Ruling jeopardizes authority of state medical boards

The AMA and others in organized medicine are concerned that a decision against a dental board will mean unfair antitrust scrutiny for regulatory agencies.

By — Posted June 17, 2013

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Physician leaders say a ruling by the 4th U.S. Circuit Court of Appeals could prove a significant impediment to the ability of state licensing boards to regulate the practice of medicine.

On May 31, the court ruled that a North Carolina dental board exceeded its authority when it attempted to stop nondentists from providing teeth-whitening services. In siding with the Federal Trade Commission, judges said the board is not shielded from antitrust scrutiny because it is not actively supervised by the state and its members are private market participants.

Legal experts say the decision could discourage physicians from serving on state boards and inhibit board members from making difficult regulatory decisions for fear of federal scrutiny. The opinion also could lead to legislative rules that impose more state oversight over licensing boards, doctors and attorneys say.

American Medical Association President Jeremy A. Lazarus, MD, called the ruling “deeply flawed” and expressed concern that the decision will impair states’ authority to safeguard public health and patient safety. The Litigation Center of the American Medical Association and the State Medical Societies had issued a friend-of-the-court brief in support of the dental board. The brief also was joined by medical societies in North Carolina, South Carolina, Virginia and West Virginia.

“It is crucial that all state regulatory boards — not just dental boards — carry out the responsibilities assigned to them by state legislatures without being intimidated by federal antitrust charges,” Dr. Lazarus said in a statement. “The American Medical Association strongly objects to subjecting state medical boards to second-guessing from the legal system and unfair antitrust scrutiny.”

The FTC hailed the decision as a victory for healthy competition among health care professionals.

“We are pleased that the 4th Circuit agreed that a state regulatory board dominated by self-interested private actors cannot shield its anti-competitive conduct from antitrust review using the state action doctrine,” FTC Chair Edith Ramirez said. “This decision … recognizes that exemptions to the antitrust laws are to be applied narrowly and that consumers are best off when there is vigorous competition.”

The case started when the North Carolina State Board of Dental Examiners received a complaint that unlicensed teeth whiteners were providing services at shopping malls amid unsanitary conditions. From 2006 to 2009, the board issued cease-and-desist letters to the nondentists, warning them about a state ban against stain removal by unlicensed practitioners.

The nondentists complained to the FTC, and an agency administrative law judge found that the board’s conduct constituted an unreasonable restraint of trade. The board argued that its conduct was protected from antitrust oversight by the state action doctrine, a legal rule that applies to some state board conduct. The doctrine exempts from antitrust scrutiny state agencies that are actively supervised by the state.

The FTC argued that the board falls outside the doctrine because it is made up of market participants and is not actively supervised by a sovereign part of the state government. The dental board requested that the 4th Circuit review the FTC’s 2011 order.

Appellate judges rejected the board’s position. Because the board’s members are elected by other dentists, the board is a private entity and must prove state supervision, the court said.

“Here, the cease-and-desist letters were sent without state oversight and without the required judicial authorization,” the court said. “The board has pointed to certain reporting provisions and ‘good government’ provisions in North Carolina law, but those fall far short. … At the end of the day, this case is about a state board run by private actors in the marketplace taking action outside of the procedures mandated by state law to expel a competitor from the market.”

The dental board is considering its legal options, said board attorney Noel Allen. Possibilities include requesting a rehearing by the 4th Circuit or petitioning the U.S. Supreme Court to hear the case.

Decision may discourage physician participation

While the court’s ruling focuses on the actions of a dental board, the same issues easily could play out with state medical licensing boards, said Ray E. Stowers, DO, president of the American Osteopathic Assn. The AOA joined the AMA’s brief in support of the dental board.

“The decision jeopardizes state boards’ authority to determine when nonphysician clinicians are providing a level of treatment that exceeds the education and training that they must complete to competently carry out the services and procedures they wish to perform,” Dr. Stowers wrote in an email. “At a time when rising health care expenditures are a national concern, it is tempting to depict decisions made by state dental and medical licensing boards as restraining trade to prevent competition. What the court’s decision fails to take into account, however, is that the quality of health care rests on the skill and ability of professionals who have been trained to deal with the complexities of diagnosing and treating patients, and who understand when it is appropriate to delegate care to another aptly qualified member of the health care team.”

Concern about increased federal scrutiny could discourage physician leaders from serving on state boards, said Stephen Keene, general counsel for the North Carolina Medical Society.

“Perhaps this case and decision will make board members think about the implications of federal regulatory scrutiny over their personal conduct as board members,” he said. “I don’t think board members today are thinking about that when they consider whether to serve on the board. It could have a chilling effect.”

The ruling also could lead to additional and unnecessary state regulations for boards, said Allen, the dental board attorney.

“A legislature could superimpose an additional layer of bureaucracy to provide additional ‘supervision,’ even though the legislature has already adopted strict ethics and conflicts of interest requirements,” he said.

The ruling could affect state resources negatively as well. Decisions on applications, rule-making and enforcement require expertise, which board members provide essentially for free, he said.

“If the states cannot have that expertise from licensee board members, they will have to pay for it through new staff or expert witnesses,” Allen said. In addition, “the FTC claimed that the state board could not send ‘cease and desist’ letters, but would apparently have to go to court for each enforcement. Going to court in every case of unauthorized practice could be an expensive, unrealistic alternative.”

Differences in member selection

The 4th Circuit decision will not affect the majority of state licensing boards because most board actions do not jeopardize competition, said Imad Abyad, an FTC attorney. The ruling applies only to boards that affect competition negatively and request an antitrust exemption, he said.

Abyad said the FTC’s objection in the North Carolina case stemmed from the board taking the law into its own hands as opposed to obtaining a cease-and-desist order from a court.

The case is a reminder to state boards that they should review their structures to ensure that they are protected from antitrust scrutiny, said Lisa Robin, chief advocacy officer for the Federation of State Medical Boards. The federation submitted a friend-of-the-court brief in support of the dental board.

She said the dental board’s members are elected by dentists. Other state boards, including a majority of medical boards, are elected or appointed by state officials. That approach provides a layer of protection if antitrust suspicion arises, she said.

“Boards need to look at their structure within the state to be sure they would meet the criteria of a [protected] state agency,” Robin said. The ruling “would certainly give states a reason to look at all their health professional boards and how they are appointed to make sure those protections are in place and that they are acting within a system of accountability.”

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Case at a glance

Did a dental board violate antitrust laws when it attempted to stop nondentists from whitening teeth?

The 4th U.S. Circuit Court of Appeals said yes. Judges rejected the North Carolina State Board of Dental Examiners’s argument that it is exempt from antitrust scrutiny. The court said a board is protected by the state action doctrine only when it is supervised by the state. The dental board could not prove it was adequately supervised by a sovereign part of the state government, judges said. Because board members are made up of market participants, the board violated antitrust rules when it attempted to stop the nondentists from practicing.

Impact: Some experts say the decision could discourage physicians from serving on state boards and inhibit board members from making difficult regulatory decisions for fear of federal scrutiny.

North Carolina State Board of Dental Examiners v. Federal Trade Commission, 4th U.S. Circuit Court of Appeals, May 31 (link)

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External links

North Carolina State Board of Dental Examiners v. Federal Trade Commission, 4th U.S. Circuit Court of Appeals, May 31 (link)

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