Teaching Antitrust in Health Law Courses 

Thomas (Tim) Greaney

I'm sometimes asked by other professors who teach Health Law, "How should I teach antitrust when I can only devote two or four hours to it in my Health Law class?" The answer I used to give was, "Quickly!" Now I say (quoting Justice Souter's California Dental opinion), "Sedulously!" Neither gets much of a laugh, but I do think there's some benefit to mapping out a strategy that focuses on a few central issues. So here's my thinking on how to teach antitrust law.

Coverage

One way of constructing the antitrust component of the course is to divide the materials into two segments: conduct and structure. The conduct section, which covers cartels and professional restraints, helps familiarize students with the analytic categories of Section 1 of the Sherman Antitrust Act and also serves to introduce the special issues presented by professionalism and the peculiar economics of health care payment. The structural segment focuses on joint ventures (especially physician-controlled networks), hospital mergers, and, time permitting, monopsony conduct by payors. An advantage of this approach-which admittedly is a bit artificial since the two segments are linked in many ways-is that it enables students to build up from the basics of antitrust while highlighting topics that have been of central importance to antitrust enforcers and practitioners. Another useful aspect is that one can cover each topic with only a few cases.

Introductory Lecture

I've found it useful to begin with a brief (fifteen-minute) introduction to basic economic concepts, such as market power and market definition and the principal analytical techniques that arise in the cases studied, namely the per se rule, the rule of reason, and the ancillary restraints doctrine. Students sometimes need to be assured that no particular background in antitrust or economics is necessary to understand these issues; a ten-minute introduction can help de-mystify some of the basic issues. Here are the points I discuss:

Market Power. The standard economic definition of market power is the ability to raise price or lower quality without losing so much business as to make the change unprofitable. Note that market power can be exercised either unilaterally (e.g., by a firm that has a large share of the market or offers a highly differentiated product) or through coordinated action among rivals (either by explicit agreement, or by interdependent, "oligopolistic" action through which rivals coordinate their actions without an explicit agreement). An example of market power (which strikes a chord with evening division students) is a law school operating the only evening division law school within a two-hundred mile radius.

Markets, geographic and product. Antitrust law has adopted an economic definition of a market as that area within which a firm or group of firms could profitably raise price (i.e., exercise market power). Thus, to determine whether a given county constitutes a proper antitrust geographic market for hospital services, one would ask whether the hospitals in that county could profitably raise price if they all got together in a cartel, or whether so many patients would travel to more distant hospitals so as to make the attempted price increasing unprofitable. If the latter is the case, the factfinder would add additional hospitals to the market until she reached the point at which the hypothetical price increase was feasible. As developed in the materials, practical indicia such as past patterns of usage, opinions of buyers, and other factors are usually determinative in answering this question.

Rule of Reason/Per se Rule Analysis. It bears repeating that these concepts form a continuum of analysis in that the courts now frequently examine, however briefly, possible justifications before attaching the per se label to conduct. By the same token, courts will often truncate the rule of reason inquiry without investigating fully market power and other issues, where the evidence suggests that either anticompetitive effect is obvious or that no market restraint is possible. In this connection, however, it is probably useful to warn students that once "professionalism" issues enter the picture, courts tend to adopt the rule of reason. The California Dental case explores this methodological issue in some detail.

Joint Ventures. The murky dividing line between cartels that should be summarily condemned and joint ventures that are afforded fuller examination under the rule of reason is crucial to dealing with the wide array of joint activities undertaken in the health care area. The "ancillary restraints" framework continues to provide the most satisfying dividing line for purposes of analysis. The FTC/Justice Department Policy Statements rely heavily on this analysis in distinguishing legitimate and objectionable joint ventures. These Policy Statements, by the way, are enormously helpful as they illuminate the nuances of applying antitrust to a wide variety of health care ventures. They also contain numerous illustrative examples (complete with answers) of hypothetical antitrust scenarios. Accordingly, the Statements provide useful fodder for both classroom discussion and final exam preparation.

Conduct and Professional Restraints

This material may be covered by using one of the classic price fixing/boycott cases such as In re Michigan State Medical Society1 or one of the recent FTC physician cartel cases. 2 These cases illustrate that antitrust does not allow the give-and-take between payors and providers to devolve into "naked" restraints of trade such as price fixing or threats of boycott to enforce attempts to get higher prices. This material leads well into cases that raise justifications based on "professionalism" or quality enhancement, including Indiana Federation of Dentists 3 and California Dental Association. 4 End your explanation with a hypothetical based on the AMA's restrictions on cooperation with chiropractors (Wilk5) and you've covered a lot of territory. A short form strategy would cover just a cartel case and Cal Dental.

Structure

I recommend covering two structural issues: physician-controlled networks and hospital mergers. Time constraints will make it hard to do both for most teachers, so it might be possible to briefly summarize the PPO/price fixing/messenger model issue when covering cartels under the conduct portion of the course. One can simply say that many of the key market definition issues are handled in the same (confusing) way they are under hospital mergers. If one chooses to cover the material, I recommend giving the students FTC/DOJ Policy Statement No. 8 and the FTC MedSouth Opinion 6 (heroically edited in my casebook 7 down to 14 pages). Students can pretty easily pick up the basic potential harms, the safety zone thresholds, and the critical need to assess the relevant market. Time permitting, this can be followed by a lively discussion of physician unions.

Merger law is probably the most important topic to cover. Not so much because students will encounter it in practice, but because it gives a good sense of the whole idea behind relying on competition in health care. I suggest in my casebook that instead of discussing the principal case and notes, the professor invite students to analyze a merger between the largest and third largest hospital in their community. This will force them to grapple with the boundaries of the market, the significance of nonprofit status, and efficiency justifications.