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Risky Business: Proposed Reform of the Antitrust Laws As Applied to Health Care Provider Networks

Published online by Cambridge University Press:  24 February 2021

Natalie Marjancik
Natalie Marjancik*
Affiliation:
Purdue University; Boston University School of Law
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Extract

Because the health care industry comprises over thirteen percent of the American economy, law enforcers increasingly apply antitrust law to all aspects of health care delivery and financing. Through antitrust enforcement, consumers receive the benefits of lower health care costs and improved health care services. To achieve further cost savings, health care providers are forming, as well as joining, many different types of provider network joint ventures. Providers form networks, expect ing “them to generate efficiencies, reduce excess capacity, improve utilization, permit greater specialization and enhance quality.” However, because they organize competing physicians and enable them to collaborate on prices and set fee schedules, provider networks raise serious antitrust concerns. Consequently, the federal government and courts are increasingly focusing their antitrust enforcement efforts on the formation and anticompetitive activities of provider networks.

In Part I, this Note addresses the degree to which network providers must be economically and financially integrated to legally collaborate and set prices. Part II briefly explains the procedures one may use to enforce the federal antitrust laws. Following this explanation of antitrust enforcement procedures, Part III discusses the relevant statutory and case law applicable to health care provider networks.

Type
Notes and Comments
Information
American Journal of Law & Medicine , Volume 24 , Issue 1 , 1998 , pp. 59 - 87
Copyright
Copyright © American Society of Law, Medicine and Ethics and Boston University 1998

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References

1 See HEALTH CARE CORPORATE LAW SERIES: FINANCING & LIABILITY § 10.1, at 10-4 (Mark A. Hall ed., 1994) [hereinafter FINANCING & LIABILITY]. Historically, many medical businesses had doubted whether antitrust laws applied to the health care industry, but the United States Supreme Court later applied antitrust law to the “professions,” including health care providers. See American Med. Ass'n v. Federal Trade Comm'n, 638 F.2d 443, 447-48 (2d Cir. 1980), aff'dper curiam by an equally divided Court, 455 U.S. 676 (1982); see also Goldfarb v. Virginia State Bar, 421 U.S. 773, 786-87 (1975) (holding that the nature of an occupation does not eliminate the application of the Sherman Antitrust Act). Presently, the Federal Trade Commission (FTC) brings more antitrust enforcement actions in the health care market than in any other industry. See Mary Lou Steptoe, Current Issues in Health Care Antitrust: Boycotts, Mergers, and Provider Networks, in 2 HEALTH CARE & ANTITRUST LAW: PRINCIPLES & PRACTICES, at app. E54-1 (John J. Miles ed., 1995)) [hereinafter HEALTH CARE & ANTITRUST LAW].

2 See FINANCING & LIABILITY, supra note 1, § 10.1, at 10-5. Antitrust enforcement is essential for markets to continue evolving to meet payer demands for quality, accountability and cost effectiveness in health care services. See Mark D. Whitner, Antitrust, Medicare Reform and Health Care Competition (visited Mar. 5, 1998) http://www.ftc.gov/speeches/other/whisp.htm.

3 See 1996 Department of Justice and Federal Trade Commission Statements of Antitrust Enforcement Policy in Health Care, 4 Trade Reg. Rep. (CCH) ¶ 13,153, at 20,814 (Aug. 5, 1996) [hereinafter 1996 Policy Statements]. A physician or provider network is “a physician-controlled venture in which the network's physician[s] … collectively agree on prices or price-related terms and jointly market their services.” Id.

4 When providers, such as physicians and hospitals, form a network to solicit third-party payer contracts and collaboratively react to third-party payer contract proposals, the network is “providersponsored.” See HEALTH CARE COMM., AMERICAN BAR ASS'N, MANAGED CARE & ANTITRUST: THE PPO EXPERIENCE, at ix (1990) [hereinafter MANAGED CARE & ANTITRUST]. When a third-party payer, such as an insurance company or a government program, solicits provider contracts on an individual basis, the network of providers is “payer-sponsored.” See id. This Note addresses provider-sponsored networks (PSNs). Generally, PSNs raise greater antitrust concerns than payersponsored networks. See id.; James A. Cherney, Some Antitrust Considerations Relevant to Integrated Delivery Systems, in HEALTH CARE REFORM LAW INSTITUTE 1994, at 206 (PLI Commercial Law and Practice Course Handbook Series No. A4-4455, Sept.-Oct. 1994) [hereinafter REFORM LAW INSTITUTE].

5 THOMAS CAMPBELL & DANIEL D. MCDEVITT, HEALTH CARE ANTITRUST: A MANUAL FOR CHANGING PROVIDER ORGANIZATIONS ¶ 600, at 3 (1994); see also Stedwagon, William M., Note, Does a Healthy Patient Need a Cure? A Response to Health Care Industry Proposals to Reform Antitrust Analysis of Horizontal Hospital Mergers, 69 ST. JOHN's L. REV. 553, 554 (1995)Google Scholar (discussing other factors that have led to the provider integration trend).

6 See MANAGED CARE & ANTITRUST, supra note 4, at 3.

7 H.R. 415, 105th Cong. (1997). This Note will refer to the Antitrust Health Care Advancement Act of 1997 as H.R. 415 or AHCAA.

8 1996 Policy Statements, supra note 3, ¶ 13, 153, at 20, 814.

9 See FINANCING & LIABILITY, supra note 1, § 10.6.1, at 10-27 to -33.

10 See Kestenbaum v. Falstaff Brewing Corp., 514 F.2d 690, 699 (5th Cir. 1975) (holding that a plaintiff in a private antitrust enforcement action only needs to prove that the restraint of trade “tends or is reasonably calculated to prejudice the public interest” rather than proving specific economic injury to competition).

11 See FINANCING & LIABILITY, supra note 1, § 10.5, at 10-20. In the health care sector, most parties that bring private antitrust actions are hospitals and doctors rather than individual patients. See id. § 10.1, at 10-5.

12 This Note refers to the Department of Justice (DOJ) and the FTC jointly as “enforcement agencies.“

13 See FINANCING & LIABILITY, supra note 1, § 10.4, at 10-19 to -20.

14 See id. § 10.6.1, at 10-27.

15 See infra Part III for a discussion of the federal antitrust laws.

16 See 15 U.S.C. § 15(a) (1994) (permitting the DOJ to bring treble damage suits).

17 See 15 U.S.C. § 57(b).

18 See 28 C.F.R. § 50.6 (1996) (authorizing the DOJ to issue business review letters).

19 See 16 C.F.R. §§ 1.1—.4 (1996) (authorizing the FTC to issue advisory opinions).

20 Before issuing a business review letter or advisory opinion, each enforcement agency must get approval from the other enforcement agency. See FINANCING & LIABILITY, supra note 1, § 10.6.1.1, at 10-31.

21 See id. at 10-30 to-31.

22 See 15 U.S.C. § 1 (1994). Most antitrust suits brought against physician networks allege Section 1 violations, as opposed to Section 2 violations. See HENRY H. PERRITT, JR., HEALTH CARE LEGISLATION UPDATE AND ANALYSIS 135 (1995); see also FINANCING & LIABILITY, supra note 1, § 10.7, at 10-35 (noting that Section 1 of the Sherman Act is the most frequently applied antitrust law in the health care industry). This is because most of the actions and lawsuits pertain to contracts among legally separate providers. See PERRITT, supra, at 135. Even if a network is sufficiently integrated so that it is a single entity, conditions in the health care industry inhibit a single network from attaining sufficient market power to monopolize a market, which is a Section 2 violation. See id.

23 15 U.S.C. § 1. Notwithstanding the specific language of the Sherman Act, the U.S Supreme Court interpreted Section 1 as prohibiting only those arrangements that unreasonably restrain trade. See Northern Pac. Ry. v. United States, 356 U.S. 1,5 (1958).

