UNITED STATES OF AMERICA

BEFORE FEDERAL TRADE COMMISSION

IN THE MATTER OF THE MAINE HEALTH ALLIANCE, A CORPORATION

AND WILLIAM R. DIGGINS, INDIVIDUALLY

FTC File No. 021-0017

COMMENTS OF CITIZENS FOR VOLUNTARY TRADE

Proposed Consent Agreement Announced July 19, 2003

Comments Filed August 18, 2003

Pursuant to the Federal Trade Commission’s publication of a

proposed consent agreement in the above-captioned matter1,
Citizens for Voluntary Trade, a Virginia nonprofit corporation,
files the following comments.

I
The Maine Health Alliance (MHA) is a nonprofit corporation
composed of approximately 325 physicians and eleven hospitals
doing business in northeastern Maine. William R. Diggins is
MHA’s executive director and, according to the FTC, served as
the Alliance’s principal negotiator with third-party payors in the
healthcare market.
The FTC’s complaint details MHA’s efforts to collectively
negotiate on behalf of its physician and hospital members with
third-party payors during a period extending from about 1996 to
2002. The complaint alleges numerous contracts negotiated
between MHA and payors violated section 5 of the Federal Trade
Commission Act, 15 U.S.C. § 45, because MHA’s actions coerced
the payors into paying Alliance members higher fees than other
physicians and hospitals in Maine. The complaint also alleges
MHA’s members failed to “engage in any significant form of
financial risk sharing or clinical integration,” that would justify
collective negotiating activities. Consequently, the proposed
1
68 Fed. Reg. 43,515-43,517 (July 23, 2003).
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consent order forbids MHA from collectively negotiating in the

future absent FTC-approved “risk sharing,” and permits payors
to terminate existing contracts with MHA. The proposed order
extends these prohibitions to William Diggins individually, and
the order itself will continue in force for twenty years, until
approximately August 2023.

II
A
The FTC’s legal argument for seeking relief in this case turns
on the definition of “coercion”. The Commission defines coercion
here to prohibit the voluntary association of MHA members for
their mutual benefit when such association affects the economic
interests of “consumers,” here meaning third-party payors who
administer Health Maintenance Organizations (HMOs) in the
State of Maine. Because HMOs were not guaranteed certain price
levels for physician services, the FTC infers illegal conduct by the
physicians under 15 U.S.C. § 45, which broadly prohibits “unfair”
methods of competition. The FTC considers physician collective
negotiating coercive, thus “unfair” and illegal. This definition,
however, ignores the plain meaning of coercion for the sake of
improperly expanding the Commission’s ability to regulate the
healthcare market, both in Maine and throughout the nation.
In paragraph 38 of the complaint, the FTC expressly defines its
application of coercion to this case:
To exert pressure on and coerce these payors to agree to the
Alliance terms, Alliance physician and hospital members
informed such payors that they would not negotiate
individually, and told the payors to contract for the Alliance
members’ services only through the Alliance. As a result of the
collective conduct, the Alliance has successfully obtained
contracts on behalf of its physicians and hospitals with these
payors on terms demanded by the Alliance.
By this reasoning, the FTC considers it coercive for individuals to
exercise their economic rights through a voluntary cooperative
agreement. This implies individual rightsûsuch as the right to
contractûare lost under the antitrust laws when individuals seek
to exercise their rights jointly. This implication is borne out in
the complaint, which clearly states doctors and hospitals may
individually contract with HMOs without legal penalty.

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The FTC’s theory is that individuals must lose their rights

when they band together to increase their economic power,
because such economic power is inherently and inevitably
coercive. An HMO, in the FTC’s view, lacks the necessary
economic power to countermand the economic power of MHA.
Thus, to preserve market “competition”, it is necessary to curtail
MHA’s economic power through force, in this case the FTC’s
proposed order. By taking this action, the FTC claims it has
removed a coercive element from the marketplace, allowing for
greater competition.
The FTC clearly does not make the proper distinction between
economic and political power, and by extension the proper
definition of coercion. Indeed, as we understand it, coercion
defines the difference between economic and political power, as
writer-philosopher Ayn Rand explained in the early 1960s:
[E]conomic power is exercised by means of a positive, by
offering men a reward , an incentive, a payment, a value;
political power is exercised by means of a negative, by the
threat of punishment, injury, imprisonment, destruction.2
(Emphasis in original)

