Robinson v. Magovern

OPINION

COHILL, District Judge.

Table of Contents

Page

Introduction........................................ 848

I. The Parties.................................. 848

A. Plaintiff................................ 848

B. The Defendants .......................... 850

1. Allegheny General Hospital.............. 850

2. The Trustees.......................... 851

3. George J. Magovern, M.D................ 851

4. Cardio-Thoracic Surgical Associates, Inc. ... 852

II. The Claims.................................. 853

III. Delivery of Open Heart Surgical Services ......... 854

A. Diagnosis................................ 854

B. Open Heart Surgery — The Procedure......... 855

C. Open Heart Surgery — The Major Players...... 856

1. The Lead Surgeon..................... 856

2. The Hospital.......................... 857

IV. Allegheny General’s Competitive Strategy......... 858

A. Institutional Objectives.................... 859

B. Marketing............................... 860

C. Role of the Department Directors............ 860

D. Results of the Revitalization Campaign........ 862'

V. The Application of John N. Robinson, M.D......... 863

A. The Interview............................ 863

B. Submission of the Application............... 864

C. The Magovern Report...................... 866

D. The Credentials Committee................. 866

E. The Rejection of the Application............. 872

VI. The Legal Action: Jurisdiction And Relevant Market 876

A. Subject Matter Jurisdiction................. 876

B. Relevant Market.......................... 877

1. The Product Market.................... 877

2. The Geographic Market................. ' 878

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Table of Contents

Page

VII. The Legal Action: Antitrust Claims............................. 886

A. Overview .............................................. 886

B. Section 2 Claims......................................... 886

1. Monopoly........................................... 886

2. Attempt to Monopolize................................. 891

3. Conspiracy to Monopolize...............................892

a. Agreement..............'.........................892

b. Specific Intent to Monopolize ........................896

C. Section 1 Claims.........................................903

1. The Standard........................................903

2. Group Boycott.......................................904

3. Essential Facility.....................................913

4. Unfair Acts With Intent to Destroy Competition............913

5. Rule of Reason.......................................914

a. Notice of Standards................................916

b. Standards Reasonably Advance Hospital’s Legitimate Objec- ^ tives............................................917

c. Standards Do Not Impose Unreasonable Restraint........919

d. Allegheny General’s Conclusions About Dr. Robinson .....920

e. Consistent With Other Personnel Decisions..............923

VIII. The Legal Action: Pendent Jurisdiction Claims....................925

A. Breach of Contract.......................................925

B. Interference With Prospective Contractual Relationship .........926

C. Conspiracy in Restraint of Trade............................ 926

Conclusion........................................................ 927

Introduction

After Allegheny General Hospital rejected Dr. John N. Robinson’s application for staff privileges in October, 1976, Dr. Robinson filed this antitrust action against the hospital, members of its Board of Trustees, and certain thoracic surgeons who are members of the hospital’s staff. Three years of extensive discovery followed, punctuated by a variety of motions to compel and motions for protective orders. The litigation culminated in a ten-week non-jury trial that included the testimony of fifty-two witnesses, extensive briefing, and arguments by counsel. We now rule in favor of all defendants on all claims. Pursuant to Federal Rule of Civil Procedure 52, we make the following findings of fact and conclusions of law.

I.

The Parties

A. Plaintiff

John N. Robinson, M.D., the plaintiff in this litigation, is a board-certified thoracic surgeon, licensed to practice medicine in the Commonwealth of Pennsylvania. Dr. Robinson graduated from George Washington University Medical School in 1963. He then served an internship with the Harvard Surgical Service at Boston City Hospital and a five-yeár general surgical residency at Presbyterian Hospital, which is affiliated with Columbia University in New York City. Dr. Robinson’s cardiothoracic

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training began in 1970 with a one-year residency in Texas at the Baylor College School of Medicine in a program headed by Dr. Michael

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DeBakey. In order to acquire the experience in pulmonary and esophageal surgery that the American Board of Thoracic Surgery requires for certification eligibility, Dr. Robinson cut short his residency at Baylor and transferred to the Veterans Administration Hospital at Little Rock, Arkansas to train for four months under Dr. Raymond Read. The following year, Dr. Robinson served as a resident in thoracic surgery at the Texas Heart Institute, where he worked under Drs. Denton Cooley and Grady Hallman. #

While Dr. Robinson was serving his residency at the Texas Heart Institute, Dr. James Giacobine, an established cardiovascular surgeon in the Pittsburgh-McKeesport area, informed Dr. Cooley that he would like to have the assistance of a young surgeon in his thriving practice. Dr. Cooley suggested to Dr. Robinson that he pursue this opportunity, and Dr. Robinson subsequently did enter into practice with Dr. Giacobine. As Dr. Giacobine’s junior associate, Dr. Robinson was expected to cover patients at all of the hospitals where Dr. Giacobine practiced medicine. Accordingly, Dr. Robinson made application to, and was accepted on, the medical staffs of various hospitals in the Pittsburgh-McKeesport area, including St. Francis, McKeesport, North Hills Passavant, St. John’s, and South Side Hospitals.

With primary care physicians and cardiologists referring more patients to Dr. Giacobine than he could operate on himself, he called upon Dr. Robinson to serve as lead surgeon in from three to five open heart operations per week. This frequency permitted Dr. Robinson to develop and maintain his surgical proficiency.

During Dr. Robinson’s association with Dr. Giacobine, St. Francis Hospital sponsored a residency program in thoracic surgery under the guidance of Dr. Giacobine. Dr. Robinson assisted in the teaching of the residents by taking them on rounds and by permitting them to assist in the operating room.

The professional relationship between Drs. Giacobine and Robinson continued for two and one-half years, ending abruptly and with bitterness in December, 1974. The dissolution resulted primarily from disagreements over two points. First, Dr. Robinson felt that he was not receiving proper recognition for his work. Although Dr. Giacobine’s reputation attracted the open heart patients, and although Dr. Giacobine interviewed them, Dr. Robinson testified that he often performed the surgery without their knowledge. Dr. Robinson objected to Dr. Giacobine’s alleged refusal to inform “Robinson’s patients” of the identity of the operating surgeon. This practice constituted “ghost surgery,” according to Dr. Robinson.

The second source of discord involved Dr. Giacobine’s intention to add another surgeon to the Giacobine-Robinson association. Dr. Robinson opposed the addition of this third surgeon because he had heard rumors that the surgeon, who was related to Dr. Giacobine by marriage, had homosexual tendencies.

In January, 1975, Dr. Robinson embarked upon a solo practice in Pittsburgh after making an unsuccessful effort in late 1974 to relocate.

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His practice primarily consisted of vascular procedures and emergency surgery. He had as his goal, however, a practice of predominantly open heart surgery, which he regards as the most challenging and rewarding type of thoracic surgery. In order to broaden his base of contacts with referring physicians, Dr. Robinson applied for, and was granted, staff privileges at several additional area hospitals.

In July, 1975, Dr. James Martin, who also is a thoracic surgeon, joined Dr. Robinson in

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practice. These two men initially formed a partnership, but they eventually reorganized into a professional corporation called “Cardiovascular and Thoracic Surgery Associates, Inc.” Their association continued until November, 1979. From November, 1979 to the present, Dr. Robinson has provided surgical services as a sole practitioner. In open heart and complex vascular procedures where it is necessary to have a second doctor participate in the surgery, Dr. Robinson has arranged for Dr. Frank Thomas, a board-certified thoracic surgeon, to assist him.

B. The Defendants

1. Allegheny General Hospital

Allegheny General Hospital is a 726-bed, regional referral, teaching hospital located in the North Side area of the City of Pittsburgh, Allegheny County, Pennsylvania.

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The hospital offers total health care service to the residents of the North Side and secondary and tertiary care service to referral patients from the “tri-state area,” which encompasses Western Pennsylvania, Eastern Ohio and Northern West Virginia.

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Allegheny General is organized into clinical departments, each of which is headed by a director appointed by the hospital’s Board of Trustees. Some of the departments are subdivided into two or more divisions. Open heart surgery, for example, comes within the jurisdiction of the Department of Surgery and the Division of Thoracic Surgery.

The keystone for the clinical operation of the hospital is the medical staff. A physician must apply for and receive staff privileges at Allegheny General before he may admit patients to the hospital or use its facilities. Regional referral, teaching hospitals, such as Allegheny General, strive to cultivate and maintain a balanced staff whose members will provide high quality clinical care while also making a contribution to the hospital’s teaching and research programs.

In order to succeed professionally and financially, a regional referral hospital must develop and market services in numerous subspecialties. This, Allegheny General has done, in such fields as renalogy, cardiology, radiology, pulmonary medicine, and sports medicine. In addition, Allegheny General has achieved modest success in establishing comprehensive centers for the care and treatment of trauma, cardiac and cancer cases. The hospital aggressively markets its secondary and tertiary level services both within and beyond Allegheny County by encouraging members of its staff to participate in educational programs at various hospitals and medical societies, by distributing information and research results to referring physicians, and by encouraging members of its staff to produce articles for publication. The fact that two-thirds of Allegheny General’s open heart patients in 1976 lived outside of Allegheny County exemplifies the success that the hospital has experienced in marketing its services over a broad geographic area.

Allegheny General is a member of the Council of Teaching Hospitals; it operates fully approved residency programs in Internal Medicine (Cardiology), General Surgery, Thoracic Surgery, Anesthesiology, Pathology, Diagnostic Radiology, Obstetrics and

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Gynecology, and Oral Surgery. In addition, residents at the University of Pittsburgh Medical Health Center in the fields of Ophthalmology, Orthopedics, Otolaryngology and Pediatrics rotate through Allegheny General as a regular component of their respective training programs. Allegheny General also sponsors educational programs for hospital administrators, nurses, medical .technicians and medical technologists.

Laboratories at Allegheny General perform significant research in the basic and applied medical and biomedical sciences. The hospital established a separate research facility for thoracic surgery in the late 1960’s, and this facility has since made important contributions to the medical literature in the field.

2. The Trustees

Twenty-six of the persons whom the plaintiff names as defendants in his complaint served as members of the Board of Trustees of Allegheny General during the period when the hospital considered and denied Dr. Robinson’s application for staff privileges. The Board of Trustees is legally responsible for the operation of the hospital. It meets quarterly to review and approve the decisions and actions of its executive committee. The Board consists of thirty-seven .members, who are elected from among prominent citizens in the community or who are appointed because of their position within the hospital administration. Appointed members include the president of the hospital, the president of the medical staff, and the chairman of the executive committee of the medical staff. Elected members serve without compensation.

The executive committee of the Board of Trustees, which is empowered to exercise the full authority of the Board of Trustees when the Board is not in session, provides continuous supervision over the operation of the hospital. Members of the executive committee include the officers of the Board of Trustees, the president of the hospital, the president of the medical staff, and the chairman of the executive committee of the medical staff. Among its duties, the executive committee reviews and approves or disapproves the recommendations made by the executive committee of the medical staff on applications for staff privileges, subject to ratification by the Board of Trustees.

3. George J. Magovern, M.D.

Defendant, Dr. George J. Magovern, is a nationally prominent thoracic surgeon who has served as the Director of the Department of Surgery and Chief of the Division of Thoracic Surgery at Allegheny General Hospital since 1968. As Director of the Department of Surgery, Dr. Magovern actively participates in the evaluation of candidates who are seeking staff privileges in the Department of Surgery.

Dr. Magovern began his career as a physician in 1947, after graduating from Marquette University Medical School. His post-graduate training included a two-year internship and a four-year general surgical residency at various hospitals in the New York area, service in the Army Medical Corps, a two-year residency in thoracic and cardiovascular surgery at George Washington University Medical School, and six months of work in Pittsburgh at Presbyterian University, Children’s and Allegheny General Hospitals. After completing his training in 1957, Dr. Magovern chose to remain in Pittsburgh. He joined the medical staffs of Presbyterian University and Allegheny General Hospitals, and he became a member of the faculty at the University of Pittsburgh Medical School. Dr. Magovern maintained a loose affiliation with Dr. Edward Kent, the then Director of the Department of Surgery at Allegheny General Hospital and a pioneer in the field of open heart surgery. When the time came to select a successor to Dr. Kent, the Board of Trustees of Allegheny General appointed Dr. Magovern as Director of the Department of Surgery because of his clinical skills and his demonstrated commitment to academic medicine and research.

The Director of the Department of Surgery has, among his many duties, the responsibility of administering the hospital’s residency program in thoracic surgery.

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This task entails the selection of residents, the establishment of a curriculum, the assignment of personnel for training and the direct supervision of training. Largely as a result of Dr. Magovem’s efforts, Allegheny General has maintained one of the few approved residency programs in thoracic surgery that is not affiliated with a university hospital. Moreover, this program has earned a reputation for high quality training. Many physicians who now practice thoracic surgery in the tri-state area are Allegheny General graduates.

Simultaneously with performing his administrative duties at Allegheny General, Dr. Magovem has engaged in a highly successful private practice in thoracic surgery through a professional corporation known as “Cardio-Thoracic Surgical Associates, Inc.” He also has made many notable contributions to medical science through publications, research and experimental surgery.

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4.

Cardio-Thoracic Surgical Associates, Inc.

Defendant, Cardio-Thoracic Surgical Associates, Inc. [hereinafter referred to as “CTSA”], is a Pennsylvania professional corporation with a membership of five physicians. Dr. William Cushing, a former resident in thoracic surgery under Dr. Kent, and Dr. George Magovem founded CTSA in 1970. Dr. George Liebler joined the group in 1972, Dr. Sang Park in 1973 and Dr. John Burkholder in 1975. Drs. Liebler and Park had trained as residents at Allegheny General under Dr. Magovem. Dr. Burkholder had taken his general surgical and thoracic surgical residencies at the University of Pittsburgh Medical School and trained under Dr. Magovern during operations performed at Presbyterian University Hospital and during a three-month rotation to Allegheny General as part of his general surgical residency. All members of CTSA have board certification in thoracic surgery. Each participates in the teaching program at Allegheny General, but only Drs. Magovern, Liebler and Burkholder have university faculty appointments.

CTSA generates substantial revenues for Allegheny General. From 1976 to 1978, for example, CTSA accounted for between 9% and 11% of the total patient admissions to Allegheny General; it was one of the five most active services (group or sole practitioner) during that period. The statistics for patient days are even more impressive. In 1977 and 1978, CTSA’s patients spent 19,417 and 20,021 days respectively at Allegheny General. These figures are roughly equivalent to the total patient days for the entire Division of General Surgery and are double the number of patient days attributable to any other single group for that time period.

CTSA dominates the open heart surgical practice at Allegheny General. Open heart procedures account for approximately 60% of CTSA’s work, and its members perform about 95% of the open heart operations at Allegheny General. The explanation for this dominance lies in the decision by the CTSA members to concentrate their practices at Allegheny General (Drs. Magovern, Liebler and Burkholder also perform a small number of operations at Presbyterian University Hospital and Children’s Hospital), while most of the other thoracic surgeons on Allegheny General’s staff center their practices elsewhere. In addition to the members of CTSA, the staff of the Thoracic Surgery Division includes five other surgeons.

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II.

The Claims

Dr. Robinson alleges in his complaint that when his application for staff privileges was denied, the defendants violated the United States Constitution, several federal statutes and three legal duties imposed by state common law. A synopsis of the six-count complaint follows:

1. Count I alleges violations of section 1 and section 2 of the Sherman Act, 15 U.S.C. §§ 1 , 2 (1976), based on agreements and acts that were designed to ensure that only members of CTSA received staff privileges in Allegheny General’s Division of Thoracic Surgery.

2. Count II alleges a denial of due process and equal protection in violation of the Fifth and Fourteenth Amendments of the United States Constitution and section 1 of the Civil Rights Act of 1871, 42 U.S.C. § 1983 (1976 & Supp. Ill 1979).

3. Count III asserts a third-party beneficiary right of action based on the defendants’ alleged failure to comply with regulations that the Secretary of Health, Education and Welfare promulgated pursuant to section 102(a) of the Health Insurance for the Aged Act, 42 U.S.C. § 1395hh (1976).