24 See City of Columbia v. Omni Outdoor Advert., 499 U.S. 365, 378-79 (1991) (holding that alleged conspiracies between private entities and government officials do not state a claim under Section 1 of the Sherman Act).

25 When competitors, such as a group of primary care physicians, reach an agreement, the agreement is a “horizontal agreement.” See CAMPBELL & MCDEVITT, supra note 5, ¶ 610, at 5. When parties competing at two different levels in an industry, such as doctors and hospitals, reach an agreement, the agreement is a “vertical agreement.” See id.

26 See Fuentes v. South Hills Cardiology, 946 F.2d 196, 198 (3d Cir. 1991) (citing Weiss v. York Hosp., 745 F.2d 786, 812 (3d Cir. 1984)).

27 See id.

28 See 15 U.S.C. § 1. In contrast, Section 2 of the Sherman Act applies only to single entities. See id. § 2. Section 2 states that it is unlawful for a single actor to “monopolize, or attempt to monopolize, or combine or conspire with any other person or persons to monopolize.” Id. Once sufficiently integrated so as to qualify as a single entity, provider networks are subject to Section 2 of the Sherman Act, which solely governs the conduct of single firms. See id.

29 See HEALTH CARE & ANTITRUST LAW, supra note 1, § 13:2, at 13-7.

30 See id.

31 See generally 15 U.S.C. § 1 (defining restraint of trade and penalties associated with restraint).

32 See CAMPBELL & MCDEVITT, supra note 5, § 1:4, at 1-17; see also Federal Trade Comm'n v. Indiana Fed'n of Dentists, 476 U.S. 447, 459 (1986) (using the rule of reason to analyze some challenged, corroborative activities in the health care field). For further discussion of the rule of reason, see infra Parts IV.C and V.C.

33 See National Soc'y of Prof 1 Eng'rs v. United States, 435 U.S. 679, 691-92 (1978); Chicago Bd. of Trade v. United States, 246 U.S. 231, 238 (1918).

34 See National Collegiate Athletic Ass'n v. Board of Regents, 468 U.S. 85, 100-02 (1984). In determining whether a restraint harms competition, a court must define the markets affected by the restraint, as well as whether the alleged conspirators have enough market power to raise prices and restrict output. See FINANCING & LIABILITY, supra note 1, § 10.8, at 10-45.

35 See FINANCING & LIABILITY, supra note 1, § 10.8, at 10-45.

36 See id.

37 See National Soc'y of Prof'I Eng'rs, 435 U.S. at 692 (explaining that illegal per se agreements are “so plainly anticompetitive that no elaborate study of the industry is needed to establish their illegality“). For a further discussion comparing the application of the rule of reason and the per se rule to alleged antitrust violations, see infra Part V.C.

38 See United States v. Columbia Steel Co., 334 U.S. 495, 522-23 (1948). Horizontal pricefixing is an agreement among otherwise competing health care providers regarding the prices they will charge. See FINANCING & LIABILITY, supra note 1, § 10.10.1.1, at 10-57.

39 See Palmer v. BRG of Ga., Inc., 498 U.S. 46, 49 (1990) (citing United States v. Topco Assocs., Inc., 405 U.S. 596, 608 (1972)). Market allocation agreements are agreements among competitors not to do business in each other's markets. See FINANCING & LIABILITY, supra note 1, § 10.10.2.1, at 10-63.

40 See Klor's, Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207, 212 (1959). Group boycotts, also referred to as “refusals to deal,” involve agreements between two or more parties regarding whether they will deal with, and if so, how they will deal with a third party. See FINANCING & LIABILITY, supra note 1, § 10.10.2.2, at 10-65.

41 See International Salt Co. v. United States, 332 U.S. 392, 394 (1947). Parties implement tying agreements to require a consumer to buy a certain product or service before the consumer may use the product or service he really wants to buy. See FINANCING & LIABILITY, supra note 1, § 10.10.2.3, at 10-69.

42 Northern Pac. Ry. Co. v. United States, 356 U.S. 1,5 (1958).

43 “The reasonable price fixed today may through economic and business changes become the unreasonable price of tomorrow. Once established, it [will] be maintained unchanged because of the absence of competition.” Arizona v. Maricopa County Med. Soc'y, 457 U.S. 332, 345 (1982) (citing United States v. Trenton Potteries Co., 273 U.S. 392, 397 (1927)). “The anti-competitive potential inherent in all price-fixing agreements justifies their facial invalidation even if pro-competitive justifications are offered for some [agreements].” Id. at 351.

44 See Cherney, supra note 4, at 203. Distinguishing between legitimate and illegitimate network joint ventures is difficult because much of the same collaborative conduct that can lead to justifiable efficiencies are present in both legitimate and sham ventures. See HEALTH CARE CORPORATE LAW SERIES: FACILITIES & TRANSACTIONS, § 5.22.2.1, at 5-74 (Mark A. Hall ed., 1994) [hereinafter FACILITIES & TRANSACTIONS].

45 See Cherney, supra note 4, at 203.

46 See Maricopa, 457 U.S. at 351-57.

47 See Cherney, supra note 4, at 203; see also Rio Vista Oil v. Southland Corp., 667 F. Supp. 757, 761 (D. Utah 1987) (“[i]f a combination is formed between two separate entities for the purpose of restraining trade” the entities will “remain separate for purposes of Section 1” of the Sherman Antitrust Act).

48 See Mark J. Horoschak, Antitrust Enforcement Policy for Health Care Markets, in REFORM LAW INSTITUTE, supra note 4, at 35, 42.

49 This Note addresses the degree of integration necessary to ensure that a joint venture is legitimate and deserves rule of reason treatment, as opposed to being deemed illegal per se.

50 See Horoschak, supra note 48, at 42.

51 See FACILITIES & TRANSACTIONS, supra note 44, § 5.22.2.2, at 5-76. Labeling something as a joint venture does not immunize providers from antitrust liability under the Sherman Act. See CAMPBELL & McDEVITT, supra note 5, ¶ 280, at 62.

52 See Cherney, supra note 4, at 205.

53 See id. If collaborating enables competitors to offer a new product producing substantial efficiencies, the courts and enforcement agencies will then analyze the venture and its horizontal restraints under the rule of reason. See Broadcast Music, Inc. v. Columbia Broad. Sys., Inc., 441 U.S. 1, 21-22 (1979); 1996 Policy Statements, supra note 3, at 20,817 n.36. The FTC warns that antitrust enforcers must approach “new product analysis” in the health care industry with extreme care. See Christine A. Varney, Responses to the Managed Care Revolution: A Competition Policy Perspective, in HEALTH CARE & ANTITRUST LAW, supra note 1, at app. E52-10. ‘“New product’ analysis is potentially limitless in its application: even naked cartels could argue that they had created a new market or new product as a result of their combination.” Id.

54 See Enders, Robert J., An Introduction to Special Antitrust Issues in Health Care Provider Joint Ventures, 61 ANTITRUST L.J. 805, 826-27 (1993)Google Scholar.

55 H.R. 415, 105th Cong. (1997). Henry Hyde first introduced similar legislation, entitled the Antitrust Health Care Advancement Act of 1996, on February 1, 1996. See H.R. REP. No. 104-646, at 6 (1996). On June 27, 1996, the House Judiciary Committee approved the bill. See id. However, the entire Congress did not vote to approve the bill. See id. The 1997 version of the bill, H.R. 415, is similar to the 1996 version of the bill, H.R. 2925. See H.R. REP. No. 105-415 (1997).