Political power, as defined above, is thus coercive. More

importantly, only political power is coercive; those possessing
only economic power cannot, by definition, coerce others.
Consider the nature of MHA’s relationship to the HMOs it
allegedly coerced. MHA possessed something of valueûphysician
and hospital servicesûthat the HMOs sought for their use. The
HMOs presented an offer to MHA’s members, who in turn
collectively presented a counter-offer. The resulting negotiations
represented the efforts of both parties to influence the other into
accepting certain terms of providing medical services for a fee.
This entire process was a purely intellectual exercise. By the
FTC’s own admission, MHA used purely non-forceful means to
advance its arguments. The complaint describes MHA’s
supposedly illegal activities with such verbs as “urging”,
“facilitating”, “discouraging”, and “warning”.3 What the
complaint does not describe, however, is any instance of MHA
threatening or using physical force against any HMO. The

2
Ayn Rand, “America’s Persecuted Minority: Big Business”, in Capitalism: The
Unknown Ideal at 46 (Sugnet, 1967).
3
Complaint at para. 29.

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absence of such force, actual or implied, means MHA’s actions

were not coercive, and thus not illegal.
The only coercive party to MHA’s dealings with HMOs is the
FTC. Through the proposed order, the Commission seeks to
coerce MHA’s members into renouncing their right to collectively
negotiate with HMOs and other payors. In doing so, the FTC uses
its political power to benefit HMOs and payors at the expense of
physicians. That the FTC twists this reality by labeling MHA’s
actions coercive only adds insult to injury.

B
Further undermining the FTC’s coercion argument is the
behavior of the “victimized” HMOs and payors. Given the years
of abuse suffered by the HMOs, one would expect to find some
evidence of legal action prior to the FTC’s involvement. But the
record contains no such evidence. Instead, the FTC’s complaint
and other filings indicate the HMOs signed, executed, and in
some cases renewed contracts now ruled invalid as a matter of
antitrust policy by the FTC. This begs the question: Did the
HMOs know they were victims of illegal activity, and if so, when
did they know it?
Take the 1996 contract between MHA and NYLCare Health
Plans of Maine. The FTC claims this contract was the product of
illegal coercion because MHA negotiated compensation levels that
were “substantially higher” than what the Commission claims is
the appropriate market rate. The FTC presents no evidence of
NYLCare taking legal action to protect itself from MHA’s
coercion at the time the contract was signed. In fact, NYLCare
not only completed its duties under the contract, but when
NYLCare was acquired by Aetna in 1998, the contract continued
in force, and it remains in effect to this day while Aetna and
MHA negotiate a new arrangement. At no point, as far as we can
tell, has Aetna taken private action to void its MHA contract on
the grounds of coercion.
If the FTC’s reading of the law is correct, there should be no
question the 1996 contract is void as a matter of common law,
since a coerced party cannot give voluntary consent to enter into
a contract. Thus, the FTC believes NYLCare, and its successor
Aetna, were under coercion for nearly seven years until the
Commission came along and put a stop to MHA’s illegal
negotiating activities. The implication is that Aetna was

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powerless to stop MHA’s reign of terror, and that no remedy

