Law & Medicine

QUESTION: The medical staff at the newly opened hospital is putting together a set of bylaws covering credentialing, peer review, and patient-care quality assurance. The doctors are mostly independent contractors and not hospital employees. The administration, obsessed with financial solvency, wishes to retain veto power over decisions affecting staff privileges. In potential disputes affecting the hospital and its medical staff, which of the following is true?

A. The Joint Commission subscribes to the view that hospital administration rather medical staff has overall authority over clinical privileges decisions.

B. Economic credentialing is universally regarded as unethical and illegal.

C. Medical bylaws are a contractual agreement.

D. A hospital can never make unilateral changes in the medical staff bylaws.

E. The medical staff is an integral part of the hospital’s organizational structure, with its powers wholly independent of the hospital’s governing board.

BEST ANSWER: A. Doctors with hospital privileges typically organize themselves into a formal medical staff, with its powers derived from the hospital’s governing board. Professional organizations such as the American Medical Association believe that the medical staff of a facility should be self governing, with its own enforceable set of bylaws. The general view is that these bylaws do not create a binding contractual agreement.

For example, when Dr. George T. O’Byrne sued Santa Monica–UCLA Medical Center where he held medical staff privileges, the California Court of Appeal ruled that the hospital’s fiduciary duty is to its shareholders and the public – but not to its physicians – and that the medical staff bylaws did not constitute a contract (OByrne v. Santa Monica-UCLA Medical Center, 114 Cal.Rptr.2d 575 [Cal. Ct. App. 2001]).

A similar situation appears to hold in Minnesota, where the medical staff accused Avera Marshall Regional Medical Center of unilateral credentialing and revision of the bylaws, and interference with quality assurance operations (Avera Marshall Medical Staff v. Avera Marshall Regional Medical Center, 836 N.W.2d 549 [Minn. Ct. App. 2013]). Both the trial court and the court of appeals have held that the medical staff lacked the legal capacity to bring a lawsuit and that the bylaws were not a contract (the final decision of the Minnesota Supreme Court is pending).

The Joint Commission’s view is that the hospital administration has the ultimate authority over clinical privileges of its medical staff, in support of the legal doctrine that a hospital can be held liable for the torts of its practitioners. This notion of corporate liability, which includes negligent credentialing, stemmed from the seminal Darling case (Darling v. Charleston Community Hospital, 211 N.E.2d 253 [Ill. 1965]) where the court held the hospital liable for failing to adequately review the qualifications and performance of a negligent medical staff member. Dr. Alexander, the doctor at issue, had applied a plaster cast too tightly, which caused the college football player to eventually lose his leg.

Other cases followed, including the infamous California case of Gonzales v. Nork, 573 P.2d 458 (Cal. 1978), in which a drug-abusing doctor misrepresented himself as being qualified to perform laminectomies. Even in jurisdictions such as Minnesota, which does not specifically recognize negligent credentialing as a legal cause of action, its supreme court has allowed this legal theory to go forward.

Two recurring issues tending to embroil hospital and staff in conflict are unilateral actions by a medical center and the use of economic credentialing.

The usual procedure for amending the bylaws is for the medical staff to initiate and approve changes before subjecting them for final endorsement by the hospital board. Thus, when a Florida hospital unilaterally refused to re-credential two qualified radiation oncologists because of its intention to exclusively contract with the University of Miami School of Medicine for all radiation oncology procedures, the jury found in favor of the aggrieved doctors, awarding them $2.5 million in lost profits and $20.25 million in punitive damages (Columbia/JFK Medical Center v. Spunberg, 784 So.2d 541 (Fla. App. Ct. 2001).

Likewise, a small Georgia hospital tried to close its cardiology department in order to enter into an exclusive contract with a separate group of cardiologists. The Georgia Court of Appeals held that a hospital could not deprive physicians of access to its facilities unless stated in the bylaws or specifically agreed to in an individual contract (Satilla Health Services v. Bell, 633 S.E.2d 575 [Ga. Ct. App. 2006]).

However, under some narrow circumstances, a hospital can act unilaterally, without medical staff agreement, especially where the bylaws are silent on the point. Illinois recently ruled that a medical center could, without physician assent, increase physician malpractice premium limits to $1,000,000 per occurrence and $3,000,000 aggregate for multiple occurrences (from $200,000 and $600,000, respectively). Its appellate court allowed the change, holding that physician enforcement of its bylaws were restricted only to matters of clinical competence (Fabrizio v. Provena United Samaritans, 857 N.E.2d 670 [Ill. S.Ct. 2006]).

And in Lo v. Provena Covenant Hospital, 796 N.E.2d 607 (Ill. App. Ct. 2003), a hospital unilaterally and summarily suspended a cardiovascular surgeon who allegedly had twice the national mortality rate. The medical staff leadership had not been responsive to the hospital’s concern of imminent danger to patients. The Illinois Appellate Court made the finding that in this "anomalous" case, the hospital’s actions were neither arbitrary, capricious, nor in violation of the bylaws.

A second area of conflict between doctors and hospitals is hospitals’ use of economic factors in credentialing, where financial factors are used to profile – and determine – a physician’s application for privileges.

For example, a staff gynecologist risked losing her 19-year membership at Baptist Health Medical Center in Little Rock, Ark., because her physician-husband owned an interest in a competing hospital specializing in spinal surgery. The case settled when the husband divested his competing ownership. In Arkansas, the courts have ruled that Baptist Health’s policy wherein a physician who holds a financial interest in a competing hospital is ineligible for privileges at any Baptist Health hospital is both unconscionable and illegal, and the hospital economic credentialing policy tortiously interfered with the physicians’ existing and prospective business relationships (Murphy v. Baptist Health, 373 S.W.3d 269 [Ark. 2010]).

But other jurisdictions have not adopted this view. The South Dakota Supreme Court has ruled that a hospital administration may refuse applicants to the medical staff based on economic criteria (

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Mahan v. Avera St. Lukes, 621 N.W.2d 150 [S.D. S.Ct. 2001]). The court questioned the legal right of certain members of the medical staff to open a competing ambulatory surgery center. In a subsequent case, the same court held that in the absence of specific prohibitions in the bylaws, a hospital could use economic credentialing in its staffing determinations.

Even for physicians with only an occasional hospital practice, the following pointers from the book "The Biggest Legal Mistakes Physicians Make and How to Avoid Them," edited by Steven Babitsky and James J. Mangraviti Jr., may prove useful:

1) Failing to practice in a collegial manner.

2) Impugning the quality of care of the hospital, nurses, and other physicians.

3) Not knowing the hospital’s policies and procedures.

4) Not involving consultants when the issue is out of one’s specialty.

5) Not accepting constructive criticism and suggestions.

6) Failing to seek approval before prescribing unorthodox drugs or treatment.

7) Failing to respond promptly to inquiries about care or behavior.

8) Failing to follow up on an agreement resolving an issue.

9) Acting as though the hospital is lucky to have such a physician.

10) Not calling a lawyer when necessary.

Dr. Tan is professor emeritus of medicine and former adjunct professor of law at the University of Hawaii. This article is meant to be educational and does not constitute medical, ethical, or legal advice. Some of the articles in this series are adapted from the author’s 2006 book, "Medical Malpractice: Understanding the Law, Managing the Risk," and his 2012 Halsbury treatise, "Medical Negligence and Professional Misconduct." For additional information, readers may contact the author at [email protected].

QUESTION: The medical staff at the newly opened hospital is putting together a set of bylaws covering credentialing, peer review, and patient-care quality assurance. The doctors are mostly independent contractors and not hospital employees. The administration, obsessed with financial solvency, wishes to retain veto power over decisions affecting staff privileges. In potential disputes affecting the hospital and its medical staff, which of the following is true?

A. The Joint Commission subscribes to the view that hospital administration rather medical staff has overall authority over clinical privileges decisions.

B. Economic credentialing is universally regarded as unethical and illegal.

C. Medical bylaws are a contractual agreement.

D. A hospital can never make unilateral changes in the medical staff bylaws.

E. The medical staff is an integral part of the hospital’s organizational structure, with its powers wholly independent of the hospital’s governing board.

BEST ANSWER: A. Doctors with hospital privileges typically organize themselves into a formal medical staff, with its powers derived from the hospital’s governing board. Professional organizations such as the American Medical Association believe that the medical staff of a facility should be self governing, with its own enforceable set of bylaws. The general view is that these bylaws do not create a binding contractual agreement.

For example, when Dr. George T. O’Byrne sued Santa Monica–UCLA Medical Center where he held medical staff privileges, the California Court of Appeal ruled that the hospital’s fiduciary duty is to its shareholders and the public – but not to its physicians – and that the medical staff bylaws did not constitute a contract (OByrne v. Santa Monica-UCLA Medical Center, 114 Cal.Rptr.2d 575 [Cal. Ct. App. 2001]).

A similar situation appears to hold in Minnesota, where the medical staff accused Avera Marshall Regional Medical Center of unilateral credentialing and revision of the bylaws, and interference with quality assurance operations (Avera Marshall Medical Staff v. Avera Marshall Regional Medical Center, 836 N.W.2d 549 [Minn. Ct. App. 2013]). Both the trial court and the court of appeals have held that the medical staff lacked the legal capacity to bring a lawsuit and that the bylaws were not a contract (the final decision of the Minnesota Supreme Court is pending).

The Joint Commission’s view is that the hospital administration has the ultimate authority over clinical privileges of its medical staff, in support of the legal doctrine that a hospital can be held liable for the torts of its practitioners. This notion of corporate liability, which includes negligent credentialing, stemmed from the seminal Darling case (Darling v. Charleston Community Hospital, 211 N.E.2d 253 [Ill. 1965]) where the court held the hospital liable for failing to adequately review the qualifications and performance of a negligent medical staff member. Dr. Alexander, the doctor at issue, had applied a plaster cast too tightly, which caused the college football player to eventually lose his leg.

Other cases followed, including the infamous California case of Gonzales v. Nork, 573 P.2d 458 (Cal. 1978), in which a drug-abusing doctor misrepresented himself as being qualified to perform laminectomies. Even in jurisdictions such as Minnesota, which does not specifically recognize negligent credentialing as a legal cause of action, its supreme court has allowed this legal theory to go forward.

Two recurring issues tending to embroil hospital and staff in conflict are unilateral actions by a medical center and the use of economic credentialing.

The usual procedure for amending the bylaws is for the medical staff to initiate and approve changes before subjecting them for final endorsement by the hospital board. Thus, when a Florida hospital unilaterally refused to re-credential two qualified radiation oncologists because of its intention to exclusively contract with the University of Miami School of Medicine for all radiation oncology procedures, the jury found in favor of the aggrieved doctors, awarding them $2.5 million in lost profits and $20.25 million in punitive damages (Columbia/JFK Medical Center v. Spunberg, 784 So.2d 541 (Fla. App. Ct. 2001).

Likewise, a small Georgia hospital tried to close its cardiology department in order to enter into an exclusive contract with a separate group of cardiologists. The Georgia Court of Appeals held that a hospital could not deprive physicians of access to its facilities unless stated in the bylaws or specifically agreed to in an individual contract (Satilla Health Services v. Bell, 633 S.E.2d 575 [Ga. Ct. App. 2006]).

However, under some narrow circumstances, a hospital can act unilaterally, without medical staff agreement, especially where the bylaws are silent on the point. Illinois recently ruled that a medical center could, without physician assent, increase physician malpractice premium limits to $1,000,000 per occurrence and $3,000,000 aggregate for multiple occurrences (from $200,000 and $600,000, respectively). Its appellate court allowed the change, holding that physician enforcement of its bylaws were restricted only to matters of clinical competence (Fabrizio v. Provena United Samaritans, 857 N.E.2d 670 [Ill. S.Ct. 2006]).

And in Lo v. Provena Covenant Hospital, 796 N.E.2d 607 (Ill. App. Ct. 2003), a hospital unilaterally and summarily suspended a cardiovascular surgeon who allegedly had twice the national mortality rate. The medical staff leadership had not been responsive to the hospital’s concern of imminent danger to patients. The Illinois Appellate Court made the finding that in this "anomalous" case, the hospital’s actions were neither arbitrary, capricious, nor in violation of the bylaws.

A second area of conflict between doctors and hospitals is hospitals’ use of economic factors in credentialing, where financial factors are used to profile – and determine – a physician’s application for privileges.

For example, a staff gynecologist risked losing her 19-year membership at Baptist Health Medical Center in Little Rock, Ark., because her physician-husband owned an interest in a competing hospital specializing in spinal surgery. The case settled when the husband divested his competing ownership. In Arkansas, the courts have ruled that Baptist Health’s policy wherein a physician who holds a financial interest in a competing hospital is ineligible for privileges at any Baptist Health hospital is both unconscionable and illegal, and the hospital economic credentialing policy tortiously interfered with the physicians’ existing and prospective business relationships (Murphy v. Baptist Health, 373 S.W.3d 269 [Ark. 2010]).

But other jurisdictions have not adopted this view. The South Dakota Supreme Court has ruled that a hospital administration may refuse applicants to the medical staff based on economic criteria (

<cf number="\"2\"">’</cf>

Mahan v. Avera St. Lukes, 621 N.W.2d 150 [S.D. S.Ct. 2001]). The court questioned the legal right of certain members of the medical staff to open a competing ambulatory surgery center. In a subsequent case, the same court held that in the absence of specific prohibitions in the bylaws, a hospital could use economic credentialing in its staffing determinations.

Even for physicians with only an occasional hospital practice, the following pointers from the book "The Biggest Legal Mistakes Physicians Make and How to Avoid Them," edited by Steven Babitsky and James J. Mangraviti Jr., may prove useful:

1) Failing to practice in a collegial manner.

2) Impugning the quality of care of the hospital, nurses, and other physicians.

3) Not knowing the hospital’s policies and procedures.

4) Not involving consultants when the issue is out of one’s specialty.

5) Not accepting constructive criticism and suggestions.

6) Failing to seek approval before prescribing unorthodox drugs or treatment.

7) Failing to respond promptly to inquiries about care or behavior.

8) Failing to follow up on an agreement resolving an issue.

9) Acting as though the hospital is lucky to have such a physician.

10) Not calling a lawyer when necessary.

Dr. Tan is professor emeritus of medicine and former adjunct professor of law at the University of Hawaii. This article is meant to be educational and does not constitute medical, ethical, or legal advice. Some of the articles in this series are adapted from the author’s 2006 book, "Medical Malpractice: Understanding the Law, Managing the Risk," and his 2012 Halsbury treatise, "Medical Negligence and Professional Misconduct." For additional information, readers may contact the author at [email protected].

QUESTION: The medical staff at the newly opened hospital is putting together a set of bylaws covering credentialing, peer review, and patient-care quality assurance. The doctors are mostly independent contractors and not hospital employees. The administration, obsessed with financial solvency, wishes to retain veto power over decisions affecting staff privileges. In potential disputes affecting the hospital and its medical staff, which of the following is true?

A. The Joint Commission subscribes to the view that hospital administration rather medical staff has overall authority over clinical privileges decisions.

B. Economic credentialing is universally regarded as unethical and illegal.

C. Medical bylaws are a contractual agreement.

D. A hospital can never make unilateral changes in the medical staff bylaws.

E. The medical staff is an integral part of the hospital’s organizational structure, with its powers wholly independent of the hospital’s governing board.