56 See H.R. REP. No. 105-415, at 1-5.

57 See id. at 4-5. Somewhat similar to H.R. 415, a provision in the Medicare Preservation Act of 1995, H.R. 2925, 104th Cong. (1995), required law enforcers to use rule of reason analysis rather than the illegal per se rule to evaluate horizontal price-fixing agreements among Medicare PSN doctors who did not share a financial risk of loss in the network. See Roscoe B. Starek, III, Antitrust Issues in Integrated Health Care Delivery Systems (visited Mar. 5, 1998) http://www.ftc.gov/speeches/starek/starcr.htm (mistakenly referring to H.R. 2925 as H.R. 2425). Congress did not include this provision in the final version of the bill. See id.

58 See infra Part III.C.2 for a discussion of recent changes in the agencies’ antitrust enforcement policies.

59 See supra note 53 and accompanying text for an explanation of the new product doctrine.

60 See Arizona v. Maricopa County Med. Soc'y, 457 U.S. 332, 356 (1982) (finding that a fee schedule agreement among network providers with insufficient risk-sharing arrangement is per se illegal). Conversely, courts generally apply the rule of reason to the joint venture's horizontal restraints if the parties assume financial risk in the venture. See id. Furthermore, if a network's activities satisfy the new product doctrine, courts and the enforcement agencies apply the rule of reason analysis to the joint venture. See Broadcast Music, Inc. v. Broadcasting Sys., Inc, 441 U.S. 1, 18-23 (1979); see also Maricopa, 457 U.S. at 351-54 (finding that the defendants did not satisfy the new product doctrine because the medical foundation-endorsed insurance plans were not new products).

61 See H.R. REP. No. 104-646, at 4-5.

62 See id. at 5. To qualify for rule of reason analysis under the proposed legislation, the network would only need to have written programs for quality assurance, utilization review (UR), coordination of care and resolution of patient grievances and complaints. See id.

63 Even though administrative consent decrees, merger guidelines, enforcement guidelines and policy statements are instructive, they do not carry as great a precedential value as does case law. See United States v. Atlantic Richfield Co., 297 F. Supp. 1061, 1073 (S.D.N.Y. 1969) (noting that courts are not bound by administrative agencies’ guidelines). Courts, however, give great weight to enforcement agencies’ policy statements. See PHILLIP E. AREEDA & HERBERT HOVENKAMP, ANTITRUST LAW: AN ANALYSIS OF ANTITRUST PRINCIPLES AND THEIR APPLICATION ¶ 33lb, at 100 (rev. ed. 1995).

64 See 1993 Department of Justice and FTC Antitrust Enforcement Policy Statements in the Health Care Area, 4 Trade Reg. Rep. (CCH) ¶ 13,151, at 20,755 (Sept. 30, 1994) [hereinafter 1993 Policy Statements]. Unlike the agencies’ previous horizontal merger guidelines, which applied to all industries, the 1993 Policy Statements dealt only with health care mergers and joint activities. See id.; cf. 1992 Department of Justice and Federal Trade Commission Horizontal Merger Guidelines, 4 Trade Reg. Rep. (CCH) ¶ 13,104, at 20,569 (May 5, 1992) (setting forth general merger guidelines).

65 See 1993 Policy Statements, supra note 64, at 20,755.

66 4 Trade Reg. Rep. (CCH) ¶ 13,152, at 20,769 (Sept. 30, 1994) [hereinafter 1994 Policy Statements].

67 See id. at 20,769-70. Multiprovider networks include: (1) networks involving a single provider type, such as doctors or hospitals; (2) networks involving a single provider specialty, such as dentists; or (3) networks involving more than one provider type, such as physician-hospital organizations or physician practice management companies. See 1996 Policy Statements, supra note 3, at 20,826 n.44. Physician network joint ventures, previously defined at note 3, supra, are a subset of multiprovider networks. See id. Because many of the issues relating to multiprovider networks are similar to those that arise in connection with physician joint ventures, the same analysis usually applies to both arrangement types. See id. In this Note, provider network refers to physician joint venture networks, as well as multiprovider network joint ventures.

68 See 1996 Policy Statements, supra note 3, at 20,799.

69 See id. at 20,794. Risk-sharing and financial integration are synonymous for purposes of this Note. The 1994 Policy Statements identified capitation and fee withholds as ways for providers to share substantial risk in their venture. See id. at 20,788, 20,790-92. In the 1996 Policy Statements, the enforcement agencies give additional examples of ways providers can share substantial risk. Supra note 3, at 20,816. The additional examples include implementing a penalty and reward system based on the network's overall costs or utilization, as well as accepting a fixed fee for a patient's extended course of treatment that requires coordination of care by providers offering complementary services. See id. at 20,815-16.

70 See 1994 Policy Statements, supra note 66, at 20,788.

71 See id. at 20,787-88. Regarding exclusive provider networks, the agencies stated that they would not challenge a venture if: (1) providers in the network represented no more than 20% of the physicians in the relevant market who practice a certain type of medicine and have active hospital staff privileges; and (2) the providers shared a substantial financial risk. See id. Similarly, regarding nonexclusive provider networks, the agencies said that they would not challenge a venture if: (1) providers in the network represented no more than 30% of the physicians in the relevant market that specialize in practicing a certain type of medicine and have active staff privileges; and (2) the providers shared a substantial financial risk. See id. at 20,788.

72 See id. at 20,787-88.

73 See 1996 Policy Statements, supra note 3, at 20,800.

74 See id. at 20,817. UR and quality assurance programs are the types of clinical integration to which the agencies refer. See id. Specifically, clinical integration may include establishing mechanisms to control costs and assure quality, choosing providers who are likely to achieve these objectives, and investing capital in the network's infrastructure. See id.

75 Like the 1994 Policy Statements, the 1996 Policy Statements explicitly recognize the new product doctrine. See id. at 20,817 n.36; 1994 Policy Statements, supra note 66, at 20,788; see also supra note 53 (explaining the new product doctrine).

76 See 1996 Policy Statements, supra note 3, at 20,817; cf. 1994 Policy Statements, supra note 66, at 20,787-93 (detailing the 1994 Policy Statements).

77 See 1996 Policy Statements, supra note 3, at 20,817.

78 See id.

79 Although courts are not bound to follow the enforcement agencies’ policy statements, the courts have given these statements precedential weight in the past in the area of mergers. See AREEDA & HOVENKAMP, supra note 63, ¶ 331b, at 100.

80 For further discussion, see infra Part IV.A.

81 For further discussion, see infra Parts IV.A-B.

82 For further discussion, see infra Part IV.B.

83 For further discussion, see infra Part IV.B.

84 For further discussion, see infra Part IV.C.

85 For further discussion, see infra Part IV.C.

86 See Frenkel, Marcel, Caveats for Physicians in the Financing of Practice Networks, J. HEALTH CARE FIN., Spring 1996, at 49, 49Google Scholar; see also Brook, Robert H. et al., Health System Reform and Quality, 276 JAMA 476, 476 (1996)Google Scholar (noting that changes in the health care industry are primarily illustrated by the shift from fee-for-service (FFS) to managed care insurance). Despite this concern, nearly 50% of doctors practicing medicine in the United States remain in solo practices. See Frenkel, supra, at 49.

87 Health maintenance organization (HMO) enrollment continues to grow because employers believe that such an entity controls their employees’ medical costs. See Robert Pear, Doctors May Get Leeway to Rival Large Companies, N.Y. TIMES, Apr. 8, 1996, at A1. If an HMO does not have its own doctors on staff, it must go out and contract with doctors to provide services to the HMO's enrollees. See Freiburg, James P., The ABCs of MCOs: An Overview of Managed Care Organizations, 81 ILL. B.J. 584, 586 (1993)Google Scholar. To receive medical services other than certain emergency care, enrollees must pay the entire costs of the medical services out of pocket unless the enrollees use HMO-approved doctors. See id. at 585-86. Thus, from a provider's standpoint, providers compete to contract with and to receive HMOs’ business. See generally Kassirer, Jerome P., Managed Care and the Morality of the Marketplace, 333 NEW. ENG. J. MED. 50 (1995)Google Scholar (describing how market forces affect managed care). Without such a contract, the provider will not have access to the HMO's enrollees unless the enrollees choose to pay for medical expenses out of their own pockets. See id.; see also David Warsh, We Gave Up Too Easily, BOSTON GLOBE, July 30, 1995, at 37 (noting that doctors, generally, are forced to join managed care plans once their community becomes predominately managed care).

