In Lori Rubenstein Physicial Therapy, Inc.,et al v. PTPN, Inc. et al, (Cal. App. 2007),the plaintiffs challenged legislation adopted by the State of California in (1982) that provided anti-trust immunity for preferred provider organizations ("PPOs") formed from groups of independent physicians to contract with health care insurers for alternative rates for their services. The defendants were PTPN, a physical therapy practice and Blue Cross of California, which gave PTPN an exclusive contract for physical therapy services. The plaintiffs were providers of physical therapy services who could not contact with Blue Cross. The suit alleged that PTPN's limitations on membership unlawfully restrains competition for Blue Cross insured patients and have foreclosed actual and potential competitors of PTPN from competing on the merits for patients with private health insurance. The California statute seems to be one of those "provider cooperation laws" passed by a number of states following California Liquor Dealer's Association v. Midcal Aluminum, Inc., 445 U.S. 97 (1980), wherein the Supreme Court held that states could provide a blanket of antitrust immunity over private action if 1) the state policy was clearly articulated and 2) the activity was actively supervised by the state. These statutes were never widely used perhaps because of concern over the "state supervision" requirements.
The Court in the PTPN case, in its opinion, underscored that "unique" aspects of the health care market serve to distort the market forces and make it less likely that market forces alone will produce efficient allocation of high quality and lower prices. The court noted that the California legislature sought to enact PPO legislation to encourage the development of PPO plans to contain rising costs. The legislature found that individual providers of health care " have not proven to be efficient sized bargaining units for these contracts" and that groups or combinations would be more efficiently sized bargaining units.
The court in upholding the statutes did not do an analysis under Midcal and didn't even mention the case.
As we have explained, the Legislature expressly authorized or exempted from antitrust enfocement the conduct alleged in this case. It is from the Legislature or the Department of Managed Health Care that plaintiffs must seek their desired remedy. The courts are not empowered to overrule the Legilsature's judgment in these matters.
The California legislature passed three statutes stating its intent that the formation of groups and combinations of providers and purchasing groups for the purpose of creating efficient sized contracting units must be recognized as the creation of a new product within the health care market place and subject only to those antitrust prohibitions "applicable to the conduct of presumptively legitimate enterprises." The legislature also created the California Department of Managed Health Care to provide state oversight responsibility for the regulation of health plans in the state. One wonders why the statutes were not challenged also on the basis of the sufficiency of the oversight provided by the state rather than suing solely under state antitrust law ("The Cartwright Act"). Perhaps the regulation accomplished the aim and efficiencies prevail. Quien sabe?
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