Wisconsin Chiropractic Association ("WCA")

9710117

UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION

In the Matter of

THE WISCONSIN CHIROPRACTIC ASSOCIATION, a corporation, and RUSSELL A. LEONARD.

Docket No. C-3943

COMPLAINT

Pursuant to the provisions of the Federal Trade Commission Act, as amended, 15 U.S.C. § 41 et seq., and by virtue of the authority vested in it by said Act, the Federal Trade Commission, having reason to believe that the Wisconsin Chiropractic Association ("WCA") and Russell A. Leonard ("Leonard") have violated Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45, and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest, hereby issues this complaint, stating its charges as follows:

RESPONDENTS

PARAGRAPH ONE: Respondent WCA is a nonprofit corporation organized, existing, and doing business under and by virtue of the laws of the State of Wisconsin, with its principal office and place of business located at 521 E. Washington Avenue, Madison, Wisconsin 53703.

PARAGRAPH TWO: Respondent Leonard is, and at all times relevant to this complaint was, the executive director of respondent WCA. His principal office or place of business is the same as that of respondent WCA.

JURISDICTION

PARAGRAPH THREE: Respondent WCA exists and operates, and at all times relevant to this complaint existed and operated, in substantial part for the pecuniary benefit of its members. By virtue of its purposes and activities, respondent WCA is a "corporation" within the meaning of Section 4 of the Federal Trade Commission Act, as amended, 15 U.S.C. § 44.

PARAGRAPH FOUR: The acts or practices of respondents WCA and Leonard, and WCA's members, including those herein alleged, are in or affecting commerce within the meaning of Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. § 45.

WCA'S MEMBERSHIP

PARAGRAPH FIVE: Approximately 900 chiropractors are members of respondent WCA, constituting a substantial majority of the chiropractors licensed to practice in Wisconsin. Its members are generally engaged in the business of providing chiropractic services to patients for a fee.

PARAGRAPH SIX: Except to the extent that competition has been restrained as herein alleged, some or all of the members of respondent WCA have been, and are now, in competition among themselves and with other chiropractors in Wisconsin.

CHIROPRACTIC MANIPULATION SERVICES

PARAGRAPH SEVEN: Professional services performed by chiropractors include, among other things, spinal and extra spinal manipulations. Prior to January 1, 1997, chiropractors generally billed for these services using a single billing code (A2000 for Medicare and 97260 for most private insurance) regardless of the number of spinal or extra spinal regions adjusted. Beginning on January 1, 1997, the Health Care Financing Administration and many private insurance companies began accepting four new chiropractic manipulative treatment ("CMT") codes (98940, 98941, 98942, and 98943) in place of the old single billing code. The new CMT codes reflected more detailed or precise descriptions of the manipulation services: 98940 (adjustment of 1-2 regions); 98941 (adjustment of 3-4 regions); 98942 (adjustment of 5 regions); and 98943 (adjustment of at least one extra spinal region).

PARAGRAPH EIGHT: Wisconsin law provides that a health care insurer (other than a health maintenance organization) must provide a specific methodology, including but not limited to the usual, customary, and reasonable ("UCR") charges by which it will determine the eligible amount of a provider's charge. The methodology must be predicated on a database that, among other things, accurately reflects the amounts charged by providers for the procedure, is updated at least every six months, and contains no data that is more than 18 months old at the time of an update. Each health care insurer selects a certain percentile (e.g., 80%) of the charges in the database as its UCR amount. In many instances, health care insurers will provide their insured members an explanation of benefits form notifying the insured members if their health care provider has charged more than the UCR amount for services.

ANTICOMPETITIVE CONDUCT

PARAGRAPH NINE: Respondent Leonard, acting in his capacity as executive director of respondent WCA, and respondent WCA, acting as a combination of its members, and in conspiracy with at least some of its members, and others, have acted to restrain competition by, among other things, encouraging, facilitating, entering into, and implementing agreements, express or implied, among WCA's members to fix and/or increase the prices paid for chiropractic services and to boycott third-party payers to obtain higher reimbursement for chiropractic services.

PARAGRAPH TEN: Respondents WCA and Leonard have engaged in acts and practices in furtherance of the combination and conspiracy, including, among other things:

Training Seminars

A. Respondents WCA and Leonard have organized and conducted seminars at eight different locations throughout the State of Wisconsin to train chiropractors and their staffs on the new CMT codes (the "CMT Seminars "), including how to price the codes, and have urged chiropractors to make no decisions on their fees for the new CMT codes before attending one of the training seminars.

B. During the CMT Seminars respondent Leonard, the principal or sole speaker at the seminars:

1. told the approximately 1300 attendees that the new CMT codes had the same values as osteopathic manipulative treatment ("OMT ") codes;

2. represented that the marketplace expected the average prices for the new CMT codes to be about the same as the average prices for the OMT codes, which were significantly higher than the average prices then charged by chiropractors for manipulation services;

3. provided data which showed the average charges for the current chiropractic code (97260) were: $30.28 (Northeast District); $28.23 (Northcentral District); $27.58 (Northwest District); $31.03 (Southeast District); $32.20 (Southcentral District); and $28.96 (Southwest District);

4. provided data which showed that the current average statewide charges for osteopathic manipulations were: $40.30 (manipulation of 1-2 regions); $57.40 (manipulation of 3-4 regions); and $91.68 (manipulation of 5 or more regions);

5. suggested that the chiropractors call osteopaths in their own areas to determine their local charges;

6. urged chiropractors to question any third-party payer that reimbursed a lesser amount for the CMT codes than for the OMT codes;

7. during at least some of the seminars, represented that the WCA had surveyed numerous chiropractors and determined that private insurance companies were paying CMT code claims at the prices the chiropractors chose to charge;

8. told chiropractors that with the introduction of the new CMT codes, chiropractors could increase their fees without any risk that third-party payers would refuse to pay their new fees, because there was no current database from which to calculate UCR fees; and

9. told chiropractors to increase their fees because their new fees would determine the new UCRs.

