U.S. v. Vision Service Plan; Proposed Revised Final Judgment and Revised Competitive Impact Statement

Federal RegisterNov 13, 1995

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DEPARTMENT OF JUSTICE

Antitrust Division

U.S. v. Vision Service Plan; Proposed Revised Final Judgment and

Revised 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

Revised Final Judgment, a Superseding Stipulation, and a Revised

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. 1:94CV02693.

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.

[[Page 57018]]

The proposed Revised 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. The proposed

Revised Final Judgment modifies a few provisions of the original

proposed Final Judgment in view of VSP's experience while operating

under the terms of the original proposed Final Judgment, pursuant to a

Stipulation with the Government, pending approval of a Final Judgment

by the Court. The specific revisions, and the reason for making them,

are summarized and explained in the Revised Competitive Impact

Statement.

Public comment on the proposed Revised 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/Health Care Task Force; United States

Department of Justice; Antitrust Division; 600 E Street, NW., Room

9300; Washington, DC 20530 (telephone: (202) 307-5799).

Rebecca P. Dick,

Deputy Director of Operations, Antitrust Division.

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]

Superseding Stipulation

It is stipulated by and between the undersigned parties, by their

respective attorneys, that:

1. This Superseding Stipulation supersedes the Stipulation of the

parties filed with the Court on December 15, 1994.

2. 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 District of Columbia.

3. The parties consent that a Revised 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.

4. Defendant agrees to be bound by the provisions of the proposed

Revised Final Judgment pending its approval by the Court. If plaintiff

withdraws its consent, or if the proposed Revised Final Judgment is not

entered pursuant to the terms of the Superseding 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.

For Plaintiff:

Anne K. Bingaman,

Assistant Attorney General.

Joel I. Klein,

Deputy Assistant Attorney General.

Rebecca P. Dick,

Deputy Director, Office of Operations.

Gail Kursh,

D.C. Bar #293118, Chief.

David C. Jordan,

D.C. Bar #914093, Ass't. Chief Professions & Intellectual Property

Section, Antitrust Division, U.S. Department of Justice.

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.

For Defendant:

John J. Miles,

D.C. Bar #364054, Ober, Kaler, Grimes & Shriver, Fifth Floor, 1401 H

Street, NW., Washington, DC 20005-2202 (202) 326-5008.

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.

[Case No. 1:94CV02693 TPJ]

Revised 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:

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.

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;

(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

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.

(F) ``Usual and customary fees'' means the fees for services and

materials that are charged, before any discounting, by VSP panel

doctors to their private

[[Page 57019]]

patients (patients not covered by Medicare or Medicaid programs).

(G) ``VSP panel doctor'' means any optometrist or ophthalmologist

who has entered into, or who has applied to enter into, a VSP Panel

Doctor's Agreement.

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.

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;

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.

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

the doctor's usual and customary fee, for each applicable service,

provided by the doctor during a preceding period of up to 12 months

ending no later than 2 months before the information must be reported,

provided that such information is requested uniformly from all panel

doctors within a meaningful geographic area comprising zip codes;

(B) Defendant may calculate the fees that it pays to a VSP panel

doctor for services rendered to VSP patients based on the panel

doctor's usual and customary 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;

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 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;

(F) consistently with Sections IV (C) and (D), Defendant may impose

penalties on panel doctors who have misrepresented their usual and

customary fees; and

(G) when acting as an agent of the Medicare program or any state

Medicaid program, Defendant may administer the payment methodologies

employed by such programs, provided that any fee information, that VSP

is required to collect from its panel doctors in administering any such

payment methodology, is not considered by VSP in determining the fees

that it pays its panel doctors for services rendered to patients not

covered by these programs.

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

Compliance 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);

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 VII(C), the

certification has been obtained;

(E) The Defendant shall notify all former VSP panel doctors whom it

should reasonably know have resigned 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.

[[Page 57020]]

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.

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.

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.

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 not 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.

Dated: ______________

----------------------------------------------------------------------

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]

Revised Competitive Impact Statement

Background

Pursuant to Section 2(b) of the Antitrust Procedures and Penalties

Act, 15 U.S.C. 16(b)-(h), the United States submits this Revised

Competitive Impact Statement relating to the proposed Revised Final

Judgment submitted for entry in this civil antitrust proceeding. These

documents are styled as ``Revised'' because they reflect changes made

to a few of the provisions of the proposed Final Judgment, filed on

December 15, 1994, as the basis for settling this antitrust lawsuit,

and in related portions of the Competitive Impact Statement, filed on

January 13, 1995, and published at 60 Fed. Reg. 5110-17 (1995).

This civil antitrust action commenced on December 15, 1994, when

the United States filed a Compliant alleging that Vision Service Plan

(VSP), in all or parts of the 46 states and the District of Columbia in

which VSP operates vision care plans, 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.

The previously filed Competitive Impact Statement is incorporated

by reference herein, except as modified by this Revised Competitive

Impact Statement. The Government has agreed to the revisions of the

proposed Final Judgment that are contained in the proposed Revised

Final Judgment and outlined below to remedy certain problems VSP has

experienced while operating under the terms of the proposed Final

Judgment since it was filed, pursuant to a Stipulation with the

Government, pending the Court's approval of the Final Judgment.

