Physicians can't unite to stifle competition

Key Points

A physician recently asked whether he and his colleagues in a local medical society could write on their prescriptions that they could be not be filled at a specific pharmacy, which had recently opened a walk-in clinic staffed by a nurse practitioner.

While the desire of the physicians to avoid sending their prescription business to a competitor is certainly understandable, once they launched a concerted effort to impose some sort of economic sanction on a competitor, they essentially embarked on an activity that would constitute an unlawful attempt at restraint of trade. This could expose them to a successful lawsuit by the pharmacy-or even action by government regulators.

Moreover, it is questionable whether such a restrictive endorsement would be effective in preventing the pharmacy from filling the prescriptions.

A classic example of physicians running afoul of legal constraints occurred in Florida a number of years ago when a group of physicians that comprised the ob/gyn department at a local hospital banded together and refused to take emergency room call at the hospital unless they were paid.

The matter came to the attention of the Federal Trade Commission, which initiated an investigation. The FTC concluded that the physicians' actions constituted an "unfair method of competition" that restrained trade and "deprived consumers of the benefit of competition."

Ultimately, the chair of the ob/gyn department was forced to enter into a consent decree with the FTC that prohibited him from entering into an agreement with any physician to withhold emergency room call services at a hospital.

There are many other situations where physicians can run afoul of anti-trust, restraint of trade, and unfair competition laws. For example, physicians have generally been aware that if they band together and agree to cooperate in refusing to accept payments from managed-care organizations and third-party payers that are below a certain level, they would undoubtedly be guilty of illegal conduct and restraint of trade.

The response to this was the development of the "messenger model" of negotiation, in which one individual or organization relayed offers and counter-offers between payers and individual physicians, but did not share the physicians' responses or demands with other physicians. It is a cumbersome and somewhat ineffective procedure, but it was necessary to get around the legal prohibition against the physicians joining forces to set prices.

While physicians can individually decide whether they want to refuse to take call if they are not paid, or refuse to participate with third-party payers unless they receive certain levels of payment, when those decisions are the product of a concerted effort or agreement among physicians, they could be illegal and could very well subject the participants to significant legal liabilities.

The author is a health law attorney with Adelman, Sheff & Smith in Annapolis, Maryland, and Washington, DC. He can be reached at aadelman@hospitallaw.com
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