Two Pennsylvania Orthopedic Practices Settle FTC Charges That Merger Harmed Competition and Inflated Prices

FTC Alleges Merger Combined 76 Percent of Orthopedists in Berks County into One Practice

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An orthopedic practice in Berks County, Pennsylvania, created through a combination of six independent orthopedic practices in 2011, has agreed to settle FTC charges that the merger was anticompetitive and violated U.S. antitrust law.

In its complaint against Keystone Orthopaedic Specialists, LLC, the FTC alleged that the merger combined 19 of the 25 orthopedists in Berks County into a single practice, giving Keystone a 76 percent share of the market for orthopedic physician services and substantially reducing competition for such services in Berks County.

The complaint alleges that in the competitive market that existed before the merger, health plans operating in Berks County could choose among the different independent practices and could form a network with some, but not all of them. However, the merger eliminated this competition and enabled Keystone to negotiate prices with health plans on behalf of all its formerly independent member practices, the FTC alleged. According to the agency, Keystone used its newly acquired market power to raise prices with most health plans operating in Berks County.

There are no merger-specific efficiencies that offset the anticompetitive harm the merger has produced, according to the complaint. Entry or expansion also is unlikely to counter the anticompetitive effects of the merger, according to the complaint. In addition, recruiting new orthopedists to enter the market is difficult, expensive, and time intensive.

The complaint also names Orthopaedic Associates, one of the six practices that merged into Keystone in 2011. The practice and six of its associates split off from Keystone in 2014, and has become a major player in the market, with eight orthopedists. Although market conditions have changed since Orthopaedic Associates separated from Keystone, a recombination of the two groups could raise serious antitrust concerns. Therefore, the proposed settlement is designed to maintain competition in the relevant market by, among other things, preserving Orthopaedic Associates’ separation, and allowing health plans to avail themselves of current market conditions by renegotiating existing Keystone contracts.

Under the terms of the settlement, Keystone and Orthopaedic Associates are required to obtain prior approval from the Commission before acquiring any interests in each other, before acquiring another orthopedic practice in Berks County, and before hiring or offering membership to an orthopedist who has provided services in Berks County in the past year.

Keystone and Orthopaedic Associates also are prohibited from anticompetitive, illegal activity such as coordinating their prices with other orthopedists in the market and jointly negotiating with or refusing to deal with payors. They also must terminate, without penalty, any existing contracts with payors for the provision of orthopedic physician services at the payors’ request.

The Commission vote to issue the administrative complaint and accept the proposed consent order for public comment was 4-0.

The FTC will publish the consent package in the Federal Register shortly. The agreement will be subject to public comment for 30 days, beginning today and continuing through November 16, 2015, after which the Commission will decide whether to make the proposed consent orders final. Comments can be filed electronically, or in paper form by following the instructions in the “Supplementary Information” section of the Federal Register notice.

NOTE: The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. 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 up to $16,000.

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 antitrust{at}ftc{dot}gov, or write to the Office of Policy and Coordination, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave., NW, Room CC-5422, Washington, DC 20580. To learn more about the Bureau of Competition, read Competition Counts. Like the FTC on Facebook,, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

Contact Information

MEDIA CONTACT:
Betsy Lordan
Office of Public Affairs
202-326-3707

STAFF CONTACT:
Robert Canterman
Bureau of Competition
202-326-2701