short of FTC prosecution could vindicate the HMO’s rights.
This theory of ongoing coercion holds water only if the FTC
can demonstrate Aetna was in fact powerless against MHA. By
this, we mean that MHA had to have acted in such a manner as
to completely negate Aetna’s ability to act on its own volitional
judgment with respect to the contract negotiations. For example,
if MHA threatened to employ physical force against Aetna if they
failed to sign a new contract, that would constitute coercion. The
record, however, contains no evidence of such threats of force,
and no evidence that Aetna was not capable of thinking for itself
and acting upon their own judgments at any time during the
period they were under contract with MHA. Quite the contrary,
all evidence suggests Aetna and MHA engaged in vigorous
negotiations that, by the FTC’s account, led to a “stalemate” in
1999 that remains unresolved. The very fact Aetna has reached
an impasse with MHA suggests the Alliance does not enjoy any
coercive power in this relationship.
As further proof of MHA’s power, or lack thereof, the FTC
provides the example of Harvard Pilgrim Health Care. In 1999, as
part of Harvard Pilgrim’s attempt to establish an HMO product
in Maine, the company entered negotiations with MHA to
purchase physician and hospital services. When the negotiations
reached an impasse over compensation terms, the FTC states,
Harvard Pilgrim ended negotiations and abandoned their effort
to enter the market. This is hardly the act of a coerced party. If
MHA maintained coercive power, it could have simply forced
Harvard Pilgrim to sign a contract on the physicians’ and
hospitals’ terms. That Harvard Pilgrim was able to act on its own
judgmentûnamely that MHA wasn’t worth the price they
soughtûclearly demonstrates that the free market worked in this
situation, as coercion, or physical force, did not enter into the
equation.
None of this suggests HMOs are happy that they have to deal
with MHA. HMOs would prefer to deal with physicians and
hospitals individually, since such circumstances give the HMOs
greater economic power to affect market outcomes. But the
inability of the HMOs to convince MHA to accept lower
compensation does not, by any objective standard, constitute
coercion or illegal action on the part of the Alliance. As
Objectivist philosopher Leonard Peikoff explains, one party’s

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regret in entering a contract does not retroactively render the

other party a coercer:
[A] man may be disappointed by others. Rightly or wrongly, he
may be unable to persuade them to agree with his ideas or to
satisfy his desires. But disappointment does not attack his
body or negate his mind; it is not an indication that he has
been coerced. A man cannot properly say: “Since no one will
pay me a larger salary, my boss forces me to take this job at
five thousand dollars per year.” No employer is obliged to
confer wealth or jobs on this individual; no one owes him a
living. Nor, in a free society, can anyone stop him from looking
further, from improving his skills, or from working to start his
own enterprise. If an employer who offers a certain salary tells
him to take it or leave it, for whatever reason (including
desperate poverty), that is the opposite of force. It is an
instance of a voluntary relationship between the men, an
instance of trade.4
Aetna and Harvard Pilgrim were understandably disappointed by
their respective efforts to deal with MHA’s members both
collectively and individually. But in the end, neither HMO was
entitled to obtain MHA’s services on anything but mutually
agreeable terms. The fact that MHA’s members chose to act
collectively does not, in any way, alter the voluntary nature of the
relationship with the HMOs.5 Trade is trade, regardless of the
composition of the particular parties. Contracts are not invalid
merely because a party a group rather than a lone individual.

III
A
The FTC places great emphasisûindeed the weight of its
entire caseûon the fact MHA’s members obtained higher
compensation through collective negotiation than other Maine
healthcare providers did negotiating individually. In the FTC’s
mind, MHA harmed competition simply by acting to raise price
levels. For example, the FTC alleges Aetna paid MHA physicians
10%-20% more for HMO subscribers than to non-Alliance

4
Leonard Peikoff, Objectivism: The Philosophy of Ayn Rand at 319 (Meridian, 1993).
5
According to the FTC, the Maine Bureau of Insurance requires any HMO operating in
the state to include enough physicians and hospitals to provide patients with timely
access from their residences. See Complaint at para. 18. While this requirement
undoubtedly contributed to the frustration of HMOs in dealing with MHA, the Alliance
cannot, as a matter of law and common sense, be held responsible for a “restraint of
trade” imposed by the state.