BEST ANSWER: A. Doctors with hospital privileges typically organize themselves into a formal medical staff, with its powers derived from the hospital’s governing board. Professional organizations such as the American Medical Association believe that the medical staff of a facility should be self governing, with its own enforceable set of bylaws. The general view is that these bylaws do not create a binding contractual agreement.

For example, when Dr. George T. O’Byrne sued Santa Monica–UCLA Medical Center where he held medical staff privileges, the California Court of Appeal ruled that the hospital’s fiduciary duty is to its shareholders and the public – but not to its physicians – and that the medical staff bylaws did not constitute a contract (OByrne v. Santa Monica-UCLA Medical Center, 114 Cal.Rptr.2d 575 [Cal. Ct. App. 2001]).

A similar situation appears to hold in Minnesota, where the medical staff accused Avera Marshall Regional Medical Center of unilateral credentialing and revision of the bylaws, and interference with quality assurance operations (Avera Marshall Medical Staff v. Avera Marshall Regional Medical Center, 836 N.W.2d 549 [Minn. Ct. App. 2013]). Both the trial court and the court of appeals have held that the medical staff lacked the legal capacity to bring a lawsuit and that the bylaws were not a contract (the final decision of the Minnesota Supreme Court is pending).

The Joint Commission’s view is that the hospital administration has the ultimate authority over clinical privileges of its medical staff, in support of the legal doctrine that a hospital can be held liable for the torts of its practitioners. This notion of corporate liability, which includes negligent credentialing, stemmed from the seminal Darling case (Darling v. Charleston Community Hospital, 211 N.E.2d 253 [Ill. 1965]) where the court held the hospital liable for failing to adequately review the qualifications and performance of a negligent medical staff member. Dr. Alexander, the doctor at issue, had applied a plaster cast too tightly, which caused the college football player to eventually lose his leg.

Other cases followed, including the infamous California case of Gonzales v. Nork, 573 P.2d 458 (Cal. 1978), in which a drug-abusing doctor misrepresented himself as being qualified to perform laminectomies. Even in jurisdictions such as Minnesota, which does not specifically recognize negligent credentialing as a legal cause of action, its supreme court has allowed this legal theory to go forward.

Two recurring issues tending to embroil hospital and staff in conflict are unilateral actions by a medical center and the use of economic credentialing.

The usual procedure for amending the bylaws is for the medical staff to initiate and approve changes before subjecting them for final endorsement by the hospital board. Thus, when a Florida hospital unilaterally refused to re-credential two qualified radiation oncologists because of its intention to exclusively contract with the University of Miami School of Medicine for all radiation oncology procedures, the jury found in favor of the aggrieved doctors, awarding them $2.5 million in lost profits and $20.25 million in punitive damages (Columbia/JFK Medical Center v. Spunberg, 784 So.2d 541 (Fla. App. Ct. 2001).

Likewise, a small Georgia hospital tried to close its cardiology department in order to enter into an exclusive contract with a separate group of cardiologists. The Georgia Court of Appeals held that a hospital could not deprive physicians of access to its facilities unless stated in the bylaws or specifically agreed to in an individual contract (Satilla Health Services v. Bell, 633 S.E.2d 575 [Ga. Ct. App. 2006]).

However, under some narrow circumstances, a hospital can act unilaterally, without medical staff agreement, especially where the bylaws are silent on the point. Illinois recently ruled that a medical center could, without physician assent, increase physician malpractice premium limits to $1,000,000 per occurrence and $3,000,000 aggregate for multiple occurrences (from $200,000 and $600,000, respectively). Its appellate court allowed the change, holding that physician enforcement of its bylaws were restricted only to matters of clinical competence (Fabrizio v. Provena United Samaritans, 857 N.E.2d 670 [Ill. S.Ct. 2006]).

And in Lo v. Provena Covenant Hospital, 796 N.E.2d 607 (Ill. App. Ct. 2003), a hospital unilaterally and summarily suspended a cardiovascular surgeon who allegedly had twice the national mortality rate. The medical staff leadership had not been responsive to the hospital’s concern of imminent danger to patients. The Illinois Appellate Court made the finding that in this "anomalous" case, the hospital’s actions were neither arbitrary, capricious, nor in violation of the bylaws.

A second area of conflict between doctors and hospitals is hospitals’ use of economic factors in credentialing, where financial factors are used to profile – and determine – a physician’s application for privileges.

For example, a staff gynecologist risked losing her 19-year membership at Baptist Health Medical Center in Little Rock, Ark., because her physician-husband owned an interest in a competing hospital specializing in spinal surgery. The case settled when the husband divested his competing ownership. In Arkansas, the courts have ruled that Baptist Health’s policy wherein a physician who holds a financial interest in a competing hospital is ineligible for privileges at any Baptist Health hospital is both unconscionable and illegal, and the hospital economic credentialing policy tortiously interfered with the physicians’ existing and prospective business relationships (Murphy v. Baptist Health, 373 S.W.3d 269 [Ark. 2010]).

But other jurisdictions have not adopted this view. The South Dakota Supreme Court has ruled that a hospital administration may refuse applicants to the medical staff based on economic criteria (

<cf number="\"2\"">’</cf>

Mahan v. Avera St. Lukes, 621 N.W.2d 150 [S.D. S.Ct. 2001]). The court questioned the legal right of certain members of the medical staff to open a competing ambulatory surgery center. In a subsequent case, the same court held that in the absence of specific prohibitions in the bylaws, a hospital could use economic credentialing in its staffing determinations.

Even for physicians with only an occasional hospital practice, the following pointers from the book "The Biggest Legal Mistakes Physicians Make and How to Avoid Them," edited by Steven Babitsky and James J. Mangraviti Jr., may prove useful:

1) Failing to practice in a collegial manner.

2) Impugning the quality of care of the hospital, nurses, and other physicians.

3) Not knowing the hospital’s policies and procedures.

4) Not involving consultants when the issue is out of one’s specialty.

5) Not accepting constructive criticism and suggestions.

6) Failing to seek approval before prescribing unorthodox drugs or treatment.

7) Failing to respond promptly to inquiries about care or behavior.

8) Failing to follow up on an agreement resolving an issue.

9) Acting as though the hospital is lucky to have such a physician.

10) Not calling a lawyer when necessary.

Dr. Tan is professor emeritus of medicine and former adjunct professor of law at the University of Hawaii. This article is meant to be educational and does not constitute medical, ethical, or legal advice. Some of the articles in this series are adapted from the author’s 2006 book, "Medical Malpractice: Understanding the Law, Managing the Risk," and his 2012 Halsbury treatise, "Medical Negligence and Professional Misconduct." For additional information, readers may contact the author at [email protected].

Meaningful use (MU), the federal government’s strategy for motivating health care providers to adopt electronic health record (EHR) technology to improve patient care,¹ is proving to be a major challenge for many health care providers, particularly for physicians in private practice. The investment of time and resources needed to capture all of the data necessary for successful MU attestation may, in many cases, outweigh the benefit (if any) to your practice and your patients as well as the promise of MU incentive dollars.

However, regardless of the financial incentives, achieving MU theoretically is worth the considerable effort, as improved documentation should lead to improvements in patient care. Errors become easier to identify and a centralized system of electronic records is easier to maintain and access than individual paper records, no matter how many physicians are contributing or where each contributor is located. Medical record entries from generalists, specialists, laboratories, and other providers ideally are available to all at any time; therefore, all involved providers theoretically should be on the same page for each patient.

The downside to MU, of course, is that the real world seldom reflects ideal situations envisioned by bureaucrats. Furthermore, MU may be too much, too soon; many providers might not have enough time to adapt. Meeting MU criteria requires resources, time, and funding that many private practices, particularly smaller ones, simply do not have. In speaking with numerous physicians struggling with MU hurdles over the last few months, I came away with the distinct impression that many are feeling overwhelmed and increasingly frustrated as they struggle to keep up.

Stage 2 Attestation
Many EHR vendors are having difficulty certifying their products to the 2014 edition of the EHR criteria necessary for stage 2 qualification, which further complicates the situation. According to a recent Medical Economics article, data from the Centers for Medicare & Medicaid Services (CMS) that were recently presented to the Health IT Policy Committee showed that 17% of eligible professionals were using software that lacked proper stage 2 certification.² If the vendors in question cannot install the necessary upgrades before the stage 2 deadline, their customers will be faced with the dilemma of switching to another EHR system on short notice or abandoning any hope of stage 2 MU attestation.

Meaningful use has been divided into 3 stages, with only the first 2 stages in production thus far. Providers must attest to demonstrating MU every year to receive incentive payments and avoid Medicare payment adjustments.³ Although most hospitals and a high percentage (precise statistics are hard to come by) of eligible practitioners signed up for stage 1, approximately 20% of them stopped participating in 2013.⁴ Furthermore, only 8 hospitals and 447 eligible professionals in the country had attested to stage 2 through June of this year.⁵

Opposition From the American Medical Association
Perhaps reflecting a general wariness among the nation’s health care providers, the American Medical Association (AMA) has questioned the overall administration of the MU program. In a May 2014 open letter to the CMS and the Office of the National Coordinator for Health Information Technology, the AMA predicted substantially higher dropout rates if major modifications are not made soon (James L. Madara, MD, written communication). Among other things, the AMA proposed eliminating the all-or-nothing provision that requires providers to meet every single benchmark in each stage and replacing it with a 75% achievement level to obtain incentive payments as well as a 50% bar to avoid financial penalties. They also suggested eliminating all requirements that fall outside the physician’s control. For example, stage 2 requires at least 5% of patients in each practice to access a patient portal in the EHR system, a provision that physicians report as difficult to implement because patients prefer to speak directly with the physician. “I resent that the CMS can dictate how many of my patients must use the portal as a measure of my quality of care,” a dermatologist told me at a recent statewide meeting of the Dermatological Society of New Jersey (personal communication, May 2014). “I will not be attesting to stage 2 unless that requirement is eliminated.”

Although there is no indication that the AMA’s warning will be heeded or any of the suggestions will be adopted, at least one CMS official has said that the agency will be more flexible with its hardship exemptions on a case-by-case basis. Currently, the CMS offers hardship exemptions for new providers, those facing natural disasters, and those who do not have face-to-face interaction with patients.⁶

Compliance Deadlines and Penalties
Ultimately, whether or not the program is substantially modified, each private practitioner must decide whether starting or continuing MU is worth the burden of time and finances in his/her particular situation. If you are still undecided, the crossroad is nigh, as 2014 is the last year to start MU before you are hit with a 1% penalty in Medicare Part B reimbursement in 2015 that may eventually rise to a maximum 5% reduction.⁷ You must choose a 90-day reporting period that will enable you to attest by the final deadline of October 1. If you have already attested stage 1 and are contemplating the progression to stage 2, you must begin reporting at the beginning of a calendar quarter, which would be October 1 at this point.¹ Detailed instructions for meeting stage 1 and stage 2 deadlines are available from many sources, including the American Academy of Dermatology.⁸

Final Thoughts
Once on board, the challenge is to remain on track, which involves a substantial investment of time and effort. “Our members who were unsuccessful at attestation weren’t watching their numbers,” said a health care strategist with the American Academy of Family Physicians. “Tracking as you go is crucial.”⁹ You must continually monitor your progress in attaining the required benchmarks, making course corrections as you go to be sure that the necessary numbers will be there when your practice is ready to attest.

Meaningful use (MU), the federal government’s strategy for motivating health care providers to adopt electronic health record (EHR) technology to improve patient care,¹ is proving to be a major challenge for many health care providers, particularly for physicians in private practice. The investment of time and resources needed to capture all of the data necessary for successful MU attestation may, in many cases, outweigh the benefit (if any) to your practice and your patients as well as the promise of MU incentive dollars.

However, regardless of the financial incentives, achieving MU theoretically is worth the considerable effort, as improved documentation should lead to improvements in patient care. Errors become easier to identify and a centralized system of electronic records is easier to maintain and access than individual paper records, no matter how many physicians are contributing or where each contributor is located. Medical record entries from generalists, specialists, laboratories, and other providers ideally are available to all at any time; therefore, all involved providers theoretically should be on the same page for each patient.

The downside to MU, of course, is that the real world seldom reflects ideal situations envisioned by bureaucrats. Furthermore, MU may be too much, too soon; many providers might not have enough time to adapt. Meeting MU criteria requires resources, time, and funding that many private practices, particularly smaller ones, simply do not have. In speaking with numerous physicians struggling with MU hurdles over the last few months, I came away with the distinct impression that many are feeling overwhelmed and increasingly frustrated as they struggle to keep up.

Stage 2 Attestation
Many EHR vendors are having difficulty certifying their products to the 2014 edition of the EHR criteria necessary for stage 2 qualification, which further complicates the situation. According to a recent Medical Economics article, data from the Centers for Medicare & Medicaid Services (CMS) that were recently presented to the Health IT Policy Committee showed that 17% of eligible professionals were using software that lacked proper stage 2 certification.² If the vendors in question cannot install the necessary upgrades before the stage 2 deadline, their customers will be faced with the dilemma of switching to another EHR system on short notice or abandoning any hope of stage 2 MU attestation.

Meaningful use has been divided into 3 stages, with only the first 2 stages in production thus far. Providers must attest to demonstrating MU every year to receive incentive payments and avoid Medicare payment adjustments.³ Although most hospitals and a high percentage (precise statistics are hard to come by) of eligible practitioners signed up for stage 1, approximately 20% of them stopped participating in 2013.⁴ Furthermore, only 8 hospitals and 447 eligible professionals in the country had attested to stage 2 through June of this year.⁵

Opposition From the American Medical Association
Perhaps reflecting a general wariness among the nation’s health care providers, the American Medical Association (AMA) has questioned the overall administration of the MU program. In a May 2014 open letter to the CMS and the Office of the National Coordinator for Health Information Technology, the AMA predicted substantially higher dropout rates if major modifications are not made soon (James L. Madara, MD, written communication). Among other things, the AMA proposed eliminating the all-or-nothing provision that requires providers to meet every single benchmark in each stage and replacing it with a 75% achievement level to obtain incentive payments as well as a 50% bar to avoid financial penalties. They also suggested eliminating all requirements that fall outside the physician’s control. For example, stage 2 requires at least 5% of patients in each practice to access a patient portal in the EHR system, a provision that physicians report as difficult to implement because patients prefer to speak directly with the physician. “I resent that the CMS can dictate how many of my patients must use the portal as a measure of my quality of care,” a dermatologist told me at a recent statewide meeting of the Dermatological Society of New Jersey (personal communication, May 2014). “I will not be attesting to stage 2 unless that requirement is eliminated.”

Although there is no indication that the AMA’s warning will be heeded or any of the suggestions will be adopted, at least one CMS official has said that the agency will be more flexible with its hardship exemptions on a case-by-case basis. Currently, the CMS offers hardship exemptions for new providers, those facing natural disasters, and those who do not have face-to-face interaction with patients.⁶

Compliance Deadlines and Penalties
Ultimately, whether or not the program is substantially modified, each private practitioner must decide whether starting or continuing MU is worth the burden of time and finances in his/her particular situation. If you are still undecided, the crossroad is nigh, as 2014 is the last year to start MU before you are hit with a 1% penalty in Medicare Part B reimbursement in 2015 that may eventually rise to a maximum 5% reduction.⁷ You must choose a 90-day reporting period that will enable you to attest by the final deadline of October 1. If you have already attested stage 1 and are contemplating the progression to stage 2, you must begin reporting at the beginning of a calendar quarter, which would be October 1 at this point.¹ Detailed instructions for meeting stage 1 and stage 2 deadlines are available from many sources, including the American Academy of Dermatology.⁸

Final Thoughts
Once on board, the challenge is to remain on track, which involves a substantial investment of time and effort. “Our members who were unsuccessful at attestation weren’t watching their numbers,” said a health care strategist with the American Academy of Family Physicians. “Tracking as you go is crucial.”⁹ You must continually monitor your progress in attaining the required benchmarks, making course corrections as you go to be sure that the necessary numbers will be there when your practice is ready to attest.

