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Cost Containment in the Health Care Field and the Antitrust Laws

Published online by Cambridge University Press:  24 February 2021

David I. Shapiro
David I. Shapiro*
Affiliation:
New York and District of Columbia bars
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Abstract

The Supreme Court of the United States and other courts currently are considering the question of the extent to which the health care field should be subject to antitrust rules. This Article explores the special characteristics of the health care field, and the problems they create for antitrust analysis. Two current cases—Arizona v. Maricopa County Medical Society (awaiting decision by the Supreme Court) and Kartell v. Blue Shield of Massachusetts, Inc. (pending in the District of Massachusetts)—illustrate the issues raised by efforts to contain health care costs through the setting of maximum fees. This Article suggests that traditional antitrust principles should and will prevail over arguments that such restraints are in the public interest.

Type
Articles
Information
American Journal of Law & Medicine , Volume 7 , Issue 4 , Winter 1982 , pp. 425 - 435
Copyright
Copyright © American Society of Law, Medicine and Ethics and Boston University 1982

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Footnotes

1

This Article expands somewhat on a speech given by the author at the conference on “Health Law—What It's All About” sponsored by the Boston Conference and Tufts University School of Medicine, September 17-18, 1981. The author is counsel for plaintiffs in., Kartell v. Blue Shield of Mass., Inc., reference to which is made in this Article.

References

1 See, e.g., P. PROGER, ANTITRUST IN THE HEALTH CARE FIELD (1979); M. THOMPSON, ANTITRUST & THE HEALTH CARE PROVIDER (1979); Borsody, The Antitrust Laws & Health Care Provider, 12 AKRON L. REV. 417 (1979); Bovbjerg, Competition Versus Regulation in Medical Care: An Overdrawn Dichotomy, 34 VAND. L. REV. 965 (1981); Horan & Nord, Application of Antitrust Law to the Health Care Delivery System, 9 CUM. L. REV. 685 (1979);.Leibenluft & Pollard, Antitrust Scrutiny of the Health Professions: Developing a Framework for Assessing Private Restraints, 34 VAND. L. REV. 927 (1981); Rosoff, Antitrust Laws ir the Health Care Industry, 23 ST. LOUIS U.L.J. 446 (1979); Symposium on the Antitrust Laws & the Health Services Industry, 1978 DUKE L.J. 303-697; Weller, Medicaid Benefits & Other Maladies from Medical Monopolists, 11 CLEARINGHOUSE REV. 99 (1977); Heither, Antitrust & the Health Care Industry: Issue Identification—Antitrust and Third Party Insurers, presented at the American Bar Association Joint’ Program of the Section of Antitrust Law and Forum Committee on Health Law, Washington, D.C. (ABA Joint Program) on Sept. 24, 1981; Rankin & Wilson, Sausalito Pharmacy and the Antitrust Consequences of Insurer-Imposed Maximum Limitations of Fees, presented at the ABA Joint Program.

2 421 U.S. 773 (1975).

3 See id. at 786 n.15 (“until the present case it is clear that we have not attempted to decide whether the practice of a learned profession falls within § 1 of the Sherman Act“).

4 15 U.S.C. §§ 1-77 (1976).

5 E.g., Federal Baseball Club v. National League, 259 U.S. 200, 209 (1922) (“a firm of lawyers sending out a member to argue a case … does not engage in … commerce because the lawyer … goes to another State“); FTC v. Raladam Co., 283 U.S. 643, 653 (1931) (medical profession not a “trade“); see generally Note, The Application of the Sherman Act to Legal Practice and Other “Non-commercial Activities,” 82 YALE L.J. 313 (1972). But see United States v. National Ass'n of Real Estate Bds., 359 U.S. 485, 492 (1950); American Medical Ass'n v. United States, 317 U.S. 519, 528 (1943).

6 15 U.S.C. § 1 (1976).

7 Respondents also argued (1) that their activities did not occur in or affect interstate commerce and (2) that the activities were “state action” within the meaning of Parker v. Brown, 317 U.S. 341 (1943). Goldfarb, 421 U.S. at 783-86, 788-92.

8 421 U.S. at 786-88.

9 421 U.S. at 788.

10 421 U.S. at 786 n.16.

11 Id.

12 Id. at 783.

13 Id. at 788 n.17.

14 435 U.S. 679 (1978) [hereinafter cited as Professional Engineers].

15 Id. at 696.

16 Id. at 688.

17 Id. at 684, 684 n.6.

18 Id. at 684.

19 Id. at 685.

20 Id. at 695.

21 Id. at 693. Although Professional Engineers sheds an important light on the rule of reason by making it clear that the criterion of reasonableness under that rule is limited to that involving competitive conditions. Justice Stevens’ opinion held that the Society's ban against competitive bidding was unreasonable “[o]n its face” and considered the Society's reasonableness argument only as an “affirmative defense.” Id. The precise relationship among per se,*∼facial unreasonableness, and rule of reason analyses remains undefined. But see United States v. Realty Multi-List, Inc., 629 F.2d 1351, 1369-87 (5th Cir. 1980) (applying facial unreasonableness theory) and Broadcast Music, Inc. v. CBS, 441 U.S. 1, 17 n.27, 19 n.33 (1979) (determination whether to apply per se rule must not subsume normal rule of reason analysis).