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physicians in northeastern Maine. The FTC claims it is illegal for

MHA to obtain higher prices than other physicians, but the
Commission never defines any precise boundaries of conduct. For
instance, the FTC never establishes the “competitive” price level
for physicians, although the complaint suggests the Commission
expects all physicians and hospitals in a given market to adhere
to the average compensation level of all providersûin other
words, the lowest possible compensation level acceptable to
payors. This viewpoint of “price competition” is hardly consistent
with free market principles, and it reflects a misunderstanding,
perhaps deliberate, by the FTC as to the nature of prices.
The law of supply and demand is familiar to even a layperson
with little economic training. A market price is determined by the
mutual agreement of a buyer and seller, each acting according to
their own judgments as to the value of a good or service. From a
moral standpoint, supply and demand restates a key principle of
individual rights: no man can demand that which he cannot trade
for using his own supply. Or, as Leonard Peikoff once stated, “a
man’s supply is his demand”.
In this case, the FTC assigns itself the power to overrule
market forces, notably the supply-and-demand principle, because
the Commission disagrees with the market’s judgment. The FTC
believes the HMOs are entitled to a lower price than that which
they agreed to with MHA. This belief does not derive from a
superior understanding of the market, or indeed any knowledge
of the economic structure of northeastern Maine’s healthcare
industry, but rather from the FTC’s static view of how markets
should operate. Here, the Commission’s view is that physicians
and hospitals should operate at or near a financial loss, while
HMOs and third-party payors should enjoy whatever profits they
wish. To that end, the FTC dictates that price levels for physician
services must fall upon the demand of payors, and that any act by
service providers to raise (or even maintain) existing price levels
should be condemned as per se illegal.
Consider the choices afforded MHA’s members by the FTC.
The Commission says physicians have two options under the
antitrust laws: negotiate individually with payors or enter a “risk
sharing” arrangement amenable to FTC standards. The illusion
is that the FTC is acting reasonably by affording providers a
choice. In reality, neither option is rational, for both place
coercive burdens on physicians that are irrational.

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In the case of individual negotiations, the FTC conveniently

ignores the fact that HMOs are afforded special legal privileges
and benefits that physicians and hospitals do not enjoy. Indeed,
HMOs themselves are government creations, a product of
congressional policies that subsidize the HMO industry and give
strong incentives to consumers, through their employers, to
enroll in these managed care programs. The result is a consumer
collective that possesses substantial power, not because of
economic influence, but political influence. Against this power,
individual physicians generally, and correctly, view their own
economic power as insignificant, leading them to join HMOs and
accept lower compensation than they would be able to obtain in
the absence of government sponsorship of HMOs. The FTC,
however, deliberately ignores the political sponsorship of HMOs,
instead limiting its market analysis to the efforts by physicians to
rationally and lawfully increase their economic power to combat
the HMOs’ political advantage.
As for “risk sharing,” the FTC argues they will accept
physician collective negotiating if, and only if, providers engage in
“significant” sharing of financial risk or “clinical integration”.
There is no legal basis for the FTC to arbitrarily impose such a
requirement on healthcare providers. Neither the Constitution
nor the antitrust laws condition the exercise of economic rights
on a particular level of risk sharing or integration. But even if the
FTC had this power, its definition of “risk sharing” here is far too
vague to survive constitutional muster. Under existing FTC
policy statements (really the opinion of staff attorneys),
physicians can share risk through capitation, withholds, or
alternatively through the “messenger model”. None of these
options are viable, and the FTC is well aware of that fact.
Capitation forms the basis of most HMO contracts. Under this
system, the payor gives the provider a fixed fee per patient,
regardless of the actual cost of services. Thus, the providerûthe
physician or hospitalûassumes the risk that the patient will cost
more or less than the fixed fee. This also assumes the provider’s
overhead and administrative costs will not consume an inordinate
amount of the revenues generated. If this system sounds
problematic, that’s because it is. Capitation is a leading cause of
financial distress among physician groups, as described in this
example from Dr. Vern S. Cherewatenko, a former member of
Washington State’s largest physician group:

