1 N.Y. Times, Oct. 1, 1982, at A13, col. 1.

2 Staff of House Committee on Ways and Means, 92D Cong., 1st Sess., Basic Facts on the Health Care Industry 8-9 (1971).

3 N.Y. Times, July 27, 1982, at Al, col. 5.

4 Note the commentary by one of the leading advocates of the competitive model in Enthoven, The Competition Strategy: Status and Prospects, 304 New Eng. J. Med. 109, 111 (1981).

5 See Leibenluft, & Pollard, Antitrust Scrutiny of the Health Professions: Developing a Framework for Assessing Private Restraints, 34 Vand. L Rev.. 927, 931 (1981)Google Scholar.

6 See 42 U.S.C. § 300e (1976 & Supp. IV 1980) for a definition of federally qualified HMOs.

7 Pollard & Leibenluft, Antitrust and the Health Professions: Policy Planning Issues Paper 106 (Office of Policy Planning, Federal Trade Commission, July 1981).

8 Id.

9 15 U.S.C.§§ 1011-1015(1976). See generally Weller, The McCarran-Ferguson Act’s Antitrust Exemption for Insurance: Language, History and Policy, 1978 Duke L.J. 587.

10 15 U.S.C. § 1013(b) (1976).

11 See, e.g., Frankford Hosp. v. Blue Cross, 554 F.2d 1253 (3d Cir.), cert.denied, 434 U.S. 860 (1977); Travelers Ins. Co. v. Blue Cross, 481 F.2d 80 (3d Cir. 1973); Doctors, Inc. v. Blue Cross, 431 F. Supp. 5 (E.D. Pa. 197’5), aff’d per curiam, 557 F.2d 1001 (3d Cir. 1976). Anderson v. Medical Serv., 1976-1 Trade Cas. (CCH) 60,884 (E.D. Va. 1976), aff’d mem., 551 F.2d 304 (4th Cir. 1977).

12 Union Labor Life Ins. Co. v. Pireno, 102 S. Ct. 3002 (1982); Group Life & Health Ins. Co. v. Royal Drug Co., 440 U.S. 205 (1979); St. Paul Fire & Marine Ins. Co. v. Barry, 438 U.S. 531 (1978).

13 438 U.S. 531 (1978).

14 See, e.g., Meicler v. Aetna Casualty & Sur. Co., 506 F.2d 732, 734 (5th Cir. 1975); Addrisi v. Equitable life Assurance Soc’y, 503 F.2d 725, 728-29 (9th Cir. 1974), cert.denied, 420 U.S. 929 (1975); Transnational Ins. Co. v. Rosenlund, 261 F. Supp. 12, 26-27 (D. Or. 1966).

15 438 U.S. at 538-52.

16 Id. at 554 n.26.

17 Id. at 555. The Court specifically did “not hold that all concerted activity violative of the Sherman Act comes within § 3(b).” Id.

18 Id. See also id. at 553-55. Even the “dissent did not argue that the agreement in question was within the contemplation of any state regulatory scheme.” Id. at 554 n.26.

19 440 U.S. 205(1979).

20 Id. at 211, 215-16, 220-21.

21 Id. at 214. In a strong dissent, Justice Brennan, joined by three other members of the Court, convincingly argued that participating agreements were within the “business of insurance:”

Id. at 252-53 (footnotes omitted). The dissent concluded that participating agreements are such an integral part of the insurance contract under the service benefit concept as to be part of the “business of insurance.” Id. at 251-52.

22 It might be argued that some such agreements are exempt from the antitrust laws under the state-action exemption of Parker v. Brown, 317 U.S. 341. But that exemption would exist because of the extent of state regulation and not because the agreements are the “business of insurance.” Id. at 233 n.41. See infra note 69 and accompanying text.

23 618 F.2d 1140 (5th Cir. 1980).

24 Id. at 1144 n.4. However, the court pointed out that only contracting agreements, as opposed to participating agreements, were before it. Id. at 1144-45. Contra Hoffman v. Delta Dental Plan, 517 F. Supp. 564, 568-70 (D. Minn. 1981).

