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
 
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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

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