Meaningful use (MU), the federal government’s strategy for motivating health care providers to adopt electronic health record (EHR) technology to improve patient care,¹ is proving to be a major challenge for many health care providers, particularly for physicians in private practice. The investment of time and resources needed to capture all of the data necessary for successful MU attestation may, in many cases, outweigh the benefit (if any) to your practice and your patients as well as the promise of MU incentive dollars.

However, regardless of the financial incentives, achieving MU theoretically is worth the considerable effort, as improved documentation should lead to improvements in patient care. Errors become easier to identify and a centralized system of electronic records is easier to maintain and access than individual paper records, no matter how many physicians are contributing or where each contributor is located. Medical record entries from generalists, specialists, laboratories, and other providers ideally are available to all at any time; therefore, all involved providers theoretically should be on the same page for each patient.

The downside to MU, of course, is that the real world seldom reflects ideal situations envisioned by bureaucrats. Furthermore, MU may be too much, too soon; many providers might not have enough time to adapt. Meeting MU criteria requires resources, time, and funding that many private practices, particularly smaller ones, simply do not have. In speaking with numerous physicians struggling with MU hurdles over the last few months, I came away with the distinct impression that many are feeling overwhelmed and increasingly frustrated as they struggle to keep up.

Stage 2 Attestation
Many EHR vendors are having difficulty certifying their products to the 2014 edition of the EHR criteria necessary for stage 2 qualification, which further complicates the situation. According to a recent Medical Economics article, data from the Centers for Medicare & Medicaid Services (CMS) that were recently presented to the Health IT Policy Committee showed that 17% of eligible professionals were using software that lacked proper stage 2 certification.² If the vendors in question cannot install the necessary upgrades before the stage 2 deadline, their customers will be faced with the dilemma of switching to another EHR system on short notice or abandoning any hope of stage 2 MU attestation.

Meaningful use has been divided into 3 stages, with only the first 2 stages in production thus far. Providers must attest to demonstrating MU every year to receive incentive payments and avoid Medicare payment adjustments.³ Although most hospitals and a high percentage (precise statistics are hard to come by) of eligible practitioners signed up for stage 1, approximately 20% of them stopped participating in 2013.⁴ Furthermore, only 8 hospitals and 447 eligible professionals in the country had attested to stage 2 through June of this year.⁵

Opposition From the American Medical Association
Perhaps reflecting a general wariness among the nation’s health care providers, the American Medical Association (AMA) has questioned the overall administration of the MU program. In a May 2014 open letter to the CMS and the Office of the National Coordinator for Health Information Technology, the AMA predicted substantially higher dropout rates if major modifications are not made soon (James L. Madara, MD, written communication). Among other things, the AMA proposed eliminating the all-or-nothing provision that requires providers to meet every single benchmark in each stage and replacing it with a 75% achievement level to obtain incentive payments as well as a 50% bar to avoid financial penalties. They also suggested eliminating all requirements that fall outside the physician’s control. For example, stage 2 requires at least 5% of patients in each practice to access a patient portal in the EHR system, a provision that physicians report as difficult to implement because patients prefer to speak directly with the physician. “I resent that the CMS can dictate how many of my patients must use the portal as a measure of my quality of care,” a dermatologist told me at a recent statewide meeting of the Dermatological Society of New Jersey (personal communication, May 2014). “I will not be attesting to stage 2 unless that requirement is eliminated.”

Although there is no indication that the AMA’s warning will be heeded or any of the suggestions will be adopted, at least one CMS official has said that the agency will be more flexible with its hardship exemptions on a case-by-case basis. Currently, the CMS offers hardship exemptions for new providers, those facing natural disasters, and those who do not have face-to-face interaction with patients.⁶

Compliance Deadlines and Penalties
Ultimately, whether or not the program is substantially modified, each private practitioner must decide whether starting or continuing MU is worth the burden of time and finances in his/her particular situation. If you are still undecided, the crossroad is nigh, as 2014 is the last year to start MU before you are hit with a 1% penalty in Medicare Part B reimbursement in 2015 that may eventually rise to a maximum 5% reduction.⁷ You must choose a 90-day reporting period that will enable you to attest by the final deadline of October 1. If you have already attested stage 1 and are contemplating the progression to stage 2, you must begin reporting at the beginning of a calendar quarter, which would be October 1 at this point.¹ Detailed instructions for meeting stage 1 and stage 2 deadlines are available from many sources, including the American Academy of Dermatology.⁸

Final Thoughts
Once on board, the challenge is to remain on track, which involves a substantial investment of time and effort. “Our members who were unsuccessful at attestation weren’t watching their numbers,” said a health care strategist with the American Academy of Family Physicians. “Tracking as you go is crucial.”⁹ You must continually monitor your progress in attaining the required benchmarks, making course corrections as you go to be sure that the necessary numbers will be there when your practice is ready to attest.

Question: Which of the following is likely to run afoul of antitrust laws?

A. A medical center in a big city buys the practices of several retiring doctors.

B. The only two hospitals in a rural area agree to merge to integrate better delivery of health care at lower cost.

C. A medical association’s president advises members of the drawbacks of a new managed care health plan.

D. All of the above.

E. None of the above.

Answer: B. Choice B constitutes illegal monopolization, whereas A is not likely to wield market power and C, without more, does not amount to a boycott. This article, the last in the series on health care antitrust, will showcase several cases illustrative of recurring themes such as the "state action doctrine," exclusive dealings, and mergers.

One broad category of cases concerns the so-called "state action doctrine," which confers antitrust immunity to all state governmental agencies.

For doctors, the most dramatic example is probably Patrick v. Burget (108 S. Ct. 1658 [1988]), an adverse peer review action against a physician who challenged it as nothing less than an anticompetitive ploy. In 1973, Dr. Timothy Patrick, a surgeon, chose to leave the Astoria Clinic in Oregon to establish an independent practice in general and vascular surgery. He continued to have staff privileges at Columbia Memorial Hospital, Astoria, but experienced refusal of professional dealings by former colleagues who were still at the clinic. One of them lodged a complaint that Dr. Patrick had left a patient unattended following surgery. In due course, the hospital medical staff voted to revoke his privileges because of substandard care.

Dr. Patrick’s lawsuit alleged that the staff’s true purpose was to eliminate him as a competitor, rather than to improve quality. The U.S. Court of Appeals for the Ninth Circuit found that the state of Oregon had articulated a policy in favor of peer review and had supervised the process. It therefore held that the "state action doctrine" exemption protected the hospital staff from antitrust liability even if the peer review proceedings were abused to disadvantage a competitor.

However, in a unanimous decision, the U.S. Supreme Court reversed, finding that the "active supervision" requirement was not satisfied, because that required Oregon to exercise ultimate control over the conduct of peer review, not simply some state involvement or monitoring. The state’s agencies were the Oregon Board of Medical Examiners and the Health Division, neither of which had the authority to expressly supervise the peer review process.

In a recent merger case, Federal Trade Commission v. Phoebe Putney Health System Inc. (133 S. Ct. 1003 [2013]) the U.S. Supreme Court again refuted the use of the "state action doctrine" defense.

The state of Georgia had claimed immunity when county-owned Phoebe Putney Memorial Hospital, Albany, Ga., made a bid to purchase Palmyra Park Hospital, also in Albany, its chief competitor. The Eleventh Circuit acknowledged that the challenged transaction would substantially lessen competition. However, the court reasoned that the transaction was exempted from the antitrust laws because the legislature, under the Georgia Hospital Authorities Law, had given hospital authorities the power to acquire or lease out hospitals despite potential anticompetitive effects.

However, the U.S. Supreme Court disagreed and reversed, holding the doctrine inapplicable because the general grant of power to the hospital authority did not clearly articulate the state’s intent to restrict competition.

Another remarkable example of the "state action doctrine" at play is North Carolina State Board of Dental Examiners v. Federal Trade Commission (719 F.3d 359 [4th Cir. 2013]). The case, currently under appeal, deals with the North Carolina State Board of Dental Examiners’ (NCSBDE) actions to forbid nondentists from providing teeth-whitening services to the public at spas, salons, and various retail outlets. NCSBDE also urged mall owners not to lease space to such providers. The FTC argued that most of the board members were practicing dentists rather than state employees; so, for purposes of the antitrust laws, the NCSBDE should be deemed a private person rather than part of a state government. Because North Carolina did not actively supervise its actions, the NCSBDE could not hide behind the protection of the "state action doctrine."

The United States Court of Appeals for the Fourth Circuit sided with the FTC, holding that NCSBDE could not restrain competition through means such as the use of cease and desist letters. The U.S. Supreme Court has agreed to hear the case, which has major implications for the regulatory authority of professional licensing boards.

A different recurring antitrust issue concerns the exclusion of doctors from a provider network. In Little Rock Cardiology Clinic v. Baptist Health (591 F.3d 591 [8th Cir. 2009]), the Little Rock (Ark.) Cardiology Clinic sued Baptist Health for entering into an exclusive contract with Blue Cross/Blue Shield of Arkansas in order to monopolize the market for cardiac care services. However, the trial court as well as the U.S. Court of Appeals for the Eighth Circuit held that the complaint failed to identify the relevant geographic area, product, or service market, without which it was impossible to reach a finding of monopolization.

Can a professional organization advise its members of pitfalls or drawbacks of health care plans? In International Healthcare Management v. Hawaii Coalition for Health (332 F.3d 600 [9th Cir. 2003]), the Hawaii Medical Association (HMA), the state’s medical organization, was sued for allegedly organizing a boycott of two managed care organizations when it advised its doctor members of certain problems with the proposed provider contracts. HMA argued that it neither forged an agreement to act in concert nor encouraged its members to participate in any boycott. It won a summary judgment in the U.S. District Court dismissing the suit, which the U.S. Court of Appeals for the Ninth Circuit affirmed.

Finally, antitrust prosecutions may be expected to increase under Obamacare, which advocates the efficient integration and consolidation of quality health services to achieve health cost savings. Any action taken, however, must still pass antitrust scrutiny.

One scenario is the trend toward hospital acquisitions of physician practices. The case of Idaho’s St. Luke Health Systems, a nonprofit, six-hospital system based in Boise and the largest in the state, is a prime example.

In a recent decision, a federal judge sided with the FTC in blocking St. Luke’s Health System from acquiring the 40-doctor Saltzer Medical Group – an acquisition made in the name of better "integrated health care." The FTC had alleged that the merger would give St. Luke a nearly 60% share of the primary-care market, resulting in diminished competition among primary care physicians. Idaho’s attorney general, as well as two other competitor health systems in Boise, also joined in the suit.

The federal court ruled against St. Luke’s, claiming that there was a legal and less anticompetitive way to achieve its goal of improving health care delivery in the area. The acquisition had in fact taken place more than a year ago, and St. Luke’s is now left with the task of dismantling the acquisition.

Antitrust law is complex and difficult, some issues and results may appear surprising and counterintuitive, and penalties can be severe (such as treble damages). All business transactions including those that touch on health care should therefore proactively examine whether they illegally affect free market competition.

Dr. Tan is professor emeritus of medicine and former adjunct professor of law at the University of Hawaii. This article is meant to be educational and does not constitute medical, ethical, or legal advice. Some of the articles in this series are adapted from the author’s 2006 book, "Medical Malpractice: Understanding the Law, Managing the Risk," and his 2012 Halsbury treatise, "Medical Negligence and Professional Misconduct." For additional information, readers may contact the author at [email protected].

Question: Which of the following is likely to run afoul of antitrust laws?

A. A medical center in a big city buys the practices of several retiring doctors.

B. The only two hospitals in a rural area agree to merge to integrate better delivery of health care at lower cost.

C. A medical association’s president advises members of the drawbacks of a new managed care health plan.

D. All of the above.

E. None of the above.

Answer: B. Choice B constitutes illegal monopolization, whereas A is not likely to wield market power and C, without more, does not amount to a boycott. This article, the last in the series on health care antitrust, will showcase several cases illustrative of recurring themes such as the "state action doctrine," exclusive dealings, and mergers.

One broad category of cases concerns the so-called "state action doctrine," which confers antitrust immunity to all state governmental agencies.

For doctors, the most dramatic example is probably Patrick v. Burget (108 S. Ct. 1658 [1988]), an adverse peer review action against a physician who challenged it as nothing less than an anticompetitive ploy. In 1973, Dr. Timothy Patrick, a surgeon, chose to leave the Astoria Clinic in Oregon to establish an independent practice in general and vascular surgery. He continued to have staff privileges at Columbia Memorial Hospital, Astoria, but experienced refusal of professional dealings by former colleagues who were still at the clinic. One of them lodged a complaint that Dr. Patrick had left a patient unattended following surgery. In due course, the hospital medical staff voted to revoke his privileges because of substandard care.

Dr. Patrick’s lawsuit alleged that the staff’s true purpose was to eliminate him as a competitor, rather than to improve quality. The U.S. Court of Appeals for the Ninth Circuit found that the state of Oregon had articulated a policy in favor of peer review and had supervised the process. It therefore held that the "state action doctrine" exemption protected the hospital staff from antitrust liability even if the peer review proceedings were abused to disadvantage a competitor.

However, in a unanimous decision, the U.S. Supreme Court reversed, finding that the "active supervision" requirement was not satisfied, because that required Oregon to exercise ultimate control over the conduct of peer review, not simply some state involvement or monitoring. The state’s agencies were the Oregon Board of Medical Examiners and the Health Division, neither of which had the authority to expressly supervise the peer review process.

In a recent merger case, Federal Trade Commission v. Phoebe Putney Health System Inc. (133 S. Ct. 1003 [2013]) the U.S. Supreme Court again refuted the use of the "state action doctrine" defense.

The state of Georgia had claimed immunity when county-owned Phoebe Putney Memorial Hospital, Albany, Ga., made a bid to purchase Palmyra Park Hospital, also in Albany, its chief competitor. The Eleventh Circuit acknowledged that the challenged transaction would substantially lessen competition. However, the court reasoned that the transaction was exempted from the antitrust laws because the legislature, under the Georgia Hospital Authorities Law, had given hospital authorities the power to acquire or lease out hospitals despite potential anticompetitive effects.

However, the U.S. Supreme Court disagreed and reversed, holding the doctrine inapplicable because the general grant of power to the hospital authority did not clearly articulate the state’s intent to restrict competition.

Another remarkable example of the "state action doctrine" at play is North Carolina State Board of Dental Examiners v. Federal Trade Commission (719 F.3d 359 [4th Cir. 2013]). The case, currently under appeal, deals with the North Carolina State Board of Dental Examiners’ (NCSBDE) actions to forbid nondentists from providing teeth-whitening services to the public at spas, salons, and various retail outlets. NCSBDE also urged mall owners not to lease space to such providers. The FTC argued that most of the board members were practicing dentists rather than state employees; so, for purposes of the antitrust laws, the NCSBDE should be deemed a private person rather than part of a state government. Because North Carolina did not actively supervise its actions, the NCSBDE could not hide behind the protection of the "state action doctrine."

