Physician's Guide to Medicine - Antitrust

What are the antitrust laws, and what do they generally prohibit?
What is required for there to have been a violation of Section One of the Sherman Act?
Why are insurance companies or HMO´s allowed to set prices?
What are good general principles for a physician to keep in mind in avoiding antitrust violations?
Why is the state or federal government permitted to limit a physician´s fees?
What guidelines exist for physician joint ventures?
How do the antitrust laws affect Independent Practice Associations (IPAs) and physician-controlled Preferred Provider Organizations (PPOs)?
Why are IPAs so risky if there are IPAs in existence which have not had problems
Why may physicians generally not form a labor union?

What are the antitrust laws, and what do they generally prohibit?

The language of the most well known of the antitrust laws the Sherman Act is really rather simple, but its application is complicated. For that reason, it is impossible to become knowledgeable quickly about the antitrust laws. However, one can become somewhat sensitive to problem areas.

When a potential problem is recognized, always seek advice from an attorney experienced in dealing with antitrust issues. An overview of the Sherman Act can help acquaint you with some of the key antitrust prohibitions.

Sections One and Two of the Sherman Act state:

Section 1 Every contract, combination, or conspiracy in restraint of trade or commerce is declared to be illegal.

Section 2 Every person who shall monopolize or attempt to monopolize or combine or conspire with any person or persons, to monopolize any part of the trade or commerce among the several states shall be deemed guilty of a felony.

What is required for there to have been a violation of Section One of the Sherman Act?

Generally, there first must be an agreement between two or more individuals or entities. If you are not speaking, thinking, or acting with a legally separate individual or entity, chances are you will not violate Section One of the Sherman Act. Employees and shareholders of the same entity are generally considered to be incapable of agreeing. The second thing that is required is an agreement which unreasonably restrains competition. Unquestionable violations would include the following:

(1) An agreement between two or more independent physician practices regarding prices for medical services;

(2) An agreement among two or more independent physician practices regarding patients they will treat and services they will offer; and

(3) Two or more independent physician practices agreeing not to deal with a particular competitor, health care entity, or man- aged care plan.

Why are insurance companies or HMO´s allowed to set prices?

The business of insurance is exempt from antitrust laws. When does a professional corporation of physicians grow so large it may be subject to claims of a monopoly? Generally, when there is power to increase and maintain prices above a competitive level for a long period of time. This answer changes depending upon interpretations given by various courts. Merely having a monopoly does not, by itself, violate the law. Generally speaking, antitrust laws are violated when a monopoly forms or increases through anti-competitive conduct.

What are good general principles for a physician to keep in mind in avoiding antitrust violations?

(1) Distinguish between other members of the entity you are a part of and "outsiders;"

(2) Never talk about fees or operational issues, such as hours of operation or geographic areas served, with any physician who is not a member of your practice, unless you have obtained advice from an attorney experienced in antitrust matters;

(3) If you have taken, or are taking steps, that will result in your having a significant percentage of the market in your geographical area, consult with an attorney who is experienced in antitrust matters.

Why is the state or federal government permitted to limit a physician´s fees?

Antitrust laws do not apply to actions of the federal or state governments.

What guidelines exist for physician joint ventures?

In 1996 the U.S. Department of Justice and the Federal Trade Commission released a set of guidelines for physician joint ventures. Under the new guidelines:

(1) Non-capitated physician ventures will be judged by the "rule of reason" rather than being viewed as per se illegal when a single price for services is agreed upon. The guidelines say "it is unlikely" that joint ventures in competitive markets would raise substantial antitrust concerns;

(2) Networks of physicians as large as fifty percent will be viewed as reasonable in competitive markets if they are non-exclusive and meet standard joint venture criteria; and

(3) The agencies acknowledge the market for medical services has significantly changed and there are substantial benefits of physician joint ventures that patients should be given the option of selecting.

It must be understood that while these guidelines are instructive, the antitrust laws are exceedingly complex. Anyone contemplating a joint venture should seek competent legal counsel.

How do the antitrust laws affect Independent Practice Associations (IPAs) and physician-controlled Preferred Provider Organizations (PPOs)?

Given the complexity of antitrust laws, there is no broad statement applicable to such arrangements. Determinations of compliance with federal and state antitrust laws are extremely fact-specific. Generally, physician controlled IPAs may not agree on fees. Some IPAs have been found to have violated the antitrust laws; at least one IPA has even been forced by the Federal Trade Commission to dissolve.

Enforcement authorities are most sensitive to what they consider to be "sham" IPAs and PPOs. Such entities are considered to be a sham when there is insufficient economic integration or risk-sharing. Physician-controlled IPAs that only accept global capitation contracts and IPAs with other types of risk sharing contracts may be considered to have economic integration and thus may be able to avoid antitrust problems if they adhere to strict guidelines.

Enforcement authorities have suggested there may be a way to legally operate a physician-controlled IPA even without integration, by using an independent third party as a "messenger" to negotiate fees on behalf of IPA members. Simply put, however, there is no clear answer in this area of the law, and expert legal advice is always necessary.

Why are IPAs so risky if there are IPAs in existence which have not had problems?

For the most part, unless it receives a complaint, the FTC has no way of knowing of the existence of an IPA. But if a complaint is filed, for example, by a competitor, hospital, or managed care company, the FTC will investigate. The more successful such an entity becomes, the greater likelihood a complaint will be filed. Complaints filed with the FTC are confidential and you will never know who complained.

Why may physicians generally not form a labor union?

Generally, labor laws only permit unions to be formed to represent employees, not independent contractors. In nearly all cases, there is no employer/employee relationship between physicians and those with whom they wish to negotiate. Even if an employer/employee relation- ship exists, physicians are usually considered supervisory personnel who are not permitted to unionize.