State antitrust enforcement in health care markets
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CHAPTER VII
STATE ANTITRUST ENFORCEMENT IN
HEALTH CARE MARKETS
A. Introduction
The health care sector continues to attract attention from state
antitrust enforcers. In part, this is because of increased activity in the
industry resulting from implementation of the Affordable Care Act.1 Like
state enforcers, federal enforcers have continued to closely monitor
consolidation in the health care sector; federal enforcement efforts in the
sector have been increasingly successful.2 The hospital sector has itself
generated more litigated antitrust merger cases than any other segment of
the United States economy. According to the New York Times, between
2007 and 2012 there were almost 600 hospital mergers nationally.3
1. Forms of State Invo lvement
State involvement in health care antitrust matters takes many forms.
As discussed below, they include: multi-district, single-district, and state-
court actions against domestic and international firms that produce health
care products; enforcement actions against local providers under state
antitrust laws; actions brought under federal antitrust law, including joint
investigations and lawsuits with the DOJ and the FTC; actions by the
states after deferral by one of the federal agencies; formal opinions of
state attorneys general; advisory opinions from states’ antitrust
1. For an overview of the DOJ and FTC positio n regarding enforce ment of
antitrust laws after the enactment of the Affordable Care Act, see Final
Statement of Antitrust Enforcement Policy Regarding Accountable Care
Organizations Participating in the Medicare Shared Savings Program,
76 Fed. Reg. 67,026 (Oct. 28, 2011).
2. See, e.g., Lisa Jose Fales & Paul Feinstein, How to Turn a Losing Streak
into Wins: The FTC and Hospital Merger Enforcement, ANTITRUST, Fall
2014, at 31.
3. A Wave of Hospital Mergers, N.Y. TIMES (Aug. 12, 2013),
http://www.nytimes.com/interactive/2013/08/13/business/A-Wave-of-
Hospital-Mergers.html?_r=2&.
224 State Antitrust Enforcement Handbook
enforcement units; and recommendations and reports on competition in
health care markets.
2. History of State Health Care Antitrust Enforcement
State antitrust enforcement efforts in health care, like enforcement by
private parties and the federal agencies, began in large part after the
Supreme Court’s 1975 decision in Goldfarb v. Virginia State Bar 4 and its
1976 decision in Hospital Building Co. v. Trustees of Rex Hospital.5 The
Court in Goldfarb held that the terms “trade and commerce,” as used in
the antitrust laws, include the learned professions.6 Later decisions
confirmed that Goldfarb’s holding applies to the medical profession.7
Pre-Goldfarb case law had been unclear on this point.8
A year after Goldfarb, Rex Hospital established that even activities
of health care providers that appear local or intrastate in nature, such as
the provision of hospital services, can affect interstate commerce
sufficiently to bring the challenged conduct within the reach of the
Sherman Act.9 The Supreme Court’s subsequent decision in Summit
Health, Ltd. v. Pinhas10 suggests that most conduct that affects the
delivery of health care will have the required effect on interstate
commerce. For example, the purchase of equipment and medicines from
out-of-state vendors, the acceptance of payment from out-of-state
sources such as commercial insurers and Medicare, the treatment of
patients from outside a state, and the receipt of financing from out-of-
4. 421 U.S. 773 (1975). That same year the FTC established its health care
antitrust enforceme nt program.
5. 425 U.S. 738 (1976).
6. Goldfarb, 421 U.S. at 786–88.
medical profession is not exempt from the antitrust laws.”); Ba llard v.
Blue Shield of S.W. Va., Inc., 543 F.2d 1075, 1079 (4th Cir. 1976) (“We
perceive no material distinction between payment for legal services, as in
Goldfarb, and payment for health care . . . .”).
that medical practitioners “follow a profession and not a trade”).
9. Rex Hospital, 425 U.S. at 743.
10. 500 U.S. 322 (1991) (holding that the exclusion of one medical
practitioner from the market could have the requisite effect on interstate
commerce).
State Antitrust Enforcement in Health Care Markets 225
state sources sufficiently affect interstate commerce to confer federal
antitrust jurisdiction.11
The year 1976 was important in the history of state antitrust
enforcement for two reasons that go beyond Rex Hospital. First, the
Crime Control Act of 197612 provided $30 million in grants to the states
as seed money to establish state antitrust enforcement programs. Second,
Congress enacted the Hart-Scott-Rodino Antitrust Improvements Act,13
one part of which authorizes states to file parens patriae actions for
treble damages under the federal antitrust laws on behalf of state
residents.14
Over the many years since the Goldfarb and Rex Hospital decisions,
the antitrust issues arising in health care have become increasingly
complex. Early private lawsuits challenged hospital decisions either
denying or revoking a physician’s staff privileges.15 Early state
enforcement actions involved relatively simple price-fixing agreements,
including the promulgation of fee schedules16 and boycotts of
governmental and private insurance programs in an effort to extract
11. See, e.g., Fuentes v. South Hills Cardiology, 946 F.2d 196, 199–201 (3d
Cir. 1991).
12. Pub. L. No. 94-503, § 116, 90 Stat. 2407, 2416 (formerly codified at 42
U.S.C. § 3739(i)) (repealed 1979).
13. Pub. L. No. 94-435, 90 Stat. 1383 (1976) (codified as amended in
scattered sections of 15 U.S.C.).
14. 15 U.S.C. §15c.
15. See, e.g., Pollack v. Methodist Hosp., 392 F. Supp. 393 (E.D. La. 1975).
16. See, e.g., State ex rel. Corbin v. Ariz. Radiological Soc’y, No. C388972,
1979 WL 18696 (Ariz. Super. Ct. June 1, 1979) (consent decree enjoining
radiological society from fixing prices and from requiring members to
work only on fee-for-service basis); State v. Nurses Private Duty
Registry, Inc., No. C-1834-76, 1977 WL 18410 (N.J. Super. Ct. Ch. Div.
Dec. 12, 1977) (consent decree enjoinin g nonprofit nurse regi stry from
fixing prices or adopting fee schedules for private-duty nursing services);
State v. Downey, No. 60-213, 1975 WL 15948 (Wis. Cir. Ct. Oct. 28,
1975) (consent decree enjoining use of agreed-upon fee schedule and
pricing formulas by veteri narians).
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