88 See Clear Antitrust Rules for Doctors, N.Y. TIMES, Apr. 9, 1996, at A20 [hereinafter Clear Antitrust Rules]. Often, doctors contract with so many different insurance companies and managed care plans that the doctors have difficulty in meeting all the demands of the different companies and plans at one time. See Norma Wagner, 2 Groups Attempting to Create New Physician Networks, SALT LAKE TRIB., Apr. 28, 1996, at F-1, available in 1996 WL 3028702. In contrast, some managed care plans have excluded doctors from participating in particular managed care plans. See id.

89 See Opderbeck, David W., New Antitrust Guidelines Better Reflect the Market, 146 N.J. L.J. 976, 976 (1996)Google Scholar.

90 See Frenkel, supra note 86, at 49.

91 Johns, Edith Loper, Who Will Dominate HMO Master Contracting?, J. HEALTH CARE FIN., Spring 1995, at 1, 4Google Scholar.

92 See Pear, supra note 87, at A1. For further discussion of providers forming their own health plans and selling their services directly to employers and patients without using an insurance company or an HMO as an intermediary, see infra Part V.A.2.

93 See Gardner, Jonathan, Docs Vie for Antitrust Relief to Form Networks, MOD. HEALTHCARE, June 17, 1996, at 68, 68Google Scholar.

94 See Docs Get Their Way: Under AMA Attack, Feds Back Off Antitrust Enforcement, MOD. HEALTHCARE, Jan. 8, 1996, at 40, 44 [hereinafter Docs Get Their Way].

95 See Weissenstein, Eric, Providers Applaud Relaxed Guidelines, MOD. HEALTHCARE, Sept. 2, 1996, at 4, 4Google Scholar.

96 See id. In arguing that law enforcers and Congress need to relax antitrust standards to allow providers to compete effectively, providers claim that insurance companies and MCOs have had a monopoly in getting employers’ health insurance contracts. See Miller, Andy, Antitrust Rule Revision Favors Doctor Groups, ATLANTA J.-CONST., Aug. 29, 1996, at F01Google Scholar, available in 1996 WL 8229135.

97 See Miller, supra note 96.

98 See id.

99 The National Association of Insurance Commissioners (NAIC) drafts model insurance legislation that is often implemented by the states. See Barnett, Alicia Ault, Do Health Plans Change Course When Doctors Take the Helm?, BUS. & HEALTH, Sept. 1995, at 32, 36Google Scholar.

100 See generally Kenyon, M. Kathleen, Commentary: FTC, Justice Antitrust Policies Right on Target, MOD. HEALTHCARE, Feb. 12, 1996, at 83, 83Google Scholar (suggesting that the threat of states licensing provider networks is a reason why federal regulatory agencies should give antitrust guidance to employers and provider networks with whom they contract).

101 See Scott, Lisa, A Blow to Providers: Minn. Urges HMO-Like Rules for Risk-Bearing Networks, MOD. HEALTHCARE, Jan. 6, 1997, at 6, 6Google Scholar.

102 See Ga. ‘Messenger Model’ is OK, HEALTH CARE FIN. VENTURES REP., Aug. 30, 1995, available in 1995 WL 10096354 [hereinafter Ga. Messenger Model].

103 See Latham, Stephen R., Regulation of Managed Care Incentive Payments to Physicians, 22 AM. J.L. & MED. 399, 409 (1996)Google Scholar.

104 See Roscoe B. Starek, III, Beyond the Health Care Policy Statements: Where Do We Go From Here? (visited Mar. 5, 1998) http://www.ftc.gov/speeches/starek/clevespc.htm.

105 See id.

106 See Docs Get Their Way, supra note 94, at 44.

107 Pear, supra note 87, at B9.

108 See Charles D. Weller, A New Way to Spell Relief from Antitrust: NCRPA, MOD. HEALTHCARE, Sept. 23, 1996, available in LEXIS, Health Library, Curnws File.

109 Proponents of H.R. 415 and the 1996 Policy Statements refer to the National Cooperative Research and Production Act of 1993, which affords rule of reason treatment to certain activities of joint ventures. See 15 U.S.C. § 4301 (1994). For further discussion of the Act's application to provider networks in the health care industry, see infra Part V.C.I.

110 See infra Part V.A.

111 See infra Part V.B.1.

112 See infra Part V.B.2.

113 See infra Part V.C.1.

114 See infra Part V.C.2.

115 See infra Part V.A.1.

116 See infra Part V.A.2.

117 See Brook, supra note 86, at 476. Furthermore, if sufficiently integrated and properly managed, provider networks can benefit patients in several ways. See Harris, Ronald M., New Antitrust Guidelines for Physician Networks, Part II, 276 JAMA 1525a, 1525a (1996)Google Scholar. Namely, having more players in the market tends to make existing players, such as insurance companies and MCOs, more competitive. See Pear, supra note 87, B9. Furthermore, by allowing doctors to form looser networks and enter into the market more easily, the 1994 Policy Statements “could allow market forces to more effectively determine price and demand for provider services, giving additional impetus to restrict price increases commensurate with inflation.” Harris, supra, at 1525a. But see infra notes 158-62 and accompanying text.

118 See Whitner, supra note 2 (noting that enforcement agencies have informed the public and the health care industry that many joint activities among providers raise few antitrust issues). See generally Michael Black & James Lagenfeld, Economic Theories of the Potential Anti-Competitive Impact of Physician-Owned Joint Ventures, ANTITRUST BULL., Summer 1994, at 385, 411-13 (discussing potential efficiencies that can offset the anticompetitive effects of provider networks).

119 See PHYSICIAN PAYMENT REV. COMM'N, PPRC REPORT ON CHANGES IN PHYSICIAN PRACTICES, reprinted in MEDICARE & MEDICAID GUIDE (CCH) ¶ 43,720, at 46,846 (Sept. 1, 1995) (concluding that there is no evidence that the 1994 Policy Statements and other antitrust laws and policies prevented providers from forming networks). For example, approximately 75% of state medical societies are planning or implementing PSNs. See Health Care Provider Networks-Antitrust Scrutiny, 7 Trade Reg. Rep. (CCH) ¶ 50,154, at 49,173 (Mar. 6, 1996) [hereinafter Pitofsky Remarks]. Additionally, at least 9.31 million Americans are enrolled in PSNs. See id.; Whitner, supra note 2.

120 Many providers criticize the 1994 Policy Statements for giving limited examples of acceptable forms of risk-sharing. See Opderbeck, supra note 89, at 8. This criticism, however, is unfounded because the 1994 Policy Statements declare that, in addition to the illustrated examples of risk-sharing, the agencies “will consider other forms of economic integration that amount to the sharing of substantial financial risk; the enumeration of the two examples … is not meant to foreclose the possibility that substantial financial risk can be shared in other ways.” 4 Trade Reg. Rep. (CCH) ¶ 13,152, at 20,788 (Sept. 30, 1994).

121 See AMA Seeks to Level Playing Field, Others Find Existing Rules Adequate, 2 Health Care Pol'y Rep. (BNA) No. 24, at 1033 (June 13, 1994) [hereinafter Level Playing Field]. Robert L. Liebenluft, Assistant Director for Health Care of the Federal Trade Commission Bureau of Competition, stated that the enforcement agencies have never intended to “chill” providers from forming networks that improve competition in the health care industry. See Robert L. Liebenluft, Remarks Before the Academy of Health Care Attorneys (June 26, 1996), quoted in Amended Health Care Guidelines to Address ‘Rule of Reason'Treatment, 5 Health L. Rep. (BNA) No. 27, at 1009 (July 4, 1996).