Explanation of the Proposed Final Judgment

A. Definitions

A definition of ``VSP panel doctor'' has been added as Section

II(G) of the proposed Revised Final Judgment to clarify that to the

extent provisions of the Final Judgment prohibit VSP from taking, or

permit VSP to take, specified actions regarding the doctors on its

panel, those provisions apply in the same manner also to doctors who

have applied for panel membership. In addition, the definitions of

``modal fee'' and ``median fee,'' which had been Sections II (F) and

(G) of the original proposed Final Judgment, have been deleted because,

as explained below, VSP will no longer collect or use information

concerning the modal or median fees of its panel doctors in calculating

payments to be made to them. A definition of ``usual and customary

fees'' has been added as a new Section II(F) because, as explained

below, VSP will be permitted to collect and use information concerning

the usual and customary fees that its panel doctors charge in

calculating VSP's payments to them.

B. Permitted Activities and Obligations

The proposed Revised Final Judgment modifies Section V of the

original proposed Final Judgment. Generally, Section V permits VSP to

undertake prescribed activities in determining payments to its panel

doctors that could otherwise violate applicable injunctive provisions

of Section IV. The proposed

[[Page 57021]]

Revised Final Judgment adds a new Section V(G) and revises Sections V

(A), (B), (C), and (F).

The addition of Section V(G) is the primary basis for submitting

the Revised Final Judgment. Section V(G) permits VSP to implement the

reimbursement methodologies of any Medicare program or any state

Medicaid program that it may administer. VSP acts as the agent for

those programs in several states, but, in negotiating the proposed

Final Judgment, VSP simply overlooked the Final Judgment's possible

restriction upon its ability to carry out its obligations to those

governmental programs. Section V(G) of the proposed Revised Final

Judgment, therefore, makes clear that nothing in the Judgment should be

construed to prevent VSP from gathering fee information required by

Medicare or Medicaid, while precluding VSP from using that fee

information in setting the fees that VSP pays its panel doctors for

providing services to VSP patients not covered by Medicare or Medicaid

programs.

Sections V (A), (B), (C), and (F) of the proposed Revised Final

Judgment have been changed to reflect that VSP will no longer maintain

the option, contained in the original proposed Final Judgment, to

calculate the payments made to its panel doctors based on a doctor's

modal or median fee and to collect and, if warranted, verify the

accuracy of, the fee data from its panel doctors needed to make such

calculations. Pursuant to revised Sections V (A), (B), (C) and (F), VSP

will now merely retain the option of calculating the fees that it pays

panel doctors based on their usual and customary fees, and it will no

longer be permitted to request panel doctors annually to report

``sufficient information'' or, if warranted, verify the accuracy of the

reported information, to enable VSP ``to calculate'' a doctor's modal

or median fee. Rather, VSP will simply be permitted to ask each panel

doctor to report annually only the doctor's usual and customary fees

before any discounts are applied, and it will be allowed, if warranted,

to verify only that fee information. These changes will substantially

reduce both the level of detail of fee information that VSP will be

permitted to obtain routinely from its panel doctors and the resultant

reporting requirements it may impose on VSP panel doctors.

VSP requested these changes because of difficulties encountered

during the past several months in trying to calculate the modal and

median fees of its panel doctors pursuant to the terms of the original

proposed Final Judgment. Based on that experience, VSP has concluded

that it does not routinely need to obtain more detailed fee information

from its panel doctors than an annual report of each doctor's usual and

customary fees, as now provided by Sections V (A) and (B) of the

proposed Revised Final Judgment. The Government is amendable to making

these requested changes because they narrow the scope of activities

permitted by VSP under the Final Judgment and raise no competitive

concerns.

III

Procedures Available for Modification of the Proposed Revised Final

Judgment

As provided by the Antitrust Procedures and Penalties Act, any

person believing that the proposed Revised Final Judgment should be

modified may submit written comments to Gail Kursh, Chief; Professions

& Intellectual Property Section/Health Care Task Force; Department of

Justice; Antitrust Division; 600 E Street, N.W.; Room 9300; Washington,

D.C. 20530, within the 60-day period provided by the Act. Comments

received, along with comments already received on the previously

published Competitive Impact Statement, and the Government's responses

to them, will be filed with the Court and published in the Federal

Department of Justice, which remains free, pursuant to Paragraph 2 of

the Stipulation, to withdraw its consent to the proposed Revised 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 Revised Final 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.

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 Revised Final Judgment.

Consequently, none are filed herewith.

Dated: ______________

Respectfully submitted,

----------------------------------------------------------------------

Steven Kramer

----------------------------------------------------------------------

Richard S. Martin,

Attorneys, Antitrust Division, U.S. Dept. of Justice, 600 E Street,

N.W., Room 9420, Washington, D.C. 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.

[Case No. 1:94CV02693 TPJ]

Certificate of Service

I certify that I caused copies of the Revised Final Judgment,

Revised Competitive Impact Statement and Superseding Stipulation to be

served on October ____, 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: ______________.

----------------------------------------------------------------------

Steven Kramer,

Attorney, Antitrust Division, Department of Justice, 600 E Street, NW.,

Room 9420, Washington, DC 20530, (202) 307-1029.

[FR Doc. 95-27939 Filed 11-9-95; 8:45 am]

BILLING CODE 4410-01-M

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