Negotiations with Third-Party Payers

C. Respondent Leonard told third-party payers that as a result of the new CMT codes, chiropractors should be paid the same amount that osteopaths are paid by third-party payers for manipulation services; encouraged third-party payers to agree to pay specific sums certain and/or to calculate UCRs in a manner or using a methodology proposed by respondent WCA; and threatened to take legal action against third-party payers in the absence of such agreements.

Fee Surveys

D. Respondents WCA and Leonard have frequently collected, analyzed, and provided to respondent WCA's members and others current charge data for the new CMT codes, including, but not limited to, the following:

1. Respondent Leonard, during a meeting of respondent WCA's board of directors in late March 1997, and during a series of WCA-sponsored seminars entitled, "Getting Paid For Your CMT Codes," held throughout the State of Wisconsin in early April 1997, provided data which showed current average charges for each of the new CMT codes within each of respondent WCA's six districts as follows:

District

Northeast

Northcentral

Northwest

Southeast

Southcentral

Southwest
98940
(1-2 Regions)

$38.45

$32.72

$33.63

$38.34

$37.46

$37.25
98941
(3-4 Regions)

$54.51

$42.87

$46.55

$53.56

$50.57

$50.77
98942
(5 Regions)

$74.46

$54.51

$62.17

$70.54

$64.74

$65.56

The data was obtained from a statewide fee survey conducted by respondent WCA during the last week of February 1997.

2. In June 1997, respondent Leonard furnished to a board member of respondent WCA, and other members of respondent WCA's Southwest District, data from a survey which was conducted by respondent WCA less than one month earlier and listed actual current charges in nine digit zip code order for the entire Southwest District.

Review of Managed Care Contracts

E. Respondent Leonard reviewed individual contract offers to WCA's members by third-party payers and circulated to respondent WCA's membership memoranda containing adverse comments about the payers' proposed fee schedules for the new CMT codes, encouraged chiropractors to negotiate higher fees, and advised them to exchange and discuss all information they receive with other chiropractors in their area to improve their bargaining position with the third-party payers.

Boycott of Managed Care Plans

F. Respondents WCA and Leonard encouraged, recommended and assisted in the boycott of managed care plans by respondent WCA's members and others, including, but not necessarily limited to, MultiPlan and Gundersen Lutheran Health Plan, to obtain higher reimbursement for chiropractic services.

G. Respondent Leonard, during a meeting of respondent WCA's board of directors in late March 1997: (1) discussed MultiPlan's proposed contract terms, including the fee schedule and a provision that network chiropractors treat worker compensation and auto insurance patients on the same terms as they treat other patients covered by the network arrangement; (2) recommended that chiropractors reject the entire contract and disrupt the MultiPlan network; (3) recommended that chiropractors hold out for a fee schedule based on 85% of the market price; (4) provided data which showed current average charges for the new CMT codes; and (5) encouraged chiropractors to communicate this information to all the other chiropractors.

H. Respondent Leonard, during at least some of the WCA-sponsored seminars entitled, "Getting Paid For Your CMT Codes," held throughout the State of Wisconsin in April 1997: (1) discussed MultiPlan's proposed contract terms, including the fee schedule and a provision that network chiropractors treat worker compensation and auto insurance patients on the same terms as they treat other patients covered by the network arrangement; (2) recommended that chiropractors reject the workers compensation and personal injury provisions of the contract; (3) suggested that if enough chiropractors rejected the contract, MultiPlan would be forced to renegotiate the terms; and (4) encouraged chiropractors to discuss the MultiPlan contract with other chiropractors in their area.

I. In April 1997, after MultiPlan revised its fee schedule, respondent Leonard communicated to the chiropractors that the revised fee schedule reflected fair market prices for chiropractic services.

J. In June 1997, respondent Leonard furnished to a board member of respondent WCA, and other members of respondent WCA's Southwest District who were actively engaged in a collective effort to induce Gundersen Lutheran Health Plan to increase its reimbursement rates, a copy of respondent WCA's most current fee survey which was concluded on May 31, 1997, and listed actual current charges in nine digit zip code order for the entire Southwest District.

PARAGRAPH ELEVEN: The members of respondent WCA have not integrated their practices in any economically significant way, nor have they created any efficiencies that might justify the acts or practices described in Paragraphs Nine and Ten.

ANTICOMPETITIVE EFFECTS

PARAGRAPH TWELVE: The acts or practices of the respondents as described in this complaint have had the purpose, tendency, effects, and capacity to restrain trade unreasonably and hinder competition in the provision of chiropractic goods and services in Wisconsin in the following ways, among others:

A. to restrain competition among chiropractors;

B. to deprive consumers of the benefits of competition among chiropractors;

C. to fix or increase the prices that consumers pay for chiropractic services;

D. to fix the terms and conditions upon which chiropractors would deal with third- party payers, including terms of chiropractic compensation, thereby raising the price to consumers of medical insurance coverage issued by third-party payers; and

E. to deprive consumers of the benefits of managed care.

PARAGRAPH THIRTEEN: The aforesaid acts and practices of the respondents are to the prejudice and injury of the public and constitute unfair methods of competition in or affecting commerce in violation of Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. § 45. The acts or practices of the respondents, as herein alleged, are continuing and will continue or recur in the absence of the relief requested.

WHEREFORE, THE PREMISES CONSIDERED, the Federal Trade Commission on this eighteenth day of May, 2000, issues its complaint against said respondents.

By the Commission.

Donald S. Clark
Secretary

SEAL