American Academy of Orthopaedic Surgeons

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In THe MATTER OF THE AMERICAN ACADEMY OF ORTHOPAEDIC SURGEONS CONSENT ORDER, ETC., IN REGARD TO ALLEGED VIOLATION OF THE FEDERAL TRADE COMMISSION ACT Docket C-2856. Complaint, Dec. 14, 1976 — Decision, Dec. 14, 1976 Consent order requiring a Chicago, IIl., professional association, among other things, to cease publishing, promulgating and participating in the development of relative value scales which have the effect of establishing prices for medical and surgical services. Respondent is required to permanently cancel, repeal, abrogate and withdraw any and all relative value scales heretofore developed or disseminated and send copies of this order to association members and certain third-party payers together with a request for the return of all copies of relative value scales in their possession.

Appearances For the Commission: Lawrence E. Gray and Edward W. Abramowitz. For the respondent: Hinshaw, Culbertson, Moelmann, Hoban & Fuller, Chicago, Ilinois.

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 American Academy of Orthopaedic Surgeons has violated the provisions of Section 5 of said Act, andit appearing to the Commission that a proceeding by it in respect thereof would be in the public interest, hereby issues its complaint stating its charges as follows: Paragraph 1. Respondent, The American Academy of Orthopaedic Surgeons (“AAOS”), is a corporation organized, existing and doing business under and by virtue of the laws of the State of Illinois, with its principal office and place of business located at 480 North Michigan Ave., Chicago, Ilinois.

Par. 2. Membership in AAOS is composed of approximately 6,200 Fellows who are certified by the American Board of Orthopaedic Surgery and have been engaged in the exclusive practice of orthopaedic surgery for a minimum period of three years subsequent to completion of their period of training. The Fellows elect the Officers and the Board of Directors which manage the affairs of AAOS. Par. 8. Orthopaedic surgeons are licensed physicians who specialize in the investigation, preservation, restoration and development of the THE AMERICAN ACADEMY OF ORTHOPAEDIC SURGEONS 969 968 Decision and Order form and function of the extremities, spine and associated structures by medical, surgical and physical methods. They are generally engaged in the private practice of medicine and surgery and derive substantial portions of their professional income from fees for medical and surgical treatment charged directly to patients or to insurers. Par. 4. The acts and practices of respondent AAOS are in or affect commerce as “commerce” is defined in the Federal Trade Commission Act.

Par. 5. AAOS prepared, published, and circulated to its members and others in 1962 a booklet entitled “Relative Value Systems for Orthopaedic Procedures,” and in 1972 a booklet entitled “Relative Values of Orthopaedic Services,” both of which set forth comparative numerical values for surgical and medical procedures and other services performed by orthopaedic surgeons. These values are stated in nonmonetary units; each value is convertible into a monetary fee by the application of a dollar conversion factor to the basic unit. Par. 6. The preparation, publication, and circulation by AAOS of relative values have the effect of establishing, maintaining, or otherwise influencing fees which orthopaedic surgeons charge for their professional services, and are in violation of Section 5 of the Federal Trade Commission Act, as amended.

DECISION AND ORDER The Federal Trade Commission having initiated an investigation of certain acts and practices of the respondent named in the caption hereof, and respondent having been furnished thereafter with a copy of a draft of complaint which the Bureau of Competition proposed to present to the Commission for its consideration and which, if issued by the Commission, would charge respondent with violation of Section 5 of the Federal Trade Commission Act; and The respondent and counsel for the Commission having thereafter executed an agreement containing a consent order, an admission by respondent of all the jurisdictional facts set forth in the aforesaid draft of complaint, a statement that the signing of said agreement is for settlement purposes only and does not constitute an admission by respondent of the charges in Paragraph Six of the complaint or that the law has been violated, and waivers and other provisions as required by the Commission’s Rules; and The Commission having considered the agreement and having provisionally accepted same and placed it on the public record for a period of sixty (60) days, and having duly considered the comments filed thereafter by interested persons pursuant to Section 2.34 of the Commission’s. Rules, now in further conformity with the procedure 223-239 O - 77 - 62 Decision and Order 88 F.T.C.

provided by Section 2.34 of its Rules hereby issues its decision in disposition of the proceeding against the above-named respondent, makes the following jurisdictional findings, and enters the following findings and order:

1. Respondent, The American Academy of Orthopaedic Surgeons (“AAOS”), is a corporation organized, existing and doing business under and by virtue of the laws of the State of Illinois, with its principal office and place of business located at 480 North Michigan Ave., Chicago, Illinois.