22 Professional Engineers simply reaffirms Justice Brandeis’ statement in Chicago Bd. of Trade v. United States, 246 U.S. 231, 238 (1918), that in considering whether a restraint promotes or suppresses competition, a court should examine “the facts peculiar to the business to which the restraint is applied.” See Continental T.V., Inc. v. GTE Sylvania, Inc., 443 U.S. 36, 49, 49 n.15 (1977). Professional Engineers underscores that early Supreme Court cases “foreclose the argument that because of the special characteristics of a particular industry, monopolistic arrangements will better promote trade and commerce than competition.” Professional Eng'r, 435. U.S. at 689 (citing United States v. Trans Mo. Freight Ass'n, 166 U.S. 290 (1897); United States v. Joint Traffic Ass'n, 171 U.S. 505, 573-77 (1898).

23 Halper, The Health Care Industry and the Antitrust JLaws, 49 ANTITRUST L.J. 17, 31 (1980).

24 Northern Pac. Ry. Co. v. United States, 356 U.S. 1, 4 (1958).

25 See generally Kallstrom, Health Care Cost Control by Third Party Payors: Fee Schedules and the Sherman Act, 1978 DUKE L.J. 645, 647-48.

26 See, e.g., Arizona v. Maricopa County Medical Soc'y, 643 F.2d 553, 556 (9th Cir. 1980), cert, granted, 49 U.S.L.W. 3663 (March 9, 1981) (No. 80-419).

27 See generally Havighust, Professional Restraints on Innovation in Health Care Financing, 1978 DUKE L.J. 303; Kallstrom, supra note 25, passim.

28 The activities in question were part of a strategy to defeat the Carter Administration health care cost containment proposal.

29 Letter from Hugh P. Morrison, Acting Assistant Attorney General, Antitrust Division, U.S. Department of Justice, to Richard J. Wertheimer, Esq. (June 12, 1978) at 2.

30 See, e.g., Albrecht v. Herald Co., 390 U.S. 145 (1968); Keifer-Stewart Co. v. Joseph E. Seagram & Sons, Inc., 340 U.S. 211 (1951); Greene v. General Foods Corp., 517 F.2d 635 (5th Cir.), cert, denied, 424 U.S. 942 (1975).

31 United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 223 (1940).

32 Kiefer-Stewart Co. v. Seagram & Sons, 340 U.S. 211, 213 (1951).

33 Albrecht v. Herald Co., 390 U.S. 145, 152-53 (1968).

34 Arizona v. Maricopa County Medical Soc'y, 643 F.2d 553 (9th Cir. 1980), cert, granted, 49 U.S.L.W. 3663 (March 9, 1981) (No. 80-419); Kartell v. Blue Shield of Mass., Civil Action No. 78-594-G (D. Mass, filed Mar. 14, 1978).

35 See, e.g., Joint Brief for Respondents at 38, Arizona v. Maricopa County Medical Soc'y, 643 F.2d 553 (9th Cir. 1980), cert, granted, 49 U.S.L.W. 3663 (March 9, 1981) (No. 80-419).

36 Professional Engineers, 435 U.S. 679, 689.

37 See note 26 supra.

38 643 F.2d 553, 556-60 (9th Cir. 1980), cert, granted, 49 U.S.L.W. 3663 (March 9, 1981) (No. 80-419).

39 Id. at 560.

40 Id. at 560-69 (Larson, J.).

41 Id. at 564.

42 Id. at 564, 566.

43 Id. at 567.

44 Id. at 569 (citing United States v. Trenton Potteries, 273 U.S. 392 (1927)).

45 Brief for the United States as Amicus Curiae at 17, Arizona v. Maricopa County Medical Soc'y, 643 F.2d 553 (9th Cir. 1980), cert, granted, 49 U.S.L.W. 3663 (March 9, 1981) (No. 80-419)….

46 Civil Action No. 78-594-G (D. Mass, filed Mar. 14, 1978). The author is counsel for plaintiffs in Kartell.

47 Parker v. Brown, 317 U.S. 341 (1943)..

48 Kartell v. Blue Shield of Mass., Inc., 592 F.2d 1191 (1st Cir. 1979).

49 Kartell v. Blue Shield of Mass., Inc., Kartell v. Blue Shield of Mass., Civil Action No. 78-594-G (D. Mass, filed Mar. 14, 1978).

50 See note 29 supra. While Blue Shield raised a separate defense of exemption under the McCarran-Ferguson Act, 15 U.S.C. §§ 1011-15 (1977), upon which the courts have not ruled, that defense appears negated by the intervening decision in Group Life & Health Ins. Co. v. Royal Drug Co., 440 U.S. 205, 215 (1979) (rejecting claim that a Blue Shield plan limiting pharmacy prices was exempt as involving the “business of insurance“).

51 National Gerimedical Hosp. and Gerontology Center v. Blue Cross of Kansas City and Blue Cross Ass'n, 69 L.Ed. 2d 89, 101 S.Ct. 2415 (1981).

52 National Gerimedical Hosp. and Gerontology Center v. Blue Cross of Kansas City and Blue Cross Ass'n, 628 F.2d 1050 (1980).

53 101 S.Ct. 2423.

54 Id. at 2424.