KEY:

Vocabulary word
Professor callout
Statute or Regulation
Case
Test/Analysis

Antitrust in Health Care Markets

Prof. Liz McCuskey
September 30–October 2, 2022

DAY 1 (Sept. 30, 2022) 1

Module 1: Statutes, Enforcement, and Competition Law & Policy (review) 1
Module 2: Applying Antitrust Law to Health Care System Markets 3

DAY 2 (Oct. 1, 2022) 7

Module 3: Competition in Healthcare Services 7

DAY 3 (Oct. 2, 2022) 8

Module 4: Competition in Medical Products & Health Reform 8

DAY 1 (Sept. 30, 2022)

I. Class Background
A. Day 1: Health care system considerations; Doctors and Providers
B. Day 2: Hospitals; Health Insurers; Collaboration
C. Day 3: Drugs and Devices; Mergers and Integration; Health Reform
D. Final: 4-hour take home exam with two questions:
1. One new fact pattern. Then, what is the next way forward? Litigation?
2. One recycled from a question we’ve already discussed in class.

Module 1: Statutes, Enforcement, and Competition Law & Policy (review)

II. Module 1 Review
A. Purpose: to protect competition (not to protect competitors)
1. Any ambiguity in antitrust law will be interpreted in a way that promotes
competition (not any individual claimant)
2. Why? Consumer welfare principle: environments where firms compete for
the business of consumers benefits the consumer.
a) Consumer benefits: variety/choice, price, quality, innovation
b) Innovation: multiple definitions in academics and regulation; can
mean something different but can also mean something different
and better.
B. Statutes
1. Federal: haven’t changed much in the past 100 years
2. State laws

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 KEY:
Vocabulary word
Professor callout
Statute or Regulation
Case
Test/Analysis

Law Purpose Criminal Who can Consequences

Penalties? bring suit?

Sherman Bans anti-competitive Can lead to DOJ Private claims

Act § 1 agreements between actors both criminal Private Actors Treble damages
consequences Attorney’s fees
and injunctive
relief

Sherman Bans unilateral conduct that Can lead to DOJ Private claims
Act § 2 monopolizes or intends to both criminal Private Actors Treble damages
monopolize consequences Attorney’s fees
and injunctive
relief

FTC Bans “unfair” methods of No FTC only Cease and

Act § 5 competition and “deceptive” desist order
(part of practices
Sherman
Act § 2) Unfair: causes or is likely to
cause substantial injury to
consumers which is not
reasonably avoidable by
consumers themselves and
not outweighed by
countervailing benefits to
consumers or competition.

Clayton More specific than Sherman No DOJ

Act §§ 1–2 Private actors

Governs:
§ 2: price discrimination
§ 3: commodities sales with
noncompete agreements
§§ 7–8: mergers and
interlocking directorates

C. Standard of Review:
1. Per se (will always have anticompetitive effects)

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 KEY:
Vocabulary word
Professor callout
Statute or Regulation
Case
Test/Analysis

a) Price fixing: Direct competitors agreeing on (usually) a minimum

price–that is, agreeing not to compete. Statute requires actual
agreement but often requires circumstantial evidence.
b) Market allocation: Instead of agreeing on price, direct competitors
allocate regions/populations
(1) E.g., realtors who don’t agree to a minimum price but do
agree not to sell on each other’s turf.
c) Refusal to deal
2. Rule of Reason (requires more evidence)
a) Tying: requiring horizontal competitor to buy additional material or
services; if it takes some talking to outline the situation, this
indicates it might be a rule of reason standard!
(1) E.g., a car (which is in itself an end unit) sold with satellite
radio that the consumer is also required to purchase a
subscription for.
(2) Also: large antitrust Microsoft case in the 1990s regarding
selling computers which only ran the Microsoft operating
system and only used MIcrosoft software.
b) Exclusive Dealing
c) All others
d) Also: “quick look” ROR, which we’re ignoring for this class.

Module 2: Applying Antitrust Law to Health Care System Markets

III. The Cost Conundrum & Economics of Health Care
A. How do antitrust issues contribute to the cost of healthcare in the U.S.?
1. E.g., hospital selection in emergency situations: consumers value quality
of care, proximity of care, but also insurance company coverage
2. Cost = price * volume
a) Dictated by insurance and reimbursement, competition,
innovation, specialization, consolidation
b) Anything that influences price or volume will influence cost.

