Licensing Health Care Professionals, State Action and Antitrust Policy

• Author: Roger D. Blair & Christine Piette Durrance
• Position: Department of Economics, University of Florida and Department of Public Policy/University of North Carolina at Chapel Hill
• Pages: 1943-1967

1943

Licensing Health Care Professionals, State

Action and Antitrust Policy

Roger D. Blair & Christine Piette Durrance

I. INTRODUCTION ........................................................................... 1944

II. POLITICAL ECONOMY OF OCCUPATIONAL LICENSING ................ 1945

III. BOYCOTTS: THEORY .................................................................... 1949

A. ECONOMIC THEORY OF BOYCOTTS ......................................... 1949

B. SUMMARY ............................................................................. 1951

IV. EMPIRICAL EVIDENCE ON THE EFFECTS OF OCCUPATIONAL

LICENSING IN HEALTH PROFESSIONS .......................................... 1952

A. GENERAL FINDINGS IN OCCUPATIONAL LICENSING .................. 1952

B. PHYSICIANS, NURSES, AND NURSE PRACTITIONERS .................. 1954

C. DENTISTS .............................................................................. 1956

D. MIDWIVES ............................................................................. 1958

E. RADIOLOGIC TECHNICIANS .................................................... 1959

F. MASSAGE THERAPY ............................................................... 1959

G. SUMMARY ............................................................................. 1960

V. THE STATE ACTION DOCTRINE ................................................... 1960

A. CLEAR STATE PURPOSE .......................................................... 1963

B. ACTIVE STATE SUPERVISION ................................................... 1964

VI. CONCLUSION .............................................................................. 1967

 Department of Economics, University of Florida and Department of Public Policy,

University of North Carolina at Chapel Hill, respectively. Without implicating them in what

follows, we thank Keith Hylton, Rebecca Haw Allensworth, James Fishkin, and Andrew Gavil for

their comments on our paper, which was presented at the University of Iowa, Iowa Law Review

Centennial Symposium Honoring Herbert Hovenkamp. We also thank our respective institutions

for financial support.

1944 IOWA LAW REVIEW [Vol. 100:1943

I. INTRODUCTION

In Capitalism and Freedom, Milton Friedman pointed out that one

rationale for restricting the number of physicians involved the preservation of

quality.1 He explained that restricting supply will prop up physician incomes

and thereby reduce the incentives to engage in unethical behavior.2 This may

sound absurd, but a similar argument has been made more recently. In both

Goldfarb v. Virginia State Bar and National Society of Professional Engineers v. United

States, the rationale for restricting competition was the need to bribe members

of the profession to prevent their performing shoddy work.3 While this excuse

is both insulting to the members of the profession and self-serving, it has a

fatal flaw: the argument that competition is undesirable—even if true—is

inconsistent with the fundamental premise of the Sherman Act.4

In Professional Engineers, Justice Stevens explained that exemptions from

the Sherman Act’s prohibitions must come from the legislature rather than

from the Court.5 When state legislatures attempt to insulate an occupational

group from competition and the dictates of the Sherman Act, they must satisfy

the state action doctrine.6 In order to do so, the state must clearly articulate

its intention to displace competition in the market for those professional

services. The state must also actively supervise the regulation that replaced

market forces to ensure that the purported rationale to displace competition

is satisfied.7

1. MILTON FRIEDMAN, CAPITALISM AND FREEDOM 152–53 (1962).

2. Id.

3. Goldfarb v. Va. State Bar, 421 U.S. 773, 789–91 (1975); Nat’l Soc’y of Prof’l Eng’rs v.

United States, 435 U.S. 679, 693–94 (1978). In Professional Engineers,

the Society averred that the standard set out in the Code of Ethics was reasonable

because competition among professional engineers was contrary to the publi c

interest. It was averred that it would be cheaper and easier for an engineer “to design

and specify inefficient and unnecessarily expensive structures and methods of

construction.” Accordingly, competitive pressure to offer engineering services at the

lowest possible price would adversely affect the quality of engineering. Moreov er,

the practice of awarding engineering contracts to the lowest bidder, regardless of

quality, would be dangerous to the public health, safety, and welfare.

Id. at 684–85 (internal citation omitted).

4. In Professional Engineers, Justice Stevens pointed out that “the Rule of Reason does not

support a defense based on the assumption that competition itself is unreasonable.” Prof’l Eng’rs,

435 U.S. at 696.

5. Id. at 689–90.

6. In contrast to our focus on health care professions, Edlin and Haw have analyzed the

economic effects of licensing professions more broadly. They have concluded that the st ate action

doctrine should not immunize a licensed profession from antitrust scrutiny. Licensing should

remove per se treatment, but not insulate a licensing board from antitrust scrutiny under the rule

of reason. See generally Aaron Edlin & Rebecca Haw, Cartels by Another Name: Should Licensed

Occupations Face Antitrust Scrutiny?, 162 U. PA. L. REV. 1093 (2014).

7. The state action doctrine can be traced to Parker v. Brown, 317 U.S. 341 (1943). At issue

in Parker was a state program that was designed to raise the price of raisins for the benefit of