25 The only issue before us is whether the Court of Appeals was correct in concluding that these Pharmacy Agreements are not the “business of insurance” within the meaning of § 2(b) of the McCarran-Ferguson Act.… Whether the Agreements are illegal under the antitrust laws is an entirely separate question, not now before us.

…

It is axiomatic that conduct which is not exempt from the antitrust laws may nevertheless be perfectly legal. The United States in its amicus brief urging affirmance has taken the position that the Pharmacy Agreements probably do not violate the anti-trust laws, though recognizing that that issue is not presented here.

440 U.S. at 210 n.5 (emphasis in original).

26 102 S. Ct. 3002 (1982). For additional discussion of this case, see also infra notes 51-57 and accompanying text.

27 Id. at 3009-11.

28 See generally, Medical Arts Pharmacy of Stamford, Inc. v. Blue Cross & Blue Shield of Conn., Inc., 518 F. Supp. 1100, 1103 (D. Conn. 1981), aff’d, 675 F.2d 502 (2d Cir. 1982).

29 See, e.g., Medical Arts Pharmacy of Stamford, Inc. v. Blue Cross & Blue Shield of Conn., Inc., 518 F. Supp. 1100 (D. Conn. 1981), aff’d, 675 F.2d 502 (2d Cir. 1982); Sausalito Pharmacy, Inc. v. Blue Shield of Cal, 1981-1 Trade Cas. (CCH) 63,885 (N.D. Cal. 1981), aff’d per curiam, 677 F.2d 47 (9th Cir. 1982).

30 518 F. Supp. 1100 (D. Conn. 1981), aff’d, 675 F.2d 502 (2d Cir. 1982).

31 The legality of activities under section 1 of the Sherman Act, 15 U.S.C. §§ 1-7 (1976), is evaluated under two approaches: the per se and rule of reason methods. National Soc’y of Prof. Eng’rs. v. United States, 435 U.S. 679, 692 (1978). The rule of reason is used when competitive effect can only be evaluated by analyzing the history of the restraint on competition, why it was imposed, its effect, and the facts of the business. Id.; Chicago Board of Trade, 246 U.S. 231, 238 (1918). The per se rule is applied when experience indicates that a given activity will have an anticompetitive effect in the overwhelming number of cases. See Continental Television, Inc. v. GTE Sylvania, Inc., 433 U.S. 36, 50 n.16. (1977). See generally, L. Sullivan, Handbook of the Law of Antitrust §§ 63-72.(1977).

32 518 F. Supp. at 1106.

33 Id. a t 1106-07.

34 See supra not e 31.

35 518 F. Supp. at 1109.

36 Id.

37 Baltimore County Hosp., Inc. v. Maryland Hosp. Serv., Inc., 234 Md. 427, 200 A.2d 39 (1964); Bloom v. Associated Hosp. Serv., 45 Misc. 2d 208, 256 N.Y.S.2d 483 (1965); Bayview Gen. Hosp. v. Associated Hosp. Serv., 45 Misc. 2d 218, 256 N.Y.S.2d 471 (1964); Shaker Medical Center Hosp. v. Blue Cross of Northeast Ohio, 115 Ohio App. 497, 183 N.E.2d 628 (1962).

38 Brief for United States as Amicus Curiae at 12, Group Life & Health Ins. Co. v. Royal Drug Co., 440 U.S. 205 (1979) (emphasis added).

In a different context, the Third Circuit stated:

Travelers Ins. Co. v. Blue Cross, 481 F.2d 80, 84 (3d Cir. 1973), cert.denied, 414 U.S. 1093 (1973).

39 102 S. Ct. 2540 (1982).

40 15 U.S.C. § 4 (1976 & Supp. IV 1980). The Clayton Act provides that “[a]ny person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor in any district court.…” 15 U.S.C. § 15 (1976).

41 102 S. Ct. at 2545. See also Reiter v. Sonotone Corp., 442 U.S. 330, 338 (1979); Pfizer Inc. v. India, 434 U.S. 308, 312 (1978).

