The Federal Trade Commission (FTC) recently filed a Complaint, Decision and Order that resolved antitrust claims against 19 Berks County, PA orthopedists. In 2011, six independent orthopedic practices merged to form Keystone Orthopedic Specialties (Keystone). According to the FTC, the merger was anti-competitive and violated U.S. antitrust law.
Prior to the merger, competition was vigorous. Health plans could choose between the different practices and form networks with some, but not all of them. But when 19 of the 25 orthopedists in Berks County merged into a single practice, the newly formed Keystone was able to negotiate prices with health plans on behalf of all the formerly independent practices. The FTC alleges that Keystone used its stranglehold on the market to raise prices with most health plans operating in the area. These increased costs were then passed on to the health plans’ enrollees. The market concentration was likely well above thresholds for presuming illegality pursuant to the Herfindahl-Hirschman Index.
According to the FTC, this settlement is designed to keep the market competitive by allowing health plans to renegotiate existing Keystone contracts. The settlement imposes extensive multi-year restrictions on the types of arrangements Keystone orthopedists and their practices may enter into. Some arrangements are strictly prohibited. Under the settlements’ terms, Keystone must obtain approval from the FTC prior to acquiring any interests in each other, acquiring any other orthopedic practices in Berks County, and before hiring orthopedists who have practiced in Berks County in the previous year. In addition, Keystone is prohibited from coordinating prices with other orthopedists in the market and jointly negotiating with or refusing to deal with payors.
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