122 See 1994 Policy Statements, supra note 66, at 20,788. For a description of the 1994 Policy Statements’ safety zones, see supra note 71.

123 Docs Get Their Way, supra note 94, at 41. Even before Congress proposed the AHCAA or the agencies revised the 1994 Policy Statements, antitrust enforcers generally supported provider networks and viewed their activities as being pro-competitive. See id. Since 1975, the federal government has brought only 11 price-fixing cases against provider networks. See id.

124 See Gail Kursh, Update on Antitrust Division Health Care Enforcement Activities, Address Before the Tennessee Bar Association's Annual Convention (June 14, 1996), at *8-20, available in 1996 WL 333485 (discussing 35 business review letters, most of which involve provider networks); see also H.R. REP. No. 104-646, at 15 (1996) (stating that since 1991, the DOJ and the FTC approved 31 of 34 proposed provider network plans). Under the 1994 Policy Statements, the agencies struck down the formation of the Orange County Los Angeles Medical Group, a “network” that would have served as a price-fixing unit for several totally unintegrated hospital-based anesthesia groups. See Orange L.A. Med. Group Inc., Dep't of Justice Bus. Rev. Letter, 6 Trade Reg. Rep. (CCH) ¶ 44,096, at 43,404 (Mar. 3, 1996) (noting that because the network contained five of the market's six anesthesia groups, the network would dominate the market and pose an anticompetitive threat). In addition, under the 1994 Policy Statements, the agencies denied a proposed network to Children's Healthcare, P.A. because members of the network had documented that the network's main purpose was to restrain competition. See Children's Healthcare, P.A., Dep't of Justice Bus. Rev. Letter, 6 Trade Reg. Rep. (CCH) ¶ 44,096, at 43,396, 43,400 (Mar. 1, 1996).

125 See Kursh, supra note 124, at *1. The agencies found that providers horizontally fixed prices in the three disapproved networks, even though the providers were not financially integrated. See United States v. Health Choice of N.W. Mo., Inc., 1996-2 Trade Cas. (CCH) ¶ 71,605, at 78,277 (W.D. Mo. Oct. 22, 1996); United States v. HealthCare Partners, Inc., 1996-1 Trade Cas. (CCH) ¶ 71,337, at 76,643 (D. Conn. Feb. 15, 1996); United States v. Woman's Hosp. Found. & Woman's Physician Health Org., 61 Fed. Reg. 21,489, 21,494-97 (Antitrust Div., Dep't of Justice 1996) (discussing proposed final judgment and competitive impact statement). The agencies struck down these networks because they posed an anticompetitive threat to consumers. See Kursh, supra, note 124, at *1-3.

126 For a description of the agencies’ safety zones, see supra note 71. Prior to the 1996 Policy Statements, agencies would not disapprove the network if a certain number of providers were necessary in the network to provide adequate medical services for the network's patients, even if the number of network providers exceeded the safety zone criterion. See Physician Care, Inc., Dep't of Justice Bus. Rev. Letter, 6 Trade Reg. Rep. (CCH) ¶ 44,021, at 43,354-55 (Oct. 28, 1994); see also Oklahoma Physicians Network, Inc., Dep't of Justice Bus. Rev. Letter, 6 Trade Reg. Rep. (CCH) ¶ 44,096, at 43,392-93 (Jan. 17, 1996) (discussing a network comprised of “substantially more” than 30% of physicians in particular specialties in some local markets); Dermnet, Inc., Dep't of Justice Bus. Rev. Letter, 6 Trade Reg. Rep. (CCH) ¶ 44,095, at 43,386 (Dec. 5, 1995) (discussing a network comprised of 43.5% of board certified dermatologists); International Chiropractor's Ass'n of Cal., Dep't of Justice Bus. Rev. Letter, 6 Trade Reg. Rep. (CCH) ¶ 44,094, at 43,352 (Oct. 27, 1994) (discussing a network comprised of up to 50% of the market's chiropractors).

127 Capital constraints, rather than federal agencies antitrust enforcement under the 1994 Policy Statements, are a primary impediment to providers forming networks. See Frenkel, supra note 86, at 49. There are also other significant obstacles, unrelated to H.R. 415 or the agencies’ Policy Statements, that providers face when forming a network. For example, providers may have poor managerial skills, making it difficult to make competitive business decisions. See Barnett, supra note 99, at 32, 34. Thus, relaxing the antitrust review standards is not likely to help providers overcome these obstacles.

128 Even if the 1994 Policy Statements did not enable providers to form networks to compete with HMOs and insurance companies, it would not justify changing the Policy Statements. Many Wall Street analysts do not see provider networks as long-term competitors to traditional managed care plans. See Weissenstein, Eric, Wall Street Questions New Networks, MOD. HEALTHCARE, Oct. 30, 1995, at 66, 66Google Scholar. This is primarily due to the difficulty of undercutting HMOs in the market for the long term. See id. Some analysts predict that even if provider networks that function as insurers are able to sustain a loss for a short period of time, they would be unable to survive a prolonged price battle with an established insurer. See id.

129 For a discussion of the increased antitrust risks associated with H.R. 415 and the 1996 Policy Statements, see infra Part V.C.2.

130 See Network Antitrust Guidance Won't Prompt Rush to Form Physician Provider Networks, PHYSICIAN MANAGER, Sept. 13, 1996, available in LEXIS, Health Library, Hcare File.

131 See Unland, James J., The Emergence of Providers as Health Insurers, J. HEALTH CARE FIN., Fall 1996, at 57, 64Google Scholar. Insurance regulators are still developing answers to issues such as what constitutes the “business of insurance,” whether provider risk-bearing is different from insurance riskbearing and whether there is a certain point at which risk-bearing providers must obtain an insurance license whether or not they contract directly with patients or through an insurer. See id. at 64-65.

132 For example, a provider network in Colorado that contracts on a capitated basis is not necessarily deemed to be in the business of insurance and subject to the state's insurance requirements. See COLO. REV. STAT. ANN. § 6-18-302 (West 1996).

The fact that a provider network or individual provider has a capitated contract or other agreement with a [purchaser], pursuant to which the provider network or individual provider shares some of the risk of providing services to groups or individuals covered under a health care coverage plan issued by a carrier, shall not, in and of itself, be grounds … that the provider network or individual provider is engaged in the transaction of the insurance business… .

Id. § 6-18-302(11).

133 For example, proposed legislation in Minnesota requires the state's risk-sharing providers meet Minnesota's insurance requirements. See Scott, supra note 101, at 6. However, the financial reserve requirement that network providers would initially have to meet is half of the reserve requirement HMOs must satisfy under Minnesota's insurance regulations. See id. Alternatively, Minnesota's Health and Commerce Departments propose that risk-sharing provider networks satisfy the same financial reserve requirements that the state's HMOs must satisfy. See id. In return, the state would subject the provider networks to much less stringent regulatory oversight. See id. Ohio recently enacted legislation reducing the solvency requirements that risk-sharing provider networks must maintain. See State Health Week: Ohio Passes Inclusive Health Plan Solvency Requirements Law, WASH. HEALTH WK., June 23, 1997, at 3, 3 (noting that the solvency standards “vary by the type of entity and the type of services the entity offers“).