4. Count IV asserts a pendent state third-party beneficiary claim for breach of contract based on the defendants’ alleged violation of the hospital’s Medical Staff Bylaws.

5. Count V asserts a pendent state claim for tortious interference with a prospective contractual relationship that denied the plaintiff the right to freely practice his profession and resulted in damage to his reputation.

6. Count VI asserts a pendent state claim of conspiracy in restraint of trade.

Early in the history of this litigation, the defendants moved for summary judgment. The late Judge Daniel Snyder of this Court entered judgment in favor of all defendants on Count II and Count III.

Robinson v. Magovern,

456 F.Supp. 1000 (W.D.Pa.1978).

The evidence presented at the trial and counsels’ subsequent arguments focused primarily on the alleged violations of the Sherman Act. Section 1 of the Sherman Act prohibits any contract, combination or conspiracy that unreasonably restrains trade

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; section 2 of the Sherman Act prohibits any entity from monopolizing, attempting to monopolize or conspiring to monopolize a particular market.

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Dr. Robinson seeks both damages and injunctive relief for the alleged antitrust violations, pursuant to section 4 and section 16 of the Clayton Act, 15 U.S.C. §§ 15 , 26 (1976).

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III.

Delivery of Open Heart Surgical Services

Congress enacted the antitrust laws to protect competition in the marketplace, which is the essence of our private enterprise system. An allegation that these laws have been violated requires the court to familiarize itself in some detail with the industry within which the illegal conduct is alleged to have occurred. The technical complexity involved in the delivery of open heart surgical services and the absence of prior case law addressing the antitrust implications of a denial of hospital staff privileges

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makes such an inquiry especially important in the present case.

A. Diagnosis

Heart disease is currently the leading cause of death in the United States. It presents major health care problems, both medically and financially. The term “heart disease” encompasses a wide variety of cardiovascular disorders. These disorders may be either congenital or acquired, and may involve either the heart itself, such as a septal defect or an abnormality of the valves, or the great vessels within the thorax, such as a blockage in a coronary artery.

Most heart problems are discovered by general practitioners and internists through blood tests, x-rays or electrocardiograms that are taken during routine physical examinations. Depending on the type of disorder, the primary care physician may begin treatment or he may refer the patient to a cardiologist

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for further testing. The cardiologist must determine the scope of the disorder and develop an appropriate treatment program. Many cardiovascular problems can be successfully treated with medication. For example, anti-coagulant drugs can prevent the formation of blood clots or the enlargement of existing clots, thereby reducing the possibility of blockage of a major blood vessel. Other drugs can increase the pumping power of the heart or control irregularities in the heart beat. A few disorders, however, can be corrected only by surgery.

Cardiac catheterization in combination with coronary arteriography is currently the definitive method for diagnosing heart disorders that may require corrective surgery. This procedure involves passing a catheter through a vein of the arm or leg and through a heart valve and into one of the chambers of the heart. The cardiologist then injects an opaque fluid into the chamber and takes a high speed X-ray motion picture, a cineangiogram, that records the passage of the dye through the heart. Blood samples and pressure readings from inside the heart also may be taken. As the description of the procedure indicates, cardiac catheterization requires sophisticated equipment and involves some risk to the patient. Most cardiologists therefore perform the procedure in a “catheterization

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laboratory” at a hospital that has surgical facilities.

• If the cardiologist determines that a patient has a heart disorder that can be treated only through surgery, the patient next must obtain the services of a cardiothoracic surgeon. Few open heart candidates are familiar with the cardiothoracic surgeons who practice in their community. Therefore, most patients rely on the recommendation of their primary care physician or their cardiologist. Recognizing the delicate and dangerous nature of open heart surgery, the referring physician will base his selection of a surgeon primarily on his perception of the surgeon’s ability to provide the particular patient with high quality service. A variety of other considerations may influence the referring physician’s decision in the event that he must choose among several equally skilled surgeons. The referring physician may consider the proximity of the patient’s home to the hospital where the surgeon performs his operations. If the patient has a strong religious preference, the referring physician may attempt to select a surgeon who performs his operations at a hospital that is affiliated with the particular religious denomination. If a primary care physician is making the referral, he may consider the accessibility and the cooperativeness of the surgeon because he will be responsible for monitoring the patient’s health after the patient leaves the surgeon’s care. If a cardiologist is making the referral, he may prefer a surgeon who previously has referred patients to his catheterization laboratory or who performs surgery in the same hospital that houses his catheterization laboratory. Over time, each referring physician will develop a referral pattern based on these various factors.

B. Open Heart Surgery

— The

Procedure

Open heart surgery is a complex procedure requiring costly, sophisticated equipment and personnel from a variety of medical disciplines. The surgery must be performed by a cohesive, well-trained team, headed by an experienced cardiothoracic surgeon and including an additional thoracic surgeon or a resident in the thoracic surgery program, scrub nurses, circulating nurses, two pump technicians (perfusionists) and an anesthesiologist. The operating room must accommodate the team and the special equipment, some of which has extraordinary electrical and plumbing specifications. Also, a special coronary care unit is needed for the postoperative phase. The estimated capital expenditure for a fully equipped operating room and a postoperative unit is about one million dollars.

Open heart surgery became practical with the introduction of the cardiopulmonary bypass (heart/lung) machine during the 1960’s. This machine is actually an amalgam of several devices that takes the blood returning to the heart, filters it, oxygenates it, regulates its temperature and then pumps the blood back through the body. With the patient connected to the cardiopulmonary by-pass machine, surgeons can operate on a relaxed, non-functioning heart while the integrity of the patient’s circulatory system is preserved.

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An open heart procedure begins with the opening of the chest cavity. The junior surgeon or the resident makes an incision down the center of the chest with a scalpel and then cuts the sternum and ribs with a saw. The exposed blood vessels are cauterized. This phase of the procedure generally requires one to two hours. The perfusionists spend this time setting up the components of the heart/lung machine.

The lead surgeon becomes involved after the initial phase has been completed successfully. Under the lead surgeon’s supervision, the chest opening is widened through the use of a retractor and the patient’s veinous and arterial systems are connected to the heart/lung machine via flexible cannulae. With the flow of blood now diverted from the heart, the surgeon slits the thin tissue surrounding the heart and begins cor

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rective surgery. The most common open heart procedure is the coronary artery bypass.

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Other common procedures are the repair of the great vessels, the replacement of heart valves and the repair of septal defects.

During the surgery, the perfusionists operating the heart/lung machine are responsible for maintaining the proper oxygen and carbon dioxide content and the proper acid/base ratio in the blood by adjusting blood flow and pressure and by adding drugs and solutions to the circulation. Deviations from acceptable levels endanger the patient. Even if the perfusionists regulate the circulatory system perfectly, however, a patient can remain on the heart/lung machine for a maximum of only four hours before his blood begins to suffer irreparable damage. Therefore, the surgeon must work quickly.

After completion of the surgical procedure, veinous flow to the oxygenator is gradually reduced as the heart assumes the circulatory load. Irregular beating or failure to beat are frequent problems, and electric defibrillation or drugs may be required. When the heart can sustain circulation, the patient is taken off the heart/lung machine. With the natural cardiopulmonary system functioning again, the lead surgeon’s participation in the operation is complete. The junior surgeon or the resident performs additional cauterization and closes the chest. The patient then is removed to the coronary care unit for continual monitoring during the critical postoperative phase. Postoperative recovery time normally is twelve days. If the patient experiences difficulty during the recovery period, the lead surgeon will supervise additional treatment and may perform a second operation.

Not surprisingly, open heart surgery is expensive. Currently, the simplest by-pass procedure will result in a total bill to the patient of $9,000 to $18,000; a complicated procedure might result in a total bill of $35,000 or more. The surgeon’s fee alone will range from $1500 to $5000. Few patients could afford the costs of surgery without receiving some assistance. Fortunately, the government through Medicare and Medicaid and insurance companies through health care insurance plans absorb most of these costs. Without the existence of these third-party payor systems, open heart surgery would not have expanded beyond the experimental stage.

C. Open Heart Surgery

— The

Major Players

1. The Lead Surgeon

Surgeons who perform open heart operations are among the most highly trained individuals in the medical profession. Following medical school and an internship, the physician must complete a four-year general surgical residency and a two-year thoracic surgical residency. Upon completion of his formal training, the doctor is eligible for examination by the American Board of Thoracic Surgery. If successful on the examination, the doctor becomes board-certified in thoracic surgery.

Although board-certified thoracic surgeons are qualified to perform a wide variety of procedures, they usually emphasize one facet of thoracic surgery in their practices because each type of procedure has its own peculiarities that must be mastered. Studies indicate that the mortality rate of open heart patients increases as the frequency of open heart procedures performed by a given surgical team declines. A surgeon should perform a minimum of three open heart procedures per week in order to maintain his proficiency. Those doctors concentrating on open heart surgery generally augment their surgical schedules and their incomes with less complex thoracic or vascular procedures.

The open heart surgeon may work as a sole practitioner or as a member of a group of cardiothoracic or cardiovascular sur

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geons. After reviewing the voluminous evidence presented at trial on the delivery of open heart surgical care nationally and in the Pittsburgh area, we perceive a trend toward group practice.

Without doubt, a group practice achieves certain efficiencies. As noted earlier, open heart surgery requires at least two surgeons. If no qualified resident is available for a particular operation, the group can provide the second surgeon. A group also can more readily provide coverage during the critical postoperative phase. Furthermore, association with an established group can give a young surgeon a mix of instruction and practice that will help him to develop his skills.

In 1979, surgeons performed approximately 118,000 open heart procedures in the United States. Experts predict a modest growth in open heart surgery over the next few years. The glamour and high fees associated with open heart surgery have combined to ensure that there is no shortage of open heart surgeons. In fact, in many areas of the country, a young sole practitioner faces a formidable task in obtaining open heart patients.

2. The Hospital

The host hospital for an open heart operation provides equipment and support personnel to the surgeon. The nurses, perfusionists and physicians from related fields, such as anesthesiology, are either employees of the hospital or independent contractors. Often, the hospital undertakes the responsibility of recruiting, training and supervising the nurses and/or the perfusionists.

Although the cost of establishing and maintaining an open heart surgical facility is high, the revenue that such a facility generates also can be substantial. Open heart patients require lengthy postoperative recovery periods in a specialized unit that has sophisticated monitoring equipment and a high nurse-to-patient ratio. As we mentioned earlier, patients admitted to Allegheny General by CTSA in the years considered accumulated as many patient days as did all of the patients admitted by the Division of General Surgery.

Not all hospitals have the capability of hosting an open heart operation, which is a tertiary level service. Hospitals in the United States fall into one of three general categories: community, teaching or regional referral, secondary teaching.

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All three types of hospitals provide some degree of patient care, but each has a different primary mission.

The vast majority of hospitals in the United States are community hospitals. They are essentially arenas or workshops, as it were, supplied by the community for physicians who provide basic health care services to local patients. In keeping with their purpose, community hospitals usually grant staff privileges to any licensed physician from the surrounding area who applies. Most of these physicians are not under contract to the hospital, but rather, they use the hospital’s facilities and the hospital bills the patients separately for this use.

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The members of the staff perform minimal hospital committee responsibilities on a rotating basis and department heads, if they exist, frequently are elected by their colleagues. Generally, little teaching or research occurs in community hospitals.

For economic reasons, community hospitals cannot offer most tertiary level services. Such services require specialized personnel and sophisticated equipment, which must be used on a daily basis if the cost per procedure is to be held within an acceptable range. Each community hospital provides coverage for a relatively small population base. This population base would not gen

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erate a sufficient number of tertiary level procedures to keep a given tertiary care unit at anywhere near optimum utilization. Therefore, community hospitals offer only basic medical care. If a local patient needs more complex treatment, the physician will transfer that patient to the care of a specialist at a regional hospital.

At the opposite end of the spectrum from the community hospitals lie the major teaching hospitals, which are relatively few in number and closely linked to, or owned outright by, universities. These hospitals serve as centers of learning, where medical students and residents receive training and where doctors work to increase the pool of medical knowledge through research. A teaching hospital has a large medical staff relative to its bed capacity. Many members of this staff are employees of the hospital with no private practice or with an arrangement by which all patient fees exceeding a certain amount are turned over to the hospital. The staff has extensive research and teaching responsibilities, and therefore, appointments to the staff often are greatly influenced by the candidates’ interest in these activities. Most doctors on the staff hold university appointments, and the full-time staff members are jointly selected and appointed by the university and the hospital. Teaching hospitals possess highly sophisticated equipment and operate at the front line of advancing medical science. Often they use the treatment of complex, tertiary level cases as pedagogical devices. The excellent quality of care and the advanced technology available at the teaching hospitals attract patients needing tertiary level services from a broad geographic area, and even occasionally from foreign countries.

In the middle of the spectrum lie the regional referral, secondary teaching hospitals such as Allegheny General. These hospitals are more numerous than the major teaching hospitals, but much less common than the community hospitals. Regional referral hospitals often provide basic medical care to the people living in the immediate vicinity, thus serving the function of a community hospital for that area. In addition, however, they have developed advanced care units in a limited number of subspecialties. These units receive referrals from primary care physicians and from the surrounding community hospitals.

A particular region may contain several regional referral hospitals, each of which will offer advanced care units in a different set of subspecialties. Thus, any one hospital will have the capability of providing advanced care only in a few types of cases, but optimally, there will be at least one hospital in the region that can satisfy a given patient’s needs.

In conjunction with its advanced care units, a regional referral hospital often will conduct clinical research and operate postgraduate training programs. Although the hospital hires a few physicians as full-time employees, it provides instruction to the participants in its residency programs primarily through the voluntary efforts of the doctors who concentrate their private practices at the hospital. A symbiotic relationship should develop between these private practitioners and the residents. For example, residents in a surgical program will save time for the private practitioner by opening and closing the patients, while the private practitioner will instruct these residents during the course of the operations and at regularly scheduled conferences.

Much of the responsibility for .maintaining the hospital’s performance standards in patient care, teaching and research falls on the departmental chairmen. One of the critical tasks that most departmental chairmen perform is the evaluation of applications for appointment to the staff. When considering such an application, the chairman must compare the interests and abilities of the applicant with the department’s present needs in patient care, teaching and research. He also must determine whether an additional doctor would overburden the hospital’s physical facilities.

IV.

Allegheny General’s Competitive Strategy

Equipped with a basic understanding of the elements involved in the delivery of

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open heart surgical services to patients in the United States, one is now prepared to examine Allegheny General’s decision to deny staff privileges to Dr. Robinson. The hospital contends that it made this decision after determining that the addition of Dr. Robinson to the medical staff would not be consistent with the hospital’s institutional objectives or competitive strategy.

A. Institutional Objectives

Allegheny General formulated its present institutional objectives and competitive strategy during 1967 and 1968 in response to a study that the management consultant firm of Cresap, McCormick and Paget performed at the request of the Board of Trustees. During the early and mid 1960’s, a phalanx of problems confronted Allegheny General. These problems included an antiquated physical plant, a lack of parking facilities, a serious deterioration in the surrounding neighborhood, an operating deficit, a medical staff that did not hold many university appointments and did not display great loyalty toward the hospital, discontent among hospital personnel, and the placing of three of the hospital’s residency programs on probation. Realizing that the hospital would have to take decisive action if it was to rectify the situation, the Trustees retained Cresap, McCormick and Paget to assist them in charting the hospital’s future course.

After making the initial decision to rebuild at the present site rather than to relocate in the suburbs, the Trustees began a nationwide search to find the right administrator to lead the efforts to revitalize Allegheny General. On January 1, 1968, Allegheny General hired Lad F. Grapski as the new president of the hospital. Mr. Grapski had extensive experience in hospital administration and academic medicine, having served as associate director or director of three university hospitals during the period 1947 through 1967.