The United States Court of Appeals for the Fourth Circuit sided with the FTC, holding that NCSBDE could not restrain competition through means such as the use of cease and desist letters. The U.S. Supreme Court has agreed to hear the case, which has major implications for the regulatory authority of professional licensing boards.

A different recurring antitrust issue concerns the exclusion of doctors from a provider network. In Little Rock Cardiology Clinic v. Baptist Health (591 F.3d 591 [8th Cir. 2009]), the Little Rock (Ark.) Cardiology Clinic sued Baptist Health for entering into an exclusive contract with Blue Cross/Blue Shield of Arkansas in order to monopolize the market for cardiac care services. However, the trial court as well as the U.S. Court of Appeals for the Eighth Circuit held that the complaint failed to identify the relevant geographic area, product, or service market, without which it was impossible to reach a finding of monopolization.

Can a professional organization advise its members of pitfalls or drawbacks of health care plans? In International Healthcare Management v. Hawaii Coalition for Health (332 F.3d 600 [9th Cir. 2003]), the Hawaii Medical Association (HMA), the state’s medical organization, was sued for allegedly organizing a boycott of two managed care organizations when it advised its doctor members of certain problems with the proposed provider contracts. HMA argued that it neither forged an agreement to act in concert nor encouraged its members to participate in any boycott. It won a summary judgment in the U.S. District Court dismissing the suit, which the U.S. Court of Appeals for the Ninth Circuit affirmed.

Finally, antitrust prosecutions may be expected to increase under Obamacare, which advocates the efficient integration and consolidation of quality health services to achieve health cost savings. Any action taken, however, must still pass antitrust scrutiny.

One scenario is the trend toward hospital acquisitions of physician practices. The case of Idaho’s St. Luke Health Systems, a nonprofit, six-hospital system based in Boise and the largest in the state, is a prime example.

In a recent decision, a federal judge sided with the FTC in blocking St. Luke’s Health System from acquiring the 40-doctor Saltzer Medical Group – an acquisition made in the name of better "integrated health care." The FTC had alleged that the merger would give St. Luke a nearly 60% share of the primary-care market, resulting in diminished competition among primary care physicians. Idaho’s attorney general, as well as two other competitor health systems in Boise, also joined in the suit.

The federal court ruled against St. Luke’s, claiming that there was a legal and less anticompetitive way to achieve its goal of improving health care delivery in the area. The acquisition had in fact taken place more than a year ago, and St. Luke’s is now left with the task of dismantling the acquisition.

Antitrust law is complex and difficult, some issues and results may appear surprising and counterintuitive, and penalties can be severe (such as treble damages). All business transactions including those that touch on health care should therefore proactively examine whether they illegally affect free market competition.

Dr. Tan is professor emeritus of medicine and former adjunct professor of law at the University of Hawaii. This article is meant to be educational and does not constitute medical, ethical, or legal advice. Some of the articles in this series are adapted from the author’s 2006 book, "Medical Malpractice: Understanding the Law, Managing the Risk," and his 2012 Halsbury treatise, "Medical Negligence and Professional Misconduct." For additional information, readers may contact the author at [email protected].

Question: Which of the following is likely to run afoul of antitrust laws?

A. A medical center in a big city buys the practices of several retiring doctors.

B. The only two hospitals in a rural area agree to merge to integrate better delivery of health care at lower cost.

C. A medical association’s president advises members of the drawbacks of a new managed care health plan.

D. All of the above.

E. None of the above.

Answer: B. Choice B constitutes illegal monopolization, whereas A is not likely to wield market power and C, without more, does not amount to a boycott. This article, the last in the series on health care antitrust, will showcase several cases illustrative of recurring themes such as the "state action doctrine," exclusive dealings, and mergers.

One broad category of cases concerns the so-called "state action doctrine," which confers antitrust immunity to all state governmental agencies.

For doctors, the most dramatic example is probably Patrick v. Burget (108 S. Ct. 1658 [1988]), an adverse peer review action against a physician who challenged it as nothing less than an anticompetitive ploy. In 1973, Dr. Timothy Patrick, a surgeon, chose to leave the Astoria Clinic in Oregon to establish an independent practice in general and vascular surgery. He continued to have staff privileges at Columbia Memorial Hospital, Astoria, but experienced refusal of professional dealings by former colleagues who were still at the clinic. One of them lodged a complaint that Dr. Patrick had left a patient unattended following surgery. In due course, the hospital medical staff voted to revoke his privileges because of substandard care.

Dr. Patrick’s lawsuit alleged that the staff’s true purpose was to eliminate him as a competitor, rather than to improve quality. The U.S. Court of Appeals for the Ninth Circuit found that the state of Oregon had articulated a policy in favor of peer review and had supervised the process. It therefore held that the "state action doctrine" exemption protected the hospital staff from antitrust liability even if the peer review proceedings were abused to disadvantage a competitor.

However, in a unanimous decision, the U.S. Supreme Court reversed, finding that the "active supervision" requirement was not satisfied, because that required Oregon to exercise ultimate control over the conduct of peer review, not simply some state involvement or monitoring. The state’s agencies were the Oregon Board of Medical Examiners and the Health Division, neither of which had the authority to expressly supervise the peer review process.

In a recent merger case, Federal Trade Commission v. Phoebe Putney Health System Inc. (133 S. Ct. 1003 [2013]) the U.S. Supreme Court again refuted the use of the "state action doctrine" defense.

The state of Georgia had claimed immunity when county-owned Phoebe Putney Memorial Hospital, Albany, Ga., made a bid to purchase Palmyra Park Hospital, also in Albany, its chief competitor. The Eleventh Circuit acknowledged that the challenged transaction would substantially lessen competition. However, the court reasoned that the transaction was exempted from the antitrust laws because the legislature, under the Georgia Hospital Authorities Law, had given hospital authorities the power to acquire or lease out hospitals despite potential anticompetitive effects.

However, the U.S. Supreme Court disagreed and reversed, holding the doctrine inapplicable because the general grant of power to the hospital authority did not clearly articulate the state’s intent to restrict competition.

Another remarkable example of the "state action doctrine" at play is North Carolina State Board of Dental Examiners v. Federal Trade Commission (719 F.3d 359 [4th Cir. 2013]). The case, currently under appeal, deals with the North Carolina State Board of Dental Examiners’ (NCSBDE) actions to forbid nondentists from providing teeth-whitening services to the public at spas, salons, and various retail outlets. NCSBDE also urged mall owners not to lease space to such providers. The FTC argued that most of the board members were practicing dentists rather than state employees; so, for purposes of the antitrust laws, the NCSBDE should be deemed a private person rather than part of a state government. Because North Carolina did not actively supervise its actions, the NCSBDE could not hide behind the protection of the "state action doctrine."

The United States Court of Appeals for the Fourth Circuit sided with the FTC, holding that NCSBDE could not restrain competition through means such as the use of cease and desist letters. The U.S. Supreme Court has agreed to hear the case, which has major implications for the regulatory authority of professional licensing boards.

A different recurring antitrust issue concerns the exclusion of doctors from a provider network. In Little Rock Cardiology Clinic v. Baptist Health (591 F.3d 591 [8th Cir. 2009]), the Little Rock (Ark.) Cardiology Clinic sued Baptist Health for entering into an exclusive contract with Blue Cross/Blue Shield of Arkansas in order to monopolize the market for cardiac care services. However, the trial court as well as the U.S. Court of Appeals for the Eighth Circuit held that the complaint failed to identify the relevant geographic area, product, or service market, without which it was impossible to reach a finding of monopolization.

Can a professional organization advise its members of pitfalls or drawbacks of health care plans? In International Healthcare Management v. Hawaii Coalition for Health (332 F.3d 600 [9th Cir. 2003]), the Hawaii Medical Association (HMA), the state’s medical organization, was sued for allegedly organizing a boycott of two managed care organizations when it advised its doctor members of certain problems with the proposed provider contracts. HMA argued that it neither forged an agreement to act in concert nor encouraged its members to participate in any boycott. It won a summary judgment in the U.S. District Court dismissing the suit, which the U.S. Court of Appeals for the Ninth Circuit affirmed.

Finally, antitrust prosecutions may be expected to increase under Obamacare, which advocates the efficient integration and consolidation of quality health services to achieve health cost savings. Any action taken, however, must still pass antitrust scrutiny.

One scenario is the trend toward hospital acquisitions of physician practices. The case of Idaho’s St. Luke Health Systems, a nonprofit, six-hospital system based in Boise and the largest in the state, is a prime example.

In a recent decision, a federal judge sided with the FTC in blocking St. Luke’s Health System from acquiring the 40-doctor Saltzer Medical Group – an acquisition made in the name of better "integrated health care." The FTC had alleged that the merger would give St. Luke a nearly 60% share of the primary-care market, resulting in diminished competition among primary care physicians. Idaho’s attorney general, as well as two other competitor health systems in Boise, also joined in the suit.

The federal court ruled against St. Luke’s, claiming that there was a legal and less anticompetitive way to achieve its goal of improving health care delivery in the area. The acquisition had in fact taken place more than a year ago, and St. Luke’s is now left with the task of dismantling the acquisition.

Antitrust law is complex and difficult, some issues and results may appear surprising and counterintuitive, and penalties can be severe (such as treble damages). All business transactions including those that touch on health care should therefore proactively examine whether they illegally affect free market competition.

Dr. Tan is professor emeritus of medicine and former adjunct professor of law at the University of Hawaii. This article is meant to be educational and does not constitute medical, ethical, or legal advice. Some of the articles in this series are adapted from the author’s 2006 book, "Medical Malpractice: Understanding the Law, Managing the Risk," and his 2012 Halsbury treatise, "Medical Negligence and Professional Misconduct." For additional information, readers may contact the author at [email protected].

Question: R, a woman with diabetes and Parkinson’s disease, executed an advance medical directive (AMD) when she was aged 70 years. Her AMD stipulated that no extraordinary measures be taken should she become terminally ill or permanently comatose, and she named her sister as her agent with durable power of attorney (DPA). Ten years later, at age 80 years, R sustained a stroke, which left her with hemiparesis and loss of cognitive function. She remained comatose for a week and was dependent on a feeding tube. Her sister decided to honor the AMD and stop all medical treatment including artificial nutrition and hydration. Given the above scenario, which of the following is most accurate?

A. R’s AMD sprang into effect when she became decisionally incapacitated.

B. An AMD can direct only the forgoing of life-sustaining treatment, not the continuation of treatment measures.

C. AMD’s are mandatory under the 1990 Federal Patient Self-Determination Act, and those without an AMD are required to make one upon admission to a hospital.

D. Those with DPA for health-care decisions are obligated to carry out the patient’s instructions but can also override them.

E. In the absence of an AMD or DPA, the attending doctor makes the final decision in the best interest of the patient.

Answer: A. An advance medical directive (AMD), sometimes called a living will, is a legally binding document executed by a competent person that provides instructions for future health-care decisions if and when that person loses decisional capacity. One can elect to forgo some or all life-sustaining measures, or to continue receiving all treatments. In 1990, Congress enacted the Federal Patient Self Determination Act, which allows patients to stipulate in advance the nature of their healthcare should they become incapacitated. Additionally, they can appoint an agent or proxy, said to have durable power of attorney (DPA) for health-care decisions, to speak for them. Agents are required to carry out, not override, the patient’s wishes. The Federal Act requires all hospitals to inquire into whether a patient has an AMD and to provide information on the subject, but the Act does not mandate that everyone should execute one. All 50 states, beginning with California in 1976, have enacted legislation on AMDs. In the absence of an AMD and DPA, a surrogate decision maker, sometimes court appointed, directs the care. The attending doctor provides the prognosis, but does not make the final decision to forgo or continue treatment.

Physicians are obligated by law to respect wishes regarding whether to forgo or continue therapy, and, if contrary to their conscience, transfer the patient to a willing health-care provider. In some jurisdictions, a patient’s wish to discontinue artificial nutrition and hydration, for example, via nasogastric or G-tube, requires a specific opt-in or opt-out choice. AMD instructions become relevant when the patient is terminally ill, but many jurisdictions allow their applicability in nonterminal conditions such as irreversible unconscious states or where the likely risks and burdens of treatment would outweigh the expected benefits (Hawaii is such a state under HRS 327E-16).

A recent review of 3,746 patients who had died between 2000 and 2006 showed that those with AMDs were more likely to want limited care or comfort care rather than all possible care, with the vast majority receiving treatment compatible with their wishes. Those who had assigned a durable power of attorney were less likely to die in the hospital or receive all care possible. The authors concluded that patients who have prepared AMDs received care that was strongly associated with their preferences. Other observers are less sanguine, noting that in only two-thirds of the time were decisions consistent, and one-third of patients changed their preferences in the face of actual illness, usually in favor of treatments rejected in advance. Surrogate agreement was only 58%, and surrogates tended to overestimate their loved one’s desire for treatment.

AMDs direct future end-of-life treatment in a hospital setting, and do not typically address emergency measures taken by ambulance personnel. The National POLST (Physician Orders for Life-Sustaining Treatment) Paradigm grew out of the need to address outpatient emergency treatment especially for seriously ill and frail patients. POLST, now available in many states across the country, is in actuality a medical order signed by the patient’s doctor directing what is and is not to be done, for example, intubation, defibrillation, etc. It does not replace the AMD but is complementary in ensuring respect for a patient’s medical wishes.

Unsurprisingly, there has been litigation over AMDs. Some of the earlier cases tended to favor the health-care institution’s refusal to cease life-sustaining treatment. In Bartling v. Glendale Adventist Medical Center, 184 Cal App 3d 961 (1986), a needle biopsy caused a patient’s lung to collapse. The patient had to be placed in restraints as he tried to remove the ventilator tubes. He had earlier executed a living will and a durable power of attorney for health care, and the family, agreeing to release the hospital and doctors from any civil liability, asked that the ventilator be removed. Instead, the hospital merely tried to "wean" him, and planned to resuscitate him in the event of a cardiopulmonary arrest. Unfortunately, no other facility was willing to accept him in transfer. However, in a defense verdict, the court held that although case law was evolving toward a greater recognition of patients’ rights, it could not be said that a common legal standard existed to guide the medical community.

The case of Osgood v. Genesys St. Joseph Hospital (No. 94-26731-NH, Mich 1996) gave a different result. The patient had a long history of seizures, and the doctors warned that a massive one could leave her in a persistent vegetative state. The patient named her mom as having durable power of attorney. One month later, the patient suffered a massive seizure but was kept alive on a ventilator with full medical support consisting of tube feeding, dialysis, blood transfusions, and medications. Although asked to have these measures removed, the hospital allegedly said they were not life support, but were "comfort care." After 2 months, the patient awoke and was able to be discharged home. However, she remained bedridden and spent most of her time "rhythmically screaming and thrashing" for hours on end, saying, "bury me". The family won a jury award of $16.5 million, which was reduced to $1.4 million on appeal.

