9810154
B251556

UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION

In the Matter of

Ernesto L. Ramirez Torres, D.M.D., Eric D. Frontera Roura, D.M.D., Ernesto L. Ramirez L.V., D.M.D., Jaime R. Gierbolini Borelli, D.M.D., Adolfo L. Gierbolini Borelli, D.M.D., Roberto L. Mateo Nieves, D.M.D., Miguel E. Rivera Mateo, D.M.D., Hector Renta Melendez, D.M.D., Migdalia E. Alvarado Burgos, D.M.D., Juan R. Rosario Ramos, D.M.D., Jorge L. Rivera Rosario, D.M.D., Jorge C. Munoz Mattei, D.M.D., and Raul D. Ortiz Escalara, D.D.S.

DOCKET NO. C-3851

COMPLAINT

Pursuant to the provisions of the Federal Trade Commission Act, as amended, and by virtue of the authority vested in it by said Act, the Federal Trade Commission ("Commission"), having reason to believe that the individuals named above, hereinafter respondents, violated the provisions of said Act, and it 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 ONE: Respondents are dentists licensed and doing business under and by virtue of the laws of the Commonwealth of Puerto Rico. These dentists constitute a majority of the dentists in the contiguous municipalities of Juana Diaz, Coamo, and Santa Isabel, Puerto Rico. The respondents are:

(a) Ernesto L. Ramirez Torres, D.M.D., Calle Comercio #105, Juana Diaz, Puerto Rico 00795;

(b) Eric D. Frontera Roura, D.M.D., Calle Mario Braschi #7, Coamo, Puerto Rico 00769;

(c) Ernesto L. Ramirez L.V., D.M.D., Comercio #105, Juana Diaz, Puerto Rico 00795;

(d) Jaime R. Gierbolini Borelli, D.M.D., Jose I. Quinton #49, Coamo, Puerto Rico 00769;

(e) Adolfo L. Gierbolini Borelli, D.M.D., P.O.Box 261, Coamo, Puerto Rico 00769;

(f) Roberto L. Mateo Nieves, D.M.D., Calle Betances #12, Santa Isabel, Puerto Rico 00757;

(g) Miguel E. Rivera Mateo, D.M.D., Haciendas del Monte, Calle 6 G-2, Santa Isabel, Puerto Rico 00757;

(h) Hector Renta Melendez, D.M.D., Calle Florencio Santiago #41, Coamo, Puerto Rico 00769;

(i) Migdalia E. Alvarado Burgos, D.M.D., Calle Santiago Iglesias #66, Coamo, Puerto Rico 00769;

(j) Juan R. Rosario Ramos, D.M.D., Calle Comercio, Esq. Hostos #116-C, Juana Diaz, Puerto Rico 00795;

(k) Jorge L. Rivera Rosario, D.M.D., Calle Munoz Rivera #47, Juana Diaz, Puerto Rico 00795;

(l) Jorge C. Munoz Mattei, D.M.D., Munoz Rivera #54-C, Juana Diaz, Puerto Rico 00795; and

(m) Raul D. Ortiz Escalera, D.D.S., Calle Baldoriaty #42, Coamo, Puerto Rico 00769.

PARAGRAPH TWO: The acts and practices of respondents, including those herein alleged, are in or affect commerce within the meaning of Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. § 45.

PARAGRAPH THREE: The acts and practices of respondents herein alleged concern their agreements, combinations, and conspiracies to set the prices and other terms and conditions under which they would participate in Puerto Rico's program to provide medical, pharmaceutical, and dental services to the indigent (the "Reform"), established pursuant to the Puerto Rico Health Insurance Administration Act of 1993, Act No. 72, Article II. The Reform was intended to create a health insurance system to give high quality health care, including dental services, to indigent residents of Puerto Rico. The Reform is financed by the Commonwealth, Federal Medicaid, other applicable Federal funds, contributions by employers and individual employees, and income from privatization funds (such as leases and sales of government-owned health care facilities). To date, the Reform has been implemented throughout much of Puerto Rico, although it is not yet in place in San Juan and its environs, Ponce, or Mayaguez. The Reform currently covers 1.1 million individuals among the over 3.8 million residents of Puerto Rico.

PARAGRAPH FOUR: The Administración de Seguros de Salud ("ASES"), a public corporation, implements and administers the Reform. ASES has divided Puerto Rico into regions, soliciting for each region bids from payers to organize and provide services for beneficiaries. ASES currently selects one payer with which to contract per region. That payer then contracts with providers, including hospitals, physicians, pharmacies, and dentists.