134 The ERISA Targeted Health Insurance Reform Act permits provider networks that function as a health plan to contract directly with self-insured employers. See H.R. 995, 104th Cong. (1996). Because self-insured employers must carry their own insurance reserves, many speculate that if Congress enacts H.R. 995, a provider network would not need to have many financial reserves when directly contracting with a self-insured employer. See generally Unland, supra note 131, at 66-67 (describing legislation that would allow provider networks to bypass state insurance commissioners and “direct contract” with self-insured employers and allow “small employers and other organizations” to unite into self-inured federations). Currently, other House bills relate to a provider network's ability to insure Medicare beneficiaries. See Common Sense Balanced Budget Act of 1995, H.R. 2530, 104th Cong. (1995); Reconciliation Act of 1995, H.R. 2491, 104th Cong. (1995). If enacted into law, these bills would allow provider networks to insure Medicare patients as long as the networks covered a minimum set of benefits for each enrollee and the network's providers assume full risk for the benefits through, for instance, capitation. See Unland, supra, at 67. The reserve requirements for provider networks insuring Medicare patients would be low, recognizing that provider networks have many noncash assets. See id. Although provider networks insuring Medicare patients would still be subject to state insurance licensing, both bills prohibit states from unreasonably delaying or withholding a license if the provider network meets the applicable reserve requirements. See id.

135 See supra notes 89-92 and accompanying text. Alternatively, a provider network can function as a health plan, which means that like an MCO or insurance company, the network insures the patients it serves. See Pear, supra note 87, at Al.

136 See Scott, supra note 101, at 6 (noting that the NAIC will not release its official stance on the issue until Winter 1997).

137 See generally McCarran-Ferguson Act, 15 U.S.C. §§ 1011-1015 (1994) (giving states the primary responsibility for regulating the insurance industry).

138 See id. This Act provides that the law enforcers and courts must not apply the federal antitrust laws to organizations that are in the “business of insurance to the extent that such business is … regulated by State Law.” Id.; see also Ocean State Physicians Health Plan, Inc. v. Blue Cross & Blue Shield, 883 F.2d 1101, 1107-09 (1st Cir. 1989) (applying the McCarran-Ferguson Act to HealthMate, Blue Cross's HMO “look-alike” in Rhode Island, and to Blue Cross’ “adverse selection” pricing policy). If an insurer boycotts, coerces or intimidates other market participants, however, the insurer remains subject to federal antitrust liability, even if the insurer is subject to state insurance requirements. See St. Paul Fire & Marine Ins. Co. v. Barry, 438 U.S. 531, 554 (1978).

139 See H.R. REP. No. 104-646, at 4-5 (1996); see also 1996 Policy Statements, supra note 3, at 20,815 (noting that some physician joint ventures fall within antitrust safety zones and are not challenged by the DOJ or the FTC).

140 The Supreme Court has indicated that health insurance policies qualify as a product for purposes of the new product doctrine. See Arizona v. Maricopa County Med. Soc'y, 457 U.S. 332, 356 (1982). The Court's statement that the defendant network did not “sell insurance, and [it] derive[d] no profits from the sale of health insurance policies” implies that if a network creates and markets its own health plan, the health plan satisfies the new product doctrine and the network's horizontal restraints are subject to rule of reason analysis. Id. (noting that the defendant network did not create a new product by setting a fee schedule and only selling its providers’ medical services).

141 See H.R. REP. No. 104-646, at 4-5; see also 1996 Policy Statements, supra note 3, at 20,815 (explaining that some physician joint ventures fall within antitrust safety zones).

142 See Pear, supra note 87, at A1.

143 Integrating and developing a health plan potentially benefits providers and patients in other ways as well. Currently, the insurance industry maintains 20-30% of health insurance proceeds for overhead and profit. See Unland, supra note 131, at 58. Forming their own health plans enables network providers to contract directly with employers and patients, rather than using an insurance company or HMO as an intermediary. See id. Network providers can then pass these administrative cost savings on to their patients. See id. Furthermore, providers in a network-created health plan “assume the financial risk of treating patients, which stops doctors from overcharging and driving customers into rival plans.” Clear Antitrust Rules, supra note 88, at A20.

144 Health Care Groups Urge Defeat of Rep. Hyde's Antitrust Bill, 5 Health L. Rep. (BNA) No. 36, at 1344 (Sept. 12, 1996) [hereinafter Health Care Groups Urge Defeat].

145 See infra Part V.B.1.

146 See infra Part V.B.1.

147 See infra Part V.B.2.

148 See infra Part V.B.2.

149 See Barnett, supra note 99, at 32, 34. Some providers form networks with limited capitalization and no administrative infrastructure; thus, they are not efficiently set up to give patients proquality care. See id. Even though there initially was concern that integrated networks were financially vulnerable because providers had to share risk of loss, a General Accounting Office (GAO) study found that financially integrated provider networks are not more financially vulnerable than unintegrated networks. See Managed Care Increases Risks for Health Care Centers, Already Financially Vulnerable, 4 Health L. Rep. (BNA) No. 19, at 727 (May 11, 1995) (stating that a GAO study of 10 health centers found all of the centers’ year-end fund balances grew between 1989 and 1993 due to increased revenue from various sources).

150 See Letter, Professionalism in Medicine: Can Patients Trust in Managed Care?, 276 JAMA 951, 951 (1996). Many physicians favor implementing capitation procedures or other means of financial integration. See generally Berwick, Donald M., Quality of Health Care, Part 5: Payment by Capitation and the Quality of Care, 335 NEW ENG. J. MED. 1227, 1228 (1996)Google Scholar (noting that as of 1995, 63% of PSN physicians received compensation on a capitated basis). Although the agencies revised the Policy Statements in 1996 and now allow providers to form nonfinancially integrated networks, providers continue to develop risk-sharing networks. See Cincinnati Reg'l Orthopedic & Sports Med. Assoc, Inc., Dep't of Justice Bus. Rev. Letter, 6 Trade Reg. Rep. (CCH) ¶ 44,096, at 43,428 (Oct. 4, 1996).

151 See Berwick, supra note 150, at 1228. Data consistently shows that networks utilizing capitation systems have lower costs and equal or better quality than networks delivering FFS care. See id.; see also Greaney, Thomas L., National Health Care Reform on Trial: Managed Competition, Integrated Delivery Systems and Antitrust, 79 CORNELL L. REV. 1507, 1531 (1994)Google Scholar (noting that risksharing among providers alleviates the moral hazard problem in insurance because risk-sharing forces providers to bear the financial consequences of performing too many medical procedures on patients).

152 See Latham, supra note 103, at 410.

153 Id.

154 See id.

155 See id. at 412.

156 See MARC A. RODWIN, MEDICINE, MONEY & MORALS: PHYSICIANS’ CONFLICTS OF INTEREST 168-75 (1993) (stating that some HMOs currently require physicians to arbitrate malpractice claims to avoid litigation and lower award amounts).

157 See Latham, supra note 103, at 408-09; see also Berwick, supra note 150, at 1228 (stating in general that studies and data consistently show that costs are lower in managed care systems, with equal or better quality of service than that in FFS care systems).

158 See Whitner, supra note 2.

159 See BARRY R. FURROW ET AL., HEALTH LAW: CASES, MATERIALS AND PROBLEMS 15-17 (3ded. 1997).

160 See id. at 17.

161 See id.

162 See David Albertson, Feds Relax Interpretation of Antitrust Regulations; Physicians Given Go-Signal to Form Networks and Compete with Commercial Managed Care, MED. LABORATORY OBSERVER, Oct. 1996, at 16, available in LEXIS, Health Library, Curnws File (quoting the Association of Private Pension and Welfare Plans); Senate Finance Hears Pros, Cons of Antitrust Exemptions in Reform, 3 Health L. Rep. (BNA) No. 20, at 659 (May 19, 1994) (quoting Sen. Howard Metzenbaum, Chairman of the Senate Judiciary Antitrust, Monopolies, and Business Rights Subcommittee, who stated that “[antitrust exemptions do not help and could make the situation even worse for consumers if we relax our antitrust laws for doctors or hospitals.“).