A third case, Noonkester v. Kline, was a 1996 defense verdict for a doctor who instituted aggressive treatment despite his patient’s rejection of extraordinary measures evident in his living will. The patient, Mr. Noonkester, had Lou Gehrig’s disease and had instructed the doctor to write a DNR order. He gave his ex-wife power of attorney, and even made arrangements to be taken to a hospice in an emergency, where he planned to die peacefully. When Mr. Noonkester developed breathing problems from pneumonia, the ambulance took him to the hospital instead, and the doctor ordered a ventilator. The patient gave a "thumbs up" when told of the treatment plan, and 3 months later wrote a letter thanking Dr. Kline of the Scripps Clinic for saving his life. Although he had refused to have the ventilator removed, deeming it to be a suicidal act that he opposed, he subsequently sued Dr. Kline for interfering with his preplanned death and continuing costs of living. The jury took all of 45 minutes to return a unanimous verdict for Dr. Kline.

The contents of an AMD may be subject to differing interpretations, as was the case in Wright v. Johns Hopkins Health Systems Corp., 728 A.2d 166 (Md. 1999). A patient with AIDS arrested following a blood transfusion and was resuscitated but left in a comatose state for 10 days before dying. The family alleged that the aggressive treatment violated the patient’s living will instructions, but their lawsuit against the hospital was unsuccessful. Maryland’s Court of Appeals agreed with the hospital and the lower court that the living will could not take effect since no doctor had certified that he was in a terminal state and that his death was imminent.

The late Daniel Callahan, a prominent philosopher-ethicist, eloquently stated that dying in America has over the centuries "evolved from the sacred to the secular, private to institutional, and natural to artifactual." AMDs are a modern attempt to address the many dilemmas and emotions surrounding death. Patient autonomy and palliative care have rightly taken center stage. This may in part be the result of a seminal paper in 1995, which reported on a multicenter study of critically ill patients and their wishes regarding DNR and other end-of-life issues. The authors found that the wishes of many of the patients were ignored, and that 50% were in moderate or severe pain. Incredibly, physician treatment failed to change despite nurse intervention with prognostic information and patient preference.

¹42 USC 1395cc(f), 1396a(w) (1994).

² Silveira MJ et al., Advance Directives and Outcomes of Surrogate Decision Making Before Death. (N. Engl. J. Med. 2010; 362:1211-8).

³ Lee et al., Do Patients’ Treatment Decisions Match Advance Statements of Their Preference? (J. Clin. Ethics 1998; 9:258-62).

⁴ See www.polst.org

⁵ A controlled trial to improve care for seriously ill hospitalized patients.1995 "SUPPORT" trial. (JAMA 1995; 274:1591-8).

Question: R, a woman with diabetes and Parkinson’s disease, executed an advance medical directive (AMD) when she was aged 70 years. Her AMD stipulated that no extraordinary measures be taken should she become terminally ill or permanently comatose, and she named her sister as her agent with durable power of attorney (DPA). Ten years later, at age 80 years, R sustained a stroke, which left her with hemiparesis and loss of cognitive function. She remained comatose for a week and was dependent on a feeding tube. Her sister decided to honor the AMD and stop all medical treatment including artificial nutrition and hydration. Given the above scenario, which of the following is most accurate?

A. R’s AMD sprang into effect when she became decisionally incapacitated.

B. An AMD can direct only the forgoing of life-sustaining treatment, not the continuation of treatment measures.

C. AMD’s are mandatory under the 1990 Federal Patient Self-Determination Act, and those without an AMD are required to make one upon admission to a hospital.

D. Those with DPA for health-care decisions are obligated to carry out the patient’s instructions but can also override them.

E. In the absence of an AMD or DPA, the attending doctor makes the final decision in the best interest of the patient.

Answer: A. An advance medical directive (AMD), sometimes called a living will, is a legally binding document executed by a competent person that provides instructions for future health-care decisions if and when that person loses decisional capacity. One can elect to forgo some or all life-sustaining measures, or to continue receiving all treatments. In 1990, Congress enacted the Federal Patient Self Determination Act, which allows patients to stipulate in advance the nature of their healthcare should they become incapacitated. Additionally, they can appoint an agent or proxy, said to have durable power of attorney (DPA) for health-care decisions, to speak for them. Agents are required to carry out, not override, the patient’s wishes. The Federal Act requires all hospitals to inquire into whether a patient has an AMD and to provide information on the subject, but the Act does not mandate that everyone should execute one. All 50 states, beginning with California in 1976, have enacted legislation on AMDs. In the absence of an AMD and DPA, a surrogate decision maker, sometimes court appointed, directs the care. The attending doctor provides the prognosis, but does not make the final decision to forgo or continue treatment.

Physicians are obligated by law to respect wishes regarding whether to forgo or continue therapy, and, if contrary to their conscience, transfer the patient to a willing health-care provider. In some jurisdictions, a patient’s wish to discontinue artificial nutrition and hydration, for example, via nasogastric or G-tube, requires a specific opt-in or opt-out choice. AMD instructions become relevant when the patient is terminally ill, but many jurisdictions allow their applicability in nonterminal conditions such as irreversible unconscious states or where the likely risks and burdens of treatment would outweigh the expected benefits (Hawaii is such a state under HRS 327E-16).

A recent review of 3,746 patients who had died between 2000 and 2006 showed that those with AMDs were more likely to want limited care or comfort care rather than all possible care, with the vast majority receiving treatment compatible with their wishes. Those who had assigned a durable power of attorney were less likely to die in the hospital or receive all care possible. The authors concluded that patients who have prepared AMDs received care that was strongly associated with their preferences. Other observers are less sanguine, noting that in only two-thirds of the time were decisions consistent, and one-third of patients changed their preferences in the face of actual illness, usually in favor of treatments rejected in advance. Surrogate agreement was only 58%, and surrogates tended to overestimate their loved one’s desire for treatment.

AMDs direct future end-of-life treatment in a hospital setting, and do not typically address emergency measures taken by ambulance personnel. The National POLST (Physician Orders for Life-Sustaining Treatment) Paradigm grew out of the need to address outpatient emergency treatment especially for seriously ill and frail patients. POLST, now available in many states across the country, is in actuality a medical order signed by the patient’s doctor directing what is and is not to be done, for example, intubation, defibrillation, etc. It does not replace the AMD but is complementary in ensuring respect for a patient’s medical wishes.

Unsurprisingly, there has been litigation over AMDs. Some of the earlier cases tended to favor the health-care institution’s refusal to cease life-sustaining treatment. In Bartling v. Glendale Adventist Medical Center, 184 Cal App 3d 961 (1986), a needle biopsy caused a patient’s lung to collapse. The patient had to be placed in restraints as he tried to remove the ventilator tubes. He had earlier executed a living will and a durable power of attorney for health care, and the family, agreeing to release the hospital and doctors from any civil liability, asked that the ventilator be removed. Instead, the hospital merely tried to "wean" him, and planned to resuscitate him in the event of a cardiopulmonary arrest. Unfortunately, no other facility was willing to accept him in transfer. However, in a defense verdict, the court held that although case law was evolving toward a greater recognition of patients’ rights, it could not be said that a common legal standard existed to guide the medical community.

The case of Osgood v. Genesys St. Joseph Hospital (No. 94-26731-NH, Mich 1996) gave a different result. The patient had a long history of seizures, and the doctors warned that a massive one could leave her in a persistent vegetative state. The patient named her mom as having durable power of attorney. One month later, the patient suffered a massive seizure but was kept alive on a ventilator with full medical support consisting of tube feeding, dialysis, blood transfusions, and medications. Although asked to have these measures removed, the hospital allegedly said they were not life support, but were "comfort care." After 2 months, the patient awoke and was able to be discharged home. However, she remained bedridden and spent most of her time "rhythmically screaming and thrashing" for hours on end, saying, "bury me". The family won a jury award of $16.5 million, which was reduced to $1.4 million on appeal.

A third case, Noonkester v. Kline, was a 1996 defense verdict for a doctor who instituted aggressive treatment despite his patient’s rejection of extraordinary measures evident in his living will. The patient, Mr. Noonkester, had Lou Gehrig’s disease and had instructed the doctor to write a DNR order. He gave his ex-wife power of attorney, and even made arrangements to be taken to a hospice in an emergency, where he planned to die peacefully. When Mr. Noonkester developed breathing problems from pneumonia, the ambulance took him to the hospital instead, and the doctor ordered a ventilator. The patient gave a "thumbs up" when told of the treatment plan, and 3 months later wrote a letter thanking Dr. Kline of the Scripps Clinic for saving his life. Although he had refused to have the ventilator removed, deeming it to be a suicidal act that he opposed, he subsequently sued Dr. Kline for interfering with his preplanned death and continuing costs of living. The jury took all of 45 minutes to return a unanimous verdict for Dr. Kline.

The contents of an AMD may be subject to differing interpretations, as was the case in Wright v. Johns Hopkins Health Systems Corp., 728 A.2d 166 (Md. 1999). A patient with AIDS arrested following a blood transfusion and was resuscitated but left in a comatose state for 10 days before dying. The family alleged that the aggressive treatment violated the patient’s living will instructions, but their lawsuit against the hospital was unsuccessful. Maryland’s Court of Appeals agreed with the hospital and the lower court that the living will could not take effect since no doctor had certified that he was in a terminal state and that his death was imminent.

The late Daniel Callahan, a prominent philosopher-ethicist, eloquently stated that dying in America has over the centuries "evolved from the sacred to the secular, private to institutional, and natural to artifactual." AMDs are a modern attempt to address the many dilemmas and emotions surrounding death. Patient autonomy and palliative care have rightly taken center stage. This may in part be the result of a seminal paper in 1995, which reported on a multicenter study of critically ill patients and their wishes regarding DNR and other end-of-life issues. The authors found that the wishes of many of the patients were ignored, and that 50% were in moderate or severe pain. Incredibly, physician treatment failed to change despite nurse intervention with prognostic information and patient preference.

¹42 USC 1395cc(f), 1396a(w) (1994).

² Silveira MJ et al., Advance Directives and Outcomes of Surrogate Decision Making Before Death. (N. Engl. J. Med. 2010; 362:1211-8).

³ Lee et al., Do Patients’ Treatment Decisions Match Advance Statements of Their Preference? (J. Clin. Ethics 1998; 9:258-62).

⁴ See www.polst.org

⁵ A controlled trial to improve care for seriously ill hospitalized patients.1995 "SUPPORT" trial. (JAMA 1995; 274:1591-8).

Question: R, a woman with diabetes and Parkinson’s disease, executed an advance medical directive (AMD) when she was aged 70 years. Her AMD stipulated that no extraordinary measures be taken should she become terminally ill or permanently comatose, and she named her sister as her agent with durable power of attorney (DPA). Ten years later, at age 80 years, R sustained a stroke, which left her with hemiparesis and loss of cognitive function. She remained comatose for a week and was dependent on a feeding tube. Her sister decided to honor the AMD and stop all medical treatment including artificial nutrition and hydration. Given the above scenario, which of the following is most accurate?

A. R’s AMD sprang into effect when she became decisionally incapacitated.

B. An AMD can direct only the forgoing of life-sustaining treatment, not the continuation of treatment measures.

C. AMD’s are mandatory under the 1990 Federal Patient Self-Determination Act, and those without an AMD are required to make one upon admission to a hospital.

D. Those with DPA for health-care decisions are obligated to carry out the patient’s instructions but can also override them.

E. In the absence of an AMD or DPA, the attending doctor makes the final decision in the best interest of the patient.

Answer: A. An advance medical directive (AMD), sometimes called a living will, is a legally binding document executed by a competent person that provides instructions for future health-care decisions if and when that person loses decisional capacity. One can elect to forgo some or all life-sustaining measures, or to continue receiving all treatments. In 1990, Congress enacted the Federal Patient Self Determination Act, which allows patients to stipulate in advance the nature of their healthcare should they become incapacitated. Additionally, they can appoint an agent or proxy, said to have durable power of attorney (DPA) for health-care decisions, to speak for them. Agents are required to carry out, not override, the patient’s wishes. The Federal Act requires all hospitals to inquire into whether a patient has an AMD and to provide information on the subject, but the Act does not mandate that everyone should execute one. All 50 states, beginning with California in 1976, have enacted legislation on AMDs. In the absence of an AMD and DPA, a surrogate decision maker, sometimes court appointed, directs the care. The attending doctor provides the prognosis, but does not make the final decision to forgo or continue treatment.

Physicians are obligated by law to respect wishes regarding whether to forgo or continue therapy, and, if contrary to their conscience, transfer the patient to a willing health-care provider. In some jurisdictions, a patient’s wish to discontinue artificial nutrition and hydration, for example, via nasogastric or G-tube, requires a specific opt-in or opt-out choice. AMD instructions become relevant when the patient is terminally ill, but many jurisdictions allow their applicability in nonterminal conditions such as irreversible unconscious states or where the likely risks and burdens of treatment would outweigh the expected benefits (Hawaii is such a state under HRS 327E-16).

A recent review of 3,746 patients who had died between 2000 and 2006 showed that those with AMDs were more likely to want limited care or comfort care rather than all possible care, with the vast majority receiving treatment compatible with their wishes. Those who had assigned a durable power of attorney were less likely to die in the hospital or receive all care possible. The authors concluded that patients who have prepared AMDs received care that was strongly associated with their preferences. Other observers are less sanguine, noting that in only two-thirds of the time were decisions consistent, and one-third of patients changed their preferences in the face of actual illness, usually in favor of treatments rejected in advance. Surrogate agreement was only 58%, and surrogates tended to overestimate their loved one’s desire for treatment.

AMDs direct future end-of-life treatment in a hospital setting, and do not typically address emergency measures taken by ambulance personnel. The National POLST (Physician Orders for Life-Sustaining Treatment) Paradigm grew out of the need to address outpatient emergency treatment especially for seriously ill and frail patients. POLST, now available in many states across the country, is in actuality a medical order signed by the patient’s doctor directing what is and is not to be done, for example, intubation, defibrillation, etc. It does not replace the AMD but is complementary in ensuring respect for a patient’s medical wishes.

Unsurprisingly, there has been litigation over AMDs. Some of the earlier cases tended to favor the health-care institution’s refusal to cease life-sustaining treatment. In Bartling v. Glendale Adventist Medical Center, 184 Cal App 3d 961 (1986), a needle biopsy caused a patient’s lung to collapse. The patient had to be placed in restraints as he tried to remove the ventilator tubes. He had earlier executed a living will and a durable power of attorney for health care, and the family, agreeing to release the hospital and doctors from any civil liability, asked that the ventilator be removed. Instead, the hospital merely tried to "wean" him, and planned to resuscitate him in the event of a cardiopulmonary arrest. Unfortunately, no other facility was willing to accept him in transfer. However, in a defense verdict, the court held that although case law was evolving toward a greater recognition of patients’ rights, it could not be said that a common legal standard existed to guide the medical community.

The case of Osgood v. Genesys St. Joseph Hospital (No. 94-26731-NH, Mich 1996) gave a different result. The patient had a long history of seizures, and the doctors warned that a massive one could leave her in a persistent vegetative state. The patient named her mom as having durable power of attorney. One month later, the patient suffered a massive seizure but was kept alive on a ventilator with full medical support consisting of tube feeding, dialysis, blood transfusions, and medications. Although asked to have these measures removed, the hospital allegedly said they were not life support, but were "comfort care." After 2 months, the patient awoke and was able to be discharged home. However, she remained bedridden and spent most of her time "rhythmically screaming and thrashing" for hours on end, saying, "bury me". The family won a jury award of $16.5 million, which was reduced to $1.4 million on appeal.