PARAGRAPH FIVE: After reviewing bids from several payers, ASES selected La Cruz Azul to administer the Southeast Region of the Reform beginning October, 1994. Initially the municipalities of Juana Diaz, Coamo, and Santa Isabel were not included in the Reform, but ASES included them in the Southeast Region on December 20, 1995. The combined population of Juana Diaz, Coamo, and Santa Isabel is approximately 106,000 residents.

PARAGRAPH SIX: Absent agreements among competing dentists on the price and other terms upon which they will provide services to third-party payers, competing dentists decide individually whether to enter into contracts with third-party payers, and on the terms and conditions under which they are willing to enter into such contracts.

PARAGRAPH SEVEN: Beginning in September of 1995, many of the respondents, in various combinations, sometimes including other dentists, met and discussed the impending expansion of the Southeast Region to Juana Diaz, Coamo, and Santa Isabel, and the terms and conditions under which they would agree to participate in the Reform. During these meetings, respondents agreed to the price terms that would cause them to participate in the Reform, and respondents agreed that they would convey their joint response to La Cruz Azul's request to each of them to participate in the Reform. Thereafter, a letter was prepared to present to La Cruz Azul, stating respondents' opposition to certain terms and conditions, including the amount of payment, which they wanted increased. The respondents threatened a boycott of the Reform program if La Cruz Azul did not address their demands. During this period of time, the respondents constituted a majority of dentists engaged in the practice of dentistry in the municipalities of Juana Diaz, Coamo, and Santa Isabel.

PARAGRAPH EIGHT: On December 14, 1995, the respondents met with representatives of La Cruz Azul, and presented their letter with the terms and conditions under which they would participate in the Reform, including price terms, for which they sought higher reimbursement. During the meeting with La Cruz Azul, and while a representative of La Cruz Azul was not present, the respondents discussed among themselves their response to the terms and conditions for participation in the Reform, and agreed to nearly identical responses. Each respondent provided La Cruz Azul written notice that the dentist would not participate in the Reform under the terms offered by La Cruz Azul.

PARAGRAPH NINE: The respondents refused to participate in the Reform upon its expansion to the areas of their practices on December 20, 1995, and communicated with the public that they would not accept its terms and conditions. Respondents in Juana Diaz placed an advertisement in a newspaper notifying the public that they would not participate, and some respondents conveyed their refusal to deal with the Reform in a radio interview. Because of this concerted refusal to deal, residents of Juana Diaz, Coamo, and Santa Isabel who were eligible under the Reform were not able to receive dental services from local providers.

PARAGRAPH TEN: Dentists from Ponce advertised their willingness to accept Reform patients from Juana Diaz, Coamo, and Santa Isabel. In response, respondents sought to have the Colegio de Cirujanos Dentistas de Puerto Rico (the "Colegio") prohibit this advertising. The Colegio eventually found advertisements by one of the dentists from Ponce to be in violation of the Colegio's rules, and notified the dentist, who then stopped advertising that was targeted to residents of Juana Diaz, Coamo, and Santa Isabel.

PARAGRAPH ELEVEN: La Cruz Azul acceded to Respondents' demand to raise the level of reimbursement of dental fees under the Reform. The respondents then agreed to participate in the Reform, effective February 1, 1996.

PARAGRAPH TWELVE: The respondents have not integrated their businesses in any economically significant way, nor have they created any efficiencies that might justify the acts and practices described in Paragraphs Seven through Eleven.

PARAGRAPH THIRTEEN: The acts and 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 dental goods and services in Southeast Puerto Rico, in the following ways, among others:

A. to restrain competition among dentists;

B. to fix the compensation and other terms and conditions upon which dentists would deal with payers and participate in the Reform, thereby raising the cost of and limiting access to dental services to be funded by the Reform; and

C. to deprive the Commonwealth of Puerto Rico, payers, and consumers of the benefits of competition among dentists.

PARAGRAPH FOURTEEN: The combination or conspiracy and the acts and practices of respondents, as herein alleged, constitute unfair methods of competition in violation of Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. § 45. The acts, practices, and violations, or the effects thereof, as herein alleged, will continue or recur in the absence of the relief herein requested.

WHEREFORE, THE PREMISES CONSIDERED, the Federal Trade Commission on this fifth day of February, 1999, issues its complaint against said respondents.

By the Commission.

Donald S. Clark
Secretary

SEAL