Why do we need antitrust laws?

The United States economy is one of the strongest and most productive in the world. Although the credit for our economic success goes to the hard work and creativity of American workers and businesses, it is the country’s policy of competition that spurs and rewards that work and creativity. History has shown that societies that promote vigorous competition among private companies have lower prices, better products, and greater consumer choice. The chiropractic profession is one of the many industries that contribute to the economic foundation of the country.

The antitrust laws are the basis of the nation’s competitive policy. These laws, enforced by both the federal and state governments, require health care providers to compete in the marketplace. The Sherman Act, the first federal “antitrust law,” was enacted in 1890, at a time when there was enormous concern about “trusts” — combinations of companies that were able to control entire industries. Since then, other laws have been enacted to supplement the Sherman Act, including the Federal Trade Commission Act and the Clayton Act (1914). With some revisions, these laws still are in effect today. They have the same basic objective: making sure there are strong economic incentives for businesses to operate efficiently, keep prices down, and keep quality up.

When consumers decide to purchase a product or service — a car, a new refrigerator, or chiropractic services, for example — the goal of the antitrust laws is to make sure their choices are not restricted unreasonably. To ensure consumer choice, the antitrust laws set two basic requirements: companies cannot agree to limit competition in ways that hurt consumers; and a single company cannot monopolize or try to monopolize an industry through unfair practices.

The antitrust laws prohibit certain kinds of agreements among businesses, including health care providers. They require that each business establish prices or other terms on its own, without agreeing with a competitor or supplier. For example, chiropractors in a city cannot agree on the price that they will charge for an adjustment. Domestic airlines cannot agree about how many flights they will offer from a particular city. Internet service providers cannot agree on the monthly terms for customers. And a clothing retailer cannot agree with a manufacturer about the minimum price the retailer will charge for clothing.

Another type of agreement among competitors involves an outright combination or merger of the companies. These agreements to merge can be illegal if they significantly undermine competition in the marketplace. These laws affect chiropractors as well as other types of businesses.

In some cases, a single company can acquire enough power unfairly to dominate a market. For example, if an airline — for no reason other than to protect its market position — makes sure that no other airlines can fly a particular route, the airline will be able to raise prices well beyond competitive levels. A chiropractic organization that acquires all its competitors might be able to do the same thing. In these cases, the companies would have violated the antitrust prohibition on monopolizing a market. A court would order the company to stop engaging in these unfair practices, and might also require the company to pay damages to consumers who have been harmed. In some cases, a court might even break up the monopoly into smaller companies.

If all the major drug companies agree privately to set identical prices, the agreement would be a clear violation of the antitrust laws. In fact, the people involved probably would go to prison for such a clear and harmful violation. If only all antitrust cases were that clear-cut. The fact is that most antitrust cases are complex and require a detailed and painstaking examination of the facts.

Consider a case where all the companies in a market are charging the same price — for example, airline fares or prices for grocery products. Are these companies violating antitrust laws? Identical prices can result from vigorous competition as well as from an outright agreement. When uniform pricing results from competition, the situation is legal; when identical pricing results from agreement, it is not. To determine what is really going on, the courts and antitrust enforcement agencies must analyze the facts.

The antitrust laws apply to almost everyone involved in business — corporations, partnerships, sole proprietorships, individuals, trade associations, professionals such as doctors and lawyers, and some activities of non-profit organizations.

At the federal level, the Bureau of Competition at the Federal Trade Commission and the Antitrust Division of the Department of Justice enforce the antitrust laws. At the state level, they are enforced by the State Attorney General. Private parties also can bring antitrust cases to redress illegal injuries.

How does antitrust law limit the conversations I can have with my colleagues about pricing and managed care agreements?

The intent of state and federal antitrust laws is to foster and encourage competition by prohibiting unfair and discriminatory business practices that destroy or hamper competition and to safeguard against monopolies. The laws affect the methods chiropractors use to obtain competitive information, the way in which they set prices, and the strategies involved in competing for and becoming involved in managed care agreements. The laws also may impact other business practices of chiropractors including how they determine staff salaries and the location and operations of their practices.