A third case, Noonkester v. Kline, was a 1996 defense verdict for a doctor who instituted aggressive treatment despite his patient’s rejection of extraordinary measures evident in his living will. The patient, Mr. Noonkester, had Lou Gehrig’s disease and had instructed the doctor to write a DNR order. He gave his ex-wife power of attorney, and even made arrangements to be taken to a hospice in an emergency, where he planned to die peacefully. When Mr. Noonkester developed breathing problems from pneumonia, the ambulance took him to the hospital instead, and the doctor ordered a ventilator. The patient gave a "thumbs up" when told of the treatment plan, and 3 months later wrote a letter thanking Dr. Kline of the Scripps Clinic for saving his life. Although he had refused to have the ventilator removed, deeming it to be a suicidal act that he opposed, he subsequently sued Dr. Kline for interfering with his preplanned death and continuing costs of living. The jury took all of 45 minutes to return a unanimous verdict for Dr. Kline.

The contents of an AMD may be subject to differing interpretations, as was the case in Wright v. Johns Hopkins Health Systems Corp., 728 A.2d 166 (Md. 1999). A patient with AIDS arrested following a blood transfusion and was resuscitated but left in a comatose state for 10 days before dying. The family alleged that the aggressive treatment violated the patient’s living will instructions, but their lawsuit against the hospital was unsuccessful. Maryland’s Court of Appeals agreed with the hospital and the lower court that the living will could not take effect since no doctor had certified that he was in a terminal state and that his death was imminent.

The late Daniel Callahan, a prominent philosopher-ethicist, eloquently stated that dying in America has over the centuries "evolved from the sacred to the secular, private to institutional, and natural to artifactual." AMDs are a modern attempt to address the many dilemmas and emotions surrounding death. Patient autonomy and palliative care have rightly taken center stage. This may in part be the result of a seminal paper in 1995, which reported on a multicenter study of critically ill patients and their wishes regarding DNR and other end-of-life issues. The authors found that the wishes of many of the patients were ignored, and that 50% were in moderate or severe pain. Incredibly, physician treatment failed to change despite nurse intervention with prognostic information and patient preference.

¹42 USC 1395cc(f), 1396a(w) (1994).

² Silveira MJ et al., Advance Directives and Outcomes of Surrogate Decision Making Before Death. (N. Engl. J. Med. 2010; 362:1211-8).

³ Lee et al., Do Patients’ Treatment Decisions Match Advance Statements of Their Preference? (J. Clin. Ethics 1998; 9:258-62).

⁴ See www.polst.org

⁵ A controlled trial to improve care for seriously ill hospitalized patients.1995 "SUPPORT" trial. (JAMA 1995; 274:1591-8).

Question: On antitrust, the U.S. courts have made the following statements, except:

A. To agree to prices is to fix them.

B. There is no learned profession exception to the antitrust laws.

C. To fix maximum price may amount to a fix of minimum price.

D. A group boycott of chiropractors violates the Sherman Act.

E. Tying arrangement in the health care industry is per se illegal.

Answer: E (see Jefferson Parish Hospital below). In the second part of the 20th century, the U.S. Supreme Court and other appellate courts began issuing a number of landmark opinions regarding health care economics and antitrust. Group boycotts were a major target, as was price fixing. This article briefly reviews a few of these decisions to impart a sense of how the judicial system views free market competition in health care.

In AMA v. United States (317 U.S. 519 [1943]), the issue was whether the medical profession’s leading organization, the American Medical Association, could be allowed to expel its salaried doctors or those who associated professionally with salaried doctors. Those who were denied AMA membership were naturally less able to compete (hospital privileges, consultations, etc.).

The U.S. Supreme Court held that such a group boycott of all salaried doctors was illegal because of its anticompetitive purpose, even if it allegedly promoted professional competence and public welfare.

Wilk v. AMA (895 F.2d 352 [1990]) was the culmination of a number of lawsuits surrounding the AMA and chiropractic. In 1963, the AMA had formed a Committee on Quackery aimed at eliminating chiropractic as a profession. The AMA Code of Ethics, Principle 3, opined that it was unethical for a physician to associate professionally with chiropractors. In 1976, Dr. Wilk and four other licensed chiropractors filed suit against the AMA, and a jury trial found that the purpose of the boycott was to eliminate substantial competition without corresponding procompetitive benefits.

The U.S. Court of Appeals for the Seventh Circuit subsequently affirmed the lower court’s finding that the AMA violated Section 1 of the Sherman Act in its illegal boycott of chiropractors, although the court did not answer the question as to whether chiropractic theory was in fact scientific. The court inquired into whether there was a genuine reasonable concern for the use of the scientific method in the doctor-patient relationship, and whether that concern was the dominating, motivating factor in the boycott, and if so, whether it could have been satisfied without restraining competition.

The court found that the AMA’s motive for the boycott was anticompetitive, believing that concern for patient care could be expressed, for example, through public-education campaigns. Although the AMA had formally removed Principle 3 in 1980, it nonetheless appealed this adverse decision to the U.S. Supreme Court on three separate occasions, but the latter declined to hear the case.

In Goldfarb v. Virginia State Bar (421 U.S. 773 [1975]), the Virginia State Bar enforced an "advisory" minimum fee schedule for legal services. The U.S. Supreme Court found that this was an agreement to fix prices, holding, "This is not merely a case of an agreement that may be inferred from an exchange of price information ... for here a naked agreement was clearly shown, and the effect on prices is plain."

The court rejected the defendant’s argument that the practice of law was not a trade or commerce intended to be under Sherman Act scrutiny, declaring there was to be no "learned profession" exemption.

However, it noted that special considerations might apply, holding that "It would be unrealistic to view the practice of professions as interchangeable with other business activities, and automatically to apply to the professions antitrust concepts, which originated in other areas. The public service aspect, and other features of the professions, may require that a particular practice, which could properly be viewed as a violation of the Sherman Act in another context, be treated differently."

Following Goldfarb, there remains no doubt that professional services – legal, medical, and other services – are all to be governed by the antitrust laws.

A flurry of health care–related antitrust cases, including Patrick v. Burget (to be discussed in part 3), reached the courts in the 1980s. In Arizona v. Maricopa County Medical Society (457 U.S. 332 [1982]), the county medical society set maximum allowable fees that member physicians could charge their patients, presumably to guard against price gouging. However, the U.S. Supreme Court, using the tough illegal per se standard, characterized the agreement as price fixing, despite it being for maximum rather than minimum fees.

The court ruled, "Maximum and minimum price fixing may have different consequences in many situations. But schemes to fix maximum prices, by substituting perhaps the erroneous judgment of a seller for the forces of the competitive market, may severely intrude upon the ability of buyers to compete and survive in that market. ... Maximum prices may be fixed too low ... may channel distribution through a few large or specifically advantaged dealers. ... Moreover, if the actual price charged under a maximum price scheme is nearly always the fixed maximum price, which is increasingly likely as the maximum price approaches the actual cost of the dealer, the scheme tends to acquire all the attributes of an arrangement fixing minimum prices."

At issue in Jefferson Parish Hospital District No. 2 v. Hyde (466 U.S. 2 [1984]) was an exclusive contract between a group of four anesthesiologists and Jefferson Parish Hospital in the New Orleans area. Dr. Hyde was an independent board-certified anesthesiologist who was denied medical staff privileges at the hospital because of this exclusive contract. The exclusive arrangement in effect required patients at the hospital to use the services of the four anesthesiologists and none others, raising the issue of unlawful "tying," where a seller requires a customer to purchase one product or service as a condition of being allowed to purchase another.

In a rare unanimous decision, the U.S. Supreme Court, while agreeing that the contract was a tying arrangement, nonetheless rejected the argument that it was per se illegal or that it unreasonably restrained competition among anesthesiologists. The court reasoned that the hospital’s 30% share of the market did not amount to sufficient market power in the provision of hospital services in the Jefferson Parish area. Pointing out that every patient undergoing surgery needed anesthesia, the court found no evidence that any patient received unnecessary services, and it noted that the tying arrangement that was generally employed in the health care industry improved patient care and promoted hospital efficiency.

Tying arrangements in health care are frequently analyzed under a rule of reason standard instead of the strict per se standard, and the favorable decision in this specific case depended heavily on the hospitals’ relatively small market power.

Finally, consider a case on insurance reimbursement and a group boycott against a third-party payer. In Federal Trade Commission v. Indiana Federation of Dentists (476 U.S. 447 [1986]), dental health insurers in Indiana attempted to contain the cost of dental treatment by limiting payments to the least expensive yet adequate treatment suitable to the needs of the patient. The insurers required the submission of x-rays by treating dentists for review of their insurance claims.

Viewing such review of diagnostic and treatment decisions as a threat to their professional independence and economic well-being, members of the Indiana Dental Association and later the Indiana Federation of Dentists agreed collectively to refuse to submit the requested x-rays. These concerted activities resulted in the denial of information that dental customers had requested and had a right to know, and forced them to choose between acquiring the information in a more costly manner or forgoing it altogether.

The lower court had ruled in favor of the dentists, but the U.S. Supreme Court reversed. It agreed that in the absence of concerted behavior, an individual dentist would have been subject to market forces of competition, creating incentives for him or her to comply with the requests of patients’ third-party insurers. But the conduct of the federation was tantamount to a group boycott, which unreasonably restrained trade. The court noted that while this was not price fixing as such, no elaborate industry analysis was required to demonstrate the anticompetitive character of such an agreement.

Dr. Tan is professor emeritus of medicine and former adjunct professor of law at the University of Hawaii. This article is meant to be educational and does not constitute medical, ethical, or legal advice. Some of the articles in this series are adapted from the author’s 2006 book, "Medical Malpractice: Understanding the Law, Managing the Risk", and his 2012 Halsbury treatise, "Medical Negligence and Professional Misconduct." For additional information, readers may contact the author at [email protected].

Question: On antitrust, the U.S. courts have made the following statements, except:

A. To agree to prices is to fix them.

B. There is no learned profession exception to the antitrust laws.

C. To fix maximum price may amount to a fix of minimum price.

D. A group boycott of chiropractors violates the Sherman Act.

E. Tying arrangement in the health care industry is per se illegal.

Answer: E (see Jefferson Parish Hospital below). In the second part of the 20th century, the U.S. Supreme Court and other appellate courts began issuing a number of landmark opinions regarding health care economics and antitrust. Group boycotts were a major target, as was price fixing. This article briefly reviews a few of these decisions to impart a sense of how the judicial system views free market competition in health care.

In AMA v. United States (317 U.S. 519 [1943]), the issue was whether the medical profession’s leading organization, the American Medical Association, could be allowed to expel its salaried doctors or those who associated professionally with salaried doctors. Those who were denied AMA membership were naturally less able to compete (hospital privileges, consultations, etc.).

The U.S. Supreme Court held that such a group boycott of all salaried doctors was illegal because of its anticompetitive purpose, even if it allegedly promoted professional competence and public welfare.

Wilk v. AMA (895 F.2d 352 [1990]) was the culmination of a number of lawsuits surrounding the AMA and chiropractic. In 1963, the AMA had formed a Committee on Quackery aimed at eliminating chiropractic as a profession. The AMA Code of Ethics, Principle 3, opined that it was unethical for a physician to associate professionally with chiropractors. In 1976, Dr. Wilk and four other licensed chiropractors filed suit against the AMA, and a jury trial found that the purpose of the boycott was to eliminate substantial competition without corresponding procompetitive benefits.

The U.S. Court of Appeals for the Seventh Circuit subsequently affirmed the lower court’s finding that the AMA violated Section 1 of the Sherman Act in its illegal boycott of chiropractors, although the court did not answer the question as to whether chiropractic theory was in fact scientific. The court inquired into whether there was a genuine reasonable concern for the use of the scientific method in the doctor-patient relationship, and whether that concern was the dominating, motivating factor in the boycott, and if so, whether it could have been satisfied without restraining competition.

The court found that the AMA’s motive for the boycott was anticompetitive, believing that concern for patient care could be expressed, for example, through public-education campaigns. Although the AMA had formally removed Principle 3 in 1980, it nonetheless appealed this adverse decision to the U.S. Supreme Court on three separate occasions, but the latter declined to hear the case.

In Goldfarb v. Virginia State Bar (421 U.S. 773 [1975]), the Virginia State Bar enforced an "advisory" minimum fee schedule for legal services. The U.S. Supreme Court found that this was an agreement to fix prices, holding, "This is not merely a case of an agreement that may be inferred from an exchange of price information ... for here a naked agreement was clearly shown, and the effect on prices is plain."

The court rejected the defendant’s argument that the practice of law was not a trade or commerce intended to be under Sherman Act scrutiny, declaring there was to be no "learned profession" exemption.

However, it noted that special considerations might apply, holding that "It would be unrealistic to view the practice of professions as interchangeable with other business activities, and automatically to apply to the professions antitrust concepts, which originated in other areas. The public service aspect, and other features of the professions, may require that a particular practice, which could properly be viewed as a violation of the Sherman Act in another context, be treated differently."

Following Goldfarb, there remains no doubt that professional services – legal, medical, and other services – are all to be governed by the antitrust laws.

A flurry of health care–related antitrust cases, including Patrick v. Burget (to be discussed in part 3), reached the courts in the 1980s. In Arizona v. Maricopa County Medical Society (457 U.S. 332 [1982]), the county medical society set maximum allowable fees that member physicians could charge their patients, presumably to guard against price gouging. However, the U.S. Supreme Court, using the tough illegal per se standard, characterized the agreement as price fixing, despite it being for maximum rather than minimum fees.

The court ruled, "Maximum and minimum price fixing may have different consequences in many situations. But schemes to fix maximum prices, by substituting perhaps the erroneous judgment of a seller for the forces of the competitive market, may severely intrude upon the ability of buyers to compete and survive in that market. ... Maximum prices may be fixed too low ... may channel distribution through a few large or specifically advantaged dealers. ... Moreover, if the actual price charged under a maximum price scheme is nearly always the fixed maximum price, which is increasingly likely as the maximum price approaches the actual cost of the dealer, the scheme tends to acquire all the attributes of an arrangement fixing minimum prices."

At issue in Jefferson Parish Hospital District No. 2 v. Hyde (466 U.S. 2 [1984]) was an exclusive contract between a group of four anesthesiologists and Jefferson Parish Hospital in the New Orleans area. Dr. Hyde was an independent board-certified anesthesiologist who was denied medical staff privileges at the hospital because of this exclusive contract. The exclusive arrangement in effect required patients at the hospital to use the services of the four anesthesiologists and none others, raising the issue of unlawful "tying," where a seller requires a customer to purchase one product or service as a condition of being allowed to purchase another.

In a rare unanimous decision, the U.S. Supreme Court, while agreeing that the contract was a tying arrangement, nonetheless rejected the argument that it was per se illegal or that it unreasonably restrained competition among anesthesiologists. The court reasoned that the hospital’s 30% share of the market did not amount to sufficient market power in the provision of hospital services in the Jefferson Parish area. Pointing out that every patient undergoing surgery needed anesthesia, the court found no evidence that any patient received unnecessary services, and it noted that the tying arrangement that was generally employed in the health care industry improved patient care and promoted hospital efficiency.

Tying arrangements in health care are frequently analyzed under a rule of reason standard instead of the strict per se standard, and the favorable decision in this specific case depended heavily on the hospitals’ relatively small market power.

Finally, consider a case on insurance reimbursement and a group boycott against a third-party payer. In Federal Trade Commission v. Indiana Federation of Dentists (476 U.S. 447 [1986]), dental health insurers in Indiana attempted to contain the cost of dental treatment by limiting payments to the least expensive yet adequate treatment suitable to the needs of the patient. The insurers required the submission of x-rays by treating dentists for review of their insurance claims.