In the months following Mr. Grapski’s appointment, he worked with certain Trustees and members of the medical staff to draft a statement of objectives that would give direction to the hospital’s revitalization campaign. These objectives, which the executive committee of the Board of Trustees formally approved on March 25, 1968, reflect the belief that secondary and tertiary medical care can best be provided by an institution that also has developed flourishing educational and research programs. “The primary objective of Allegheny General Hospital is to protect and improve the health of the people it services through the maintenance of the scope and quality of patient care . . .. ”

Definition, Purpose and Statement of Objectives of the Allegheny General Hospital,

AGH Exh. 102, at 2. The leadership of Allegheny General stated, however, that “[a] true standard of excellence in patient care can be achieved only in those hospitals in which a stimulating and challenging educational environment is maintained. Allegheny General Hospital is committed to a role in graduate medical education for interns and residents to support patient care.”

Id.

at 3 . Furthermore, the leadership expressed

a firm commitment to the continued fostering and encouragement of research and investigation. The principal focus for such research is presently in the basic and applied medical and biomedical sciences. Allegheny General Hospital encourages and supports the strengthening of clinical departmental staffs with research scientists, or the appointment of physicians who devote a portion of their professional work to research activity. Allegheny General Hospital’s commitment to the research objective is integral to, and a part of the commitment to excellence in patient care and education.

Id.

at 4 . The theory underlying this integrated approach to the delivery of medical services is that practicing physicians who participate in teaching or research, or who interact regularly with such participants, will thereby keep abreast of the latest developments in the field, which in turn should enhance patient care. Moreover, the obligation to teach students by example places continuous pressure on all of the medical staff and the support personnel to maintain high standards of patient care.

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B. Marketing

When formulating the set of institutional objectives, Allegheny General’s leadership also had to consider the marketing of the hospital’s services. Hospitals no longer can afford to sit back and hope that the patients will present themselves.

Cf.

Norris & Szabo,

Communication Between The Antitrust And The Health Law Bars: Appeals For More Effective Dialogue And A New Rule Of Reason,

7 Am.J.L. & Med. i, ii (1981) (“The classical model of collegial physician control over health care delivery is being replaced rapidly by a view of health care providers (institutional as well as individual) as intense competitors for a limited health care dollar.”). In order to financially support research programs, educational programs and the personnel and equipment necessary for tertiary level procedures, the hospital must attract enough patients to enable it to operate at near full capacity. Other regional referral hospitals and one university hospital in the Pittsburgh area compete with Allegheny General in the delivery of secondary and tertiary level medical services. St. Francis General Hospital, Mercy Hospital, The Western Pennsylvania Hospital, Shadyside Hospital and Presbyterian University Hospital compete with Allegheny General for adult open heart patients, and some excess capacity exists in the market.

Allegheny General’s strategy for marketing secondary and tertiary level medical services is intimately connected with its institutional objectives. Mr. Grapski and the Trustees believe that a reputation for excellence and innovation in medical care will attract patients, both directly and through referrals. Prospective patients and referring physicians will perceive an institution whose staff provides formal instruction for young doctors as an institution that has a commitment to excellence in the delivery of medical services and has the talent available on the medical staff to fulfill that commitment. Likewise, they will perceive an institution whose staff participates in medical research as an institution that will provide its patients with care that incorporates the latest advances in medical science.

Allegheny General contacts prospective patients and the medical community through several channels. The hospital conducts a small amount of commercial advertising. The local news media provide the hospital with a far greater amount of publicity, however, through their coverage of research breakthroughs, unusual or dramatic cases and operations, and special services that the hospital offers. Naturally, the relative success that the hospital achieves in its research programs and in its treatment of tertiary level patients will affect the amount of media coverage that it receives. As we noted earlier, Allegheny General also distributes information and research data to the medical community, encourages the members of its staff to participate in educational programs sponsored by various medical organizations, and supports the efforts of members of its staff to write and publish scholarly works. Thus, for the past fifteen years, Allegheny General has anchored its marketing strategy on the proposition that a regional referral hospital will attract large numbers of patients if it develops a reputation for high quality programs in patient care, teaching and research.

C. Role of the Department Directors

Although Mr. Grapski and the Trustees had the primary responsibility for formulating the revitalization campaign, they realized that, as a practical matter, they would have to place on the shoulders of the directors of the hospital’s clinical departments the primary responsibility for improving the performance of each of the three components of the hospital’s integrated medical services delivery system.

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Therefore, the

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leadership placed a high priority on the selection of multitalented, dynamic individuals to head the hospital’s major departments.

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In order to perform effectively, these individuals would need managerial' skills, experience in academic medicine, technical proficiency in their respective fields and an appreciation for the role of research.

On April 22, 1968, the Board of Trustees approved the appointment of Dr. George J. Magovern, an eminent thoracic surgeon and scholar, to the position of Director of the Department of Surgery. Dr. Magovern received authority to use his own judgment in building an integrated department that would achieve the hospital’s institutional objectives. In his capacity as director, Dr. Magovern’s duties have included establishing and maintaining high standards of clinical care, developing and supervising educational programs, encouraging and overseeing research activities, and making recommendations on staff applications and reappointments.

Dr. Magovern has had to devote particular attention to Allegheny General’s residency program in thoracic surgery. The national accrediting agency, known as the Liaison Committee for Graduate Medical Education (“LCGME”), imposes very demanding requirements on such residency programs. A document entitled “Essentials of Accredited Residencies” sets forth these requirements in general terms. AGH Exh. 104. This document reads in part:

The teaching staff should be composed of physicians and other health professionals qualified on the basis of educational background and professional accomplishment, oriented to the requirements and responsibilities of the teaching appointment and motivated to assign acceptable priority to teaching duties. A well organized and well qualified staff . .. may well be the determining factor in the development and approval of a graduate training program. . . .

Members of the attending staff should be assigned by the department head to specific responsibility as far as the work of the services is concerned. The service of each attending physician should include an adequate number of patients and extend over a sufficient period to elicit his full interest and attention while on service. On the other hand the service should not be so large as to be a burden to the attending staff and thus result in reduced attention to the educational program. . . .

The staff must hold an adequate number of regularly scheduled clinical pathological conferences and other staff conferences, in addition to meetings of the staff at which the histories, clinical observations, laboratory studies, and pathology of selected cases are reviewed. Scientific meetings at which papers are presented by members of the staff or guest speakers are considered commendable but do not serve to meet the requirements of these scheduled conferences.

Id.

at 24 . The experience of Allegheny General’s orthopedic residency program served notice to the hospital of the need to comply with these requirements. LCGME placed the orthopedic program on probation because the residents were providing serv

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ices’rather than receiving instruction. The members of the staff who participated in the program devoted very little time to teaching the residents, while using them to perform many tasks that did not contribute to their education. Dr. Magovern has had the responsibility of ensuring that the members of his department display an interest in teaching the residents, in thoracic surgery and that these residents receive an educational experience rather than a service experience.

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D. Results of the Revitalization Campaign

Under Mr. Grapski’s leadership, Allegheny General has built a reputation as a vibrant and productive regional referral, secondary teaching hospital. Although it offered. some secondary and tertiary level services before Mr. Grapski’s arrival, the hospital has greatly expanded such services during the past fifteen years while deemphasizing its role in providing basic medical services. Specifically, the hospital has developed a cardiac center and an oncology center that provide comprehensive services for the diagnosis and treatment of heart disease and cancer respectively. It also has devoted substantial efforts to the establishment of a trauma center and a sports medicine clinic. In conjunction with this shift in emphasis, the hospital constructed additional operating rooms and diagnostic and treatment rooms during a renovation of the physical plant.

Allegheny General has improved the quality of its medical staff significantly. It has recruited several eminent physicians to serve as directors of various departments. For example, the Trustees appointed Dr. Claude Joyner, a cardiologist, as Director of the Department of Medicine. Prior to joining Allegheny General, Dr. Joyner pioneered the use of sound waves to diagnose heart disease at the University of Pennsylvania School of Medicine. In addition to serving Allegheny General as a department director, Dr. Joyner has accepted a position on the faculty at the University of Pittsburgh School of Medicine. Approximately eighty other members of Allegheny General’s present staff likewise hold faculty appointments at the University of Pittsburgh’s School of Medicine or School of Dentistry. The availability of such a large number of doctors with experience in academic medicine has contributed to the success of Allegheny General’s residency programs, all of which now are fully accredited. Moreover, the hospital has experienced considerable success in its research activities. The staff has made many contributions to medical science, most notably in the diagnosis and treatment of heart disease.

Mr. Grapski and the Trustees also have attended to the hospital’s physical needs. In addition to renovating the present hospital building, Allegheny General constructed a parking garage and a professional office building. A new main hospital building is scheduled for completion this year.

The many efforts to upgrade the hospital’s integrated medical services delivery system have been well received by both the general population and the medical community. As a result of substantially achieving its institutional objectives, Allegheny General has attracted large numbers of patients from a wide geographic area. The hospital’s total revenues (receipts and contributions) exceed its costs.

The Department of Surgery, and particularly its Division of Thoracic Surgery, has played an important role in the resurgence of Allegheny General. Through the efforts of Dr. Magovern, the department has maintained the accreditation of the general surgery and thoracic surgery residency programs, has greatly expanded its research activities, and has developed a reputation for providing secondary and tertiary level patients with high quality, innovative care.

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The achievements of the Department of Surgery have attracted a large volume of patients to Allegheny General and have won national recognition for Dr. Magovern.

V.

The Application of John N. Robinson, M.D.

Allegheny General’s institutional objectives and competitive strategy influence the hospital’s evaluation of applications for staff privileges. Dr. Robinson initiated his effort to obtain staff privileges at Allegheny General in February, 1975, after Dr. Kian Kooros, an invasive cardiologist on the staffs of Allegheny General and North Hills Passavant Hospitals, told Dr. Robinson that he would make referrals to Dr. Robinson for open heart surgery that was to be performed at Allegheny General if Dr. Robinson could acquire staff privileges. A member of Allegheny General’s Board of Trustees, whom Dr. Robinson met socially, also had encouraged him to apply for staff privileges.

With the intention of obtaining an application form, Dr. Robinson visited the administrative office of Allegheny General. A woman in that office asked Dr. Robinson whether he was joining an established group at the hospital. He replied that he would be applying as a solo practitioner. The woman did not give Dr. Robinson an application form, but rather, told him that the hospital would mail a form to him. The following day, the woman telephoned Dr. Robinson to inform him that the Director of the Department of Surgery, Dr. Magovern, would have to interview him before the hospital would provide him with an application form. In compliance with that instruction, Dr. Robinson mailed a copy of his curriculum vitae to Dr. Magovern and obtained an appointment to see him.

A. The Interview

Dr. Robinson met with Dr. Magovern for approximately one-half hour on April

4,

1975 at the latter’s office. The two men offered differing accounts of that meeting in their testimony. Harmonizing the testimony and resolving questions of credibility, we find that the interview began with Dr. Robinson stating that an Allegheny General Trustee and Dr. Kooros had suggested that he make application to the hospital for staff privileges. Dr. Magovern responded that Dr. Robinson had excellent credentials.

Dr. Robinson then summarized his experience with Dr. Giacobine and explained the circumstances that led to the dissolution of their association.

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During the course of his remarks, Dr. Robinson conveyed a negative attitude about St. Francis’ thoracic surgery residency program, referred to certain foreign residents at St. Francis as “camel drivers,” implied that a former Allegheny General resident was a homosexual, and criticized Dr. Giacobine’s unwillingness to inform patients that Dr. Robinson, would perform their surgery. Dr. Magovern replied that he understood Dr. Robinson’s interest in establishing his own identity as a surgeon. The two men next discussed the surplus of thoracic surgeons in the United States. As a partial solution to the problem, Dr. Magovern suggested that American hospitals accept only those foreign residents who intend to return to their native lands after their training.

The conversation eventually turned to the Department of Surgery at Allegheny General. Dr. Magovern stated that Allegheny General was suffering from a shortage of operating rooms; he did not mention that construction of new operating rooms was expected to begin that fall. Dr. Magovern also explained the importance of the thoracic surges residency program to Allegheny General, and he emphasized the difficulties involved in maintaining accreditation for a nonuniversity residency program. In that regard, he expressed the view that Allegheny General should grant staff privileges in its Division of Thoracic Surgery only to those doctors who have the qualifications to obtain a faculty appointment at the University of Pittsburgh School of Medicine. Dr. Magovern noted that Dr. Burkholder, who

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was to join CTSA after completing his residency at Presbyterian University Hospital, had a good chance of obtaining a faculty appointment. Dr. Robinson told Dr. Magovem that he had spoken with Dr. Henry Bahnson at the University of Pittsburgh about a faculty appointment, but that he believed that he could not now obtain such an appointment. At the conclusion of the interview, Dr. Magovern pointed the way to the office where Dr. Robinson could pick up an application form.

Dr. Magovern testified that, based on the interview, he was not impressed with Dr. Robinson. Discovering that Dr. Robinson did not have an outgoing personality, Dr. Magovern had some difficulty in carrying on a conversation with him. Dr. Robinson did not volunteer information and gave abrupt answers to several of Dr. Magovern’s questions. Dr. Magovern was surprised by Dr. Robinson’s negative attitude toward the St. Francis residency program. He felt that a young thoracic surgeon should welcome the opportunity to practice at a hospital that has a residency program and should work to improve it. Dr. Robinson’s attitude raised a question in Dr. Magovern’s mind as to whether or not Dr. Robinson was interested in teaching. Dr. Magovern also was very concerned about Dr. Robinson’s reference to certain foreign residents as “camel drivers” because Allegheny General had residents from Middle Eastern countries. Dr. Magovern did not want a physician on the staff who might have trouble working with some of the residents. Furthermore, Dr. Robinson’s curriculum vitae did not reflect an interest in research. He told Dr. Magovern that he had not participated in significant research because St. Francis did not have a laboratory. Finally, Dr. Magovem was irritated by Dr. Robinson’s suggestion that a former Allegheny General resident was a homosexual. Dr. Magovern had trained that resident and had written letters of recommendation on his behalf. He did not believe that the accusation was true, and in any case, he felt that it was an inappropriate comment.

Disturbed by the interview with Dr. Robinson, Dr. Magovern telephoned Dr. Giacobine to ask about Dr. Robinson and about the former resident, who was related to Dr. Giacobine by marriage. Dr. Magovern’s negative impressions of Dr. Robinson were reenforced by his conversation with Dr. Giacobine. He also learned that Dr. Robinson was suing Dr. Giacobine over certain aspects of the dissolution of their association.

Although Dr. Robinson described the interview as “friendly,” he left it with the belief that Dr. Magovern, in effect, had rejected his request for staff privileges. AGH Exh. 1, at 190; Tr. 178-79. Therefore, he did not bother to obtain an application form following the interview. Angered by what he considered to be an infringement on his right to practice medicine, Dr. Robinson complained to the Allegheny County Medical Society about the “closed shop” at Allegheny General. Tr. 180-81. After speaking with the president of the medical society and with the society’s attorney, Dr. Robinson retained private counsel in the person of Roslyn M. Litman, Esquire.

B. Submission of the Application

Following the Magovern-Robinson meeting on April 4, 1975, no one at Allegheny General heard from Dr. Robinson for almost five months, that is, until August 27, 1975, when the hospital received a letter from Mrs. Litman, Dr. Robinson’s attorney. That letter read in full as follows:

August 26, 1975

Allegheny General Hospital

320 East North Avenue

Pittsburgh, Pennsylvania 15212

Attention: Chief Administrative Officer

Gentlemen:

This office has been retained by Dr. John N. Robinson who has advised us that his several attempts to be favorably considered for admission to your surgical staff have been frustrated by the personnel of your hospital. After I learned of Dr. Robinson’s credentials, I was frankly surprised that an appointment of Dr. Robinson to your staff had not been

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made. The information I have received on this case leads to the conclusion that your failure to process my client’s application to a just conclusion in accordance with the various applicable statutes and regulations governing the operation of hospitals like yours has caused our client serious damage.