42 102 S. Ct. at 2545. In dissent, Justice Rehnquist felt that it was not enough “for a plaintiff merely to allege that the defendant violated the antitrust laws and that he was injured.” Rather, “[t]he injury suffered by the plaintiff must be of the type the antitrust laws were intended to forestall.” Id. at 2552.

43 For legislation mandating utilization review of all claims for reimbursement under Social Security, see 42 U.S.C. §§ 1320c-1320c-l (1976 & Supp. IV 1980).

44 Compare Pireno v. New York State Chiropractic Ass’n, 650 F.2d 387, 393-95 (2d Cir. 1981) (peer review was not “business of insurance”), with Bartholomew v. Virginia Chiropractors Ass’n, 612 F.2d 812, 816-17 (4th Cir. 1979) cert. denied, 446 U.S.938 (1980) (peer review was “business of insurance”).

45 650 F.2d 387 (2d Cir. 1981).

46 Id. at 393.

47 Id. at 392-94.

48 612 F.2d 812 (4th Cir. 1979), cert. denied, 446 U.S. 938 (1980).

49 Id. at 817.

50 Id. The conflict between the circuits was acknowledged in Pireno, 650 F.2d at 395 n.13, and in at least one subsequent district court case. Ratino v. Medical Serv., 1981-1 Trade Cas. (CCH) 64,144, at 76,860 (D. Md. 1981) (“[t]here is now a conflict between the Second and Fourth Circuits as respects the scope of Royal Drug”). Following the Bartholemew rationale and bound by Fourth Circuit law, the Ratino court held peer review to “involv[e] the business of insurance.” Id.

51 102 S. Ct. 3002.

52 Id. at 3009.

53 Id. at 3007-08.

54 Id. at 3009-11.

55 Id. at 3007.

56 Id. at 3011.

57 Id. at 3014.

58 For an application of the rule of reason analysis to chiropractic peer review committees that concluded that the net effect of peer review is not anitcompetitive, see Note, Antitrust Implications of Chiropractic Peer Review Committees, 8 AM. J. L. & Med. 45 (1982).

59 Pollard & Leibenluft, supra note 7, at 66. A dental peer review program was found not to violate § 5 of the Federal Trade Commission Act because cost containment and fee dispute resolution were among the purposes of the program. Iowa Dental Ass’n, 3 Trade Reg. Rep. (CCH) 21,918 (Apr. 9, 1982). Noting the pending Supreme Court resolution of Pireno, the Commission declined to offer any opinion on whether peer review is the “business of insurance” under the McCarran-Ferguson Act. Id. at 22,271 n.3.

60 Pollard & Leibenluft, supra note 7, at 55. Another problem identified with respect to physician controlled plans is potential conflicts of interest between a physician’s duty to provide adequate health care to patients and the motive to maximize profits. Under general corporate law, however, there are prophylactic measures available to meet such a problem apart from antitrust enforcement.

61 Physician Agreements to Control Medical Prepayment Plans, Notice of Initiation of Case-by-Case Law Enforcement Program, 46 Fed. Reg. 27,768, 27,768-69 (1981).

62 Id. at 27,769.

63 Id.

64 Id.

That progress is the result of state statutes and lawsuits, as well as voluntary action by individual prepayment plans. In addition, economic studies of the relationship between plan control and reimbursement levels have produced somewhat inconsistent and inconclusive results. While the most recent analysis by the Commission’s Bureau of Economics continues to suggest a troublesome relationship between fee levels and medical society involvement on some Blue Shield boards, those results may not support setting a single standard applicable to all medical control situations, regardless of such factors as the type of physician group or type of prepayment plan involved.

Id.

65 Id. The FTC issued an Enforcement Policy with Respect to Physician Agreements To Control Medical Prepayment Plans, 46 Fed. Reg. 48,982 (1981). The statement sets forth the general approach the Commission uses to evaluate agreements and is intended to facilitate voluntary compliance.