Viewing such review of diagnostic and treatment decisions as a threat to their professional independence and economic well-being, members of the Indiana Dental Association and later the Indiana Federation of Dentists agreed collectively to refuse to submit the requested x-rays. These concerted activities resulted in the denial of information that dental customers had requested and had a right to know, and forced them to choose between acquiring the information in a more costly manner or forgoing it altogether.

The lower court had ruled in favor of the dentists, but the U.S. Supreme Court reversed. It agreed that in the absence of concerted behavior, an individual dentist would have been subject to market forces of competition, creating incentives for him or her to comply with the requests of patients’ third-party insurers. But the conduct of the federation was tantamount to a group boycott, which unreasonably restrained trade. The court noted that while this was not price fixing as such, no elaborate industry analysis was required to demonstrate the anticompetitive character of such an agreement.

Dr. Tan is professor emeritus of medicine and former adjunct professor of law at the University of Hawaii. This article is meant to be educational and does not constitute medical, ethical, or legal advice. Some of the articles in this series are adapted from the author’s 2006 book, "Medical Malpractice: Understanding the Law, Managing the Risk", and his 2012 Halsbury treatise, "Medical Negligence and Professional Misconduct." For additional information, readers may contact the author at [email protected].

Question: On antitrust, the U.S. courts have made the following statements, except:

A. To agree to prices is to fix them.

B. There is no learned profession exception to the antitrust laws.

C. To fix maximum price may amount to a fix of minimum price.

D. A group boycott of chiropractors violates the Sherman Act.

E. Tying arrangement in the health care industry is per se illegal.

Answer: E (see Jefferson Parish Hospital below). In the second part of the 20th century, the U.S. Supreme Court and other appellate courts began issuing a number of landmark opinions regarding health care economics and antitrust. Group boycotts were a major target, as was price fixing. This article briefly reviews a few of these decisions to impart a sense of how the judicial system views free market competition in health care.

In AMA v. United States (317 U.S. 519 [1943]), the issue was whether the medical profession’s leading organization, the American Medical Association, could be allowed to expel its salaried doctors or those who associated professionally with salaried doctors. Those who were denied AMA membership were naturally less able to compete (hospital privileges, consultations, etc.).

The U.S. Supreme Court held that such a group boycott of all salaried doctors was illegal because of its anticompetitive purpose, even if it allegedly promoted professional competence and public welfare.

Wilk v. AMA (895 F.2d 352 [1990]) was the culmination of a number of lawsuits surrounding the AMA and chiropractic. In 1963, the AMA had formed a Committee on Quackery aimed at eliminating chiropractic as a profession. The AMA Code of Ethics, Principle 3, opined that it was unethical for a physician to associate professionally with chiropractors. In 1976, Dr. Wilk and four other licensed chiropractors filed suit against the AMA, and a jury trial found that the purpose of the boycott was to eliminate substantial competition without corresponding procompetitive benefits.

The U.S. Court of Appeals for the Seventh Circuit subsequently affirmed the lower court’s finding that the AMA violated Section 1 of the Sherman Act in its illegal boycott of chiropractors, although the court did not answer the question as to whether chiropractic theory was in fact scientific. The court inquired into whether there was a genuine reasonable concern for the use of the scientific method in the doctor-patient relationship, and whether that concern was the dominating, motivating factor in the boycott, and if so, whether it could have been satisfied without restraining competition.

The court found that the AMA’s motive for the boycott was anticompetitive, believing that concern for patient care could be expressed, for example, through public-education campaigns. Although the AMA had formally removed Principle 3 in 1980, it nonetheless appealed this adverse decision to the U.S. Supreme Court on three separate occasions, but the latter declined to hear the case.

In Goldfarb v. Virginia State Bar (421 U.S. 773 [1975]), the Virginia State Bar enforced an "advisory" minimum fee schedule for legal services. The U.S. Supreme Court found that this was an agreement to fix prices, holding, "This is not merely a case of an agreement that may be inferred from an exchange of price information ... for here a naked agreement was clearly shown, and the effect on prices is plain."

The court rejected the defendant’s argument that the practice of law was not a trade or commerce intended to be under Sherman Act scrutiny, declaring there was to be no "learned profession" exemption.

However, it noted that special considerations might apply, holding that "It would be unrealistic to view the practice of professions as interchangeable with other business activities, and automatically to apply to the professions antitrust concepts, which originated in other areas. The public service aspect, and other features of the professions, may require that a particular practice, which could properly be viewed as a violation of the Sherman Act in another context, be treated differently."

Following Goldfarb, there remains no doubt that professional services – legal, medical, and other services – are all to be governed by the antitrust laws.

A flurry of health care–related antitrust cases, including Patrick v. Burget (to be discussed in part 3), reached the courts in the 1980s. In Arizona v. Maricopa County Medical Society (457 U.S. 332 [1982]), the county medical society set maximum allowable fees that member physicians could charge their patients, presumably to guard against price gouging. However, the U.S. Supreme Court, using the tough illegal per se standard, characterized the agreement as price fixing, despite it being for maximum rather than minimum fees.

The court ruled, "Maximum and minimum price fixing may have different consequences in many situations. But schemes to fix maximum prices, by substituting perhaps the erroneous judgment of a seller for the forces of the competitive market, may severely intrude upon the ability of buyers to compete and survive in that market. ... Maximum prices may be fixed too low ... may channel distribution through a few large or specifically advantaged dealers. ... Moreover, if the actual price charged under a maximum price scheme is nearly always the fixed maximum price, which is increasingly likely as the maximum price approaches the actual cost of the dealer, the scheme tends to acquire all the attributes of an arrangement fixing minimum prices."

At issue in Jefferson Parish Hospital District No. 2 v. Hyde (466 U.S. 2 [1984]) was an exclusive contract between a group of four anesthesiologists and Jefferson Parish Hospital in the New Orleans area. Dr. Hyde was an independent board-certified anesthesiologist who was denied medical staff privileges at the hospital because of this exclusive contract. The exclusive arrangement in effect required patients at the hospital to use the services of the four anesthesiologists and none others, raising the issue of unlawful "tying," where a seller requires a customer to purchase one product or service as a condition of being allowed to purchase another.

In a rare unanimous decision, the U.S. Supreme Court, while agreeing that the contract was a tying arrangement, nonetheless rejected the argument that it was per se illegal or that it unreasonably restrained competition among anesthesiologists. The court reasoned that the hospital’s 30% share of the market did not amount to sufficient market power in the provision of hospital services in the Jefferson Parish area. Pointing out that every patient undergoing surgery needed anesthesia, the court found no evidence that any patient received unnecessary services, and it noted that the tying arrangement that was generally employed in the health care industry improved patient care and promoted hospital efficiency.

Tying arrangements in health care are frequently analyzed under a rule of reason standard instead of the strict per se standard, and the favorable decision in this specific case depended heavily on the hospitals’ relatively small market power.

Finally, consider a case on insurance reimbursement and a group boycott against a third-party payer. In Federal Trade Commission v. Indiana Federation of Dentists (476 U.S. 447 [1986]), dental health insurers in Indiana attempted to contain the cost of dental treatment by limiting payments to the least expensive yet adequate treatment suitable to the needs of the patient. The insurers required the submission of x-rays by treating dentists for review of their insurance claims.

Viewing such review of diagnostic and treatment decisions as a threat to their professional independence and economic well-being, members of the Indiana Dental Association and later the Indiana Federation of Dentists agreed collectively to refuse to submit the requested x-rays. These concerted activities resulted in the denial of information that dental customers had requested and had a right to know, and forced them to choose between acquiring the information in a more costly manner or forgoing it altogether.

The lower court had ruled in favor of the dentists, but the U.S. Supreme Court reversed. It agreed that in the absence of concerted behavior, an individual dentist would have been subject to market forces of competition, creating incentives for him or her to comply with the requests of patients’ third-party insurers. But the conduct of the federation was tantamount to a group boycott, which unreasonably restrained trade. The court noted that while this was not price fixing as such, no elaborate industry analysis was required to demonstrate the anticompetitive character of such an agreement.

Dr. Tan is professor emeritus of medicine and former adjunct professor of law at the University of Hawaii. This article is meant to be educational and does not constitute medical, ethical, or legal advice. Some of the articles in this series are adapted from the author’s 2006 book, "Medical Malpractice: Understanding the Law, Managing the Risk", and his 2012 Halsbury treatise, "Medical Negligence and Professional Misconduct." For additional information, readers may contact the author at [email protected].

This article introduces United States antitrust laws and discusses their application in health care. Part 2 will summarize major court decisions covering that subject.

Question: Antitrust laws:

A. Are based in part on the physician-patient trust relationship.

B. Prohibit anticompetitive behavior.

C. Regulate business activities but not professional services.

D. A, B, and C are correct.

E. B and C are correct.

Answer: B. Economic interests are best served in a freely competitive marketplace. Trade restraints such as price fixing and monopolization tend to promote inefficiency and increase profit for the perpetrators, at the expense of consumer welfare.

Accordingly, Congress enacted the Sherman Antitrust Act way back in 1890 to promote competition and outlaw unreasonable restraint of trade. Additional laws prohibit mergers that substantially lessen competition, price discrimination, and unfair trade practices. Collectively, these are known as the antitrust laws, the term reflecting their initial purpose to prevent commercial traders from forming anticompetitive groups or "trusts."

The Department of Justice (DOJ), the Federal Trade Commission (FTC), and their state counterparts enforce these laws, which have nothing whatsoever to do with the doctor-patient trust relationship.

Section I of the Sherman Act, the paramount antitrust statute, declares that "Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal." Section II stipulates, "Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony."

Other important laws are Sections 4 and 7 of the Clayton Antitrust Act and Section 5(a)(1) of the Federal Trade Commission Act, which outlaws "unfair methods of competition in or affecting commerce ... " Additionally, all states have their own antitrust statutes, which in some cases may be more restrictive than the federal laws are.

These laws initially targeted anticompetitive business practices. In 1975, the U.S. Supreme Court declared that there was to be no "learned profession" exemption, although special considerations may apply.¹ However, activities of state government officials and employees are exempt from antitrust scrutiny under the so-called "state action doctrine," which confers immunity if an exemption is clearly articulated and affirmatively expressed as state policy, and there is active state supervision of the conduct in question.

Antitrust issues are ubiquitous in health care, and fall into seven major categories: 1) price fixing; 2) boycotts; 3) market division; 4) monopolization; 5) joint ventures; 6) exclusive contracts, and 7) peer review.

1. Price fixing. An agreement to fix prices is the most egregious example of anticompetitive conduct, so much so that the courts will use a per se analysis, i.e., without need to consider other factors, to arrive at its decision. Price fixing does not require any party to show market dominance or power, and its presence can be inferred from circumstances and agreements, which can be either oral or written.

For example, physician fee schedules or guidelines by a medical association would constitute price fixing. Even an agreement to fix maximum prices, as opposed to minimum prices, has been ruled illegal. At a practical level, physicians should avoid sharing pricing information with anyone, especially with colleagues, unless strict FTC "safety zone" criteria are satisfied.

2. Boycotts. Group boycotts are usually per se illegal, but in the health care industry, a rule of reason analysis is frequently used. Courts will look at the circumstances and purpose of the boycott, its pro- and anti-competitive effects, and whether there are other less restrictive ways to achieve the purported goal.

Affiliating physicians face this risk when forming alliances, as boycott questions may arise when a doctor is inappropriately excluded, which deprives him/her from earning a living in the relevant market.

A related controversial issue is the unionization of doctors. Unionization protects labor rights, especially those of medical residents, and offers greater parity in collective bargaining. On the other hand, the danger is in tying a physician’s obligations to the interests of other workers who may not share the same ethical commitment to patients.²

Strikes by doctors are likely to interfere with patient care, raise serious ethical questions, and may also be in violation of antitrust laws although boycotts for sociopolitical and noncommercial reasons are not specifically prohibited.

3. Market division. Agreements to restrict competition by dividing or allocating territories or patients are illegal per se under the Sherman Act.

4. Monopolization. Section 2 of the Sherman Act prohibits monopolization and attempts to monopolize. Examples are predatory pricing, long-term exclusive contracts, and refusal to deal. Mergers and acquisitions may substantially lessen competition with the tendency to create a monopoly, and they are subject to Section 7 of the Clayton Act. Proof of monopolization requires an inquiry into the relevant product and geographic markets (usually greater than 50%-60% market share), and regularly requires an economist’s expertise at trial.

As a general proposition, restraint of trade and monopolistic charges are difficult to prove. Monopoly through "the exercise of skill, foresight, and industry" does not constitute monopolizing conduct.

5. Joint ventures. The two main ways physicians form network joint ventures are: 1) join together in an entity with shared financial risks and clinical integration, and 2) join a looser network without integration to simply facilitate the flow of information for contracting purposes between physicians and other payers, the so-called messenger method.

Many health delivery systems involve joint venture agreements among practitioners or groups of health professionals and health care institutions, e.g., physician hospital organizations (PHOs), independent practice associations (IPAs), and preferred physician organization (PPOs). Physicians and physician practice groups may become targets if their attempted efforts at joint ventures are deemed to be a pretext for price fixing or otherwise anticompetitive.

The DOJ and FTC have promulgated guidelines regarding joint venture structures and will perform a review of the proposal upon request.³

However, under Obamacare, which promotes the efficient integration of health services through competition such as accountable care organizations, these guidelines are likely to be revised in the near future.

6. Exclusive contracts. Many hospitals have exclusive contracts with health professionals such as radiologists, anesthesiologists, and pathologists. Patients using the facility may be forced to use the services of these providers ("tying arrangement"). If the hospital does not possess requisite market power, or force the acceptance of the service, such agreements may pass antitrust scrutiny.

7. Peer review. The Health Care Quality Improvement Act (42 U.S.C. §§ 1101 et seq.) immunizes physicians and others performing peer review activities from federal antitrust claims so long as peer review was carried out: 1) in reasonable belief that the action was in furtherance of quality health care; 2) after reasonable effort to obtain the facts; 3) after an adequate notice and hearing procedure; 4) in reasonable belief that the action was warranted; and 5) any adverse outcome was reported to the National Practitioners’ Data Bank.

A doctor who is judged wanting in peer review occasionally asserts a discriminatory or anticompetitive intent, and may file a retaliatory lawsuit. One caveat: Peer review deliberations are always held in strict confidence. Disparaging a doctor under review in an unrelated forum constitutes a violation of the peer review process, which risks nullification of discovery protection and antitrust immunity.

Antitrust problems are highly fact dependent and analytically complex, and therefore require counsel with special expertise and experience. Issues are surprisingly prevalent and may be counterintuitive, affecting not only parties in joint ventures and mergers, but also the solo office or hospital practitioner. Matters of medical staffing, joint purchasing, information exchange, managed care negotiation, peer review and price agreements are some examples.

Penalties are severe, and may cover more than simple cease and desist orders. Some behavior constitutes criminality punishable by prison terms, though this is rare in the health care arena.

More often, the guilty parties face heavy monetary fines from both governmental officials as well as private litigants who can join in the lawsuit and stand to benefit from awards of treble damages and attorneys’ fees.