163 See 1994 Policy Statements, supra note 66, at 20,788. In previous administrative proceedings, the enforcement agencies repeatedly stressed the importance of network providers sharing financial risk in their venture to avoid antitrust concerns. See, e.g., Physicians Group, Inc., 60 Fed. Reg. 25,223, 25,226 (Fed. Trade Comm'n 1995) (permitting, in a proposed consent agreement, physician participation in an “integrated joint venture“); Southbank IPA, Inc., 56 Fed. Reg. 50,912, 50,913-14 (Fed. Trade Comm'n 1991) (same). Even following the release of the 1996 Policy Statements, the agencies noted the importance of implementing a risk-sharing infrastructure to achieve cost savings and other pro-competitive efficiencies. See United States v. Health Choice of N.W. Mo., Inc., 1996-2 Trade Cas. (CCH) ¶ 71,605, at 78,289 (W.D. Mo. Oct. 22, 1996); Montana Associated Physicians, Inc., 61 Fed. Reg. 56,682, 56,683 (Fed. Trade Comm'n 1996) (stating that a proposed consent agreement would permit physicians to enter a “risk-sharing joint venture“).

164 457 U.S. 332(1981).

165 See id. at 351 (applying the per se rule). The doctors participating in the foundations did not have any financial interests in the foundations. See id. at 340. Significantly, the Court did not totally prohibit nonfinancially integrated networks from establishing fee schedules. See id. at 352-54. Rather, the Court simply held that nonfinancially integrated network doctors, themselves, may not collaborate and set prices. See id.

166 Id. at 356.

167 See id. at 356-57. For another court's application of the Maricopa principles, see Hassan v. Independent Practice Associates, 698 F. Supp. 679, 686-90 (E.D. Mich. 1988). In Hassan, a group of competing physicians established a fee schedule. See id. at 687. The court found that the providers’ collaboration was neither a rule of reason nor a per se violation of Section 1 of the Sherman Act because the providers shared a substantial financial risk in their venture. See id. at 687-91. Specifically, the providers in Hassan, utilized a risk-withhold fund, later used to compensate the network's providers for achieving cost containment and utilization goals. See id. at 682. Thus, unlike the providers in Maricopa, the providers in Hassan shared the risks of loss and opportunities for profit by implementing a risk-sharing system. See id. at 690.

168 See Maricopa, 457 U.S. at 356-57.

169 See 1996 Policy Statements, supra note 3, at 20,816-18.

170 See Maricopa, 457 U.S. at 351.

171 See Varney, supra note 53, at E52-7 to -11.

172 See United States v. HealthCare Partners, Inc., 60 Fed. Reg. 52,014, 52,021 (D. Conn. 1995) (proposing a final judgment and a competitive impact statement to enjoin defendant health care corporations from engaging in activity that restrains competition among physicians).

173 See Whitner, supra note 2; discussion supra note 44 (discussing the difficulty of distinguishing between legitimate and sham ventures).

174 See Mark J. Horoschak, Remarks Before the Washington State Hosp. Ass'n (Sept. 25, 1993), quoted in FTC Will Continue to Challenge Unsavory Joint Ventures Official Says, 1 Health Care Pol'y Rep. (BNA) No. 31, at 1314 (Oct. 11, 1993). “Substantial risk-sharing [is] the hallmark of a legitimate joint venture.” Id.

175 There are several problems with the AHCAA's and the Policy Statements’ clinical integration standards. Although the proposed legislation does give examples of types of acceptable forms of clinical integration, the Policy Statements do not specify whether the agencies will evaluate the clinical integration of a network on a prospective basis or whether a network can demonstrate clinical integration after operating for awhile. See generally Antitrust Guidelines Could Shift Power from Hospitals to Physicians, 5 Health L. Rep. (BNA) No. 43, at 1584 (Oct. 31, 1996) (describing questions the Policy Statements leave unanswered, namely, at what point in time the agencies will evaluate the physician networks). Furthermore, the AHCAA does not adequately specify when joint pricing among nonfinancially integrated network providers is reasonably necessary. See generally id. (describing questions the Policy Statements leave unanswered regarding joint pricing and nonfinancially integrated networks). Likewise, the AHCAA does not specify how much clinical integration is sufficient, or whether the clinical integration standard applies to nonphysician providers, such as dentists and independent pharmacies. See generally Rule of Reason Analysis is Seen to Spur Rapid Growth of Networks, 71 Antitrust & Trade Reg. Rep. (BNA) No. 1778, at 217, 223 (Sept. 12, 1996) (discussing questions the Policy Statements leave unanswered, namely, the guidelines’ application to nonphysician providers). Because network providers can now clinically integrate, rather than economically integrate, to receive rule of reason treatment, consumers and health plans that contract with clinically integrated networks can expect to pay more for medical services due to additional monitoring costs related to UR, quality assessment and provider selection. See id.

176 Terese Hudson, Guiding Light: Will the Justice Department's New Antitrust Guidelines Really Make a Difference to Physicians?, HOSP. & HEALTH NETWORKS, Oct. 5, 1996, available in LEXIS, Health Library, Hcare File (quoting the Chicago Blue Cross and Blue Shield Association).

177 See generally H.R. REP. No. 104-646, at 14 (1996) (discussing committee members’ criticisms of the AHCAA for failing to establish or continue to support provisions to curtail anticompetitive practices); Richards, Glenn, How Do Joint Ventures Affect Relations with Physicians?, HOSPITALS, Dec. 1, 1984, at 68, 70Google Scholar (supporting the proposition that economic shared risks found in joint ventures are important to providing physicians with incentives to contain costs). For further discussion of how a risk-sharing requirement discourages anticompetitive behavior, see infra Part V.C.1.

178 See H.R. REP. NO. 104-646, at 16; Pitofsky Remarks, supra note 119, at 49, 175-76. Some providers have joined together as clinically integrated “networks,” but the “networks” have turned out to be sham ventures designed to raise prices and restrain competition. See Physicians Group, Inc., 60 Fed. Reg. 25,223, 25,223-25 (Fed. Trade Comm'n 1995) (addressing a proposed consent order prohibiting a physicians group from agreeing with other physicians to negotiate with a thirdparty payer); Trauma Assoc. of N. Broward, Inc., 59 Fed. Reg. 63,805, 63,805 (Fed. Trade Comm'n 1994) (summarizing a consent order requiring that the corporation be dissolved in a settlement in response to allegations of unfair acts and practices and unfair methods of competition).

179 See infra Part V.C.1.

180 See infra Part V.C.2.

181 15 U.S.C. §4301 (1994).

182 See id. § 4301(b)(2).

183 See id.

184 See H.R. REP. NO. 104-646, at 17 (1996).

185 United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 222 (1940); see also Harris, Barry C. & Fenton, Kathryn M., Congress and Antitrust Exemptions: Is Statutory Antitrust Relief Necessary for Health Care Reform?, ANTITRUST BULL., Fall 1996, at 557, 561Google Scholar (noting that it is difficult to justify antitrust exemptions for a specific industry).

186 United States v. HealthCare Partners, 60 Fed. Reg. 52,014, 52,020 (Antitrust Div., Dep't of Justice 1995) (citing Arizona v. Maricopa County Med. Soc'y, 457 U.S. 332, 356-57 (1982) in the proposed final judgment and competitive impact statement).

187 See Ray, Harry B., Government Antitrust Guidelines for Health Care Providers, 31 TENN. B.J. 11, 11 & 14 (July/Aug. 1995)Google Scholar.