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My charge for a 10-minute patient visit was $79. The

insurance companies typically reimbursed $43. Costs of
collection were anywhere from $5 to $20 depending on the
staff time, billing system, etc. All doctors know they don't get
reimbursed the full amount they charge for a visit, but most
doctors completely overlook what it costs to collect even the
discounted reimbursement. By our calculation, then, I was
actually being reimbursed $23 for a $79 office visit charge! Add
in the overhead for the exam room (the national average is
$30), and we discovered we were losing about $7 on each of the
75,000 patients we were seeing annually!
We could not cut our overhead any further--we had been doing
that for the past two years (cheaper photocopy paper, less-
fancy patient info, fewer nurses, fewer receptionists, no more
"pantry stocking," and so on). We were running as lean as we
could . . . practically on bare bones.
In April 1998, we looked again at the $80,000-a-month loss,
concluding we both were destined to be bankrupt in six
months.
Looking around the country to see if we were alone in our
struggle, we were alarmed to find doctors everywhere were
beginning to file bankruptcy in increasing numbers.6
The FTC is well aware of the problems of capitation and
clinical integration. In two complaints filed during the past year
against physician groups in Texas, the FTC conceded that the
groups faced bankruptcy under capitation, leading them to switch
to a non-integrated model similar to that of MHA. The result of
the groups’ decision to protect their economic interests was FTC
prosecution for illegal “collective negotiating”. The undisputed
fact that the groups could not make financial “risk sharing” work
made no difference to the FTC. Nor, it should be noted, has the
FTC produced any evidence that “risk sharing” such as capitation
ever actually works under practical market conditions.7
The other option given to physician groups, the “messenger
model”, also suffers the fatal flaw of being impossible to
implement under actual market conditions. The model itself has
never been objectively defined by the FTC, which takes a “we

6
Vern S. Cherewatenko, “The SimpleCare Story,” Capitalism Magazine (accessed
online at http://capmag.com/article.asp?ID=1509) (March 26, 2002).
7
“Withholds” is the other form of FTC-approved risk sharing. Under this system, the
payor withholds a predetermined amount of the provider’s fees unless certain cost-
containment objectives are met. Since this produces the same problems as capitation,
we need not discuss withholds at great length here, except to note that many state
governments have banned the practice, despite the FTC’s endorsement.

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know a messenger model when we see it” approach to deciding ex

post facto whether a provider group’s actions fall within the
model’s protection. Many of the recent FTC prosecutions, in fact,
arose from a difference of opinion over what constituted a proper
application of the messenger model. The model itself, to the
extent its defined, requires physicians to enter a negotiation with
payors completely deaf, dumb, and blind. The “messenger” is a
one-way conduit of information from payors to providers, with
providers required to remain clueless as to the activities of their
colleagues. Such a model is the equivalent of forcing physicians to
negotiate individually, which suffers from the problems discussed
above.

B
Physicians and hospitals are not the only parties injured by the
FTC’s policies. Customers, the group the FTC claims it protects,
are injured just as much, if not more so, by cases like the one
against MHA. In this context, we define “customers” not as the
third-party payorsûthe only group the FTC is actually
protectingûbut the ultimate purchasers of healthcare services,
namely the patients. Customers do not benefit from the
government’s arbitrary restraint of physician rights, and indeed
customers do not benefit from the entire third-party payor
system in healthcare.
There is no other free market where a third-party assumes the
primary responsibility for providing a basic consumer good or
service. Unlike insurance, which allows customers to pool risk to
protect against an extraordinary event, healthcare is a routine
service rationed by a party that is neither the customer nor the
producer. Adding to this strange arrangement is the
government’s role in supporting the third-party rationer, or
payor, through policies designed to discourage traditional market
relationships between the customers and producers.
In a normal market, the producer earns profits by providing a
valuable service at a reasonable price. In contrast, third-party
payors in healthcare, especially HMOs, profit by withholding
service from consumers while paying providers less than they
could earn in a free market. An HMO has a major incentive,
backed by government policy, to ration care for individual
patients in the name of preserving a minimal level of care for all
patients enrolled in the plan. Such policies encourage “lowest

