Yesterday the U.S. Court of Appeals for the Ninth Circuit gave the nation’s doctors some good news on the antitrust front. While hardly an unconditional validation that physicians enjoy the same individual rights as any other citizen, the three-judge panel’s unanimous ruling in International Healthcare Management v. Hawaii Coalition for Health nevertheless makes a good-faith effort to put some limits on the ability of government-supported HMOs to force doctors to act against their will.
The case arises from a 1997 contract negotiation between Blue Cross/Blue Shield and physicians in Hawaii. That year, the Hawaii Medical Association and several independent physician groups formed a “consortium” with the Hawaii Coalition for Health, a consumer group composed principally of physicians. This consortium basically reviewed the Blue Cross contract proposal and issues recommendations, which individual physicians were completely free to accept or reject in deciding whether to sign the Blue Cross proposal.
International Healthcare Management, another provider network and competitor with Blue Cross, entered the market in 1998 and began offering contracts to physicians. The consortium once again provided a review and advisory role. The consortium also entered discussions with IHM about certain elements of their proposal, although apparently not about actual reimbursement levels. In any case, in June 1998, the consortium sent out an “alert” to its members, notifying them of ongoing problems with the IHM proposal. In the aftermath of this “alert,” several hundred physicians still agreed to join IHM’s network, though apparently not enough. IHM ceased its recruiting efforts and sued the various participants in the consortium for violating the Sherman Act.
The trial judge found no evidence to support IHM’s Sherman Act claims, and granted the consortium’s request for summary judgment in their favor. On appeal to the Ninth Circuit, IHM argued “that the district court erroneously held that it is lawful for physician associations to negotiate with health plans on behalf of their competing physician members.” This is a very broad claim, encompassing not just negotiations over prices, but essentially any discussion among “competing” physicians. In recent FTC and Justice Department cases, the government has actually pursued a similar goal, although they usually hide that fact by concurrently (and often falsely) alleging price-fixing. Here, IHM argued price-fixing could be inferred from the consortium’s activities. Thankfully, the Ninth Circuit found that inference was not a substitute for evidence, and that none of the alleged consortium activities came close to violating the Sherman Act. Even the “alert” that was issued contained no specific information regarding price terms, and in fact the alert came after Hawaii’s state insurance commissioner urged physicians to delay considering the IHM contract until certain non-price issues could be cleared up. Thus, the Ninth Circuit, in an opinion authored by Circuit Judge Pamela Ann Rymer, affirmed the lower court’s summary judgment, finding no reversible error.
The heart of the Ninth Circuit’s opinion deals with the scope of the “per se rule,” the doctrine under which a particular class of activity is illegal under the antitrust laws regardless of context. In physician cases, HMOs and government antitrust enforcers have sought to impose a very wide definition of “per se,” to the point, as noted above, where the mere act of communication among competing physicians is sufficient to justify an antitrust charge. It is, for all intents and purposes, a slipper slope argument: If competing doctors have a legal right to talk to one another about HMO contract terms, they will inevitable conspire to “fix prices” and harm consumers.
The Ninth Circuit wisely chose not to adopt this all-encompassing view of “per se.” Instead they maintained what is supposed to be the correct judicial standard; namely, that “[p]er se categories are not to be expanded indiscriminately to new factual situations.” The consortium members correctly claimed “that it was entitled to express its opinions and to share information about health care plans, whether or not its opinions carried weight and regardless of market effects.” The per se rule only extends to overt acts of price-fixing, not mere discussions among “competing” individuals. Nor did the appellate court accept IHM’s assertion that patient welfare would be harmed by permitting physicians to exchange thoughts on proposed contracts: “Disseminating information that fosters rational business decisions is pro-competitive.”
In short, this case was a total vindication of the Hawaii physicians’ position, although the scope of the ruling did not break much new ground in terms of expanding protection of individual rights. The Ninth Circuit simply prevented HMOs from further eroding what little protections currently remain. Nevertheless, this decision should be greeted warmly, because it provides a useful tool in refuting the federal government’s own claims in favor of expanding the “per se” rule to effectively silence physicians who attempt to speak with one another about managed care contracts. This also demonstrates why it is essential to get physician antitrust prosecutions out of the unilateral control of the FTC and DOJ and into the courts, because independent judges tend to hold antitrust prosecutors to at least minimal standards of rationality.