1 15 U.S.C. §§ 1-2 (1982).

2 15 U.S.C. § 12 (1982).

3 Brodley, , Joint Ventures and Antitrust Policy, 95 HARV. L. REV. 1521, 1525 (1982)CrossRefGoogle Scholar. Professor Brodley gives an excellent overview of antitrust analysis of joint ventures but does not specifically mention hospital joint ventures.

4 Id. at 1527.

5 See id. at 1527-29.

6 A Computerized Tomograph (CT) Scanner is a tool for diagnosis which uses a computer to analyze information produced by x-rays and prints a picture. SLOANE-DORAND ANNOTATED MEDICAL LEGAL DICTIONARY (1987).

7 Brody & Magel, Step-Down Care Promotes Vertical Integration, HOSPITAL, Dec. 1, 1985, at 76.

8 Ventures Show Cooperation with MDs Up, HOSPITAL, Oct. 1, 1985, at 37.

9 Section 1 provides in relevant part:

15 U.S.C. § 1 (1982).

15 U.S.C. § 2 (1982).

10 15 U.S.C. §§ 12-26 (1982). For the text of these sections, see infra text accompanying notes 14-19.

11 Section 1 also has been interpreted to prohibit illegal tying arrangements and exclusive dealing arrangements. A tying arrangement occurs when a party refuses to sell an item (the tying product), unless the buyer agrees to take another item (the tied product). See United States v. Loew's Inc., 371 U.S. 38 (1962). An exclusive dealing arrangement requires the buyer to purchase a particular product only from the seller. See F.T.C. v. Motion Picture Advertising Serv. Co., 344 U.S. 392 (1953)(distributors conditioned sale of films on acceptance of a package containing unwanted films); see also Northern Pac. Ry. Co. v. United States, 356 U.S. 1 (1958).

12 175 U.S. 211 (1899); see United States v. Socony-Vacuun Oil Co., 310 U.S. 150 (1940).

13 472 U.S. 284 (1985).

14 15 U.S.C. § 2 (1982).

15 236 F. Supp. 244 (D.R.I. 1964), aff'd except as to degree, 384 U.S. 563, 570 (1966).

16 384 U.S. at 570-71.

l7 [I]t shall be unlawful for any person engaged in commerce, in the course of such commerce, either directly or indirectly, to discriminate in price between different purchasers of commodities of like grade and quality, where either or any of the purchases involved in such discrimination are in commerce, where such commodities are sold for use, consumption, or resale within the United States or any territory thereof or the District of Columbia or any insular possession or other place under the jurisdiction of the United States, and where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly ….

15 U.S.C. § 13 (a) (1982).

18 Id. Direct discrimination occurs when a seller charges buyers differently. Indirect price discrimination occurs when different conditions of sale result in lower prices for certain buyers. See Standard Oil Co., N.J. v. United States, 221 U.S. 1 (1961); F.T.C. v. Anheuser-Busch Inc., 363 U.S. 536 (1960).

19 An example of a legitimate reason for charging a different price would be when the price variation is based on the size of the order.

20 221 U.S. 1 (1961).

21 Id. at 66.

22 See generally P. MARCUS, ANTITRUST LAW AND PRACTICE 170-77 (1980).

23 Berg, , Applying the Antitrust Laws to Exclusive Arrangements for the Provision of Hospital-Based Medical Services: A Tale of Two Hospitals, 72 J. MED. ASS‘N GA. 573 (1983)Google Scholar.

24 See, e.g., Northern Pac. Ry. Co. v. United States, 356 U.S. 1 (1958)(involved illegal tying arrangements among railroads).

25 See, e.g., United States v. Trenton Potters Co., 273 U.S. 392 (1972); United States v. McKesson & Robbins, Inc., 351 U.S. 305 (1956); United States v. Socony-Vacuum Oil Co., 310 U.S. 150 (1940).

26 United States v. Trenton Potters, 273 U.S. 392 (1972).

27 Trenton Potters, 273 U.S. at 401.

28 See, e.g., Business Electronics Corp. v. Sharp Electronics Corp., 108 S. Ct. 1515 (1988); F.T.C. v. Indiana Fed. of Dentists, 476 U.S. 447 (1986); National Collegiate Athletic Ass'n v. Board Regents Univ. of Ok., 468 U.S. 85 (1984).

29 468 U.S. 685 (1984).

30 Id. at 100-01.

31 Id. at 117-20.

32 Irmen, , Preferred Provider Organizations: Legal Aspects, 40 J. Mo. B. 149 (1984)Google Scholar.

33 See generally id. at 150. For further information on the antitrust implications of other forms of PPO's, see Youle, & Daw, , Preferred Provider Organizations: Antitrust Perspective, 29 ANTITRUST BULL. 301 (1984)Google Scholar.

34 Irmen, supra note 32, at 149.

35 See, e.g., Trenton Pollers, 273 U.S. 392 (1927); United States v. Socony-Vacuum Oil Co., 310 U.S. 150 (1940).

36 457 U.S. 332 (1982).