References:

1. Goldfarb v. Virginia State Bar 421 U.S. 773, 1975.

2. Code of Medical Ethics, AMA, 9.025, 2012-2013 edition.

3. Statements of Antitrust Enforcement Policy in Health Care. Department of Justice and Federal Trade Commission (1996).

Dr. Tan is professor emeritus of medicine and former adjunct professor of law at the University of Hawaii. This article is meant to be educational and does not constitute medical, ethical or legal advice. Some of the articles in this series are adapted from the author’s 2006 book, "Medical Malpractice: Understanding the Law, Managing the Risk," and his 2012 Halsbury treatise, "Medical Negligence and Professional Misconduct." For additional information, readers may contact the author at [email protected].

This article introduces United States antitrust laws and discusses their application in health care. Part 2 will summarize major court decisions covering that subject.

Question: Antitrust laws:

A. Are based in part on the physician-patient trust relationship.

B. Prohibit anticompetitive behavior.

C. Regulate business activities but not professional services.

D. A, B, and C are correct.

E. B and C are correct.

Answer: B. Economic interests are best served in a freely competitive marketplace. Trade restraints such as price fixing and monopolization tend to promote inefficiency and increase profit for the perpetrators, at the expense of consumer welfare.

Accordingly, Congress enacted the Sherman Antitrust Act way back in 1890 to promote competition and outlaw unreasonable restraint of trade. Additional laws prohibit mergers that substantially lessen competition, price discrimination, and unfair trade practices. Collectively, these are known as the antitrust laws, the term reflecting their initial purpose to prevent commercial traders from forming anticompetitive groups or "trusts."

The Department of Justice (DOJ), the Federal Trade Commission (FTC), and their state counterparts enforce these laws, which have nothing whatsoever to do with the doctor-patient trust relationship.

Section I of the Sherman Act, the paramount antitrust statute, declares that "Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal." Section II stipulates, "Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony."

Other important laws are Sections 4 and 7 of the Clayton Antitrust Act and Section 5(a)(1) of the Federal Trade Commission Act, which outlaws "unfair methods of competition in or affecting commerce ... " Additionally, all states have their own antitrust statutes, which in some cases may be more restrictive than the federal laws are.

These laws initially targeted anticompetitive business practices. In 1975, the U.S. Supreme Court declared that there was to be no "learned profession" exemption, although special considerations may apply.¹ However, activities of state government officials and employees are exempt from antitrust scrutiny under the so-called "state action doctrine," which confers immunity if an exemption is clearly articulated and affirmatively expressed as state policy, and there is active state supervision of the conduct in question.

Antitrust issues are ubiquitous in health care, and fall into seven major categories: 1) price fixing; 2) boycotts; 3) market division; 4) monopolization; 5) joint ventures; 6) exclusive contracts, and 7) peer review.

1. Price fixing. An agreement to fix prices is the most egregious example of anticompetitive conduct, so much so that the courts will use a per se analysis, i.e., without need to consider other factors, to arrive at its decision. Price fixing does not require any party to show market dominance or power, and its presence can be inferred from circumstances and agreements, which can be either oral or written.

For example, physician fee schedules or guidelines by a medical association would constitute price fixing. Even an agreement to fix maximum prices, as opposed to minimum prices, has been ruled illegal. At a practical level, physicians should avoid sharing pricing information with anyone, especially with colleagues, unless strict FTC "safety zone" criteria are satisfied.

2. Boycotts. Group boycotts are usually per se illegal, but in the health care industry, a rule of reason analysis is frequently used. Courts will look at the circumstances and purpose of the boycott, its pro- and anti-competitive effects, and whether there are other less restrictive ways to achieve the purported goal.

Affiliating physicians face this risk when forming alliances, as boycott questions may arise when a doctor is inappropriately excluded, which deprives him/her from earning a living in the relevant market.

A related controversial issue is the unionization of doctors. Unionization protects labor rights, especially those of medical residents, and offers greater parity in collective bargaining. On the other hand, the danger is in tying a physician’s obligations to the interests of other workers who may not share the same ethical commitment to patients.²

Strikes by doctors are likely to interfere with patient care, raise serious ethical questions, and may also be in violation of antitrust laws although boycotts for sociopolitical and noncommercial reasons are not specifically prohibited.

3. Market division. Agreements to restrict competition by dividing or allocating territories or patients are illegal per se under the Sherman Act.

4. Monopolization. Section 2 of the Sherman Act prohibits monopolization and attempts to monopolize. Examples are predatory pricing, long-term exclusive contracts, and refusal to deal. Mergers and acquisitions may substantially lessen competition with the tendency to create a monopoly, and they are subject to Section 7 of the Clayton Act. Proof of monopolization requires an inquiry into the relevant product and geographic markets (usually greater than 50%-60% market share), and regularly requires an economist’s expertise at trial.

As a general proposition, restraint of trade and monopolistic charges are difficult to prove. Monopoly through "the exercise of skill, foresight, and industry" does not constitute monopolizing conduct.

5. Joint ventures. The two main ways physicians form network joint ventures are: 1) join together in an entity with shared financial risks and clinical integration, and 2) join a looser network without integration to simply facilitate the flow of information for contracting purposes between physicians and other payers, the so-called messenger method.

Many health delivery systems involve joint venture agreements among practitioners or groups of health professionals and health care institutions, e.g., physician hospital organizations (PHOs), independent practice associations (IPAs), and preferred physician organization (PPOs). Physicians and physician practice groups may become targets if their attempted efforts at joint ventures are deemed to be a pretext for price fixing or otherwise anticompetitive.

The DOJ and FTC have promulgated guidelines regarding joint venture structures and will perform a review of the proposal upon request.³

However, under Obamacare, which promotes the efficient integration of health services through competition such as accountable care organizations, these guidelines are likely to be revised in the near future.

6. Exclusive contracts. Many hospitals have exclusive contracts with health professionals such as radiologists, anesthesiologists, and pathologists. Patients using the facility may be forced to use the services of these providers ("tying arrangement"). If the hospital does not possess requisite market power, or force the acceptance of the service, such agreements may pass antitrust scrutiny.

7. Peer review. The Health Care Quality Improvement Act (42 U.S.C. §§ 1101 et seq.) immunizes physicians and others performing peer review activities from federal antitrust claims so long as peer review was carried out: 1) in reasonable belief that the action was in furtherance of quality health care; 2) after reasonable effort to obtain the facts; 3) after an adequate notice and hearing procedure; 4) in reasonable belief that the action was warranted; and 5) any adverse outcome was reported to the National Practitioners’ Data Bank.

A doctor who is judged wanting in peer review occasionally asserts a discriminatory or anticompetitive intent, and may file a retaliatory lawsuit. One caveat: Peer review deliberations are always held in strict confidence. Disparaging a doctor under review in an unrelated forum constitutes a violation of the peer review process, which risks nullification of discovery protection and antitrust immunity.

Antitrust problems are highly fact dependent and analytically complex, and therefore require counsel with special expertise and experience. Issues are surprisingly prevalent and may be counterintuitive, affecting not only parties in joint ventures and mergers, but also the solo office or hospital practitioner. Matters of medical staffing, joint purchasing, information exchange, managed care negotiation, peer review and price agreements are some examples.

Penalties are severe, and may cover more than simple cease and desist orders. Some behavior constitutes criminality punishable by prison terms, though this is rare in the health care arena.

More often, the guilty parties face heavy monetary fines from both governmental officials as well as private litigants who can join in the lawsuit and stand to benefit from awards of treble damages and attorneys’ fees.

References:

1. Goldfarb v. Virginia State Bar 421 U.S. 773, 1975.

2. Code of Medical Ethics, AMA, 9.025, 2012-2013 edition.

3. Statements of Antitrust Enforcement Policy in Health Care. Department of Justice and Federal Trade Commission (1996).

Dr. Tan is professor emeritus of medicine and former adjunct professor of law at the University of Hawaii. This article is meant to be educational and does not constitute medical, ethical or legal advice. Some of the articles in this series are adapted from the author’s 2006 book, "Medical Malpractice: Understanding the Law, Managing the Risk," and his 2012 Halsbury treatise, "Medical Negligence and Professional Misconduct." For additional information, readers may contact the author at [email protected].

This article introduces United States antitrust laws and discusses their application in health care. Part 2 will summarize major court decisions covering that subject.

Question: Antitrust laws:

A. Are based in part on the physician-patient trust relationship.

B. Prohibit anticompetitive behavior.

C. Regulate business activities but not professional services.

D. A, B, and C are correct.

E. B and C are correct.

Answer: B. Economic interests are best served in a freely competitive marketplace. Trade restraints such as price fixing and monopolization tend to promote inefficiency and increase profit for the perpetrators, at the expense of consumer welfare.

Accordingly, Congress enacted the Sherman Antitrust Act way back in 1890 to promote competition and outlaw unreasonable restraint of trade. Additional laws prohibit mergers that substantially lessen competition, price discrimination, and unfair trade practices. Collectively, these are known as the antitrust laws, the term reflecting their initial purpose to prevent commercial traders from forming anticompetitive groups or "trusts."

The Department of Justice (DOJ), the Federal Trade Commission (FTC), and their state counterparts enforce these laws, which have nothing whatsoever to do with the doctor-patient trust relationship.

Section I of the Sherman Act, the paramount antitrust statute, declares that "Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal." Section II stipulates, "Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony."

Other important laws are Sections 4 and 7 of the Clayton Antitrust Act and Section 5(a)(1) of the Federal Trade Commission Act, which outlaws "unfair methods of competition in or affecting commerce ... " Additionally, all states have their own antitrust statutes, which in some cases may be more restrictive than the federal laws are.

These laws initially targeted anticompetitive business practices. In 1975, the U.S. Supreme Court declared that there was to be no "learned profession" exemption, although special considerations may apply.¹ However, activities of state government officials and employees are exempt from antitrust scrutiny under the so-called "state action doctrine," which confers immunity if an exemption is clearly articulated and affirmatively expressed as state policy, and there is active state supervision of the conduct in question.

Antitrust issues are ubiquitous in health care, and fall into seven major categories: 1) price fixing; 2) boycotts; 3) market division; 4) monopolization; 5) joint ventures; 6) exclusive contracts, and 7) peer review.

1. Price fixing. An agreement to fix prices is the most egregious example of anticompetitive conduct, so much so that the courts will use a per se analysis, i.e., without need to consider other factors, to arrive at its decision. Price fixing does not require any party to show market dominance or power, and its presence can be inferred from circumstances and agreements, which can be either oral or written.

For example, physician fee schedules or guidelines by a medical association would constitute price fixing. Even an agreement to fix maximum prices, as opposed to minimum prices, has been ruled illegal. At a practical level, physicians should avoid sharing pricing information with anyone, especially with colleagues, unless strict FTC "safety zone" criteria are satisfied.

2. Boycotts. Group boycotts are usually per se illegal, but in the health care industry, a rule of reason analysis is frequently used. Courts will look at the circumstances and purpose of the boycott, its pro- and anti-competitive effects, and whether there are other less restrictive ways to achieve the purported goal.

Affiliating physicians face this risk when forming alliances, as boycott questions may arise when a doctor is inappropriately excluded, which deprives him/her from earning a living in the relevant market.

A related controversial issue is the unionization of doctors. Unionization protects labor rights, especially those of medical residents, and offers greater parity in collective bargaining. On the other hand, the danger is in tying a physician’s obligations to the interests of other workers who may not share the same ethical commitment to patients.²

Strikes by doctors are likely to interfere with patient care, raise serious ethical questions, and may also be in violation of antitrust laws although boycotts for sociopolitical and noncommercial reasons are not specifically prohibited.

3. Market division. Agreements to restrict competition by dividing or allocating territories or patients are illegal per se under the Sherman Act.

4. Monopolization. Section 2 of the Sherman Act prohibits monopolization and attempts to monopolize. Examples are predatory pricing, long-term exclusive contracts, and refusal to deal. Mergers and acquisitions may substantially lessen competition with the tendency to create a monopoly, and they are subject to Section 7 of the Clayton Act. Proof of monopolization requires an inquiry into the relevant product and geographic markets (usually greater than 50%-60% market share), and regularly requires an economist’s expertise at trial.

As a general proposition, restraint of trade and monopolistic charges are difficult to prove. Monopoly through "the exercise of skill, foresight, and industry" does not constitute monopolizing conduct.

5. Joint ventures. The two main ways physicians form network joint ventures are: 1) join together in an entity with shared financial risks and clinical integration, and 2) join a looser network without integration to simply facilitate the flow of information for contracting purposes between physicians and other payers, the so-called messenger method.

Many health delivery systems involve joint venture agreements among practitioners or groups of health professionals and health care institutions, e.g., physician hospital organizations (PHOs), independent practice associations (IPAs), and preferred physician organization (PPOs). Physicians and physician practice groups may become targets if their attempted efforts at joint ventures are deemed to be a pretext for price fixing or otherwise anticompetitive.

The DOJ and FTC have promulgated guidelines regarding joint venture structures and will perform a review of the proposal upon request.³

However, under Obamacare, which promotes the efficient integration of health services through competition such as accountable care organizations, these guidelines are likely to be revised in the near future.

6. Exclusive contracts. Many hospitals have exclusive contracts with health professionals such as radiologists, anesthesiologists, and pathologists. Patients using the facility may be forced to use the services of these providers ("tying arrangement"). If the hospital does not possess requisite market power, or force the acceptance of the service, such agreements may pass antitrust scrutiny.

7. Peer review. The Health Care Quality Improvement Act (42 U.S.C. §§ 1101 et seq.) immunizes physicians and others performing peer review activities from federal antitrust claims so long as peer review was carried out: 1) in reasonable belief that the action was in furtherance of quality health care; 2) after reasonable effort to obtain the facts; 3) after an adequate notice and hearing procedure; 4) in reasonable belief that the action was warranted; and 5) any adverse outcome was reported to the National Practitioners’ Data Bank.

A doctor who is judged wanting in peer review occasionally asserts a discriminatory or anticompetitive intent, and may file a retaliatory lawsuit. One caveat: Peer review deliberations are always held in strict confidence. Disparaging a doctor under review in an unrelated forum constitutes a violation of the peer review process, which risks nullification of discovery protection and antitrust immunity.

Antitrust problems are highly fact dependent and analytically complex, and therefore require counsel with special expertise and experience. Issues are surprisingly prevalent and may be counterintuitive, affecting not only parties in joint ventures and mergers, but also the solo office or hospital practitioner. Matters of medical staffing, joint purchasing, information exchange, managed care negotiation, peer review and price agreements are some examples.

Penalties are severe, and may cover more than simple cease and desist orders. Some behavior constitutes criminality punishable by prison terms, though this is rare in the health care arena.

More often, the guilty parties face heavy monetary fines from both governmental officials as well as private litigants who can join in the lawsuit and stand to benefit from awards of treble damages and attorneys’ fees.

References:

1. Goldfarb v. Virginia State Bar 421 U.S. 773, 1975.

2. Code of Medical Ethics, AMA, 9.025, 2012-2013 edition.

3. Statements of Antitrust Enforcement Policy in Health Care. Department of Justice and Federal Trade Commission (1996).

Dr. Tan is professor emeritus of medicine and former adjunct professor of law at the University of Hawaii. This article is meant to be educational and does not constitute medical, ethical or legal advice. Some of the articles in this series are adapted from the author’s 2006 book, "Medical Malpractice: Understanding the Law, Managing the Risk," and his 2012 Halsbury treatise, "Medical Negligence and Professional Misconduct." For additional information, readers may contact the author at [email protected].