A group representing all optometrists in Puerto Rico, along with two of its leaders, has agreed to settle Federal Trade Commission charges that they violated the FTC Act by orchestrating and carrying out agreements among the group’s members to refuse, and threaten to refuse, to deal with payors, unless the payors raised the fees paid to the optometrists.
The complaint and consent order announced today settle the FTC’s charges against the following respondents: Colegio de Optometras de Puerto Rico (the Colegio), Edgar Dávila Garcia, O.D. (Dr. Dávila), and Carlos Rivera Alonso, O.D. (Dr. Rivera). The consent order settling the Commission’s charges bars the group and two of its leaders from engaging in such conduct, while allowing them to participate in legal joint arrangements.
The Colegio and its Optometrists
The Colegio is a not-for-profit association of professional optometrists practicing in Puerto Rico. Headquartered in San Juan, the association is incorporated in Puerto Rico and has approximately 500 member optometrists, constituting all of the optometrists licensed to practice in Puerto Rico. When not acting jointly in the manner alleged in the FTC’s complaint, Colegio members compete with each other to provide optometry services on the island.
Dr. Dávila is a licensed optometrist who provides vision-care services to patients. He was the treasurer of the Colegio from 2002-04 and also served as the president of the Colegio’s Health Plans Commission from 2001-04. Dr. Rivera also is a licensed optometrist who provides vision-care services to patients. He served as president-elect of the Colegio in 2004, and then as president from October 2004 to September 2006.
The Commission’s Complaint
According to the Commission’s complaint, the Colegio and Drs. Dávila and Rivera violated the FTC Act by facilitating, negotiating, entering into, and implementing express or implied agreements among the Colegio’s members to refuse, or threaten to refuse, to accept vision and health care contracts except on collectively agreed-upon terms.
Specifically, the FTC alleges the respondents’ conduct targeted Ivision International Inc. (Ivision), which has offered vision-care services and products in Puerto Rico since 1997. Ivision contracts with Puerto Rico health plans to administer vision plans and provide vision-care products and services to covered patients. The health plans pay Ivision per individual member. Ivision then contracts with the island’s optometrists to provide these services. By August 2004, Ivision had almost 130 optometrists – located all over Puerto Rico – in its network, making it very attractive to health plans and to patients covered by those plans.
In June and July 2004, Ivision sent announcements to optometrists about its contracts with several new health plans (many of which previously had contracted only directly with optometrists). Under these new contracts, Ivision offered to pay optometrists the same fees as in its contracts with other health plans. As a result of these new contracts, the optometrists would lose much or all of their lucrative direct business with these plans. Many optometrists, all of whom were member of the Colegio, called Ivision to complain about the new reimbursement structure, threatening that if Ivision did not pay more, they would stop treating patients covered by Ivision. As part of a collective effort to get Ivision to raise its rates, Colegio representatives contacted other optometrists and urged them to stop participating in Ivision’s network.
Later that summer, Ivision met with its providers. During that meeting, the optometrists – led by Dr. Rivera – indicated that if Ivision did not raise its reimbursement rates, the Colegio would ensure that all of its optometrists left Ivision and that Ivision would have no providers left in Puerto Rico. The day after the meeting, Dr. Dávila circulated a letter on Colegio letterhead to the group’s members concerning Ivision’s new health plan contracts, urging the members not to participate in Ivision’s network and informing them that the Colegio was going to develop a strategy to battle Ivision.
The respondents’ efforts on behalf of the Colegio’s members eventually succeeded. By mid-October 2004, almost 40 Colegio members had left the Ivision network and refused to provide their services to patients. In November 2004, in an effort to retain the remaining optometrists, Ivision significantly increased its reimbursement rates.
Drs. Dávila and Rivera also orchestrated collective negotiations with other plans, according to the FTC, and on several occasions, Colegio officers approached other health plans to negotiate higher reimbursement levels for Colegio members. These, as well as the activities related to Ivision, harmed competition in violation of the FTC Act. Additional details of the conduct that led to the Commission’s complaint can be found in the analysis to aid public comment for this matter.
The Consent Order
The Commission’s consent order is designed to end the illegal conduct alleged in the complaint. It prohibits the Colegio and Drs. Dávila and Rivera from entering into or facilitating agreements for the provision of optometry services: 1) on behalf of any optometrist with any payor; 2) refusing to deal or threatening to refuse to deal with any payor; 3) designating the terms upon which any optometrist deals, or is willing to deal, with any payor, including price terms; 4) refusing to deal individually with any payor, or refusing to deal with any payor through any arrangement other than one involving the Colegio.
The consent order permits the Colegio to undertake certain kinds of joint contracting arrangements – “qualified risk-sharing joint arrangements” and “qualified clinically integrated joint arrangements” – terms that are defined in the order. These are arrangements in which physician participants engage in joint activities to control costs and improve quality by managing the provision of services. Any agreement concerning reimbursement or other terms must be reasonably necessary to obtain significant efficiencies through the joint arrangement.
Other provisions of the order reinforce these general provisions by prohibiting the respondents from exchanging information among optometrists concerning their willingness to deal with a payor, or the terms – including price terms – on which they are willing to deal. In addition, the order bars the respondents from encouraging anyone into engaging in any action that it prohibits. It also requires the respondents – for three years from the date the order becomes final – to notify the FTC in writing before conducting any joint negotiating activities that could be considered anticompetitive under its terms. The order must be translated into Spanish and distributed to all Colegio members, as well as payors. It will expire in 20 years.
The Commission vote to place the consent order on the public record for comment and publish a copy in the Federal Register was 5-0. The Commission is accepting comments on the order for 30 days, until August 28, 2007, after which it will decide whether to make it final. Comments should be sent to: FTC Office of the Secretary, 600 Pennsylvania Ave., N.W., Washington, DC 20580. The FTC was joined in its investigation by the Office of Monopolistic Affairs of the Commonwealth of Puerto Rico’s Department of Justice.
NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000.
The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to [email protected], or write to the Office ofPolicy and Coordination, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, DC 20580. To learn more about the Bureau of Competition, read “Competition Counts” at http://www.ftc.gov/competitioncounts.