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common denominator” medicine, which result in inferior service

at higher prices for customers, precisely the economic outcome
the FTC seeks to avoid in attacking providers. Only the providers
have no power to improve service or reduce patient costs, because
physicians and hospitals lack political power relative to the third-
party payors.
The government facilitates the growth of anti-provider, anti-
consumer managed care payors through a combination of tax-
code manipulations and direct intervention, as writer Joseph
Kellard explains:
Doctors join HMOs because they fear this government-backed
system will eliminate their business if they remain in private
practice. Patients are encouraged to join HMOs by their
employers, who are compelled to offer health insurance, as
government allows tax relief for health care coverage only to
businesses, not to individuals. Managed care dominates the
market and raises premiums considerably for (self-employed)
individuals because the market shrinks for them. The tax code
and government intervention on behalf of HMOs forces health
insurers to treat everyone as a big collective.
HMOs are playing a more prominent role in health care
primarily because Medicare's bankruptcy is becoming more
apparent. Vascular surgeon Dr. David Loiterman told the
Chicago Sun Times that "about 65 percent of his practice is
with Medicare patients, but they make up only 12 percent of
his income". Such decreased payments to doctors who treat
Medicare patients are compensated via "cost-shifting" --that is,
the extra cost of treating Medicare patients are imposed on
younger, privately funded patients.8

“Cost-shifting” is the principal objective of the government’s

healthcare policies, and that includes the FTC’s action against
MHA. In a normal market, costs are essentially shared by
customers and producers, with differences worked out in the
process of negotiating prices. In the third-party payor healthcare
market, however, the HMOs shift the entire cost burden to
physicians. This obviously harms physicians, as discussed above,
but it also distorts the customer’s understanding of actual costs.
Since a customer is no longer bound to spend only within his
meansûhis supply is no longer his demandûhe demands more
services than he could in a free market. This increased demand is
met by a limited supply of providers, who lack the ability to

8
Joseph Kellard, “Health Care’s Deterioration,” The American Individualist (accessed
online at http://theai.net/health.html) (December 21, 1997).

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reduce the excess demand because of the underlying market

distortion. Since the third-party payors essentially control the
market, the normal supply-and-demand mechanism fails to
operate properly, leaving customers and providers at the mercy of
health plan bureaucrats.
To put this in additional perspective, consider the system that
most emulates the third-party payor market: public education.
Government schools function as a monopoly payor, one which
exercises force directly over customers, rather than indirectly as
with managed care. Customers (parents) are forced to pay into
the system, via taxes (premiums) set by the payor (school
system), while the payor decides the quality and level of service
provided. The providers, teachers, are themselves a government-
sponsored monopoly, since they can force the payor to collectively
negotiate compensation and other terms. The result, in most
cases, is similar to what we see in healthcare: customers pay
more, get less, and lack the options to effectively assert their
individual economic interests against government-sponsored
interests.
Now, the one key difference between healthcare and education
is that the providers hold differing amounts of political power.
Physicians have none, while teachers have, in many cases, largely
unrestricted power. Why, then, should the FTC not stand in the
way of physician collective negotiating? After all, would it not
lead to the same cost-inefficient abuses seen by teacher unions
throughout the country? No, because recognizing the right to
negotiate and act in one’s interest does not, as discussed above,
confer political power; only force can do that.
Teacher unions derive their political power from two main
sources: mandatory collective bargaining laws, and laws requiring
teachers to join and financially support a union despite their
personal interests. If a bare majority of teachers choose to form a
union, that union becomes the exclusive bargaining agent for all
teachers, and no individual teacher can contract outside the
collective bargaining agreement or refuse to pay union dues. This
regime, unlike voluntary coalitions such as MHA, relies at all
times on government coercion via the labor laws.
In this case, MHA does not possess the sort of political power
enjoyed by teacher unions. MHA cannot compel any payor to
negotiate with it and, as Harvard Pilgrim demonstrated, an HMO
can simply walk away from the table. Also unlike a teacher union,
an individual physician or can break away and negotiate

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individually with any payor. MHA can certainly try to persuade a

provider to stay within the fold, but ultimately it cannot force any
physician or hospital to accept or reject a payor’s offer.
Indeed, even if it were legally possible, most physicians and
hospitals would likely reject the forced unionism model employed
by government school teachers. For one thing, unions tend to
emphasize the same kind of “lowest common denominator”
approach to compensation that third-party payors do. Few
teacher unions, for example, support paying teachers based on
the quality of their work; they insist on distinguishing pay only
by length of service. Individual economic self-interest is not
important to a union, only the collective interest of the aggregate
membership. This is precisely the approach physicians seek to
rescue their patients (and themselves) from by jointly negotiation
with payors. By replacing coercive economic power with
voluntary economic power, the healthcare providers seek to
restore the role of rational market forces in determining market
outcomes. This approach benefits consumers far more than the
FTC’s short-term effort to maintain the coercive power of third-
party payors.