66 Id. at 55-56. The staff paper also noted that “these Plans appear to be attractive to many consumers because they can continue to obtain services from physicians with whom they have established relationships.” Id. at 55.

67 Lynk, Regulatory Control of the Membership of Corporate Boards of Directors: The Blue Shield Case, 24 J. L. & Econ. 159 (1981).

68 Ohio AFL-CIO v. Insurance Rating Board, 451 F.2d 1178 (6th Cir. 1971), cert. denied, 409 U.S. 917 (1972).

69 General Ins. Co. v. Allstate Ins. Co., 1982-1 Trade Cas. (CCH) 64,543, at 72,981 (S.D. Fla. Jan. 25, 1982). But see United States v. Southern Motor Carriers Rate Cong., Inc., 672 F.2d 469, 472-76 (5th Cir. 1982). The posture of the insurance industry is best demonstrated by a report of an advisory group predominantly composed of industry representatives. While stating that the insurance industry is competitively structured and expressing support for competition and competitive rating statutes, the report also endorsed the current rate bureau situation. Shenefield, Insurance—The New Frontier of Deregulation, 16 Forum 679, 685 (1981) (citing report of the National Association of Insurance Commissioners’ Advisory Committee on Competitive Rating). The report recommended “that membership in such bureaus and adherence to their rates be voluntary.” Id. at 685. In the past, there have been few appraisals of joint insurer activities; a 1977 Department of Justice report was apparently “the first systematic effort to analyze the application of the antitrust laws to collective insurance activities.” Id. at 685 (citing United States Department of Justice, Antitrust Division, The Pricing and Marketing of Insurance (1977) (“1977 Justice Report”)).⁷⁰ Id.

71 In 1963, thirteen states passed legislation permitting insurance companies to pool their resources to offer “65” plans to the elderly. The following year, additional states took similar action.

72 See 18 Hospital Week No. 23 (June 11, 1982).

73 Shenefield, supra note 70, at 686 (citing Report to the President and the Attorney General of the National Commission for the Review of Antitrust Laws and Procedures (1979)).

74 Id. at 686.

75 “Because the development of actuarially sound loss data is essential to a competitive rate-making process, collective activities designed to develop such data are likely to be pro-competitive, not anticompetitive, in the context of insurance.” Id. at 686.

76 Id. at 687.

77 Journal of Commerce, Mar. 11, 1982. The original eleven carriers were Aetna Life & Casualty, Connecticut General, Equitable, John Hancock, Lincoln National, Metropolitan life, New York Life, Pacific Mutual, Provident Life & Accident, Prudential, and Travelers.

78 See Kallstrom, Health Care Cost Control by Third Party Payors: Fee Schedules and the Sherman Act, 1978 Duke L.J. 645, 689.

79 Halper, The Health Care Industry and the Antitrust Laws: Collision Course?, 49 Antitrustl.J. 17, 25 (1980).

80 Id. at 25 n.32.

81 473 F. Supp. 147 (S.D.N.Y. 1979).

82 Id. at 158-59.

83 See Pollard & Leibenluft, supra note 7, at 59.

84 102 S. Ct. 2466 (1982).

85 15 U.S.C. §§ 1-7 (1976).

86 The Maricopa Foundation for Medical Care is a non-profit Arizona corporation composed of licensed doctors of medicine, osteopathy, and podiatry engaged in private practice. Approximately 1,750 doctors, representing about 70% of the practitioners in Maricopa County, are members. 102 S. Ct. at 2470. The Pima Foundation for Medical Care, the other foundation defendant, was a similar organization. Id. at 2471.

87 Id. at 2470-71. In setting the fees, the foundations used “relative values” and “conversion factors.”

Id. at 2471. In addition, the foundation reviewed the medical necessity and appropriateness of treatment given by members to insureds. It also was “authorized to draw checks on insurance company accounts to pay doctors for services performed for covered patients.” Id. No challenge was made to these functions. Id.

88 Justices Blackmun an d O’Connor did not take part in the decision. It is conceivable that these two votes could join the dissenters in a future similar case, thereby making the precedential value of Maricopa somewhat weaker.