2. The Federal Trade Commission has jurisdiction over the subject matter of this proceeding and over the respondent, and the proceeding is in the public interest.

ORDER I A. The term “relative value scale” means any list or compilation of surgical and/or medical procedures and/or services which sets forth comparative numerical values for such procedures and/or services, without regard to whether those values are expressed in monetary or non-monetary terms.

B. The term “AAOS” means the American Academy of Orthopaedic Surgeons.

C. The term “effective date of this order” means the date of service of this order.

I It 1s ordered, That AAOS, its successors, or assigns, and its officers, agents, representatives and employees, directly or through any corporation, subsidiary, division, or other device, shall: A. Cease and desist from directly or indirectly initiating, originating, developing, publishing, or circulating the whole or any part of any proposed or existing relative value scale(s); B. Cease and desist from directly or indirectly advising in favor of or against the use of, or contributing to the whole or any part of any proposed or existing relative value scale(s); provided, however, that nothing contained herein shall prohibit AAOS from furnishing testimony to any government body, committee, or instrumentality, or from furnishing to any third party or government body, committee, or instrumentality such information as may be requested; to the extent, however, that such information or testimony may bear directly or indirectly on compensation levels for orthopaedic services or proce- THE AMERICAN ACADEMY OF ORTHOPAEDIC SURGEONS 971 968 Decision and Order dures, it shall be limited to historical data, free of editing or interpretation, and shall be completely described as to methodology. C. Permanently cancel, repeal, abrogate, and withdraw any and all relative value scales which it has heretofore developed, published, circulated, or disseminated;

D. Within thirty (80) days after the effective date of this order, distribute by first class mail a copy of the Commission’s complaint and order in this matter, as well as a letter, in the form shown in Appendix “A” to this order, to each of its Fellows and to each of the third-party payers and others listed in Appendix “B” to this order, instructing such third-party payers and others to return to AAOS all copies of AAOS relative value scales in their possession. Ill It is further ordered, That AAOS shall notify the Commission at least thirty (30) days prior to any proposed change in its organization which might affect compliance obligations under this order, such as, but not limited to, dissolution, the emergence of a successor corporation, and the creation and/or dissolution of subsidiaries. IV It is further ordered, That AAOS shall, within sixty (60) days after the effective date of this order, file with the Commission a written report showing in detail the manner and form of its compliance with each of the provisions of the order.

Vv Nothing in this order shall be construed to exempt The American Academy of Orthopaedic Surgeons from complying with the antitrust laws or the Federal Trade Commission Act. The fact that any activity is not prohibited by this order shall not bar a challenge to it under such laws.

APPENDIX A (AAOS LETTERHEAD) DATE To: Fellows of the American Academy of Orthopaedic Surgeons and other Recipients of AAOS Relative Value Scales. As you may be aware, the Federal Trade Commission has been conducting inquiries into various components of health care, including Decision and Order 88 F.T.C.

the relative value scale activities of the Academy. The Board of Directors of the Academy no longer desires to continue such activities and has discontinued them. Your Board of Directors has concluded that it is more desirable to utilize Academy funds for its intended educational and research activities rather than continue involvement in this inquiry. Hence, it has entered into an agreement with the FTC to formalize the discontinuance of its relative value scales. This agreement resulted in the issuance by the Federal Trade Commission on [date], of a Complaint and the entry of a Consent Order which requires, in essence, that the Academy: (a) stop publishing and participating in the development of relative value scales;

(b) withdraw the relative value scales it has already published; (c) distribute a copy of the complaint and order to every AAOS relative value scale recipient; and (d) instruct all recipients of AAOS value scales to return them. The Federal Trade Commission’s complaint alleges basically that the Academy’s relative value scales have the effect of influencing fees charged by orthopaedic surgeons. The Consent Agreement with the FTC states that it is for settlement purposes only and does not constitute an admission by the Academy of the charges in the complaint or that the law has been violated.

In accordance with the provisions of the FTC’s Order, you are instructed to cease using and to promptly return all copies of any Academy relative value scale in your possession. The proper mailing address is:

American Academy of Orthopaedic Surgeons 4380 North Michigan Avenue Chicago, Illinois 60611 Copies of the FTC’s complaint and order are enclosed. Sincerely, President APPENDIX B Commissioner Deputy Assistant Secretary for Medical Services Administration Health Resources and Programs Social and Rehabilitation Service Department of Defense Department of Health, Education, and Washington, DC 20301 Welfare 3380 C Street, 5.W.

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