37 The plan in Maricopa involved about 10% of area physicians. Id. at 339.

38 Id. at 337.

39 Id. at 356-57.

40 Id. at 341-42.

41 Id. at 341.

42 In antitrust terms, the market share of a venture involves an examination of several markets. The particular market of a product or service must be examined along with the relevant geographical market. The relevant geographical market for hospitals would generally be larger in rural areas and smaller in urban areas which have numerous medical facilities. See Jefferson Parish Hosp., Dist. No. 2 v. Hyde, 466 U.S. 214 (1984)(case involves claims of illegal tying arrangements between a hospital and staff members and includes an extensive discussion of market power).

43 Batavia, , Preferred Provider Organizations: Antitrust Aspects and Implications for the Hospital Industry, 10 AM. J.L. & MED. 169, 181 (1984)Google Scholar.

44 See generally Ball Mem. Hosp., Inc. v. Mutual Hosp. Inc., 784 F.2d 1325, 1332 (1986) (court affirmed a lower court ruling denying a preliminary injunction against a PPO run by Blue Cross/Blue Shield because of alleged Sherman Act violations).

45 441 U.S. 1 (1979).

46 Id. at 22-23.

47 Arizona v. Maricopa County Med. Soc'y, 457 U.S. 357 (1982).

48 67 Aspen Systems Corp. 4 HOSP. L. MAN. (1983 & Supp. 1985).

49 L. Costilo, Remarks before the Public Health Ass'n (Nov. 20, 1985)(available from the F.T.C. Bureau of Competition).

50 Id. at 185; Alpert, & McCarthy, , Beyond Goldfarb: Applying Traditional Antitrust Analysis to Changing Health Markets, 29 ANTITRUST BULL. 165, 197 (1984)Google Scholar; Irmeni supra note 32, at 153.

51 Irmen, supra note 32, at 153; see also C. Rule, Remarks before the Antitrust Section of the Connecticut Bar Ass'n (Mar. 11, 1988), reprinted in ANTITRUST HEALTHCARE CHRON. (1988).

52 457 U.S. at 351.

53 Rich, , PPO‘s and the Per Se Rule Against Price Fixing, 6 WHITTIER L. REV. 723, 724 (1984)Google Scholar.

54 Arizona v. Maricopa County Med. Soc'y, 457 U.S. 332, 349 (1982).

55 See, e.g.. National Soc'y Professional Engineers v. United States, 435 U.S. 679 (1978).

56 Alpert & McCarthy, supra note 49, at 198.

57 Id at 197-98.

58 Id. at 198.

59 J. McGrath, Remarks at the A.B.A. Antitrust Spring Meeting (Mar. 22, 1985).

60 Id. at 10 (McGrath believes that exclusion of some interested parties will promote competition).

61 Youle & Daw, supra note 33, at 343.

62 See St. Bernard Gen. Hosp. v. Hosp. Serv. Ass'n, 712 F.2d 978, 987 (5th Cir. 1983), cert, denied, 104 S.Ct. 2342 (1984).

63 Roblr, Knoulton & Rosenberg, , Hospital Sponsored PPO, 12 MED. & HEALTH CARE 204, 206 (1984)Google Scholar; see generally Northwest Wholesale Stationers, Inc. v. Pacific Stationery & Printing Co., 2613 (1985); Ron Tonkin Gran Tourismo, Inc. v. Fiat Distrib., Inc., 637 F.2d 1376, 1381-87 (9th Cir. 1981), cert, denied, 454 U.S. 831 (1981); United States Trotting Ass'n v. Chicago Downs Ass'n Inc., 665 F.2d 781, 787-90 (7th Cir. 1981).

64 Irmen, supra note 32, at 154.

65 Youle & Daw, supra note 33, at 355.

66 In Broadcast Music, response to competition led to the creation of a new product which the court found procompetitive. See Broadcast Music, Inc. v. Columbia Broadcasting System, 441 U.S. 1 (1979).

67 Recently, the Supreme Court extensively considered “quality of care” concerns when dentists boycotted insurance companies. F.T.C. v. Indiana Fed. Dentists, 106 S.Ct. 2009, 2020 (1986).

68 Id.

69 See J. McGrath, supra note 58, at 7-8 (Department of Justice encourages PPO's to integrate for efficiency purposes).

70 See generally Rich, supra note 52, at 729.

71 An economy of scale occurs “when the cost per unit (or average cost) of production declines as the total amount of output increases.” COOTER, R. & ULEN, T., LAW AND ECONOMICS 97 n.5 (1988)Google Scholar.

72 P. Proger, Remarks on Shared Service Organizations at the Fourth Annual Program on Antitrust in the Health Care Field (Jan. 7-8, 1981)(available from the National Health Lawyers Ass'n).

73 Alpert & McCarthy, supra note 50, at 199.

74 49 Stat. 1526 (1936)(codified as amended at 15 U.S.C. § 13(f) (1982)).

75 See generally Dolan, , What are the Antitrust Implications of Shared Purchasing for Hospitals?, 53 HOSPITAL, Oct. 16, 1979, at 76Google ScholarPubMed.