89 102 S. Ct.at 2480.

90 Id. at 2475.

91 Id. at 2472.

92 The Court held that established precedent condemned horizontal agreements fixing maximum prices. Id. at 2475. Since the case was “not premised on public service or ethical norms,” the fact that members of a profession were the parties involved did not alter the Sherman Act violation. Id. at 2475-76. Finally, the Court felt that the per se rule against price-fixing agreements applied to all industries uniformly. Id. at 2476-77.

93 Id. at 2477.

94 Id.

95 Id. at 2478. The Court noted that this case did not present the question “whether an insurer may, consistent with the Sherman Act, fix the fee schedule and enter into bilateral contracts with individual doctors.” It noted that this question was not reached in Royal Drug Co. (see 440 U.S. at 210 n.5), and that in an amicus curiae brief, the Department of Justice expressed its opinion that such an arrangement would be legal unless the plaintiffs could establish that a conspiracy among providers was at work. Brief for the United States as Amicus Curiae at 10-11, Arizona v. Maricopa County Medical Soc’y, 102 S. Ct. 2466 (1982). The Court concluded that the record provided no factual basis for the claim that the doctors must fix the fee schedule. 1102 S. Ct. at 2478 n.26.

96 See, e.g., The National Health Planning and Resources Development Act of 1974, 42 U.S.C. §§ 300k-300t (Supp. V 1975)

97 National Gerimedical Hosp. & Gerontology Center v. Blue Cross, 452 U.S. 378, 391-92 (1981).

98 452 U.S. 378(1981).

99 42 U.S.C. §§ 300k-300t (Supp. V 1975).

100 452 U.S. at 381.

101 See id. A health systems agency, or HSA, is the federal entity charged with regional health care planning.

102 452 U.S. at 393.

103 Id. at 393 n.19.

104 452 U.S. at 389-90 & n.15. “Missouri ha d not established any state regulatory agency with authority to review hospital construction.” Id. at 390. “If it had done so, this case probably would not have arisen.” Id. at 390 n.15.

105 See 452 U.S. at 389-90.

106 See generally Community Psychiatric Centers of Or., Inc. v. Grant, 664 F.2d 1148 (9th Cir. 1981).

107 Nevertheless, because Congress has remained convinced that competition does not operate effectively in some parts of the health-care industry, e.g., 42 U.S.C. § 300k-2(b) (1976 ed., Supp. III), we emphasize that our holding does not foreclose future claims of antitrust immunity in other factual contexts. Although favoring a reversal in this case, the United States as amicus curiae asserts that “there are some activities that must, by implication, be immune from antitrust attack if HSA’s and State Agencies are to exercise their authorized powers.” Brief for United States as Amicus Curiae at 16, n.11. Where, for example, an HSA has expressly advocated a form of cost-saving cooperation among providers, it may be that antitrust immunity is “necessary to make the [NHPRDA] work.” 373 U.S. 341, 357 (1963). See 124 Cong. Rec. 34932 (1978) (Rep. Rogers) (“The intent of Congress was that HSA’s and providers who voluntarily work with them in carrying out the HSA’s statutory mandate should not be subject to the antitrust laws. If they were, Public Law 93-641 simply could not be implemented”). Such a case would differ substantially from the present one, where the conduct at issue is not cooperation among providers, but an insurer’s refusal to deal with a provider that failed to heed the advice of an HSA.

452 U.S. at 393 n.18. See citation of this footnoted reservation in Huron Valley Hosp., Inc. v. City of Pontiac, 666 F.2d 1029, 1034 (6th Cir. 1981).

108 452 U.S. at 388 n.13.

109 452 U.S. at 393 n.18.

110 Norris & Szabo, Communication Between the Antitrust and the Health Law Bars: Appeals for More Effective Dialogue and a New Rule of Reason, 7 Am. J. L. & Med. i, v-vi (1981).

111 Control of Health Care Costs in the 1980’s, New Eng. L. Med. (Special Art., Nov. 6, 1980).