Don't shoot the messenger: Independent physicians and joint payment contracting using the messenger model

University of Memphis Law Review, The, Summer 2002 by Clemons, Miriam L

B. Antitrust Laws and Joint Contracting by Competitors

with free competition."63 It is embodied in the Sherman Act, which states that "[e]very contract, combination in the form of trust or otherwise, or conspiracy, in the restraint of trade or commerce among the several States . . . is hereby declared to be illegal."64 The primary antitrust concern in the health care context is horizontal price-fixing, or cooperation among producers of the same product or providers of the same service, to reduce competition by agreeing on prices applicable to all.65

Prior to the development of contractual MCO models for reimbursement for health care services, antitrust issues rarely arose. Providers had no need to communicate with their competitors in a fee-for-service payment environment. Patients were free to choose their physician, that physician could bill the insurer whatever fee he deemed proper, and the insurer paid it. Indeed, until the health care revolution of the 1970's, there was some question as to whether antitrust law even applied to physicians, either because their services did not affect interstate commerce or because the common law exempted "learned professions" from federal antitrust regulations.66

foundation and no other relationship to one another, aside from their membership.70

The balance of power, which in Maricopa favored the independent providers, has now shifted to the other side-a dwindling number of MCO's with growing market dominance. According to the AMA, the five largest insurers have more than fifty percent of the covered lives in twenty-three states, and in sixteen of those states they have more than seventy percent of the market.76 The MCO's are enjoying monopsony77 power to depress the price of health care services they buy from providers below competitive levels by controlling the demand for those services.78

The Supreme Court has yet to address whether the public interests in low prices should offset the anticompetitive threat of MCO market concentration to such a degree that the MCO's could escape antitrust scrutiny. Similarly, they have yet to address then-- Judge Breyer's underlying assumption that the price benefits to the consumer are sufficient to offset the harms that may arise by the associated lack of choice.86 The AMA contends that this assumption is false:

In a market dominated with a few large health plans and stifled by significant barriers to entry, the result [of MCO dominance] is reduced competition and reduced choice for patients, employers and physicians. It is estimated that sixty percent of Americans have no choice at all as to which health plan they may choose and that another twenty percent have a choice between only two health plans. In some circumstances this is, in part, due to the fact that employers may choose only one or two plans, but it is undoubtedly the case that health plan mergers will only exacerbate this problem.87

authority.89 The original version of the Statements, developed in 1993, addressed six areas related primarily to hospital mergers and joint ventures, joint-purchasing agreements, and physician network joint ventures among clinically or financially integrated providers.90 In 1996, revisions were made, and additional provisions were added, to keep pace with the continuing evolution of the health care markets, which created new and untested types of joint activity between providers, as well as to reflect the agencies' experiences in the implementation of the 1993 Statements.91 The goal of the new provisions was to "ensure a competitive marketplace in which consumers will have the benefit of high quality, cost effective health care and a wide range of choices, including new provider-controlled networks that expand consumer choice and increase competition."92 A new Statement, entitled Multiprovider Networks, addressed physician joint networks that fall outside of antitrust "safety zones" made up of non-competitors who share financial risk or have significant clinical integration.93 It also recognized that the formation of relationships and affiliations between competing providers could ultimately offer significant pro-competitive benefits to consumers.94