IV
Beyond the broader fight over the future of the healthcare
market, the FTC’s proposed order in this case suffers a far more
ordinary, and sadly commonplace, defect. Section III(B) of the
proposed order requires MHA and William Diggins to “cease and
desist” from “[e]xchanging or facilitating in any manner the
exchange or transfer of information among hospitals concerning
any hospital’s willingness to deal with a payor, or the terms or
conditions, including price terms, on which the hospital is willing
to deal with a payor.” This requirement plainly violates the First
Amendment, because the government cannot impose prior
restraints on ordinary acts of speech.
The FTC may believe it necessary to restrain MHA and
Diggins from taking any action that might lead to a recurrence of
the allegedly illegal conduct described in the complaint. But the
exchange of information, an act of speech, cannot itself be
classified the underlying illegal activity. The act of collectively
negotiating with HMOs is what the FTC aims to prevent. Merely
talking about such actions, however, is protected expression, and
the FTC exceeds its constitutional authority in imposing such a

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requirement on MHA and Diggins, even in the context of a

consent order.
The only function of the restriction on exchanging
information, it seems, would be to intimidate individual providers
into complying with HMO demands more readily in the future.
The FTC concedes that individual physicians and hospitals can
accept, reject, or negotiate contracts with payors. If that’s true,
then it doesn’t matter whether an individual simply expresses his
view on a contract to other colleagues that might be negotiating
with the same payor. As discussed above, a right is not lost
merely because an individual exercises that right in conjunction
with others who enjoy that same right. But by forbidding even
professional communication, the FTC clearly intends to increase
pressure on MHA’s members to simply accept future HMO offers
without considering the merits of such proposals.

V
While MHA and Diggins conceded the FTC’s jurisdiction in
this matter as part of the proposed order, we note our concern
over the Commission’s decision to exercise concurrent
jurisdiction with the Maine Attorney General. Just weeks before
the FTC announced its proposed order in this matter, the
Attorney General concluded a nearly identical order under the
auspices of Maine law, which closely mirrors the federal antitrust
language the FTC relies on.9 Given the Attorney General’s
actions, it’s difficult to understand the FTC’s need to impose
additional relief under color of federal law. While MHA’s actions
may have impacted interstate commerce, the affects of their
alleged infractions were felt solely in Maine. The FTC should not,
as a simple matter of resource allocation, duplicate state antitrust
prosecutions where the local authorities have already
accomplished the Commission’s objective.

VI
Finally, the term of the proposed orderû20 years from the
order’s final adoptionûis unreasonable and unnecessary. The
FTC cannot predict the state of northeastern Maine’s healthcare
market in August 2023. Nor would it be reasonable for the FTC
to make static assumptions about the market and how MHA’s

9
http://www.maine.gov/ag/press_release_pop_up.php?press_id=160 (July 3, 2003).

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 IN THE MATTER OF MAINE HEALTH ALLIANCE AND WILLIAM R. DIGGINS

Comments of Citizens for Voluntary Trade

members interact with it over the next two decades. Continuing

the proposed order for 20 years serves only to punish MHA, and
does nothing to remedy the allegedly anticompetitive acts of the
Alliance and its executive director. At a minimum, the FTC
should reduce the term of the order to a period of between five
and ten years.

VII
For the numerous independent grounds stated above, CVT
requests the FTC reject entry of the proposed consent order as
inconsistent with the public interest.

Respectfully Submitted,

S.M. OLIVA
President
CITIZENS FOR VOLUNTARY TRADE
P.O. Box 66
Arlington, Virginia 22210
(571) 242-1766

Dated: August 18, 2003

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