I would be grateful if you would advise me as soon as possible the reasons for your failure to justly process Dr. Robinson’s request to join your surgical staff. If your actions are supported by by-laws or other governing rules of the hospital, please submit a copy of these documents to me. I would appreciate, as well, your sending a copy of your written rules and regulations covering applications for staff membership, methods of processing applications, procedures related to submission and processing of applications and particularly your defined criteria for staff membership.

I will be happy to meet with a representative of your hospital to further discuss the problem presented by what has occurred since Dr. Robinson first attempted to file an application for membership on your staff. Since Dr. Robinson’s extensive damages to date are continuing, I submit that it is necessary that the problem be resolved with minimal delay. If, of course, I do not receive an indication from you of a desire to resolve this problem within the next 15 days, I will have no further choice but to institute appropriate legal proceedings for the benefit of Dr. Robinson.

Very truly yours,

(Signed)

ROSLYN M. LITMAN RMLresf

cc: Dr. George J. Magovern

Jt. Exh. 1 — B.

The hospital administration immediately notified in-house counsel of the contents of Mrs. Litman’s letter, and counsel thereafter participated in processing Dr. Robinson’s application. Lad Grapski, the president of Allegheny General, investigated the assertions contained in the Litman letter and determined that Dr. Robinson never had submitted an application for staff privileges.

On September 16, 1975, after an exchange of correspondence with Mrs. Lit-man, Allegheny General mailed to Dr. Robinson an application form and a copy of the Medical Staff Bylaws. Dr. Robinson completed the application form, attached a copy of his curriculum vitae, and returned the form to Allegheny General on September 29, 1975.

Mr. Grapski gave copies of Dr. Robinson’s application to Dr. Magovern and to Dr. John Feist, who was the chairman of the hospital’s credentials committee. Article III, section 3(c) of the Medical Staff Bylaws places on the director of the relevant department the duty of preparing a report and recommendation, which are submitted for consideration by the credentials committee. Jt. Exh. 88. Article III, section 3(b) of those same bylaws provides that the credentials committee “shall investigate the personal character and professional ethics of the applicant, and shall evaluate his professional competence to exercise the privileges he requests, or to undertake the professional responsibility he seeks, and shall verify, through references given by the applicant and other sources available to it, that he meets and has established all the necessary qualifications set forth in these bylaws.”

Id.

In support of the work of the credentials committee, Mr. Grapski requested Boston City Hospital and the Veterans Administration Hospital at Little Rock, Arkansas to confirm that Dr. Robinson had received a portion of his training at those institutions. He also requested letters of recommendation from McKeesport Hospital, North Hills Passavant Hospital, Western Pennsylvania Hospital and St. Francis Hospital, which Dr. Robinson had listed on his application as “Present Affiliations,” and from Drs. Den-ton Cooley, Edward Longabaugh and Michael Levis, whom Dr. Robinson had listed on his application as “References.”

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C. The Magovern Report

Upon learning that Dr. Robinson had submitted an application for staff privileges, Dr. Magovern again telephoned Dr. Giacobine. When he told Dr. Giacobine that Allegheny General had received the application through the office of an attorney, Dr. Giacobine, referring to the lawsuit that Dr. Robinson had filed against him, responded: “Join the crowd.” Tr. 4967.

Dr. Magovern also wrote letters to Dr. Denton Cooley and Dr. Grady Hallman, both surgeons at the Texas Heart Institute whom Dr. Magovern knew. The plaintiff contends that these letters were an attempt by Dr. Magovern to generate negative recommendations. We disagree. Although Dr. Magovern did delineate in his letters the reasons that made him inclined to recommend denial of Dr. Robinson’s application, he also asked both men to provide him with any positive information about Dr. Robinson that might cast a different light on the application. For example, in the letter to Dr. Hallman, Dr. Magovern wrote:

Since I felt I knew you well enough to at least inquire of your feelings, as he rotated through your service, I would like to hear from you. My feeling would be that unless he had such superb credentials that the above difficulty in getting along with people would be overcome by this, I would be less than pleased if he joined the staff. Basically what I’m saying if I have become over prejudice [sic] by this, I would like to know. If you think he is really a good fellow, then we can certainly try to look at the other side of the story.

Jt. Exh. 10. Dr. Magovern never received a response from either Dr. Cooley or Dr. Hall-man.

On October 13, 1975, Dr. Magovern submitted his department director’s report on the Robinson application. The report recommended that the hospital reject the application. It set forth the following seven reasons in support of this recommendation:

1) a shortage of operating room space and time existed;

2) Dr. Robinson is on the staffs of seven other hospitals, so it is doubtful that he would have time to contribute to a teaching program at an eighth institution;

3) Dr. Robinson’s former associate, Dr. Giacobine, did not give a favorable recommendation;

4) Dr. Robinson has not published any papers since leaving medical school; '

5) the University of Pittsburgh School of Medicine has refused to appoint Dr. Robinson to the faculty;

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6) Dr. Robinson has displayed a willingness to resort to legal action; and

7) Dr. Magovern did not initiate or encourage Dr. Robinson’s application.

Jt. Exh. 1-S.

D. The Credentials Committee

The six-member credentials committee

21

received an unusually large volume of information about Dr. Robinson between October 13, 1975, the day on which Dr. Magovem submitted his department director’s report, and March 4,1976, the day on which the committee met to consider Dr. Robinson’s application. All four hospitals that Dr. Robinson had listed on his application form as “Present Affiliations” responded promptly to Mr. Grapski’s request for information. Dr. John Gaisford, chief of the Division of Surgery at West Penn Hospital, replied that he was unable to evaluate the applicant because Dr. Robinson had not performed any surgery at West Penn since joining the staff. Jt. Exh. 1-DD. Mr. Robert Bigge, the executive director of McKeesport Hospital, wrote that “I have

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had no occasion to question his ethics or his morals and have heard nothing derogatory about him. His fellow surgeons respect his work and tell me that he shows good judgment and skill in the operating room.” Jt. Exh. 1-CC. Dr. Harry Feather, medical director of St. Francis Hospital, informed Allegheny General that

I did not know Dr. Robinson before he joined our staff. Since that time I have found him to be completely ethical and his character to be above reproach. He is not too “outgoing” but gets along well with the staff and nursing personnel. He is a competent surgeon and I can recommend him to you.

Jt. Exh. 1-EE. Mr. Alexander McAliley, the executive director of North Hills Passavant Hospital, responded succinctly, stating that “I have enjoyed a business acquaintance with Dr. Robinson and feel that he would be an outstanding addition to any hospital staff .... ” Jt. Exh. 1-FF.

A letter of recommendation from Dr. Edward Longabaugh supplemented Mr. McAliley’s evaluation of Dr. Robinson’s work at North Hills Passavant. Dr. Longabaugh’s letter read in part:

He has been, but briefly, a member of our staff, yet our impression of Dr. Robinson is highly favorable and I am pleased to recommend him to you.

I feel personally unqualified to judge his competence in Cardiovascular Surgery, except to affirm that his work has been exceptable [sic], in so far as one can judge from the records. I have assisted him only occasionally in the operating room, but in so far as this brief exposure permits evaluation, I regard his technique as excellent.

I’ve found no reason to question his moral character or the ethics of his practice. I would like to add that he has been exceptionally helpful to the physicians of the North Hills Passavant Hospital in answering consultations, in caring for emergency patients, at any and all hours, and he has been cooperative in carrying out his staff assignments.

He has been a most welcome addition to our staff, and I feel that if he is granted privileges in Cardiovascular Surgery at Allegheny General Hospital, an admirable continuity of care may be offered the North Hills patient with cardiopulmonary problems.

Jt. Exh. 1-AA. A second physician on the staff of North Hills Passavant, Dr. Michael Levis, also submitted a letter of recommendation on Dr. Robinson’s behalf. Dr. Levis, who at that time was the president of the Allegheny County Medical Society, wrote that

[i]t has been my privilege to know Dr. Robinson for approximately six months. During this time I have found him to be an extremely dedicated, conscientious, and capable thoracic surgeon. He has had excellent training and in my brief acquaintance with him has demonstrated outstanding qualities as a clinician.

Jt. Exh. 1-V.

Several doctors who had participated in Dr. Robinson’s training likewise responded to Allegheny General’s request for information.

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Dr. William McDermott, who had supervised Dr. Robinson’s internship at Boston City Hospital from July, 1963 to June, 1964, wrote that Dr. Robinson “showed competence as a physician, was of unquestioned high moral character and had good relationships with his colleagues and patients.” Jt. Exh. 1-HH. Two surgeons from the Baylor College of Medicine, Dr. Stanley Crawford and Dr. Michael DeBakey, submitted letters to the credentials committee. Dr. Crawford’s letter read in part:

I found him to be a tall, attractive person with good professional bearing. He was well informed medically and his technical skill was quite satisfactory. He got along well with all the people here and I think he made a good reputation.

Jt. Exh. 1-PP. Dr. DeBakey informed the committee that Dr. Robinson

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entered our Cardiovascular Fellowship Program on September 14, 1970, with the original intent of remaining in this program through June 30, 1971. In this position he functioned in the equivalent capacity of a Junior Resident in Thoracic Surgery. However, Dr. Robinson found it necessary to terminate his appointment on March 1, 1971, to accept an appointment as a Thoracic Surgery Resident in Little Rock, Arkansas. During the short time he was with us his performance was considered most satisfactory, and his knowledge and technical ability were above average. However, it is somewhat difficult to make definitive statements in this regard, but only because of the shortness of the period of time Dr. Robinson was in our program. Therefore, I would suggest that you obtain a more definitive evaluation by those responsible for his thoracic and cardiovascular surgical residency after he left our program.

Jt. Exh. 1-SS. At the Veterans Administration Hospital in Little Rock, Dr. Robinson worked for four months under the supervision of Dr. Raymond Read, the chief of surgical services. Dr. Read wrote to the committee that he thinks

very highly of Dr. Robinson. He is an ex-Marine who fought in Korea. He is an excellent cardiovascular surgeon, is conscientious, takes care of his patients very well and gets along with his peers, and to the best of my knowledge has excellent moral and ethical standards. I think he would be a considerable asset to your staff and I would recommend wholeheartedly that he be appointed.

Jt. Exh. 1-U. Dr. Robinson completed his training at the Texas Heart Institute under the supervision of Dr. Denton Cooley. After two requests from Mr. Grapski and one request from Dr. Magovern for information about Dr. Robinson, Dr. Cooley sent the following response to Mr. Grapski:

[Dr. Robinson] served as a Resident in Thoracic Surgery for the period July 1, 1971 to July 1, 1972 at the Texas Heart Institute of St. Luke’s and Texas Children’s Hospital. He performed his duties well, and we believe that he is an accomplished and capable cardiovascular and thoracic surgeon.

Dr. Robinson can be a rather stern, rigid person in his dealings with others, but this does not necessarily indicate a serious personality handicap. I believe that he shows promise of success in his chosen specialty.

Since I have not been in contact with Dr. Robinson since his departure from Houston, may I suggest that you get a reference from Dr. James Giacobine of Pitts-burg. [sic] Dr. Giacobine and Dr. Robinson were associated in practice.

I would appreciate any consideration given to him.

Jt. Exh. 1-RR.

The committee already had written to Dr. Giacobine to inquire about his experience with Dr. Robinson. Dr. Giacobine’s reply read in part:

I am sure his curriculum vitae is a fair assessment of his professional training. In successfully passing the examination of the Board of Thoracic and Cardiovascular Surgery, he has achieved the minimum requirement of our specialty. Absence of special qualification or achievement, I am sure, are also evident in his staff application.

Several years ago, when I requested a recommendation from Doctor Denton Cooley, of Houston, Texas, his letter among other things, indicated Doctor Robinson’s inability to accept criticism. I have since assessed this as being a masterful understatement of Doctor Robinson’s problem.

Jt. Exh. 1-TT.

In all, the credentials committee requested and received letters from twelve physicians or hospitals concerning Dr. Robinson. Only Dr. Howard Baron of the New York University Medical Center failed to respond to Allegheny General’s inquiry. Few applicants at Allegheny General are the subject of such a thorough investigation; normally the credentials committee requests information from only three or four sources.

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While the credentials committee was waiting for responses to certain of its inquiries, Dr. Magovern spoke with Dr. Feist on several occasions about the Robinson application.

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During a conversation that occurred in early February, 1976, Dr. Magovem told Dr. Feist that Dr. Robinson recently had exchanged blows with a Dr. Joseph DeCapua in the catheterization laboratory at St. Francis Hospital. This incident, which Dr. Robinson has described as “embarrassing,” became widely known in the Pittsburgh medical community. AGH Exh. 1, at 207-08. Some members of the credentials committee attempted to learn more about the incident through informal inquiries, but they failed to obtain a verified account before making their recommendation on Dr. Robinson’s application. The committee did not ask Dr. Robinson to explain the circumstances surrounding the altercation.

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Dr. Magovern submitted a letter to the credentials committee on January 20, 1976, in which he gave further explanations for some of the points that he had made in his department director’s report. This letter read in part:

What I would like to stress is the overall approach to obtaining a position on the Allegheny General Hospital Staff, which is essentially “if nothing negative is submitted then one is therefore applicable [sic] for admission to our staff”. I feel in reviewing anyone’s application, we should look for the plus features as well and it is that aspect of his particular application which does bother me.

Dr. Robinson has not contributed a paper to the literature despite his extensive training in the past eleven years. He has not secured an appointment to the faculty at the University of Pittsburgh despite the fact he has been practicing in Pittsburgh for sometime. ... I can see no extremely positive features in terms of what he has contributed even to the local community which would particularly qualify him to be a member of a teaching faculty at any institution which is involved in a residency training program. Indeed the one program in which he was a member has been discontinued.

... I feel we have every right to maintain the highest standards which are possible, and I think I have attempted to do this. Two of the men who had been appointed since I have directed the Department, Dr. Liebler and Dr. Burkholder, have been able to achieve University appointments and both have demonstrated their ability to contribute to the literature. The Thoracic Surgery Department as a whole has contributed 15 papers to the literature in the past year.

It is my firm conviction that given the responsibility that I have in maintaining the Department and its training program that people must demonstrate that they have done more than completed their training. In Dr. Robinson’s case he certainly has had ample opportunity to do this. The attitude which I am trying to acquire in the people who would become affiliated with the Department is one of an inquisitive, didactic approach to the patient in addition to demonstrating their clinical skills and since we are one of approximately four improved [sic] residencies in the State of Pennsylvania, I think it is imperative that we look for the positive aspects as well as “the lack of negative features” in those people applying for a position on the staff. In addition I am a member of the Residency Evaluation Committee of the Directors of Thoracic Surgery Association and I feel if I can’t maintain standards in my own Institution that I would have to bring this problem to the Board of Thoracic Surgery for their disposition of the status of our program.

*870

Jt. Exh. l-OO.

25

Dr. Feist placed Dr. Ma-govern’s letter in Dr. Robinson’s official application folder.

On March 4, 1976, five of the members of the credentials committee met to consider Dr. Robinson’s application for staff privileges.

26

Each of the members had had an opportunity to examine Dr. Robinson’s application folder prior to the meeting. During the hour-long discussion, the committee reviewed all of the letters that Allegheny General had received concerning Dr. Robinson. They discounted the favorable letters from Dr. Longabaugh, Dr. Levis, Dr. Read and Dr. Crawford because these men had known Dr. Robinson for a relatively short period of time. In addition, the eleven year hiatus between Dr. Robinson’s internship at Boston City Hospital and his application to Allegheny General caused the committee to discount Dr. McDermott’s favorable letter. The committee read Dr. Cooley’s letter as less than enthusiastic

27

and Dr. DeBakey’s reply as evasive and surprisingly brief.

Although the letters from McKeesport, St. Francis and North Hills Passavant Hospitals all complimented Dr. Robinson and supported his application, they raised concern among the members of the committee that Dr. Robinson already was on the staffs of too many hospitals.