188 See supra note 175, discussing the shortcomings of the AHCAA's clinical integration standard. Even though groups complained that the agencies’ Policy Statements did not give providers enough guidance to establish legitimate networks, the AHCAA's focus on the rule of reason analysis, rather than per se analysis, gives providers even less guidance as to what collective actions providers can legally take. See generally Ray, supra note 187, at 11, 14 (discussing the agency practice of preferring a’ rule of reason if the physicians in a joint venture share a substantial financial risk or if bringing physicians into the joint venture results in the offering of a new product).

189 See AHA Confers with DOJ, FTC on Expanded Antitrust Guidance, 3 Health L. Rep. (BNA) No. 18, at 591 (May 5, 1994).

190 See Pitofsky Remarks, supra note 119, at 49,174; see also H.R. REP. No. 104-646, at 16 (1996) (citing cases in the health care industry involving PSNs in which the court has used the per se analysis); ROBERT H. BORK, THE ANTITRUST PARADOX: A POLICY AT WAR WITH ITSELF 267-69 (1993) (discussing the economic justifications for applying the per se rule to price-fixing agreements).

191 See H.R. REP. NO. 104-646, at 10 (discussing the Congressional Budget Office's (CBO) findings). Although this Note focuses on the price-fixing risks inherent in the AHCAA, excluding providers from joining a network is an another antitrust concern associated with provider networks. The act of excluding providers from joining a network must rationally relate to the network's legitimate competitive strategy. See Enders, supra note 54, at 821. Providers, however, are generally unsuccessful when they bring an antitrust claim against a provider network, insurer or hospital for excluding them. See Doctor's Hosp. v. Southeast Med. Alliance, 889 F. Supp. 879, 891 (E.D. La. 1995) (granting summary judgment for defendant, a provider network, on plaintiffs claims that the network wrongfully terminated plaintiffs relationship with the network in favor of contracting with a different provider); see also Fogel v. Metropolitan Life Ins. Co., 871 F. Supp. 571, 572 & 574-75 (E.D.N.Y. 1994) (holding that even though the defendant network excluded the plaintiff, the plaintiff did not have a successful antitrust claim).

192 See H.R. REP. No. 104-646, at 10. Furthermore, the CBO cannot closely predict whether the bill would spur providers to form networks, as the bill's sponsors intend. See id. at 8.

193 See id. at 8 (noting that providers seeking to prevent managed care networks from gaining market share are likely to rely on the lesser antitrust scrutiny to impermissibly collude on prices and develop strategies to impede competition).

194 See Level Playing Field, supra note 121, at 1033-34. Relaxing the antitrust laws directly affects consumers’ purchasing power and threatens a return to extreme inflation of health care costs. See Health Care Groups Urge Defeat, supra note 144, at 1344. The CBO estimates that if enacted, the AHCAA would cause health costs to increase. See H.R. REP. No. 104-646, at 10-11. Higher health costs would also reduce federal employees’ benefits. See id. Similarly, the CBO predicts that private health insurance costs will rise if the AHCAA is enacted. See id.

195 Pitofsky Remarks, supra note 119, at 49,176. Despite provider networks’ potential procompetitive attributes, some providers form networks merely to restrain competition. See Virginia v. Physician's Group, Inc., 1995-2 Trade Cas. (CCH) ¶ 71,236, at 75,977 (W.D. Va. May 16, 1995) (requiring a physician network to dissolve because members conspired to boycott third parties, fix reimbursement terms and resist payers cost-containment efforts); Montana Associated Physicians, Inc., 61 Fed. Reg. 56,682, 56,682 (Fed. Trade Comm'n 1996) (prohibiting a nonfinancially integrated provider network from continuing to obstruct the entry of managed care plans into the market, fix prices and thwart cost-containment measures); Trauma Assoc, of N. Broward County, 59 Fed. Reg. 63,805, 63,805 (Fed. Trade Comm'n 1994) (requiring, in a consent order, dissolution of the corporation accused of unfair acts and practices and unfair competition); Southbank IPA, Inc., 56 Fed. Reg. 50,912, 50,912 (Fed. Trade Comm'n 1991) (prohibiting unintegrated providers from continuing to collaborate, set prices and threaten to boycott payers).

196 See Witnesses Try to Convince Subcommittee Antitrust is No Barrier to Health Reform, 4 Medicare Rep. (BNA) No. 20 (May 14, 1993), available in 1998 Westlaw BNA-MED.

197 See H.R. REP. No. 104-646, at 8 (1996). If enacted, the AHCAA would cost the federal and state governments approximately $5 million to $15 million annually or an average of $250,000 per case to enforce the antitrust laws because law enforcers would need additional legal and investigatory resources. See id. Some cases would likely be much more expensive because they could extend over several years. See id.

198 See id. The CBO estimates that antitrust enforcement agencies will likely alter their caseloads to minimize the costs resulting from relying on a rule of reason analysis rather than a per se analysis. See id. at 10. “They would become more selective, investigating and prosecuting fewer … health care antitrust cases.” Id.

199 See generally Consumer Safeguards Thwarted FTC Challenge to Montana Merger, MOD. HEALTHCARE, July 8, 1996, at 5, 5 (detailing two Montana hospital agreements that limit profits and pay back $86 million in cost savings to consumers in exchange for merger authorization from the attorney general).

200 See id.

201 When using a messenger model, a third party or agent separately obtains information from each provider in the network regarding the fees that each provider is willing to accept. See United States v. Health Choice of N.W. Mo., Inc., 1996-2 Trade Cas. (CCH) ¶ 71,605, at 78,280 (W.D. Mo. Oct. 22, 1996). The third party does not tell this information to any of the other providers in the network, but the third party does convey it to potential purchasers and payers. See id. Following those discussions, a provider in the network makes a separate, independent and unilateral decision to accept or reject a purchaser's offer. See id.

202 See DOJ Does Not Intend to Challenge Hospice Network Proposal in New Jersey, 5 Health L. Rep. (BNA) No. 18, at 663, 664 (May 2, 1996).

203 1994 Policy Statements, supra note 66, at 20,794-95.

204 See Ga. Messenger Model, supra note 102, at 2.

205 See 1996 Policy Statements, supra note 3, at 20,831.

206 See generally FYI: Ohio Ambulance Network. Inc. (Jan. 30, 1997) http://www.ftc.gov/opa/9701/oan.htm (permitting thirteen licensed ambulance and ambulette service providers to join in a messenger model network that will offer services across Northeast and South-Central Ohio).

207 Sierra CommCare Inc., Dep't of Justice Bus. Rev. Letter, 6 Trade Reg. Rep. (CCH) ¶ 44,096, at 43,427 (Aug. 15, 1996).

208 See id.

209 See Justice Department Will Not Challenge Network of Home Health Care Providers in Mississippi (Oct. 4, 1996) http://www.usdoj.gov/opa/pr/1996/Oct96/491at.htm. The DOJ has regularly issued favorable reviews for provider networks with high provider market shares if the network implements a messenger model. See Georgia Preferred Podiatric Network, Dep't of Justice Bus. Rev. Letter, 6 Trade Reg. Rep. (CCH) ¶ 44,095, at 43,383 (Nov. 3, 1995) (providing no upper limit on the number of association members that can join the network); Preferred Podiatric Network, Dep't of Justice Bus. Rev. Letter, 6 Trade Reg. Rep. (CCH) ¶ 44,094, at 43,350 (Sept. 14, 1994) (permitting 54% of the doctors in the market to join the network, which used a messenger model).

210 Such a requirement would be consistent with previous case law and consent decrees. See Arizona v. Maricopa County Med. Soc'y, 457 U.S. 332, 351 (1982). For example, the Maricopa Court emphasized that “if a fee schedule is … desirable, it is not necessary that the doctors do the price fixing.” Id. at 352.

211 See supra note 209 and accompanying text.

212 See supra notes 207-09 and accompanying text (noting that messenger model networks reduce the risk of antitrust concerns because they do not involve price-fixing or sharing of contract information among providers).

213 457 U.S. 351 (1982).