If you question whether one of your business practices violates state or federal antitrust law it is important that you obtain a written opinion from an attorney that specializes in antitrust. Under no circumstances should you rely on the word of another health care provider or a managed care company. Their assurances will not protect from an antitrust inquiry.

I think a particular managed care agreement is blatantly unfair to chiropractors. Can I express my personal opinion to other chiropractors not to sign this agreement?

Encouraging any chiropractor outside your service corporation not to sign a managed care agreement for any reason is considered a boycott and is explicitly forbidden under state and federal antitrust law.

From practical experience our doctors have learned that if the state of federal government inquires into your business practices because they suspect an antitrust violation you will incur substantial costs even if you are not charged with a violation. These costs involve complying with subpoenas and the costs of consulting with legal counsel that may be necessary if the state department of justice or the federal trade commission interviews you.

May I collect data on prices charged by other chiropractors or medical doctors?

As any business, you may collect data on prices charged by other chiropractors or medical doctors; however, you may not share that data with members outside your service corporation. Under no circumstances may you discuss pricing strategies with chiropractors outside your service corporation.

May I discuss prices with other chiropractors?

All of your pricing decisions must be made as an individual or with members of your service corporation. You may not call or meet with chiropractors outside your service corporation to decide what prices to charge.

I have collected pricing data on other health care providers in my area. Am I restricted on sharing that information?

You may not call, write, fax or e-mail other chiropractors to give them pricing information that you have gathered even if it is for a new CPT code.

A group of doctors wants to have a meeting to discuss pricing. May I attend this type of meeting? You may not attend a meeting in which pricing is discussed unless the information is presented under the FTC guidelines.

Can the WCA help me determine what a fair price would be for my market area?

The WCA cannot recommend pricing strategies to you. The only information that is released on pricing is a periodic price survey under which the data is collected and distributed under the FTC guidelines.

May I discuss whether or not to sign a particular managed care agreement with other chiropractors?

All of your managed care decisions must be made as an individual or with members of your service corporation. You may not call or meet with chiropractors outside your service corporation to decide what managed care agreements to accept, reject, or negotiate.

I have collected data on managed care plans in my area. Am I restricted on sharing that information?

You may collect data on managed care contracts signed by other chiropractors; however, you may not share that data with members outside your service corporation.

A group of doctors wants to have a meeting to discuss managed care reimbursement. May I attend this type of meeting?

You may not attend a meeting in which the terms of a managed care agreement are discussed unless the information is presented under the FTC guidelines.

A group of doctors in my area gets together on a regular basis. What should I do if the group discusses the terms of a managed care agreement or its reimbursement?

If you are at a meeting in which managed care terms or negotiating strategies are improperly discussed; you must leave the meeting immediately. Sitting silent through the meeting may make you as responsible as the people participating in the discussion.

A group of doctors in my area are all going to sign with a managed care company. Can we delegate the responsibility of negotiating the contract terms to one of the doctors?

You may not allow someone outside your service corporation (unless it is your attorney) to negotiate the terms of a managed care agreement on your behalf even if you are requested to do so by the insurance or managed care company.

Several of my colleagues located in small towns are considering merging our practices. Should we take any special antitrust precautions?

Chiropractors that are considering buying or merging with other practices in which the resulting organization materially reduces competition on a city or county basis should consult with an attorney specializing in antitrust matters at the initial stages of any discussion. Organizations that are created or expand to the point that they provide a major percentage of the chiropractic services in an area have potential problems under the antitrust laws.

I am thinking of starting my own PPO. Is this something a person can do by themselves?

No. There are many regulations that govern the operation of any managed care entity. A chiropractor seeking to form an IPA or PPO should have qualified legal counsel to guide them through the statutes and requirements of Wisconsin’s Insurance Commissioner.