28

Recognizing that an open heart patient can experience serious complications during the twenty-four hours following the operation, the committee felt that Dr. Robinson could not provide adequate coverage for his patients at Allegheny General while also performing surgery and fulfilling staff commitments at several other hospitals. Moreover, they doubted that Dr. Robinson could contribute to the teaching program and to staff committees at Allegheny General if he maintained active affiliations with other institutions.

The committee gave the greatest weight to the letter from Dr. Giacobine, who had the longest and most recent experience with Dr. Robinson. Dr. Giacobine, a well-known and respected member of the Pittsburgh medical community, had informed the committee that Dr. Robinson had good, but not exceptional, credentials and that Dr. Robinson had a serious personality problem. The committee noted that additional evidence corroborating this latter observation came from Dr. Cooley’s letter, from the report of the physical altercation between Dr. Robinson and Dr. DeCapua, and from Dr. Robinson’s use of an attorney to obtain an application form.

29

Finally, the committee considered Dr. Magovern’s report and supplemental letter. Dr. Magovern strongly recommended denial of Dr. Robinson’s application, stating that he believed that Dr. Robinson would not contribute to the department’s teaching and research efforts, that Allegheny General lacked the physical facilities to accommodate an additional thoracic surgeon, and that Dr. Robinson might be a disruptive force in the department. The committee accorded substantial weight to Dr. Magovern’s opinion for three reasons. First, the Board of Trustees had given the depart

*871

ment directors the leading role in Allegheny General’s effort to achieve its institutional objectives. Therefore, the credentials committee looked to the department director for an evaluation of the department’s current personnel needs and for insight on the individual applicant’s potential to make a significant contribution to the hospital. Second, Dr. Magovern’s performance as department director over the previous seven years had earned him great respect among the members of the committee. Third, the committee had independent corroboration for Dr. Magovern’s conclusions: Dr. Robinson’s curriculum vitae informed the committee that he was affiliated with seven hospitals and that he had not written a research paper since medical school; the two surgeons on the committee verified that Allegheny General had a shortage of operating rooms; and at least four sources of information indicated that Dr. Robinson might be a disruptive force.

Based on the disappointing letters of recommendation, the strong opposition of the department director, and the concern that Dr. Robinson already was overextended, the credentials committee voted unanimously to recommend that Allegheny General deny Dr. Robinson’s application for staff privileges. The members of the committee gave their chairman, Dr. Feist, the responsibility of conveying their recommendation to Dr. Lawrence Brent, who was the chairman of the executive committee of the medical staff. On March 9, 1976, Dr. Feist wrote the following confidential letter to Dr. Brent:

During its regular monthly meeting of March 4, the Credentials Committee [considered] the application of John N. Robinson, M.D., to the Associate Attending Staff in Cardiothoracie Surgery. Although his records indicate that he has fulfilled the minimum training requirements, the Committee voted unanimously to recommend denial of this application. In order to maintain confidentiality and minimize adverse publicity, it was decided to omit from the official minutes a listing of the reasons for rejection, and, instead, to transmit this material to you by letter. The Credentials Committee’s recommendation is based on the following findings and considerations:

1. Dr. Robinson already holds active Staff appointments in his specialty in 7 other area hospitals. This would inevitably fragment his professional efforts and preclude the prompt availability and devotion of the requisite time and effort necessary to render continuous care and supervision to his own patients. Moreover, it would be physically impossible to fulfill all the Staff responsibilities inherent in such a critical specialty, were he also to be appointed here.

2. George J. Magovern, M.D., Director of the Department of Surgery, recommends denial of this application because of:

(a) Insufficient operating time and space to expand cardiothoracie surgery beyond its present volume;

(b) Saturation of the Cardiothoracie Surgery residency staff by the current patient load;

(c) Lack of evidence that Dr. Robinson has either the ability or the interest to make a substantial positive contribution to the daily conduct or continued approval of the residency program, or to the established high standard of quality of the clinical service in Cardiothoracic Surgery, or to the educational commitments of the institution at large, and

(d) Inability to qualify for a faculty appointment at the University of Pittsburgh School of Medicine.

3. There is substantial doubt that the applicant meets the personal qualifications to function harmoniously and constructively in our institution, because:

(a) The written references to his character by physicians in his own specialty and his training preceptors are in part evasive or ambiguous, in part clearly indicative of a serious personality defect and inability to get along well with his colleagues;

*872

(b) The only clearly positive recommendations originate from physicians who have only brief and superficial acquaintance with the applicant; and

(c) A recent episode of assault and battery upon a fellow physician on the premises of St. Francis Hospital has been reported to the Committee.

Jt. Exh. 1-UU.

E. The Rejection of the Application

The executive committee of the medical staff develops clinical standards, monitors and coordinates the work of the hospital’s various departments, advises the president of Allegheny General on matters of hospital policy and reviews the recommendations of the medical staff’s many committees. Article III, § 3(d) of the Medical Staff Bylaws provides that “[u]pon receipt of the report of the Credentials Committee, the Executive Committee of the Medical Staff at its next regular meeting, shall consider the report and recommend to the Medical Staff through the President of the Medical Staff, that the application be accepted, deferred, or rejected.” Jt. Exh. 88. The executive committee has fourteen voting members, consisting of the three elected officers of the medical staff, the directors of five of the hospital’s departments, five members elected from the ranks of the senior attending and associate attending staffs, and the president of the hospital.

Id.,

article VII, § 1(a)(1). In 1976, Dr. Magovern was CTSA’s only representative on the executive committee.

On March 15,1976, the executive committee met to consider,

inter alia,

the credentials committee’s report on Dr. Robinson’s application. Nine voting members were present, including two doctors who also served on the credentials committee.

30

Dr. Magovern did not attend the meeting.

The members of the committee discussed Dr. Robinson’s application at length, in the process reviewing the letters of recommendation, Dr. Robinson’s curriculum vitae, the department director’s report and Dr. Feist’s letter to Dr. Brent. Mr. Grapski also informed the committee of one recent development. In connection with Dr. Feist’s reference to the altercation between Dr. Robinson and Dr. DeCapua, Mr. Grapski reported that, in response to his telephone inquiry, Sister Adele Meiser, the executive director of St. Francis Hospital, neither had confirmed nor denied that the incident occurred. At the conclusion of the discussion, the committee voted unanimously to recommend that Allegheny General reject Dr. Robinson’s application for staff privileges.

Three members of the committee testified at trial. Mr. Grapski stated that he voted to adopt the recommendation of the credentials committee for two reasons. First, he had great confidence in the ability of the credentials committee to judge an applicant’s qualifications. Second, Mr. Grapski had serious doubts about Dr. Robinson’s ability to function harmoniously in the stressful environment of the practice of cardiothoracic surgery. This concern had its origin in the letters of recommendation, the altercation at St. Francis, and the applicant’s use of an attorney to obtain an application form.

Dr. Laibe Kessler, a neurosurgeon, testified that the letters of recommendation raised a red flag for him. Over the years, Dr. Kessler had found that such letters usually went overboard in their praise of an applicant. He characterized the letters received from those who had trained Dr. Robinson, however, as halting and evasive. Tr. 6688, 6691. Moreover, he noted that the favorable letters came from individuals who had not worked closely with Dr. Robinson. Two other factors also contributed to Dr. Kessler’s negative vote. First, he did not believe that the applicant could provide adequate coverage for his patients and contribute to the residency program at Allegheny General while performing surgery at two or three other hospitals and consulting at still more hospitals. Although he looked

*873

for some indication that Dr. Robinson intended to concentrate his practice at Allegheny General, Dr. Kessler ultimately concluded that Dr. Robinson did not have such an intention. Second, Dr. Kessler did not want any physician on the staff who would resort to physical violence.

Dr. Frank Begg, a cardiologist, testified that two considerations persuaded him to cast a negative vote. Speaking from a position of familiarity with the field, Dr. Begg first stated that he did not believe that an open heart surgeon could provide high quality patient care, contribute to a residency program and perform research unless that surgeon concentrated his practice at one hospital. Dr. Begg noted that Dr. Robinson held multiple staff appointments and had not represented that he would make Allegheny General the focus of his practice. The second consideration underlying Dr. Begg’s vote was the presence in the file of “some unflattering recommendations.” Tr. 4498.

Following the unanimous vote of the committee, Mr. Grapski informed Dr. Robinson by letter that “the Executive Committee of the Medical Staff recommended denial of your application. If you wish a hearing as provided in Article 3, Section 6 of the Medical Staff Bylaws, you must submit a written request for same within ten days of receipt of this notice.” Jt. Exh. 1 — VV. Subsequently, Mrs. Litman did request that the executive committee conduct a hearing on her client’s application. Jt. Exh. 1-WW.

Article III, section 6(a) of the Medical Staff Bylaws provides in part that

[i]n the event of such a hearing, the application, together with the report and recommendation of the Credentials Committee for denial shall form the basis upon which the Executive Committee may receive evidence bearing on the applicant’s qualifications for appointment to the Medical Staff. The Credentials Committee shall present evidence in support of its findings and recommendations, and the applicant shall present evidence in support of his qualifications. The recommendation of the Executive Committee of the Medical Staff following this hearing shall be sent to the Board of Trustees and a copy of it sent to the applicant by certified or registered mail by the Office of the President of the Hospital.

Jt. Exh. 88. Dr. Robinson knew from his reading of the Medical Staff Bylaws that he would have the burden at the hearing of allaying the concerns expressed by the credentials committee and of establishing his good character and professional competence.

Id.,

article III, § 3(b). In anticipation of the hearing, Allegheny General supplied Mrs. Litman with a copy of Dr. Robinson’s application form, a copy of all letters of reference that Allegheny General received concerning Dr. Robinson, and a copy of the report and recommendation of the credentials committee. Jt. Exh. 1-YY.

The executive committee convened on June 21,1976 to conduct the hearing on Dr. Robinson’s application. By agreement of counsel, John J. McClean, Jr., Esquire, a former judge of the Court of Common Pleas of Allegheny County, presided at the hearing. David B. Fawcett, Jr., Esquire, represented the credentials committee and Mrs. Litman appeared on behalf of Dr. Robinson. Three witnesses presented testimony.

Dr. Feist testified first, explaining how the credentials committee reached its decision. Dr. Magovern then recounted his initial meeting with Dr. Robinson and reviewed the reasons for his opposition to the appointment of Dr. Robinson to the medical staff.

The applicant took the stand as the final witness. Through questioning by Mrs. Lit-man, Dr. Robinson first presented a detailed account of his medical training. He then discussed his two and one-half year association with Dr. Giacobine and explained the circumstances that led to its termination. Dr. Robinson told the committee that “a long-term relationship was just impossible with the man” because Dr. Giacobine “interjected severe family problems into the practice” and would not permit Dr. Robinson to tell patients that he would be performing their surgery. AGH Exh. 1, at 182-83.

*874

Dr. Robinson next attempted to rebut Dr. Magovern’s testimony concerning their meeting of April 4, 1975: Directly contradicting Dr. Magovern, Dr. Robinson stated that he had not mentioned Dr. Giacobine’s relative during the interview and definitely had not commented on that individual’s sexual preferences. Moreover, Dr. Robinson testified that Dr. Magovern had told him that a faculty appointment at the University of Pittsburgh Medical School was a prerequisite to obtaining staff privileges at Allegheny General.

In an effort to establish that he had an interest in teaching, Dr. Robinson informed the committee that he had participated in the instruction of residents while serving as the chief surgical resident at Columbia Presbyterian Hospital. He also told the committee that Creighton University Medical School had offered him the position of professor of surgery and chief of cardiac and thoracic surgery upon his leaving the Texas Heart Institute. Finally, Dr. Robinson testified that he “taught the residents operating” at St. Francis Hospital. AGH Exh. 1, at 182.

Recognizing that the committee was concerned about his multiple staff appointments, Dr. Robinson assured the committee that “I’m not overworked and I fulfill all my obligations.”

Id.

at 194. Noting that he originally had joined the staffs of the seven hospitals listed on his curriculum vitae at Dr. Giacobine’s direction, Dr. Robinson testified that he visited South Side Hospital only once a week, that he had performed only one operation at St. John’s Hospital, that he had not visited Pittsburgh Hospital for at least a year, and that he never had admitted a patient to West Penn Hospital. In 1976, Dr. Robinson concentrated his practice at St. Francis Hospital, McKeesport Hospital and North Hills Pas-savant Hospital. At no point during his testimony did Dr. Robinson state that he intended to make Allegheny General the focus of his practice.

Finally, Dr. Robinson discussed the altercation involving Dr. DeCapua. Although conceding that he was not proud about his participation in the altercation, he emphasized that Dr. DeCapua had thrown the first punch and later had apologized to Dr. Robinson for his behavior.

During cross-examination, Mr. Fawcett elicited several significant admissions. First, Dr. Robinson stated that he had written the only paper of his professional career during medical school on a subject that is unrelated to cardiothoracic surgery. Second, Dr. Robinson confirmed that he had initiated legal action against Dr. Giacobine after the termination of their association. Third, when asked whether he had talked to anyone at McKeesport Hospital about Dr. Giacobine’s relative, Dr. Robinson responded as follows: “Well, they ask you why you are coming or why you left.” AGH Exh. 1, at 225. Fourth, Dr. Robinson testified that he “may have” referred to residents at St. Francis as “camel drivers” during his interview with Dr. Magovern.

Id.

Fifth, another hospital, Suburban General Hospital in Bellevue, Pennsylvania, recently approved Dr. Robinson’s application for staff privileges. Finally, Dr. Robinson stated that the letter of recommendation that Dr. Cooley submitted to Allegheny General disappointed him and hurt his feelings.

Id.

at 234.

During the course of the hearing, Mrs. Litman offered into evidence five letters of recommendation that were not available at the time that the credentials committee considered Dr. Robinson’s application. The majority of these letters were solicited by the applicant directly. Dr. Thomas Madigan, the chairman of the Department of Surgery at St. Francis Hospital, addressed the following letter to the executive committee:

I would like to recommend the appointment of Dr. John N. Robinson in Cardiac and Thoracic Surgery.

I have known Dr. Robinson for the past ten years. He is well trained, has an excellent surgical background, makes a real effort to teach the residents, and he gets along well with his fellow physicians.

Jt. Exh. 36. Dr. Henry Madoff, a thoracic surgeon on the staff of McKeesport Hospital, addressed a letter to Mrs. Litman, stating in part that

*875

Dr. Robinson has shown technical competence and knowledge of his field. He has been diligent in his responsibility to patients, residents and attending staff of the McKeesport Hospital. His ability to get along with members of the staff has been proven by his development of a good referral practice at McKeesport and other area hospitals, since starting on his own.

Jt. Exh. 34. Dr. Frank Bondi, the chairman of the Department of Surgery at McKeesport Hospital, informed Allegheny General that

Dr. Robinson has gradually increased his practice at McKeesport Hospital and on many occasions I have had an opportunity to observe him in the operating room and to watch some of his cases on the wards of the hospital. He has always demonstrated to me excellent judgment and in the operating room excellent ability and technique. He has been a very frequent participant in our educational programs and attends most of our scientific meetings here at the hospital.

Jt. Exh. 33. Dr. Arthur Beall, a professor of surgery at the Baylor College of Medicine, wrote that “Dr. Robinson satisfactorily performed all the duties assigned to him and was considered to be an excellent technical surgeon with mature judgement.” Jt. Exh. 38. Finally, Dr. Grady Hallmaij, a central figure at the Texas Heart Institute, addressed the following letter to the credentials committee:'

I knew Dr. John Robinson well and was in frequent contact with him during his years of training in thoracic and cardiovascular surgery here at the Texas Heart Institute of St. Luke’s Episcopal and Texas Children’s Hospitals. I believe that Dr. Robinson is highly intelligent and well motivated. He is of high moral character and possesses good surgical technique. I admired John’s honesty and candor. He did not hesitate to speak his mind and give his opinion even if it differed from that of his seniors on the staff.

I believe that Dr. Robinson has a good future in cardiovascular surgery and would appreciate your favorable consideration of his application.

Jt. Exh. 27.

