Doctors take Pennsylvania antitrust case to U.S. Supreme Court

A lower court found that hospital restrictions on the physician who brought suit were not a restraint on trade.

By Amy Lynn Sorrel — Posted April 3, 2006

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Physician groups are asking the U.S. Supreme Court to weigh in on a lower court ruling they say would allow hospitals to stymie physician efforts to open surgery centers.

The Federated Ambulatory Surgery Assn. in March filed a friend-of-the-court brief seeking to overturn two key aspects of a September 2005 decision by the 3rd U.S. Circuit Court of Appeals.

In the ruling, the appeals court found that a surgery facility being opened by a physician was not a competitor of a local hospital because it was not yet operational. The court also ruled that the hospital's restriction of the doctor's conversations with patients was not anticompetitive and was a protected peer review action under the Health Care Quality Improvement Act.

"This has been a particular area of concern, and there have been a number of instances in the courts where ambulatory surgery centers are prohibited from functioning because of restrictions from hospitals on medical staff or exclusive contracts on patient care in the area," said FASA President Jack Egnatinsky, MD.

If the high court takes the case, it could shift the way such antitrust issues are handled by the courts, which is why FASA got involved, according to Kathy Bryant, the group's executive vice president. The American Academy of Ophthalmology, the Pennsylvania Academy of Ophthalmology, the American College of Surgeons and the California Medical Assn. also joined the brief.

Legal experts agree this type of conflict has cropped up more often in recent years. But they say it is an area of antitrust law that remains tricky for the courts in determining what constitutes a restraint on trade. Some speculate the Supreme Court might not choose this case to clarify the law because of its complicated facts.

The case weighs antitrust concerns with the legitimate purposes of the hospital to control the behavior of staff physicians, said Glen O. Robinson, a professor of antitrust law at the University of Virginia School of Law.

"That doesn't mean that the hospital has immunity ... but it does mean that there is no per se rule against restricting the 'dissemination of truthful and non-deceptive information,' " he said.

The case stems from a 1995 dispute between Pennsylvania ophthalmologist Alan Gordon, MD, and Lewistown Hospital, the only medical and surgical facility serving two counties, court documents show. Dr. Gordon and Paul Nancollas, MD, were the only two ophthalmologists in Mifflin and Juniata counties, and both had staff privileges at Lewistown.

The two doctors performed different cataract surgery procedures, and on several occasions, Dr. Gordon made disparaging statements to patients about Dr. Nancollas, according to court documents. This prompted the hospital to prohibit Dr. Gordon from discussing with patients the differences between the doctors' techniques. To maintain his privileges at Lewistown, Dr. Gordon was required to agree to the communication restraints.

At the time, Dr. Gordon was in the process of opening his eye surgery facility, Mifflin County Community Surgical Center. He sued the hospital for antitrust violations, alleging the restrictions were an "unreasonable restraint on trade" that prevented him from competing with the hospital.

The 3rd Circuit ruled against Dr. Gordon. It found that he "and the hospital were not competitors in the relevant market in 1995 when he agreed to the conditions. His competition in the facility services market did not commence until MCCSC opened more than one year later."

The court stated that given Dr. Gordon's history of disruptive conduct, the hospital was justified in restricting his privileges.

Dr. Gordon has petitioned the Supreme Court for a review of his case. Steve Varick, Gordon's attorney, said the doctor denies the misconduct allegations, which were never litigated. "The courts have not focused on the important restraints on competition and focused instead on what were irrelevant disputes about past conduct," he said.

The FASA brief argues, however, that the 3rd Circuit applied an unfair standard to the surgery center and asks the Supreme Court to clarify that a potential competitor is entitled to antitrust protection under the Sherman Act.

"By limiting the availability of the Sherman Act's protections to actual competitors, the 3rd Circuit has effectively immunized antitrust competitors ... so long as their competitor has not yet opened," the brief states.

A facility does not have to "actually sell goods or services" to be considered a competitor under the act, Bryant explained. "It seems wrong to use [this standard], because physicians are most susceptible to pressure when they are planning to open the ASC."

FASA also is asking the high court to rule that restricting physicians from sharing information with patients has a "substantial effect on competition."

But legal experts say the brief might be going too far in construing a broader negative effect from what they view as a limited ruling.

The FASA brief is correct in arguing that antitrust protections apply to potential competitors, Robinson said. But that was not the question the court was aiming to address in this case.

"All the court intends to say here is that the absence of actual competition tends to corroborate that the hospital was not acting with a purpose of [restricting] competition," he said.

Antitrust claims have the potential for deterring hospitals from exercising authority to supervise physicians, Robinson explained, "which is precisely why [federal peer review law] grants them a conditional immunity."

But because there is no clear legal basis for determining whether an agreement is a restraint on trade, the burden falls on the plaintiff to persuade the court, said Clark C. Havighurst, a professor of antitrust and health care law at Duke University School of Law.

"Although the 3rd Circuit might have been a bit more open to the possibility that restraining the plaintiff as a competitor was a principal goal of the agreement, the plaintiff doctor seems to have given the hospital lots of plausible pretexts for disciplining him," he said.

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