Can I serve as a director of more than one managed care company at the same time?

You may not serve as a director of more than one company at a time if the organizations are competitors and any agreement between them would eliminate competition.

Can the WCA recommend whether or not I should join a particular managed care company?

The WCA cannot recommend whether or not you should join a particular managed care company. The WCA provides general information on the risks in managed care contracts; however, the decision make the decision of whether to sign a contract is one that you should make in consultation with your practice partners, attorney and/or accountant.

I just read the series of questions that have to do with restrictions on pricing and managed care. I have a question that is not on the list. What should I do?

Questions concerning activities with other health care providers or insurance companies not included on this list should be directed to the WCA who will direct to your attorney if they are not able to answer your question.

Several of my colleagues located in small towns are considering ways to become more efficient including merging our staffs or purchasing activities. Should we take any special antitrust precautions?

Chiropractors that enter a relationship with other chiropractors to limit their administrative costs by sharing or “pooling” staff, especially those located in rural areas, should consult with an attorney specializing in antitrust matters before any agreements are finalized.

What business practices are illegal under state and federal antitrust laws?

All of the following activities are illegal under state and federal antitrust laws.

Horizontal agreements among competitors.

Agreements among parties in a competing relationship can raise antitrust suspicions. Competitors may be agreeing to restrict competition among themselves. Antitrust authorities must investigate the effect and purpose of an agreement to determine its legality.

Agreements on price.

Agreements about price or price-related matters potentially are the most serious. That’s because price often is the principal way that most health care providers compete. A “naked” agreement on price — where the agreement is not reasonably related to the practices’ business operations — is illegal. Hard core — clear or blatant — price-fixing is subject to criminal prosecution.

Are similarity of prices, simultaneous price changes or high prices indications of price-fixing? Not always. These conditions can result from price-fixing, but to prove the charge, antitrust authorities would need evidence of an agreement to fix prices. Price similarities — or the appearance of simultaneous changes in price — also can result from normal economic conditions.

Boycotts.

A group boycott — an agreement among competitors not to deal with another person or business — violates the law if it is used to force another party to pay higher prices. Boycotts to prevent a firm from entering a market or to disadvantage a competitor also are illegal. A recent case involved a group of physicians charged with using a boycott to prevent a managed care organization from establishing a competing health care facility in Virginia.

Market division.

Agreements among competitors to divide territories or allocate customers — essentially, agreements not to compete — are presumed to be illegal.

Agreements to restrict advertising.

Restrictions on price advertising can be illegal if they deprive consumers of important information. Restrictions on non-price advertising also may be illegal if the evidence shows the restrictions have anticompetitive effects and lack reasonable business justification. The FTC recently charged the California Dental Association dealers with restricting comparative and discount advertising to the detriment of consumers.

Codes of ethics.

A professional code of ethics may be unlawful if it unreasonably restricts the ways professionals may compete. Several years ago, for example, the FTC ruled that certain provisions of the American Medical Association’s code of ethics restricted doctors from participating in alternative forms of health care delivery, such as managed health care programs, in violation of the antitrust laws.

Maintaining or Creating a Monopoly.

While it is not illegal to have a monopoly position in a market, the antitrust laws make it unlawful to maintain or attempt to create a monopoly through tactics that either unreasonably exclude firms from the market or significantly impair their ability to compete. A single business may commit a violation through its unilateral actions, or a violation may result if a group of businesses work together to monopolize a market.

A common complaint is that some companies try to monopolize a market through “predatory” or below-cost pricing. This can drive out smaller companies that cannot compete at those prices. But lower prices may simply reflect efficiencies from spreading overhead costs over a larger volume of patients. Because the antitrust laws encourage competition that leads to low prices, courts and antitrust authorities challenge predatory activities only when they will lead to higher prices.

While the FTC has not found predatory pricing violations in recent years, it examines potential violations very carefully and maintains a close watch for other kinds of tactics — like raising competitors’ costs — that may disadvantage rivals.