76 Id. at 77.

77 “Nothing in the Act … known as the Robinson-Patman Antidiscrimination Act shall apply to purchases of their supplies for their own use by schools, colleges, universities, public libraries, churches, hospitals, and charitable institutions not operated for profit.” 52 Stat. 446 (1938)(codified as amended at 15 U.S.C. § 13(c) (1982)).

78 Many hospitals are proprietary institutions. As a result, the Robinson-Patman Act applies to these institutions, while the Non-Profit Institutions Act does not apply to them.

79 743 F.2d 1388 (9th Cir. 1984), cert, denied, 105 S.Ct. 1230 (1985).

80 Id at 1393.

81 Proprietary institutions are hospitals that are operated for profit. Since the Non-Profit Institutions Act, supra note 77, applies to institutions which are not operated for a profit, sales to a proprietary hospital do not seem to fit within the exceptions created by the Act. There are, however, no cases on point. See generally Students Book Co. v. Washington Law Book Co., 232 F.2d 49 (D.C. Cir. 1955), cert, denied, 350 U.S. 988 (1956).

82 Alpert & McCarthy, supra note 50, at 194.

83 Id

84 723 F.2d 495 (6th Cir. 1983).

85 Id. at 498.

86 Id. at 499.

87 Id.

88 Id. at 495.

89 Id. at 508.

90 Id. at 508. The court's lack of concern for local suppliers may indicate that it would allow GPOs to occupy a large share of the local markets. As a result, local suppliers could be forced out of business.

91 Id. at 506.

92 365 U.S. 320, 327 (1961), cited in White & White, 723 F.2d at 501.

93 Id.

94 See White & White, 723 F.2d 495 (6th Cir. 1983).

95 See Northwest Wholesale Stationers, Inc. v. Pacific Stationery, 472 U.S. 284 (1985)(the court emphasized that expulsion from a purchasing cooperative would not be judged as a perse illegal boycott when the restraint is unlikely to result in anticompetitive effects).

96 J. Waxman, Competition, Antitrust, and the Hospital, paper presented at the Fourth Annual Program on Antitrust in the Health Care Field, 26, 27 (Jan. 7-8, 1981) (available from the National Health Lawyers Ass'n).

97 Id. at 28.

98 This percentage is determined from the Department of Justice's revised merger guidelines, which are used in conjunction with the Herfindahl-Hirschman Index. UNITED STATES DEP't OF JUSTICE MERCER GUIDELINES 14 (June 1984). The merger guidelines are applicable to joint ventures because even though a joint venture is not a merger, the combined market power of the entities forming the joint venture has the same effect on the market as a merger. The merger guidelines also are helpful in defining a market and determining the orientation of firms in that market.

99 Id.

100 See White & White, Inc. v. American Hosp. Supply Corp., 723 F.2d 495, 508 (6th Cir. 1983)(citing Richter Concrete Corp. v. Vendo Co., 660 F.2d 255, 271 (7th Cir. 1981), cert denied, 455 U.S. 921 (1982)) (a market share of up to 30% is insufficient to prove a dangerous probability of monopoly.).

101 See I.R.C. § 501(e) (1986).

102 I.R.C. §§ 501(c)(3), 501(e) (1986). Section 501(e) specifically exempts from taxation: data processing, purchasing, warehousing, billing and collection, food, clinical, industrial engineering, laboratory, printing, communications, record center, and personnel (including selection, testing, training and education) services; as long as all the hospitals involved with the shared service are tax exempt.

103 See supra note 6 and accompanying text.

104 441 U.S. 1, 20-21 (1979).

105 468 U.S. 85 (1984); see supra text accompanying notes 29-31.

106 Id. at 101.

107 Dolan, supra note 75, at 77.

108 Id. at 78.

109 15 U.S.C. § 13(a), (c); see also Ball Mem. Hosp., Inc. v. Mutual Hosp. Inc., 784 F.2d 1325, 1340 (7th Cir. 1986)(medical services are not “commodities“).

110 Bernstein, Antitrust Risks in Health Insurance, Staff Boycotts, and Shared Services, HOSPITAL, May 4, 1982, at 33; 34; P. Proger, supra note 72, at 22.

111 See, e.g., Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752 (1984)(Spray-Rite claimed that Monsanto terminated its distributorship as part of a conspiracy with other distributors to fix prices).

112 These suggestions are not exhaustive. Particular shared services may require more extensive precautions, especially when the market for the services is limited.

113 An example of possible objective criteria in the case of a CT scanner would be a limit placed on its use based on its availability or manufacturer's instructions. In the case of other services, objective criteria for limiting membership could involve the general operating capacity of the service.

114 P. Proger, supra note 72, at 20.

115 In Goldfarb v. Virginia State Bar Association, the Supreme Court held that members of the learned professions did not have the privilege of being exempted from the Court's scrutiny in an antitrust case, 421 U.S. 773 (1975).

116 Examples of precautions unique to the health care industry include justifying a limitation based on quality of care concerns, or certificate of need requirements, or the number of hospitals able to participate in a shared service.