Following an investigation, on December 14, 2015, the FTC filed a Complaint and a Decision and Order that resolved antitrust claims against 19 orthopedists in Berks County, PA, arising out of a 2011 merger of six independent physician groups in which the orthopedists practiced. Those six groups merged to form Keystone Orthopaedic Specialties (“Keystone”).
According to the Complaint, the 19 orthopedists comprised 76% of the 25 physician orthopedic physician services market in Berks County. Prior to the merger, competition among orthopedists was robust, with the 25 orthopedists in the market practicing in 11 different physician groups. The merger, however, resulted in market concentration likely well above the thresholds for presuming market power and illegality under the Herfindahl-Hirschman Index.
According to the Complaint, because of the highly concentrated market and entry barriers, health plans operating in Berks County were unable to establish networks of orthopedists for their enrollees in Berks County, and were therefore forced to pay higher rates to the Keystone orthopedists, which they passed on to their enrollees.
The Decision and Order imposes extensive multi-year restrictions on the types of joint arrangements the Keystone orthopedists and their practices may enter into going forward, prohibiting some arrangements altogether, while requiring FTC consent for others.
The lesson of Keystone is simple. Physicians practicing in independent physician groups who are contemplating a joint venture of any kind should retain antitrust counsel to advise on and resolve any antitrust issues before the arrangement is consummated in order to avoid regulator scrutiny and the potential for the severe penalties and practice restrictions that come with it.