After the presentation of the evidence, the executive committee discussed the merits of Dr. Robinson’s application for approximately one hour and then voted unanimously to endorse the committee’s original decision to recommend denial of the application. Dr. Magovern and the members of the credentials committee did not participate in either the discussion or the subsequent vote. The voting members of the executive committee who testified at trial stated that the testimony and the exhibits presented at the hearing did not allay their primary concerns: Dr. Robinson did not represent to the committee that he intended to concentrate his practice at Allegheny General and several unrebutted pieces of information indicated that Dr. Robinson might not function harmoniously with the medical staff, the residents and the support personnel.

At the June 28,1976 meeting of the executive committee of the Board of Trustees, Dr. Brent, in his capacity as the chairman of the executive committee of the medical staff, reported that the latter committee had afforded Dr. Robinson a formal hearing on his application for staff privileges and that it unanimously recommended that the Board of Trustees deny the application. The chairman of the Board of Trustees appointed a special committee comprised of two trustees, Mr. Kenneth Hewitt and Mr. Harry Epstine, to review the Robinson file for the purpose of determining whether Allegheny General had followed proper procedures in processing the application and whether the executive committee of the medical staff had reached the correct conclusion.

Mr. Hewitt

31

and Mr. Epstine independently read the transcript of Dr. Robinson’s

*876

hearing and the many letters of recommendation that Allegheny General had received concerning Dr. Robinson. The two gentlemen then discussed the file at length, ultimately concluding that Dr. Robinson had received a fair hearing, that the conduct of the hearing fully complied with the requirements of the corporate bylaws, and that they saw no reason to disagree with the recommendation of the executive committee of the medical staff. After the special committee reported its findings on September 27,1976, the executive committee of the Board of Trustees passed a resolution recommending that the Board of Trustees reject Dr. Robinson’s application for staff privileges.

The full Board of Trustees convened on October 25, 1976 for its fourth quarterly meeting. Mr. Grapski gave an oral report on the Robinson application, summarizing what had transpired at each level of review. After a discussion of the matter, the Board of Trustees passed the following resolution:

RESOLVED, That the action of the Executive Committee of the Medical Staff taken with respect to the application for staff appointment of John N. Robinson, M.D. is approved and that said appointment is hereby rejected.

Jt. Exh. 7.

VI.

The Legal Action: Jurisdiction And Relevant Market

A. Subject Matter Jurisdiction

Dr. Robinson responded to Allegheny General’s decision to deny his application for staff privileges by filing this action for injunctive relief and damages based on federal antitrust and pendent state law claims. As a threshold matter, the defendants argue that this Court lacks jurisdiction over the subject matter of Dr. Robinson’s lawsuit. They contend that their alleged unlawful conduct did not substantially affect interstate commerce, and therefore, that Congress’ power to regulate interstate commerce through the antitrust laws cannot extend to encompass their alleged conduct. If this Court lacks jurisdiction over the plaintiff’s antitrust claims, his pendent state law claims lose their bridge to federal court.

We believe that the plaintiff did satisfy the jurisdictional element of the Sherman Act by establishing that the defendants’ activities had a substantial effect on interstate commerce.

See Hospital Building Co. v. Trustees of Rex Hospital,

425 U.S. 738, 743-44 , 96 S.Ct. 1848, 1851-52 , 48 L.Ed.2d 338 (1976);

Doctors, Inc. v. Blue Cross of Greater Philadelphia,

490 F.2d 48, 50-51 (3d Cir. 1973). Virtually all of the supplies, drugs and equipment used by Allegheny General and the CTSA surgeons during open heart procedures are purchased from manufacturers outside the Commonwealth of Pennsylvania. The cost of single-use products expended in open heart surgery ranges from $300 to $3500 per procedure.

32

Moreover, Allegheny General and CTSA receive a substantial portion of their revenue from non-Pennsylvania sources. The hospital obtains one-third of its revenue from federally funded Medicare reimbursements. It also receives several million dollars in Medicaid funds, half of which originate from the federal government, and payments from Blue Cross and commercial insurance companies located outside the Commonwealth. CTSA likewise receives payments from these sources. Finally, Allegheny General’s Division of Thoracic Surgery attracts a significant number of patients from Ohio, West Virginia and Maryland.

*877

The plaintiff alleges that the defendants combined to exclude him from participation in a specialty within the medical profession that has significant links with interstate commerce. We hold that these links establish a sufficient nexus between the activities of the defendants and interstate commerce to support the application of the federal antitrust laws to the alleged restraint of trade by Allegheny General and by certain surgeons on the hospital’s staff.

See McLain v. Real Estate Board of New Orleans, Inc.,

444 U.S. 232 , 100 S.Ct. 502 , 62 L.Ed.2d 441 (1980) (plaintiffs satisfied jurisdictional element of Sherman Act by demonstrating that defendants’ brokerage activity had a substantial effect on interstate commerce; plaintiffs need not make particularized showing of effect on interstate commerce caused by the alleged unlawful activity);

Hospital Building Co. v. Trustees of Rex Hospital,

425 U.S. 738 , 96 S.Ct. 1848 , 48 L.Ed.2d 338 (1976) (plaintiff satisfied jurisdictional element of Sherman Act by alleging that it purchases a large percentage of its medical supplies from out-of-state manufacturers; it attracts a significant number of patients from out-of-state; it obtains a substantial portion of its revenue from out-of-state sources; and it plans to finance the construction of a new facility through the use of out-of-state lenders).

B. Relevant Market

Before a court can evaluate the merits of a plaintiff’s antitrust claims, it first must identify the market that the defendants’ alleged unlawful conduct affects. This relevant market usually has two dimensions— product and geographic. Professor Lawrence Sullivan presented the following illustration of the concept of relevant market:

To define a market in product and geographic terms is to say that if prices were appreciably raised or volume appreciably curtailed for the product within a given area, while demand held constant, supply from other sources could not be expected to enter promptly enough and in large enough amounts to restore the old price or volume. If sufficient supply would promptly enter from other geographic areas, then the “defined market” is not wide enough in geographic terms; if sufficient supply would promptly enter in the form of products made by other producers which had not been included in the product market as defined, then the market would not be wide enough in defined product terms. A “relevant market,” then, is the narrowest market which is wide enough so that products from adjacent areas or from other producers in the same area cannot compete on substantial parity with those included in the market.

L. Sullivan,

Handbook of the Law of Antitrust

§ 12, at 41 (1977) [hereinafter referred to as

“Sullivan

”]. This traditional description of relevant market applies to the present case with one modification. As we observed earlier, the third-party payor system generally insulates the consumer-patients from price considerations; this sharply contrasts with the commercial world, in which price often is the determinative factor for the buyer. When purchasing medical services, most consumer-patients look for a high quality of care rather than for a low price. The change in the buyers’ focus does not impair the applicability of Professor Sullivan’s illustration to the medical services industry, however, because quality of care can substitute without difficulty for price as the primary competitive variable.

Cf. SmithKline Corp. v. Eli Lilly & Co.,

575 F.2d 1056, 1063-64 (3d Cir. 1978) (demand for various antibiotics with overlapping capabilities not sensitive to price; physicians prescribe particular antibiotic on basis of its range of effectiveness and its level of toxicity). Patients and referring physicians respond to the quality of care variable when selecting medical services just as they would respond to the price variable when purchasing table salt.

1. The Product Market

A properly defined product market should encompass all products — both items that are presently available and potential entrants — that have a significant, positive cross-elasticity of demand.

See

Times—

Picayune Publishing Co. v. United States,

*878

345 U.S. 594 , 612 n. 31, 73 S.Ct. 872 , 882 n. 81, 97 L.Ed. 1277 (1953);

SmithKline Corp. v. Eli Lilly & Co.,

575 F.2d 1056, 1063 (3d Cir. 1978). In other words, a relevant product market includes all products that consumers perceive as reasonable substitutes for each other.

See United States v. E. I. du Pont de Nemours & Co.,

351 U.S. 377, 394-95 , 76 S.Ct. 994, 1006-07 , 100 L.Ed. 1264 (1956);

Columbia Metal Culvert Company, Inc. v. Kaiser Aluminum & Chemical Corp.,

579 F.2d 20, 26-30 (3d Cir. 1978).

The plaintiff contends that the appropriate product market in the present case is “adult open heart surgery,” which the parties define as surgery requiring the use of cardiopulmonary by-pass equipment. We agree that the relevant product market is adult open heart surgery because no substitute for the product exists and because high entry barriers prevent most surgeons from becoming suppliers of open heart procedures.

Only a small percentage of patients who suffer from cardiovascular defects or diseases undergo cardiac catheterization, and only 25% to 30% of these are identified as candidates for open heart surgery. Recognizing the operation’s risk and expense, physicians usually recommend open heart surgery only as a last resort for patients who do not respond to other treatment. A candidate for open heart surgery has no real choice.

An open heart operation can be supplied only by an experienced cardiothoracic surgeon working in cooperation with a team of support personnel in a hospital’s specially equipped operating room. The lead surgeon is a highly trained specialist who has completed medical school, an internship, four years of general surgical training, a two-year residency program in cardiothoracic surgery and additional training while in private practice with experienced surgeons. The support team includes one or two less experienced cardiothoracic surgeons or residents, an anesthesiologist, scrub nurses, circulating nurses and perfusionists. This team uses sophisticated equipment that the hospital provides, such as the heart/lung machine, monitoring devices and a postoperative intensive care unit. Open heart surgeons and their support teams must perform a minimum of three operations per week in order to maintain their proficiency and to minimize mortality rates. Lateral entry by a doctor into the market from most other surgical fields is not possible.

Adult open heart surgery is a distinct market from pediatric open heart surgery (involving persons under seventeen years of age). Pediatric open heart surgery usually is for the correction of congenital heart defects, whereas most adult open heart surgery results from acquired defects. A surgeon who operates on children must develop skills that are somewhat different from those that the surgeon who operates on adults must develop, and pediatric surgery also requires specialized facilities and equipment. The vast majority of pediatric open heart procedures in Pittsburgh are performed at Children’s Hospital; no pediatric open heart surgery is performed at Allegheny General.

2. The Geographic Market

A court attempting to define the relevant geographic market in an antitrust case must identify the area of effective competition that the defendant encounters when it offers the designated product for sale.

See Tampa Electric Co. v. Nashville Coal Co.,

365 U.S. 320, 331-33 , 81 S.Ct. 623, 630-31 , 5 L.Ed.2d 580 (1961). The area of effective competition is the territory within which the buyer has, or in the absence of unlawful market power would have, the ability to seek alternatives if the supplier was to change one of the competitive variables to the disadvantage of consumers.

See United States v. Philadelphia National Bank,

374 U.S. 321, 359-61 , 83 S.Ct. 1715, 1739-40 , 10 L.Ed.2d 915 (1963);

Weeks Dredging & Contracting, Inc. v. American Dredging Co.,

451 F.Supp. 468, 490-92 (E.D. Pa.1978). As a corollary, the relevant geographic market is the territory within which the defendant can operate without encountering other suppliers who have the ability to compete on substantial parity.

*879

See United States v. Aluminum Company of America,

148 F.2d 416, 430-31 (2d Cir. 1945);

Power Replacements Corp. v. Air Preheater Company, Inc.,

356 F.Supp. 872, 896-97 (E.D.Pa.1973);

United States v. Kimberly-Clark Corp.,

264 F.Supp. 439, 455-59, 464 (N.D.Cal.1967). A defendant has market power if it can exclude competition from a particular territory, thus permitting it to change the competitive variables of its product without thereby causing other suppliers to enter the market.

See Sullivan

§ 19, at 67. Practical commercial realities govern when defining the relevant geographic market.

Brown Shoe Co., Inc. v. United States,

370 U.S. 294, 336 , 82 S.Ct. 1502, 1529 , 8 L.Ed.2d 510 (1962).

Courts, when appropriate, will recognize geographic submarkets for the purpose of evaluating the merits of antitrust claims.

See id.

at 336-39 , 82 S.Ct. at 1529-31 ;

Erie Sand and Gravel Company

v.

Federal Trade Commission,

291 F.2d 279, 283 (3d Cir. 1961). A submarket exists if a supplier, who competes at parity with other suppliers over most of a broad geographic area, can maintain a significant competitive advantage against all other suppliers within a small section of that broad geographic area. See Case-Swayne Co.,

Inc. v. Sunkist Growers, Inc.,

369 F.2d 449, 456-58 (9th Cir. 1966),

rev’d on other grounds,

389 U.S. 384 , 88 S.Ct. 528 , 19 L.Ed.2d 621 (1967) (applicability of Capper-Volstead Act). Common examples of factors that can result in a local competitive advantage include high transportation costs for bulky items, unilateral advertising directed at a specific community, or the elimination of retailing costs through the establishment of a factory outlet store.

The plaintiff urges -this Court to recognize both a broad geographic market and a relevant geographic submarket for adult open heart surgery. According to the plaintiff’s economic expert, Peter Max, the broad geographic market should encompass the counties of Allegheny, Armstrong, Beaver, Butler, Cambria, Clarion, Elk, Fayette, Forest, Indiana, Jefferson, Washington and Westmoreland in Pennsylvania, Brooke and Hancock in West Virginia, and Jefferson in Ohio. Mr. Max found both supply and demand side evidence to support this definition of the broad geographic market. On the supply side, the six open heart hospitals in Pittsburgh obtained 89% of their open heart patients from these sixteen counties in 1976. On the demand side, a high percentage of the residents of these sixteen counties who underwent open heart surgery in 1976 had their operations performed at one of the six open heart hospitals in Pittsburgh.

For the purpose of evaluating the plaintiff’s antitrust claims, however, Mr. Max urged the Court to focus on a geographic submarket composed of Beaver County and the northwestern section of Allegheny County. The plaintiff alleges that Allegheny General and CTSA possess unlawful market power in this geographic submarket over the delivery of adult open heart surgical services and that the defendants have excluded the plaintiff from performing open heart surgery on patients from this submarket.

In an effort to substantiate the existence of a viable submarket, Mr. Max first noted during his testimony that the Allegheny County Health Department subdivides the county into five districts to “better provide health services and to bring the Health Department closer to the people.” Tr. 2503. The Health Department labels its districts “southeast,” “northeast,” “central,” “northwest” and “southwest.” Allegheny General is the only open heart hospital located in the northwest district, and 55.5% of the open heart procedures that were performed in 1976 at the six Pittsburgh hospitals on residents of that district were performed at Allegheny General. By contrast, only 9.4% of the residents of the southeast district who underwent open heart surgery in 1976 at one of the Pittsburgh hospitals had their operations performed at Allegheny General.

Like the Health Department, Allegheny General also subdivides Allegheny County for planning purposes. The hospital has identified four sectors: east, south, northwest and local. The local sector encompass

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es the Northside area of Pittsburgh, where Allegheny General is located. Mr. Max found further support for the existence of a submarket when he focused on Allegheny General’s open heart patients who reside in each of these four subdivisions of Allegheny County. Two hundred and forty-seven residents of the northwestern and local sectors underwent open heart surgery in 1976 at one of the six Pittsburgh hospitals; surgeons at Allegheny General performed 44.1% of these procedures. Allegheny General obtained only a 10.3% share, however, of the open heart patients from the eastern sector of Allegheny County who underwent surgery at one of the six hospitals in 1976.

Mr. Max expressed the view that Allegheny General’s ability to attract a large percentage of the open heart patients who reside in northwestern Allegheny County indicates that Allegheny General has market power in northwestern Allegheny County, and therefore, that northwestern Allegheny County should be a component in the submarket that the Court will use to evaluate Dr. Robinson’s claims. Employing the same analysis, Mr. Max recommended that the Court exclude eastern and southern Allegheny County from the relevant submarket because Allegheny General has failed to demonstrate an ability to attract a substantial percentage of the open heart patients who reside in those areas.

