Industry-Specific Application of the Doctrine

There are certain industries in which the state action doctrine is most
commonly encountered. These include health care, energy and utilities,
transportation, and the regulation of professionals. This chapter
addresses the application of the state action doctrine in each of these
A. Health Care
The state action doctrine is frequently invoked by participants in the
health care industry. The doctrine’s application to state-operated or
owned hospitals, certificates of need (CONs), and staff privileges and
peer review, is discussed below.
1. State-Operated or Owned Hospitals
Several states have enacted legislation allowing municipalities or
other political subdivisions to operate hospitals or health care districts.
Courts generally have held that public hospitals are municipal or political
actors entitled to the protections of the state action doctrine so long as the
challenged regulation or conduct stems from a clearly articulated state
policy.1 Based on their status as municipalities, public hospitals are not
1. See, e.g., FTC v. Phoebe Putney Health Sys., Inc., 133 S. Ct. 1003, 1010
(2013) (finding that hospital authority was a substate govern mental entity,
but was not entitled to state-action immunity from antitrust laws because
its actions did not satisfy clear articulation requirement); Lafaro v. N.Y.
Cardiothoracic Group, 570 F.3d 471, 477-78 (2d Cir. 2009) (treating
public benefit corporation that operated medical center as a municipality
for purposes of state action doctrine); Jackson, Tenn. Hosp. Co. v. W.
Tenn. Healthcare, 414 F.3d 608, 611-12 (6th Cir. 2005) (holding that
public hospital constituted political subdivi sion and was immune from
antitrust challenge so long as it acted pursua nt to a clearly expressed
state policy); Crosby v. Hosp. Auth. of Valdosta & Lowndes Cnty., 93
F.3d 1515, 1525 (11th Cir. 1996) (holding that public hospital author ity
98 State Action Practice Manual
required to meet the active supervision prong of the Midcal test in order
to establish an antitrust exemption for a challenged regulation or course
of conduct.2
For example, in Crosby v. Hospital Authority of Valdosta and
Lowndes County3 the Eleventh Circuit determined that, based on a state
statute conveying broad public powers to the hospital authority,
combined with the state supreme court’s historical interpretation of the
hospital as a governmental entit[y],the defendant hospital authority
constituted a municipality for state action purposes.4 The court then had
only to examine whether the state, through its statutes, “clearly
articulate[d] a policy authorizing the challenged anticompetitive
To satisfy the clear articulation requirement, the anticompetitive
effect of the delegated action must be the foreseeable resultof the state
authorization; the state legislature is not required to explicitly authorize
or anticipate specific anticompetitive effects.6 Applying this standard,
qualified as a political subdivision and was subj ect only to clear
articulation test); Martin v. Meml Hosp. at Gulfport, 86 F.3d 1391, 1398-
99 (5th Cir. 1996) (holding that public hospital was a state subdivision or
municipal corporation, and need prove only that it acted p ursuant to a
clearly articulated and affirmatively expressed state policy); FTC v.
Hosp. Bd. of Dirs. of Lee Cnty., 38 F.3d 1184, 1188 (11th Cir. 1994)
(holding that healt h care authority was a political subdivision subject o nly
to clear articulation test because it was a special purpose unitof local
2. See, e.g., Crosby, 93 F.3d at 1521-25; Martin, 86 F.3d at 1397; Hosp. Bd.
of Dirs. of Lee Cnty., 38 F.3d at 1188.
3. 93 F.3d 1515 (11th Cir. 1996).
4. Id. at 1523-26.
5. Id. at 1532 (quoting Hosp. Bd. of Dirs. of Lee Cnty., 38 F.3d at 1187-88).
6. Id. (quoting Hosp. Bd. of Dirs. of Lee Cnty., 38 F.3d at 1189 (emphasis
added), and citing Town of Hallie v. Cit y of Eau Claire, 471 U.S. 34, 42
(1985)); see also Phoebe Putney, 133 S. Ct. at 1012-13 (Thus, we have
concluded that a state policy to displace federal antitrust law was
sufficiently expressed where the displacement of competition was the
inherent, logical, or ordinary result of the exercise of authority delegated
by the state legislature.); Crosby, 93 F.3d at 1534 (citing to cases
observing that reasonable anticipatio n does not require explicit
authorization to enga ge in anticompetiti ve conduct); Jackson, Tenn.
Hosp., 414 F.3d at 612 (The state legislature need not explicitly
authorize anticompetitive conduct, as long as anticompeti tive effect
would logically result from the authority gra nted by the state.);
Redwood Empire Life Support v. Cnty. of Sonoma, 190 F.3d 949, 955

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