IV. Health Care Markets: Providers, Places, Payers, Products

A. Providers: blanket term for all actors who deliver healthcare; includes individuals
(nurses, doctors, etc.) as well as institutions (i.e., hospitals)
B. Places: facilities of healthcare (EDs, urgent care, specialty clinics)
C. Payers (aka payors): insurers
D. Products: technology, machines, medical devices, pharmaceuticals, services

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 KEY:
Vocabulary word
Professor callout
Statute or Regulation
Case
Test/Analysis

E. How do we measure “competition”? → begins the question of how to define the

“market”
1. Information asymmetry: when one side of the transaction has all the
information. In healthcare, the end consumer rarely has all the tools or
information necessary to make an “economically rational” choice.
2. Opacity: lack of transparency; such as unclear or surprise billing
3. Learned intermediaries: help consumers to understand complex
transactions; possibly, in healthcare, physicians.
F. Why do we regulate health care through an economic model?
1. It’s a market with consumers, major source of jobs and industry with
massive financial effects
2. Inelastic demand: Someone will always need healthcare and someone
will always pay for it. Necessary interventions, emergency care.
3. Economic models can illustrate consequences of healthcare access,
volume, cost, pricing.
G. Market Considerations
1. Commercial Insurers
a) Competitors: BCBS, Aetna, United Healthcare, Cigna
(1) Often, Americans don’t choose their insurer because they
get it through their employer (who selects the plan) or the
government.
b) Products: different service plan/coverage offerings
(1) Providers offered
(2) Level of risk
(3) Cost for employers, cost for patient: premiums,
deductibles, co-pays, out-of-pocket caps, tiering →
costs are a “crapshoot”
2. Healthcare triangle:
a) Patient
(1) Pays premium to insurer
(2) Pays provider a copay for cost of care
b) Provider
(1) Provides care to patient
(2) Provides access for insurer’s clients (through a K)
c) Insurer (third party payor)
(1) Provides insurance policy to patient (risk, extra costs)
(2) Pays remainder of costs to provider
d) Additional Players
(1) Patient’s employer, who select insurance plans

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 KEY:
Vocabulary word
Professor callout
Statute or Regulation
Case
Test/Analysis

V. Doctors & Antitrust – Cases

A. Case analysis
1. Facts: Identify:
a) Conduct: what is the activity? There must be an act. (N.B. The
existence of trade organizations are not violative, what they
do can be violative of antitrust.)
b) Actors (groups or individuals acting unilaterally?)
c) Market (who controls it? What share is monopolized?)
2. Issue: does the action in question violate antitrust laws? (that is,
does it decrease competition?) What type of violation of antitrust
laws does the action appear to be? (Monopoly, predatory pricing,
discount bundling, tying, etc.)
3. Rule: Apply Sherman § 1, Sherman § 2, FTC Act § 5, or Clayton Act
4. Analysis:
a) Which standard of review (per se or ROR)?
b) If ROR, can D advance an excuse that the action promotes
competition?
c) If yes,
(1) Is excuse narrowly tailored/the least-restrictive way of
achieving the alleged goal? → probably not violative of
antitrust
(2) Or, is there a less-damaging alternative? → likely violative
B. Goldfarb v. Bar Assoc. (1975)
1. Importance: Application of antitrust laws to the “learned
professions” (here, lawyers).
2. After this, cases concerning engineers, dentists, etc.
3. Having a professional organization does not exempt learned professions
from antitrust laws.
C. Arizona v. Maricopa Co. Medical Society (1982)
1. Facts: Society consisting of 70% of the physicians in the county agreed to
set prices at a certain level (a fee schedule), which its members would not
charge prices above. Insurance companies agreed to pay the prices at
this level.
2. Issue: Is this price fixing? Are price-fixed maximums a per se violation?
3. Rule: Sherman Act § 1 - group of competitors cannot agree to set prices.
4. Application: It’s price fixing. Even though price fixing is per se violative,
the court reviewed because it concerned maximums. The court holds that
in cases of horizontal price fixing, per se rule applies to maximum and
minimum prices, whereas in vertical price fixing cases, per se only
applies to minimum prices. The difference is the harm of reduced

