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CITIZENSFORVOLUNTARYTRADE
OFFICIAL REPORTS J
UDICIAL
R
EVIEW OF
A
NTITRUST
S
ETTLEMENTS
:T
HE
T
UNNEY
A
CTAND
M
OUNTAIN
H
EALTH
C
ARECVT Reports No. 2/ November18, 2003
On November 7, 2003, CVT President S.M. “Skip” Olivaappealed a federal court’s final judgment in
United States v.Mountain Health Care, P.A.
1
, to the U.S. Court of Appeals for the
Fourth Circuit. Oliva’s appeal will address the federalgovernment’s compliance with the Tunney Act, 15 U.S.C. §16,which governs negotiated settlements inJustice Department civilantitrust cases.This paper discusses the issues Oliva will raise onappeal and provides background on the Mountain case.
2
The Tunney ActThe majority of government antitrust cases are settled withouttrial. In antitrust complaints brought by the Department of Justice before U.S. district courtsfrom 1993 through 2002, the
government’s won-loss record is an astounding 178-4.
3
Most of
those 178 wins came from “consent decrees,” or settlementsgiving the DOJ the substantive relief they would otherwise seekat trial.Congress expressed concern about the high settlement rate inantitrust cases as early as 1959. In response to congressionalhearings on the subject, Attorney General Robert F. Kennedyimplemented administrative reforms to the settlement process inthe early 1960s. The Kennedy reforms required any proposedsettlement be subject to 30 days of public comment. This policy,however, was purely an administrative regulation, not a statutoryrequirement.
4
1
Civil No. 02-288 (W.D.N.C. 2002).
2
This report was prepared by CVT staff.
3
Department of Justice, Antitrust Division, “Workload Statistics, FY 1993-2002,”available at http://www.usdoj.gov/atr/public/12848.htm.
4
See
House Report 94-499, 1974 U.S.C.C.A.N. 6535, 6537.
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”The Tunney Act and Mountain Health Care”November 18, 2003
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In 1974, Congress enacted the public comment requirementinto law by passing the Antitrust Proceduresand Penalties Act,commonly called the Tunney Act after its chief Senate sponsor.
The Tunney Act’s objective is to ensure “effective and meaningfulpublic comments” in antitrust settlement cases.
5
To that end, the30-day comment period was expanded to 60 days, and the DOJ isnow required to complete several preliminary steps beforeobtaining final approval of a settlement from a federal districtcourt.In general, when a settlement is announced, the DOJ must file
a “competitive impact statement,” which is published in the
Federal Register
, which describes the allegations against anantitrust defendant, the terms of the proposed settlement, and anexplanation from the DOJ as to why the settlement will remedythe alleged violations.
6
The 60-day comment period runs from thepublication of the Federal Register notice; when completed, theDOJ must submit all comments filed, along with the
government’s responses, to the district court overseeing thesettlement.
7
The judge then usually enters the settlementwithout question, although the Tunney Act does permit courts tomodify settlement t
erms, subject to the DOJ’s concurrence.The Tunney Act also requires the DOJ to disclose, at the timethe Federal Register notice is published, any “materials anddocuments which the United States considered determinative informulating”the proposed settlement.
8
This phrase would seemto grant the public access to a wide range of materials related to aparticular antitrust case. But in practice, the requirement isignored by the DOJ, and courts rarely make any effort to examine
the precise scope of “determinative” materials. This issue formsthe basis of Oliva’s appeal in
U.S. v. Mountain Health Care
.Mountain Health CareMountain Health Carewas aprofessionalassociation of approximately 400physicianshareholdersin the Asheville, NorthCarolina, area. Since 1994, Mountain contracted with North
5
Id
.
6
15 U.S.C. ÿ16(b).
7
15 U.S.C. ÿ16(d).
8
15 U.S.C. ÿ16(b).
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”The Tunney Act and Mountain Health Care”November 18, 2003
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Carolina employers to provide access to its network.
9
Thenetwork operated according to strict guidelines established by theDOJ and FTC. Basically, Mountain negotiated rates withindividual employers, then sent those rates to individualproviders. The provider could then accept the rateor make acounter-offer. Under the antitrust guidelines, providers could notconsult with one another about a contract offer; that is
condemned as “price fixing” by the government. But Mountain’sbusiness model complied with DOJ requirements.The DOJ disagreed. After a two year investigation ofNorthCarolina’s healthcare market, the Government filed a complaintagainst Mountain in December 2002, alleging the network“organized and directed an effort to develop a uniform feeschedule to be used to negotiate and contract for fees forphysician reimbursement.”
10
The DOJ said Mountain operated asan illegal agent for physicians, coordinating their negotiationswith health care purchasers, rather than allowing physicians toindividually decide whether to acceptor reject particularcontracts. This joint negotiating, according to the DOJ,
“unreasonably restrained” price competition among Mountain’sproviders and denied consumers “the benefits of free and opencompetition in the sale of physician services to managed carepurchasers.”
11
According to the DOJ’s policy, physicians may not share priceinformation with one another; it’s treated as a form of “price-fixing.”Instead, physcians must individually negotiate withmanaged care companies and other consumers. Thiscreates aninherently biased playing field. Consumers, after all, are free to join together when negotiating with physicians; managed carecompanies are nothing more than joint negotiating entities. Butthe DOJ believes physicians do not possess the same legal rightsas consumers, because physicians may conceivable join togetherto “harm” consumers by raising prices. Accordingly, federalantitrust policy imposes de facto price controls on physicians by
9
In addition to Mountain’s 400 shareholders, there were other providers, including non-physicians, that were part of the overall network. The precise size of the entireMountain network is unclear; Mountain claimed to have 1,800 providers, but the Justice Department only believed there to be 1,200.
10
Complaint at 1, United States v. Mountain Health Care(Dec. 13, 2002).
11
Id
. at 6-7
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