In addition to northwestern Allegheny County, Mr. Max would include Beaver County in the relevant submarket. The Office of Management and Budget, a federal agency, identifies standard metropolitan statistical areas for the purpose of collecting and publishing statistical information. The agency establishes these areas by grouping counties that have close economic and social links with a particular urban center. The Pittsburgh standard metropolitan statistical area includes the Pennsylvania counties of Allegheny, Beaver, Washington and Westmoreland. Surgeons at Allegheny General performed 70.7% of the open heart operations done at all of the open heart hospitals in Pittsburgh on residents of Beaver County in 1976. In that same year, Allegheny General had a 34.4% share among the six Pittsburgh hospitals of the open heart procedures that were performed on residents of Washington County and a 20.8% share of the open heart procedures that were performed on residents of Westmoreland County. Based on Allegheny General’s predominance in providing open heart surgical services to the residents of Beaver County, Mr. Max concluded that the Court should include Beaver County in the relevant submarket. Although a sizable percentage of open heart patients from Washington and Westmoreland Counties underwent surgery at Allegheny General, Mr. Max did not believe that the submarket should include those counties.

Mr. Max proposed two slightly different submarkets. The first proposed submarket encompasses Beaver County and the Allegheny County Health Department’s northwest district. During 1976, two hundred and forty-seven residents from this area underwent open heart surgery at the six Pittsburgh hospitals. Surgeons at Allegheny General performed one hundred and fifty-one of these operations, which is 61.1% of the total. Allegheny General outdrew its nearest competitor, St. Francis, by four to one. The second proposed submarket contains Beaver County and Allegheny General’s northwestern and local sectors. During 1976, three hundred and thirty-nine residents from this area underwent open heart surgery at the six Pittsburgh hospitals. Surgeons at Allegheny General performed one hundred and seventy-four of these operations, which is 51.3% of the total. The nearest competitor attracted less than one-third as many patients as Allegheny General. The plaintiff asserts that Allegheny General held a monopoly position in either submarket in 1976.

CTSA concentrates its practice at Allegheny General, although its surgeons perform a few operations at Presbyterian University Hospital. In 1976, members of CTSA accounted for nearly all of the open heart procedures that were performed at Allegheny General. Dr. Magovern and other CTSA surgeons performed 61.5% of the total number of open heart operations that

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were performed at the six Pittsburgh hospitals on residents of Beaver County and the Health Department’s northwest district. Likewise, members of CTSA performed 51.9% of the total number of open heart operations that were performed at the six hospitals on residents of Beaver County and Allegheny General’s northwestern and local sectors. Therefore, the proposed geographic submarket for Dr. Magovern and CTSA is identical to the proposed geographic sub-market for Allegheny General. The plaintiff alleges that CTSA held a monopoly position in that submarket in 1976.

The defendants, through their economic expert, also contend that the Court should recognize a broad geographic market and a relevant submarket for adult open heart surgery, but these markets differ from the plaintiff’s proposal. Paul Cook, the defendant’s economic expert, testified that the broad market should include the entire nation and that the relevant submarket should encompass the sixteen counties in Pennsylvania, West Virginia and Ohio that the plaintiff proposes as the broad geographic market. Mr. Cook rejected the proposition that Beaver County and the northwestern portion of Allegheny County comprise the relevant submarket for this case.

In support of a national definition for the broad geographic market, Mr. Cook expressed the opinion that open heart candidates, faced with an extremely delicate operation and financed by a third-party payor, will travel to any location in the United States in order to obtain the highest quality of care. Therefore, he reasoned, the open heart hospitals in Pittsburgh must meet national standards of care established by such institutions as the Texas Heart Institute, Johns Hopkins Medical Center and the Mayo Clinic if they wish to attract patients from even Allegheny County. Should referring doctors and open heart candidates in Western Pennsylvania perceive a significant decline in the quality of care that the Pittsburgh hospitals offer, Mr. Cook predicted that the primary care physicians would refer their patients to surgeons in other areas of the country.

Although Mr. Cook believes that a national market exists for adult open heart surgery, he also has identified a sixteen-county submarket that is serviced by surgeons who operate at the six open heart hospitals in Pittsburgh. A distinct sub-market exists, according to Mr. Cook, because primary care physicians now refer a high percentage of the open heart candidates who reside in these sixteen counties to Pittsburgh surgeons and because the six Pittsburgh hospitals obtain most of their open heart patients from these counties. Many of the referral patterns have become ingrained over time as the doctors developed professional and personal relationships. If the quality of care offered by Pittsburgh surgeons and hospitals deteriorated, the referral patterns would dissolve at different rates depending on the strength of the particular relationship. Mr. Cook believes that the natural reluctance to sever a relationship that has been satisfactory for an extended period would cause the shift from Pittsburgh suppliers to outside suppliers to occur gradually rather than in the form of a sudden stampede. This impediment to the prompt substitution of suppliers creates the submarket, in the opinion of Mr. Cook.

We cannot accept the existence of a national market or a two-county submarket for adult open heart surgery. Rather, we find that the relevant geographic market for the purpose of evaluating Dr. Robinson’s antitrust claims is the sixteen-county area that the plaintiff proposes as the broad market and that the defendants propose as the submarket.

Although the existence of a national market for adult open heart surgical services makes sense in terms of traditional economic theory, practical realities indicate that it rests on two erroneous assumptions. First, Mr. Cook erred when he estimated the magnitude of any future deterioration in the quality of care that might occur at Pittsburgh open heart hospitals. He stated that if the quality of care offered by Pittsburgh-based suppliers deteriorated, the open heart candidates would seek surgical services out

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side the region. After examining the structure of the supply side of the market, we cannot accept the proposition that the quality of care could uniformly deteriorate at all six Pittsburgh hospitals. The cardiothoracic surgeons and the hospitals in the Pittsburgh area strive to provide the best care for their patients. Although some surgeons and hospitals may be more successful than others in providing high quality care, we have seen no evidence, and do not believe, that any would purposely cut corners or reduce the quality of care in order to increase profit. Moreover, the pride that the surgeons take in their work motivates them to maintain national standards of care by keeping abreast of the latest technical advancements in the field. Therefore, a decline in the level of care that one surgeon or hospital provides would have no effect on the level of care that another surgeon or hospital provides. Any one of a large number of catalysts, including the advanced age of a surgeon, personal problems or a low frequency of operations, can result in a decline in the quality of care; but at any one time, most surgeons and hospitals in Pittsburgh are able to provide high quality care. We cannot imagine that a large percentage of the open heart candidates and their primary care physicians would ever perceive the quality of care available in Pittsburgh as uniformly substandard, and therefore feel compelled to look outside of the region for a cardiothoracic surgeon.

33

The second erroneous assumption that underlies Mr. Cook’s argument for recognition of a national market is that open heart candidates are completely mobile and are willing to travel anywhere in the United States for their operations. Although patients do want quality care and although the third-party payor system shields' the patients from the cost of the medical services, most patients do not want to be separated from their families while enduring the delicate operation and the extended period of recuperation. Therefore, they must either identify a local supplier who can provide high quality care or they must absorb travel and lodging expenses for family members who accompany them to distant hospitals. In light of our conclusion above that open heart candidates and their pri7 mary care physicians always should be able to locate suppliers in Western Pennsylvania who can provide high quality care, we believe that few patients would choose to incur the additional expense and inconvenience associated with leaving the region. Therefore, we will not consider a national market when evaluating the merits of Dr. Robinson’s antitrust claims.

We also conclude that the facts established during the presentation of this case do not support the existence of a submarket that spans only two counties. The plaintiff’s argument in favor of a two-county submarket has two main points. First, several organizations have decided that it is appropriate for their purposes to subdivide and/or to group certain counties in Western Pennsylvania. Second, a high percentage of the residents from the proposed sub-market who undergo open heart surgery have their operations performed at one of the six Pittsburgh hospitals, and of the residents who select a Pittsburgh hospital, over half select Allegheny General and CTSA. Therefore, according to the plain

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tiff, the Court should group Beaver County and northwestern Allegheny County because Allegheny General has obtained a large market share of the open heart procedures performed on patients from that area. We find serious defects in both parts of the plaintiff’s argument.

The decisions by the Allegheny County Health Department and Allegheny General to subdivide Allegheny County for the purpose of facilitating the planning and the delivery of general health and medical care have little probative value when evaluating the propriety of subdividing Allegheny County for the purpose of determining Allegheny General’s market power over the delivery of adult open heart surgical services. Allegheny General, as its name suggests, supplies a full range of medical services to the community, but the scope of the community that it supplies varies according to the particular type of medical service provided in a given situation. For example, Allegheny General provides emergency treatment primarily to residents from the North Side area of Pittsburgh, but its sports medicine clinic draws patients from all of Southwestern Pennsylvania. The community that Allegheny General supplies expands as the service in question becomes more specialized. Allegheny General’s coverage reaches its geographic maximum in the delivery of tertiary care because most community hospitals could not economically and safely

34

provide such care. Thus, each type of medical service has a particular geographic market.

Cf. United States v. Philadelphia National Bank,

374 U.S. 321, 360-61 , 83 S.Ct. 1715, 1739-40 , 10 L.Ed.2d 915 (1963) (Court, determining relevant geographic market, recognizes that some banking services are more local in nature than others and that each customer has distinct economic scale that affects customer’s ability to conduct its banking over a distance). Subdivisions of a county that relate to the . delivery of general health and medical services are not appropriate guidelines for a court to use when determining a relevant geographic market for the delivery of adult open heart surgical services.

Likewise, the lines drawn by the Office of Management and Budget to designate the Pittsburgh standard metropolitan statistical area have no correlation to the appropriate boundaries of a relevant geographic market for adult open heart surgery. Tertiary care coverage by a regional referral hospital may well extend beyond the zone of an urban center’s general economic and social impact. The relevance of the Pittsburgh standard metropolitan statistical area to the present case is further undermined by the plaintiff’s decision to include in his proposed submarket only two of the four counties that compose the statistical area. Frankly, we do not understand why the plaintiff mentioned the Pittsburgh standard metropolitan statistical area if he was going to select from the four counties only those that yield the most favorable statistics.

A more logical reason for recognizing a two-county submarket originated in the testimony of Alexander McAliley, the Executive Director of North Hills Passavant Hospital, who described Allegheny General’s role in the Northwest Allegheny Hospital Corporation (“NAHC”). Nine hospitals, seven general hospitals and two specialty hospitals, formed NAHC for the purpose of increasing the efficiency of each of the member hospitals by consolidating services where possible. According to Mr. McAliley, NAHC’s service area encompasses the northern and northwestern sections of Allegheny County, the southeastern section of Beaver County, and the southern section of Butler County. Within this service area, Allegheny General is the only hospital that offers a broad range of tertiary care. Mr. McAliley testified that the hospitals within NAHC attempt to support each other by referring patients to the member hospital that is best equipped to provide the type of care that the particular patient requires. The plaintiff asks us to draw the inference that Allegheny General and CTSA have mo

*884

nopoly power within NAHC’s service area because the member hospitals refer open heart patients to Allegheny General. Based upon this inference, he contends that we should recognize a relatively small sub-market within Allegheny General’s total area of coverage.

We note first that NAHC’s service area is not identical with the plaintiff’s proposed submarket. The member hospitals serve southern Butler County, which the plaintiff has not included in the proposed submarket, and the proposed submarket contains all of Beaver County even though the member hospitals only provide coverage for the southeastern portion of that county. Furthermore, NAHC has not affirmatively addressed the delivery of open heart surgical services. Mr. McAliley testified that the member hospitals have established a consolidated laundry service and have developed plans for the delivery of services in the areas of alcohol and drug abuse, rehabilitation, pediatrics and obstetrics, but that they have not made a specific study of open heart surgery.

In addition to the two minor discrepancies just discussed, the plaintiff’s position is fatally flawed because it rests on an erroneous premise. Mr. McAliley’s testimony did not establish that NAHC provides Allegheny General and CTSA with an effective monopoly over open heart procedures for patients who reside in NAHC’s service area. The witness stated that the member hospitals want to support each other and that they attempt to persuade the doctors on their respective staffs to refer patients to doctors on the staffs of other member hospitals. He freely admitted on cross-examination, however, that “[y]ou do not tell a doctor where he takes his patient. You can lead him and suggest, but you do not tell him.” Tr. 1435. Exercising the independence that they possess, some physicians on the staffs of member hospitals do refer open heart patients to cardiothoracic surgeons who do not have staff privileges at Allegheny General. When asked by defense counsel to explain why physicians at member hospitals would choose to refer patients to hospitals other than Allegheny General, Mr. McAliley listed the following reasons:

[Tjhey may not have a personal contact with the personnel that would be doing the coronary surgery.

They may have personality differences of opinion.

They may have preferences of skills that they have grown familiar with at other facilities.

They send where they feel most comfortable in referring.

Tr. 1437-38.

When defining the relevant geographic market in an antitrust action, we must focus on the area of effective competition. Mr. McAliley’s testimony provided two important items of information about the area of effective competition for adult open heart surgery in Southwestern Pennsylvania. First, doctors on the staffs of NAHC member hospitals have the freedom to refer open heart patients to surgeons who perform their operations at hospitals other than Allegheny General. Second, some doctors on the staffs of member hospitals exercise their freedom to refer open heart patients to surgeons outside the NAHC system. We infer from this information that some referring physicians in northwestern Allegheny County, southeastern Beaver County and southern Butler County believe that acceptable alternate sources of supply exist for adult open heart surgical services.

Unquestionably, a substantial percentage of the open heart patients who reside in the proposed submarket have their operations performed at Allegheny General by CTSA surgeons. The defendant hospital, however, also had a 50% or better market share in 1976 in the delivery of adult open heart surgical services by Pittsburgh hospitals to residents of Bedford, Huntingdon, Indiana, Mercer and Somerset Counties, but the plaintiff did not include these counties in his proposed submarket. AGH Exh. 165. No identifiable factor distinguishes the proposed submarket from surrounding areas, and the plaintiff’s economic expert admitted that Allegheny General and the CTSA

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surgeons do not discriminate against residents of the proposed submarket in quality of service or price. Tr. 2875-76.

The acquisition of a 50% to 60% share in the proposed submarket does not alone prove the existence of market power or the absence of effective competition.

Cf. Weeks Dredging & Contracting, Inc. v. American Dredging Co.,

451 F.Supp. 468, 490-92 (E.D.Pa.1978) (although particular dredging company may do most of its work in particular harbor, customers in that harbor have choice because twelve dredging companies compete along entire Atlantic coast line). “Although actual sales patterns can . . . illuminate the geographic character of a market, we should be aware that actual patterns can also be virtually meaningless.” P. Areeda & D. Turner, II

Antitrust Law

§ 522, at 357 (1978).

Cf.

Landes & Posner,

Market Power in Antitrust Cases,

94 Harv. L.Rev. 937, 947 (1981) (market share is only one of several factors that should be used in determining market power). The plaintiff’s economic expert testified that a relevant geographic market should encompass the area over which buyers realistically can look for alternate sources of the product and/or over which sellers realistically can provide the product. Tr. 2777-78.

Accord, United States v. Empire Gas Corp.,

537 F.2d 296, 304 (8th Cir. 1976),

cert. denied,

429 U.S. 1122 , 97 S.Ct. 1158 , 51 L.Ed.2d 572 (1977). The validity of the plaintiff’s proposed sub-market therefore depends on a determination of the area over which open heart candidates realistically could look for alternate suppliers if Allegheny General and CTSA were to change the competitive variables to the disadvantage of the patients.

35

All six open heart hospitals in Southwestern Pennsylvania are located within the City of Pittsburgh, and only a few miles separate any two of them.

36

Pittsburgh has an unusual geographic configuration. The heart of the downtown area lies between the Allegheny River, which flows southwest toward the city from the north, and the Monongahela River, which flows northwest toward the city from the south. These two rivers meet at the “Point” and form the Ohio River, which flows away from the city in a westerly direction.

Allegheny General is located just to the north of the Allegheny River. The other five hospitals that offer adult open heart surgery lie between the Allegheny and Monongahela Rivers. Several bridges over the Allegheny River connect the Northside area of Pittsburgh with the downtown area.

