Federal Courts and Enforcers Diagnose Physician Practice Associations with Risk of Conspiracy Liability: Degree of Integration is Crucial to Challenges to Medical Network Price Agreements

Thanks to a recent federal district court decision, physicians and medical staff have more reason to think twice about price and other arrangements adopted by the practice associations and clinics to which they belong. Last Spring, the United States District Court for the Eastern District of California held that a hospital and a physicians practice association, and a hospital and the physicians that provide services to it under contract, may be sufficiently distinct separate economic actors capable of conspiring with each other under Section 1 of the Sherman Act. The court denied a motion to dismiss a complaint that alleged that a hospital and two independent physician practice associations conspired to restrain trade in violation of Section 1 of the Sherman Act by prohibiting neonatologists who did not agree to practice exclusively at the hospital or refer cases to doctors practicing exclusively neonatology at the hospital, from using the hospital’s neonatal intensive care unit (“NICU”).

There are few Ninth Circuit cases addressing these issues and other circuits have come to different conclusions. Federal antitrust enforcement agencies have taken the position that members of physician practice associations and networks can conspire with each other and with hospitals for antitrust purposes. In fact, the Perinatal decision is fairly consistent with the enforcers’ approach to evaluating antitrust issues with clinical integration practices and arrangements.