Law & Medicine

Law & Medicine: Antitrust issues in health care, part 2


Question: On antitrust, the U.S. courts have made the following statements, except:

A. To agree to prices is to fix them.

B. There is no learned profession exception to the antitrust laws.

C. To fix maximum price may amount to a fix of minimum price.

D. A group boycott of chiropractors violates the Sherman Act.

E. Tying arrangement in the health care industry is per se illegal.

Answer: E (see Jefferson Parish Hospital below). In the second part of the 20th century, the U.S. Supreme Court and other appellate courts began issuing a number of landmark opinions regarding health care economics and antitrust. Group boycotts were a major target, as was price fixing. This article briefly reviews a few of these decisions to impart a sense of how the judicial system views free market competition in health care.

In AMA v. United States (317 U.S. 519 [1943]), the issue was whether the medical profession’s leading organization, the American Medical Association, could be allowed to expel its salaried doctors or those who associated professionally with salaried doctors. Those who were denied AMA membership were naturally less able to compete (hospital privileges, consultations, etc.).

The U.S. Supreme Court held that such a group boycott of all salaried doctors was illegal because of its anticompetitive purpose, even if it allegedly promoted professional competence and public welfare.

Wilk v. AMA (895 F.2d 352 [1990]) was the culmination of a number of lawsuits surrounding the AMA and chiropractic. In 1963, the AMA had formed a Committee on Quackery aimed at eliminating chiropractic as a profession. The AMA Code of Ethics, Principle 3, opined that it was unethical for a physician to associate professionally with chiropractors. In 1976, Dr. Wilk and four other licensed chiropractors filed suit against the AMA, and a jury trial found that the purpose of the boycott was to eliminate substantial competition without corresponding procompetitive benefits.

The U.S. Court of Appeals for the Seventh Circuit subsequently affirmed the lower court’s finding that the AMA violated Section 1 of the Sherman Act in its illegal boycott of chiropractors, although the court did not answer the question as to whether chiropractic theory was in fact scientific. The court inquired into whether there was a genuine reasonable concern for the use of the scientific method in the doctor-patient relationship, and whether that concern was the dominating, motivating factor in the boycott, and if so, whether it could have been satisfied without restraining competition.

The court found that the AMA’s motive for the boycott was anticompetitive, believing that concern for patient care could be expressed, for example, through public-education campaigns. Although the AMA had formally removed Principle 3 in 1980, it nonetheless appealed this adverse decision to the U.S. Supreme Court on three separate occasions, but the latter declined to hear the case.

In Goldfarb v. Virginia State Bar (421 U.S. 773 [1975]), the Virginia State Bar enforced an "advisory" minimum fee schedule for legal services. The U.S. Supreme Court found that this was an agreement to fix prices, holding, "This is not merely a case of an agreement that may be inferred from an exchange of price information ... for here a naked agreement was clearly shown, and the effect on prices is plain."

The court rejected the defendant’s argument that the practice of law was not a trade or commerce intended to be under Sherman Act scrutiny, declaring there was to be no "learned profession" exemption.

However, it noted that special considerations might apply, holding that "It would be unrealistic to view the practice of professions as interchangeable with other business activities, and automatically to apply to the professions antitrust concepts, which originated in other areas. The public service aspect, and other features of the professions, may require that a particular practice, which could properly be viewed as a violation of the Sherman Act in another context, be treated differently."

Following Goldfarb, there remains no doubt that professional services – legal, medical, and other services – are all to be governed by the antitrust laws.

A flurry of health care–related antitrust cases, including Patrick v. Burget (to be discussed in part 3), reached the courts in the 1980s. In Arizona v. Maricopa County Medical Society (457 U.S. 332 [1982]), the county medical society set maximum allowable fees that member physicians could charge their patients, presumably to guard against price gouging. However, the U.S. Supreme Court, using the tough illegal per se standard, characterized the agreement as price fixing, despite it being for maximum rather than minimum fees.


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