The geographic proximity of all of the open heart hospitals means that most patients would not attach any significance to the relative locations of the hospitals. We cannot imagine that a referring physician would make a referral to one of the six hospitals on the basis of its location or that a patient would overrule his doctor’s advice because he or she wanted to be a mile or two closer to home.

In 1976, a high percentage of the residents of sixteen counties who underwent open heart surgery chose to have their operations performed in Pittsburgh, and almost all of these sixteen counties were represented at each of the six open heart hospitals. If the quality of care offered by Allegheny General and CTSA were to decline, the residents of this sixteen-county area realistically could turn to cardiothoracic surgeons who operate at the other five Pittsburgh hospitals.

37

Therefore, we hold

*886

that the relevant geographic market includes, at the minimum, the counties of Allegheny, Armstrong, Beaver, Butler, Cambria, Clarion, Elk, Fayette, Forest, Indiana, Jefferson, Washington and Westmoreland in Pennsylvania, Brooke and Hancock in West Virginia, and Jefferson in Ohio.

VII.

The Legal Action: Antitrust Claims

A. Overview

Equipped with a definition of the relevant product and geographic markets, one now is prepared to explore the merits of Dr. Robinson’s antitrust claims. The plaintiff has asserted four separate antitrust claims under section 1 of the Sherman Act, 15 U.S.C. § 1 (1976), and three separate claims under section 2 of the Sherman Act, 15 U.S.C. § 2 (1976).

Section 1 of the Sherman Act proscribes every contract, combination or conspiracy in restraint of trade that affects interstate commerce. The plaintiff alleges that, in violation of section 1, Dr. Magovern and CTSA combined or conspired with representatives of Allegheny General (1) to unreasonably restrain trade that affects interstate commerce, (2) to engage in a group boycott against or a concerted refusal to deal with Dr. Robinson, (3) to deny Dr. Robinson access to a facility that is essential to the practice of his profession and (4) to commit unfair acts with the specific intention of eliminating Dr. Robinson as a competitor in the practice of adult open heart surgery.

Section 2 of the Sherman Act prohibits anyone from monopolizing, attempting to monopolize or conspiring to monopolize any part of interstate commerce. The plaintiff alleges that, in violation of section 2, the defendants jointly and/or severally have monopolized or have attempted to monopolize the delivery of adult open heart surgical services in the relevant geographic sub-market and that the defendants have conspired to monopolize the relevant product in the relevant geographic submarket.

B. Section 2 Claims

1. Monopoly

Our definition of the relevant geographic market has its most graphic impact on the plaintiff’s section 2 claim of monopoly. Dr. Robinson contends that Allegheny General and CTSA have monopolized the delivery of adult open heart surgical services in a sub-market that consists of Beaver County and northwestern Allegheny County. We have held that no such submarket exists, and that all six Pittsburgh open heart hospitals compete in a sixteen-county area of Western Pennsylvania, Eastern Ohio and Northern West Virginia. Consistent with this holding, we now will determine whether any of the defendants has monopolized the relevant product in the sixteen-county area.

In order to establish that a defendant has committed the offense of monopolization, the plaintiff must prove “(1) the possession of monopoly power in the relevant market and (2) the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.”

United States v. Grinnell Corp.,

384 U.S. 563, 570-71 , 86 S.Ct. 1698, 1703-04 , 16 L.Ed.2d 778 (1966). A defendant possesses monopoly power if it has the ability to change the competitive variables of a product to the disadvantage of consumers without causing effective competitors to enter the relevant market.

See United States v. E. I. du Pont de Nemours & Co.,

351 U.S. 377, 391-92 , 76 S.Ct. 994, 1004-05 , 100 L.Ed. 1264 (1956);

American Tobacco Co. v. United States,

328 U.S. 781, 811 , 66 S.Ct. 1125, 1139 , 90 L.Ed. 1575 (1946).

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“The [section] 2 market definition looks to the existence of competitors as evidence of countervailing power which would preclude monopolization.”

Columbia Metal Culvert Company, Inc. v. Kaiser Aluminum & Chemical Corporation,

579 F.2d 20 , 27 n.11 (3d Cir.),

cert. denied,

439 U.S. 876 , 99 S.Ct. 214 , 58 L.Ed.2d 190 (1978). Allegheny General faces competition in the relevant geographic market from five other Pittsburgh open heart hospitals. In 1976, cardiothoracic surgeons performed nineteen hundred and twelve open heart procedures at the six Pittsburgh hospitals; surgeons at Allegheny General performed 29.5% of these procedures. PI. Exh. 110. Shadyside Hospital, Allegheny General’s most successful competitor, garnered a 22.1% share of the open heart procedures that were performed at the Pittsburgh hospitals.

Id.

Allegheny General’s market share increased to 32.6% in 1977 and to 36.4% in 1978, but it declined to 34% in 1979. PI. Exh. 112.

In

United States v. Aluminum Company of America,

148 F.2d 416 (2d Cir. 1945), the Second Circuit, considering the appeal on referral from the United States Supreme Court, stated that a ninety percent market share “is enough to constitute a monopoly; it is doubtful whether sixty or sixty-four percent would be enough; and certainly thirty-three percent is not.”

Id.

at 424 . Based upon Allegheny General’s 30% market share and the existence of at least five viable competitors,

38

we hold that Allegheny General does not possess monopoly power over the delivery of adult open heart surgical services in the relevant geographic market.

Accord, Yoder Brothers, Inc. v. California-Florida Plant Corp.,

537 F.2d 1347, 1368 (5th Cir. 1976),

cert. denied,

429 U.S. 1094 , 97 S.Ct. 1108 , 51 L.Ed.2d 540 (1977) (as a matter of law, company with 20% market share cannot be guilty of monopolization). Allegheny General does not have the ability to lower the quality of its product without losing patients to other hospitals. All physicians who testified on the subject stated that they would refer their patients to surgeons on the staffs of other hospitals if they perceived a diminution in the quality of care that Allegheny General provided.

Likewise, CTSA does not possess monopoly power over the delivery of adult open heart surgical services in the relevant geographic market. Many other cardiothoracic surgeons and surgical groups in the Pittsburgh area offer the same services that CTSA offers. CTSA cannot lower the quality of care that it provides without losing volume, and it cannot prevent competitors from practicing at the other five hospitals in the relevant geographic market.

Cf. Sokol v. University Hospital, Inc.,

402 F.Supp. 1029, 1030 (D.Mass.1975) (surgeon at one Boston Hospital does not have monopoly over delivery of cardiac surgery in relevant geographic market because eight hospitals in Boston area are equipped to host open heart procedures).

Although we have rejected the plaintiff’s contention that a geographic submarket exists, we acknowledge that the ability of Allegheny General and CTSA to attract a high percentage of the open heart candidates from Beaver County, Indiana County and northwestern Allegheny County who undergo surgery at Pittsburgh hospitals looks suspicious upon initial examination. A more careful review of the facts reveals, however, that this success does not result from anticompetitive behavior, but rather, it results from the natural development of referral patterns.

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As we discussed earlier, few patients in need of open heart surgical services personally know of a cardiothoracic surgeon. Therefore, most open heart candidates rely on their primary care physician or their cardiologist to recommend a surgeon. If the surgeon achieves satisfactory results on the first referral, the referring physician probably will recommend that surgeon to future patients. If the surgeon continues to achieve satisfactory results, a referral pattern will develop and eventually will become established.

Dr. Robinson recognizes the crucial role that referral patterns play in developing and maintaining a practice in open heart surgery. On cross-examination by counsel for Allegheny General, Dr. Robinson gave the following testimony:

Q [0]pen heart surgery patients . . . are referred to surgeons like yourself by cardiologists who have catheterization privileges or catheterization abilities, as well as by cardiologists and other physicians who do not have the capacity to do cardiac catheterizations. Isn’t that true?

A Yes.

Q And in fact many of the open heart surgery patients are referred by physicians who have no staff privileges at hospitals where open heart surgery is performed. Isn’t that correct?

A I would say that. Oh, yes, I would have to say that.

Q And many of your patients would be referred by physicians in that category, aren’t they?

A Yes.

Q Isn’t it true, Dr. Robinson, that these physicians who don’t have staff privileges at open heart surgery hospitals tend to make their referrals to the surgeons who they think will do the best job, that are the best qualified to perform that surgery?

A Well, generally it is on a basis of an established referral pattern. That’s the advantage of being a senior man, being there. That’s why young doctors work for senior doctors.

Q But initially isn’t it true that these men refer to the doctors they think will do the best job for them?

A Well, that’s one of the reasons.

Q And that these referral patterns are built up over time?

A Yes. ... It is a long term referral pattern. It is very difficult once they are established to break through them and establish yourself on your own.

Q All right, because once a referring physician makes the relationship with the surgeon and becomes satisfied with the quality of his work and with his results, he tends to keep that relationship, doesn’t he?

A Yes. I’d say that’s correct.

Q And do younger referring physicians tend to refer to younger surgeons?

A Generally that’s about really the — I would say so, but it can be a senior man referring to you.

Q Older referring physicians, having established their referral patterns a long time previously, tend to stay with the surgeon with whom they already have established a pattern, provided they are satisfied with the results?

A I’d say that’s fair.

Q. Is it true that referring physicians tend to watch the results of their surgeons very closely?

A Oh, yes.

Tr. 1217-19.

Open heart surgery entails substantial risks, so a referring physician, in order to satisfy himself psychologically, must feel comfortable with the surgeon whom he recommends. The referring physician will base his selection of a surgeon primarily on the surgeon’s reputation in the medical community, any personal contact that he has had with the surgeon, and the results that the surgeon achieved on any prior patients whom the physician referred. Once a physician has found a surgeon in whom he has confidence, he naturally will continue to recommend that surgeon. The development of such lines of referral from physicians to a particular surgeon does not vio

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late the antitrust laws.

Cf. Joseph E. Seagram & Sons, Inc.

v.

Hawaiian Oke & Liquors, Ltd.,

416 F.2d 71, 76-80 (9th Cir. 1969),

cert. denied,

396 U.S. 1062 , 90 S.Ct. 752 , 24 L.Ed.2d 755 (1970) (two manufacturers, acting independently and without anti-competitive intent but with knowledge of the other’s actions, did not commit

per se

violation of section 1 of the Sherman Act by terminating exclusive distributor and granting an exclusive distributorship to another company; manufacturer has legitimate interest in the quality, competence and stability of its distributors);

Lawlor v. National Screen Service Corp.,

270 F.2d 146, 152 (3d Cir. 1959),

cert. denied,

362 U.S. 922 , 80 S.Ct. 676 , 4 L.Ed.2d 742 (1960) (independent decisions by various film producers to grant exclusive licenses to particular company to provide film accessories does not constitute

per se

violation of antitrust laws).

Although lines of referral do not implicate the antitrust laws, they do present young surgeons with a problem. Using his experience with Dr. Giacobine as an example, Dr. Robinson discussed the difficulty that a young surgeon faces when competing for patients with long-established surgeons.

Q And you testified . . . that you developed or were able to develop a sizable number of patients at McKeesport after you established an office out there?

A Yes.

Q All right. Did you have difficulty establishing a referral pattern and a base for patients prior to that time?

A ....

Of course, I am not going to walk — Dr. Giacobine is long established in McKeesport. That’s one of his primary referring areas, and you are not going to just, you know, do a lot of cases in an area where another fellow is well established.

Q Are you now well established in McKeesport?

A Well, as much as anybody else. I mean it is sort of a—

Q I am sorry.

A As I say, it is sort of a wide open staff out there and there is a lot of cardiovascular surgeons there.

Q Don’t you generate a substantial volume of patients from McKeesport Hospital?

A Well, not an overwhelming thing. I would say Dr. Giacobine still gets the lion’s share of what goes on out there.

Q And he has been there longer than anybody else?

A Yes. He was the first one there of any significance, I think.

Q And he would have been the first one to have established these referral lines?

A Yes.

Q And that accounts in large part for the fact that he still gets a lot of patients from that area, does it not?

A That and he does good surgery.

Tr. 1222-23.

Q Did the time come when you began to do open heart surgery at West Penn Hospital as well?

A Yes.

Q How did that come about?

A We felt that the structure of West Penn was more meaningful in trying to establish a young group. Now St. Francis was so structured that Dr. Giacobine was there and he was a very good cardiac surgeon. He had a very well established reputation and the people in the catheterization lab were limited in numbers of men. They did all the catheterizations from Dr. Giacobine. It was very difficult to try to establish yourself in that set of circumstances.

West Penn had an open staff. They were on the other hand trying to increase the number of cases they were doing, . . .

Q Now when you did the open hearts at West Penn, where did those patient referrals come from?

*890

A Primarily the younger cardiologists there on the staff.

Tr. 206, 208.

Recognizing the obstacle that referral patterns present, many young surgeons associate themselves with an older, established surgeon rather than attempting to build a solo practice. These young surgeons assist the established surgeon during operations, provide coverage for patients when the established surgeon is not available, and perform surgery on the overflow of patients whom the established surgeon attracts. The system is analogous to the practice of law in the multiperson firm.

If a young surgeon eschews an association with an older surgeon and wishes to develop a solo open heart practice, he must concentrate his efforts to obtain patients on young primary care physicians and young cardiologists who have not yet established referral patterns.

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Moreover, the young surgeon must provide the “three A’s”: ability, availability and affability. He must be willing to perform less complex surgery to “prove” his ability; he must offer service when others are less willing or unable, such as in emergencies or during the late hours; and he must be personable. After leaving Dr. Giacobine, Dr. Robinson pursued such a strategy by joining the staffs of several additional hospitals in order to make contact with as many referring physicians as possible. He impressed many of these physicians by his willingness to provide coverage at any time and on any day, his willingness to travel to outlying hospitals for consultations, and his technical proficiency when performing non-open heart procedures. This strategy has yielded the plaintiff a tremendous volume of non-open heart cases and an increasing volume of open heart cases. Drs. Robinson and Martin performed forty open heart procedures in 1975, thirty-two such procedures in 1976, forty-two such procedures in 1977, sixty-seven such procedures in 1978 and sixty-eight such procedures in 1979. AGH Exh. 166. Some of these open heart patients resided in Beaver County and northern Allegheny County, which are the areas that Allegheny General and CTSA allegedly have monopolized. Dr. Robinson had his greatest success in this two-county area in 1978, when he attracted eight open heart patients from Beaver County and ten open heart patients from northern Allegheny County.

40

AGH Exh. 164.

A new competitor entering a market must attempt to overcome loyalty to preexisting suppliers and tap new sources of demand. A new entrant in the field of open heart surgery must follow these same basic principles. The substitution by open heart candidates of quality of care for price as the primary competitive variable makes the young surgeon’s path more difficult, however. A new supplier of laundry soap, for example, can attract consumers by undercutting the price that the established suppliers charge. A new supplier of open heart surgical services does not have this option; rather, the young sole practitioner, at a minimum, must convince referring physicians that he has the technical ability to successfully perform one of the most difficult surgical procedures now attempted. Even if he does possess the technical ability, however, many physicians will see no reason to shift their referrals away from a surgeon in whom they have developed confidence.

If a young surgeon wishes to perform a large quantity of open heart procedures immediately, he must join an established surgical group that has cultivated lines of referral over an extended period of time. Dr.

*891

Robinson initially followed such a course by associating himself with Dr. Giacobine at St. Francis. The Giacobine group has successfully competed with CTSA throughout the relevant geographic market, and Dr. Giacobine has attracted more open heart patients than he personally can handle. In late 1974, however, Dr. Robinson decided to strike out on his own. Not surprisingly, the plaintiff’s volume of open heart operations declined sharply because few referring physicians in the geographic market knew of John Robinson. Over the past few years, Dr. Robinson has worked to develop a reputation as a skilled surgeon by performing primarily non-open heart procedures.

Congress did not pass the antitrust laws in order to insure that every young surgeon can perform the type and number of procedures that he considers to be most satisfying. Rather, Congress sought to insure that consumers have a choice. Although CTSA has a large number of lines of referral in Beaver C

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