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 KEY:
Vocabulary word
Professor callout
Statute or Regulation
Case
Test/Analysis

competition on direct competitors: if everyone at this level of care doesn’t

charge more than X, that reduces competition and can hurt availability,
innovation, and other competition-based incentives.
D. Wilk v. American Medical Association (AMA) (1983)
1. Facts: Chiropractors sued, claiming medical doctors had created a
monopoly by preventing referrals and therefore their patient pools had
dried up.
2. Issue: Is the AMA discouraging referrals to chiropractors, set out in an
anti-chiropractic policy, a violation of antitrust laws? The policy called
chiropractic practice a “cult”.
3. Rule: Sherman Act § 1
a) Standard: Rule of Reason
b) Groups of professionals cannot get together and agree to block
others out of the market. However, there must be evidence of
intent.
4. Application: it sounds like a group boycott by doctors of chiropractors as
affiliated medical professionals.
a) But receiving ROR opens the door for AMA to advance a pro-
competitive argument, and they argue (unsuccessfully) that they
have relied upon their licensing and expertise to decide not to trust
chiropractic care in order to protect patients “from quackery”.
b) Court does not accept justification because there are
alternatives that are less-damaging to competition.
E. FTC v. Indiana Federation of Dentists (IFD) (1986)
1. Facts: Dental ins. co. adopted policy of reviewing dental x-rays and
records, in order to pay benefits on the “least costly, but adequate”
treatments. Indiana Dental Ass’n (IDA) consisted of 85% of dentists in this
area and urged its members to not submit x-rays. Fearing antitrust
penalties, it withdrew its effort. 100 dentists formed IFD and required
members to not submit x-rays.
2. Issue: Does the formation of the IFD violate antitrust laws?
3. Analysis: Court applied ROR analysis. IFD is a professional ass’n, which
in and of itself doesn’t necessarily implicate antitrust. However, the act of
attempting to monopolize vertically does. “Quality of care” argument will
fail antitrust analysis if claimant cannot prove it’s the least competition-
restricting option.
F. Koefoot v. Am. College of Surgeons (1987)
1. Facts: rural independent provider challenged the boycott-like policy of the
ACS preventing surgeons from referring to non-surgeons for post-
operative care.

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Vocabulary word
Professor callout
Statute or Regulation
Case
Test/Analysis

2. Issue: Is this violative of antitrust? Market allocation? Tying?

3. Analysis: This conduct triggers antitrust analysis: policy ties surgical care
to surgical post-op, which bars rural providers from participating/receiving
referrals (which could be a form of market allocation).
a) Does the ACS have a pro-competitive argument? Better, expert
care for patients.
b) Is this argument the solution least-damaging to competition? No.
This ties patients to unnecessarily expensive care.
G. Sugarbaker v. SSM Health (1999)
1. Facts: A hospital terminated the privileges of a surgeon (Dr. Sugarbaker)
on the basis malpractice or incompetence, but this must be submitted to
the licensing board. Sugarbaker claims conspiracy; all the other doctors
banded together to take revenge because he wouldn’t join their Jeff City
practice.
2. Issue: Does multiple other direct competitors making an
agreement/enforceable decision to exclude their market violate Sherman
Act § 1?
3. Analysis: Yes, if the facts are what Sugarbaker represented. Harm to
competition: can exclude any doctors that don’t play along/charge less
money/etc. Quality justification can beat an anti-competition charge when
proved. Sugarbaker was bad at his job and he refused to learn - he’s a
bad doctor! Hospital board MUST be able to terminate his privileges
because he is a liability.

DAY 2 (Oct. 1, 2022)

Module 3: Competition in Healthcare Services

I. The Hospital Wars

II. Health Insurer Conduct

III. Accountable Care

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 KEY:
Vocabulary word
Professor callout
Statute or Regulation
Case
Test/Analysis

DAY 3 (Oct. 2, 2022)

Module 4: Competition in Medical Products & Health Reform

I. Drug & Device Competition

II. Health Care Consolidation & Integration

III. Antitrust & Health Reform