FTC Staff Opposes Alaska Proposal to Allow Physician Collective Bargaining

A bill pending before the Alaska legislature that seeks to authorize competing physicians to engage in collective bargaining with health plans over fees and other terms would significantly increase health care costs and harm consumers, according to the staff of the Federal Trade Commission. The Commission has opposed similar legislation at the federal level, and Commission staff have expressed concerns about similar bills before state legislatures on a number of occasions.

In response to a request for comment on Alaska Senate Bill 37 from Representative Lisa Murkowski, Chair of the Labor and Commerce Committee of the Alaska House of Representatives, staff of the Bureau of Competition and the Office of Policy Planning note that the bill would authorize horizontal price fixing by physicians, as well as collusive refusals to deal with health plans.

According to the FTC staff opinion, such anticompetitive physician conduct is likely to result in substantial consumer harm. Consumers and employers would face higher prices for health insurance coverage. Consumers would also face a reduction in access to care, as increasing costs would likely result in a reduction in health care benefit options. State Medicaid programs using managed care strategies would be forced to increase their budgets, cut optional benefits, or reduce the number of covered beneficiaries. And state and local programs providing care for the uninsured would be adversely affected as well, as an increase in health care costs would likely add additional consumers to the ranks of the uninsured.

In addition, FTC staff conclude that the proposed regulatory structure to be established by the Alaska bill does not satisfy the Supreme Court's requirements under the "state action" doctrine, which allows a state to override the national policy favoring competition only where it expressly decides to govern aspects of its economy by state regulation rather than market forces. Under that doctrine, a state may not simply authorize private parties to violate the antitrust laws; instead, it must actually substitute its own active control for the discipline that competition would otherwise provide. To that end, the state legislature must clearly articulate a policy to displace competition with regulation, and state officials must actively supervise the private anticompetitive conduct.

As the FTC staff opinion further explains, Senate Bill 37 falls far short of the "active supervision" required by Supreme Court case law. The opinion notes that the Supreme Court has made it clear that the active supervision standard is a rigorous one, designed to ensure that an anticompetitive act of a private party is shielded from antitrust liability only when "the State has effectively made [the challenged] conduct its own." The Court has also held that active supervision requires a state to exercise "sufficient independent judgment and control so that the details of the rates or prices have been established as a product of deliberate state intervention, not simply by agreement among private parties." In this instance, the bill does not provide the Attorney General with the means to exercise sufficient independent judgment and control, according to the FTC staff opinion. As a result, anticompetitive conduct undertaken in conformity with the bill would not be immunized, and could subject physicians to antitrust liability.

"In sum," the letter concludes, "the proposed antitrust exemption for physician collective bargaining is likely to result in increased consumer costs and threatens to reduce access to care. Furthermore, the risk of consumer harm does not appear to be offset by any substantial procompetitive benefits or increased quality of care."

The letter represents the views of the FTC's Bureau of Competition and Office of Policy Planning. Although it does not necessarily represent the views of the Commission or any individual Commissioner, the Commission authorized submission of the letter by a vote of 5-0.

Copies of the staff opinion letter are available from the FTC's Web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC's Bureau of Competition seeks to prevent business practices that restrain competition. The Bureau carries out its mission by investigating alleged law violations and, when appropriate, recommending that the Commission take formal enforcement action. To notify the Bureau concerning particular business practices, call or write the Office of Policy and Evaluation, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, D.C. 20580, Electronic Mail: antitrust@ftc.gov; Telephone (202) 326-3300. For more information on the laws that the Bureau enforces, the Commission has published "Promoting Competition, Protecting Consumers: A Plain English Guide to Antitrust Laws," which can be accessed at http://www.ftc.gov/bc/compguide/index.htm.

(FTC Matter No.: V020003)