudy or other
relative value guides as a basis for an unlawful agreement to fix the
prices for their services has not been eliminated. Although the federal
policy to use RBRVS for Medicare reimbursement counsels in favor of
setting aside the restriction of the Order on distribution of relative
values to AAOS members, AAOS and its members remain subject to the laws
against price fixing. Setting aside the restrictions of the Order
should not be construed as approval for use by AAOS or its members of a
relative value guide as a basis for an unlawful agreement on price.
In some circumstances, preparation and circulation by a medical
society of a relative value scale may have anticompetitive
consequences. For example, in American Society of Internal Medicine,
105 F.T.C. 505 (1985) (advisory opinion), the Commission declined to
approve a proposal to circulate a relative guide because of the
``substantial danger that ASIM's proposed conduct would involve an
agreement in restraint of trade amoung ASIM and physicians to
concertedly adhere to the RVG.'' \20\ The Joint Health Care Policy
Statements also caution that ``information exchanges among competing
providers may facilitate collusion or otherwise reduce competition on
prices.'' \21\
\20\ Id. at 511.
\21\ Health Care Policy Statements at 20,784.
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VI. Conclusion
Accordingly, it is ordered that this matter be, and it hereby is,
reopened, and that the modified Order in Docket C-2856 be, and it
hereby is, set aside, as of the effective date of this order.
By the Commission, Commissioner Starek concurring in the result
only.
Donald S. Clark,
Secretary.
[FR Doc. 95-14186 Filed 6-8-95; 8:45 am]
BILLING CODE 6750-01-M
