Tuesday, April 29, 2008
Posted by D. Daniel Sokol
Tim Greaney of St. Louis University Law School has an interesting essay on Thirty Years of Solitude: Antitrust Law and Physican Cartels.
ABSTRACT: For over thirty years the United States Department of Justice and Federal Trade Commission (“Agencies”) have confronted bands of businessmen who have steadfastly refused to pay attention to legal precedent, repeated governmental pronouncements, and administrative sanctions imposed on their colleagues. The conduct revealed in these cases evidences a willingness to blatantly disregard the law by repeatedly undertaking arrangements already deemed illegal by the enforcers or by concocting schemes that raise untested but dubious justifications. Who are these lawbreakers? Organized criminals? Internet spam artists? Boiler-room operators? No, these cases involve physicians, some grouped in associations numbering in the thousands and almost always proceeding with the advice of business consultants and counsel. The conduct challenged by the government involves the formation of loosely-structured organizations, ranging from Independent Practice Associations to Preferred Provider Organizations (PPO) to other kinds of loose “networks” that collectively bargain with employers or managed care organizations for provider contracts.
The puzzle explored in this essay is why the government’s deployment of extensive resources has not curtailed physician attempts to engage in collective bargaining and other attempts to restrain price competition. It first analyzes the hypothesis that overly cautious government enforcement policies created a mismatch between penalties and rewards that invited abuse. While finding merit in this explanation, the essay offers a more nuanced account. It suggests that a convergence of factors including doctrinal shortcomings, political pressures, and institutional constraints may have deterred the Agencies from seeking stronger remedies and emboldened parties who questioned the role of competition in health markets generally. A related claim of this essay is that the Agencies may have inadvertently precipitated some of this conduct by the regulatory efforts they have undertaken. Finally, the essay offers some lessons learned from the FTC’s recent North Texas Specialty Physicians case.