Amicus Curiae Brief — Summit Health, Ltd. v. Pinhas

In The AUG 10 1990

Supreme Court of the United Stafedoserr F. sPaniow, ur.

CLERK

October Term, 1990

SUMMIT HEALTH, LTD., MIDWAY HOSPITAL

MEDICAL CENTER, THE MEDICAL STAFF OF

MIDWAY HOSPITAL MEDICAL CENTER, MITCHELL

FELDMAN, AUGUST READER, M.D., ARTHUR N.

LURVEY, M.D., JONATHAN I. MACY, M.D., JAMES J.

SALZ, M.D., GILBERT PERLMAN, M.D., MARK

KADZIELSKI AND WEISSBURG AND ARONSON,

INC.,

Petitioners,

SIMON J. PINHAS, M.D.,

Respondent.

On Writ of Certiorari

to the United States Court of Appeals

for the Ninth Circuit

BRIEF OF THE ARIZONA HOSPITAL ASSOCIATION,

CALIFORNIA ASSOCIATION OF HOSPITALS AND

HEALTH SYSTEMS, HEALTHCARE ASSOCIATION

OF HAWAII, IDAHO HOSPITAL ASSOCIATION,

MONTANA HOSPITAL ASSOCIATION, NEVADA

HOSPITAL ASSOCIATION, OREGON ASSOCIATION

OF HOSPITALS AND WASHINGTON STATE

HOSPITAL ASSOCIATION, AS AMICI CURIAE IN

SUPPORT OF PETITIONERS

LEWIS AND ROCA

John P. Frank

Counsel of Record

Andrew S. Gordon

Beth Schermer

40 North Central Avenue

Phoenix, Arizona 85004

(602) 262-5311

Attorneys for Amici Curiae

ppd ele

sh

C. Peer Review Activities May or May Not

Substantially Affect Interstate Com-

MSS SP a

Il. A Per Se Rule That Hospital Peer Review

en

Required By McLain .............:c00c0e0000+

A. McLain Does Not Mandate or Suppor

the Ninth Circuit’s Decision in Pinhas...

B. Pinhas Ignores McLain’s Standards

CONCLUSION

TABLE OF AUTHORITIES

Case Page

Ball Memorial Hospital v. Mutual Hospital Insur-

ance, Inc., 784 F.2d 1325 (7th Cir. 1986) ................ 4

Bredice v. Doctors Hospital, 50 F.R.D. 249 (D.D.C.

1970), aff'd, 479 F.2d 920 (D.C. Cir. 1973).............. 4

Cardio-Medical Associates v. Crozer-Chester

Medical Center, 721 F.2d 68 (3d Cir. 1983)............ 11

Crane v. Intermountain Health Care, Inc., 637 F.2d

715 (10th Cir. 1980) 10, 14

Darling v. Charleston Community Memorial Hospi-

tal, 33 Ill. 2d 326, 211 N.E.2d 253 (1965), cert.

denied, 383 U.S. 946 (1966) 5

Doe v. St. Joseph’s Hospital of Fort Wayne, 788

F.2d 411 (7th Cir. 1986) 6, 13

Elam v. College Park Hospital, 132 Cal. App. 3d

332, 183 Cal. Rptr. 156 (1982) 5

Furlong v. Long Island College Hospital, 710 F.2d

922 (2d Cir. 1983) 10, 13

Hayden v. Bracy, 744 F.2d 1338 (8th Cir. 1984) ......7, 10, 13

Hospital Corp. of America v. Federal Trade Com-

mission, 807 F.2d 1381 (7th Cir. 1986), cert.

denied, 481 U.S. 1038 (1987) 8,9

Kartell v. Blue Shield of Massachusetts, 749 F.2d

922 (Ist Cir. 1984), cert. denied, 471 U.S. 1029

(1985) - 8

McLain v. Real Estate Board of New Orleans, 444

U.S. 232, 100 S. Ct. 502, 62 L. Ed. 2d 441 (1980) .. passim

Pinhas v. Summit Health, Ltd., 894 F.2d 1024 (9th

Cir. 1989) passim

Purcell v. Zimbelman, 18 Ariz. App. 75, 500 P.2d

335 (1972) ..........-2+- 6

iii

TABLE OF AUTHORITIES CONTINUED

Case Page

Rhee v. El Camino Hospital District, 201 Cal. App.

3d 477, 247 Cal. Rptr. 244 (1988) ..........ssseeseseeeeees 7

Sarin v. Samaritan Health Center, 813 F.2d 755

aici ihaidheit tcacnnestnnnipeenaticbeentecsencee 7,9, 13

Seglin v. Esau, 769 F.2d 1274 (7th Cir. 1985) ............ 10

Setliff v. Memorial Hospital of Sheridan County,

850 F.2d 1384 (10th Cir. 1988) ...........ccccccseeeereeeees 7

Shahawy v. Harrison, 778 F.2d 636 (11th Cir. 1985),

amended, 790 F.2d 75 (11th Cir. 1986) ............00000+- i”

Stone v. William Beaumont Hospital, 782 F.2d 609

, etl ieiiieiccccccvitnnilintbinicesenciomettetaintireee 10, 13

Thompson v. Wise General Hospital, 707 F. Supp.

849 (W.D. Va. 1989), aff'd, 896 F.2d 547 (4th Cir.

1990) petition for cert. filed, April 27, 1990............ 9, 10

Western Waste Service Systems v. Universal Waste

Control, 616 F.2d 1094 (9th Cir.), cert. denied,

I On ee oe 11

Rules, Regulations and Statutes

Arizona Revised Statutes Annotated:

EEE SSE TT TEE 4,5

California Business & Professions Code.

I attiicninitcicrrnesenmenseennmmmrseesnetsecaeseneveessencece 4

i rcinceriincagahdncinavcinibecesesoneneusnece 4

California Civil Code:

§§ 43.7-43.8 (West 1982 & Supp. 1990).............00+. 4

California Evidence Code:

§§ 1156-1157 (West 1986 & Supp. 1990)................ 4

iv

TABLE OF AUTHORITIES CONTINUED

Rules, Regulations and Statutes Page

Hawaii Revised Statutes:

Be itittreeneicescnnareccesccnndeunisennsindascnsanies 4

8 AA ln A ET 4

Idaho Code:

§§ 39-1392 & 39-1393 (1985 & Supp. 1990)........... 4

Montana Code Annotated:

ins ratesetcetnnescnienaneres 4

EEE TTT 4

Nevada Administrative Code:

Oy iN aikteccinssinctccnnrocinindsnncsnenbine 4

Nevada Revised Statutes:

Ee a 4

FE 4

Oregon Revised Statutes:

i itintanithhinntniattintnititeegiiereiitiitasimaces 4

UN iii ice ti ecinitiihiteepetilil 4

Washington Revised Code Annotated:

§§ 4.24.240-4.24.260 (1988 & Supp. 1990).............. 4

ET eee ee ee 4

Washington Revised Statutes:

Be ctehidteiclinsdihbtidiclinecetnctstannitectiaclstacstilicseusedes 5

Other Authorities

“The Report of the Joint Task Force on Hospital-

Medical Staff Relationships,” American Hospital

Association & the American Medical Association

Vv

TABLE OF AUTHORITIES CONTINUED

Other Authorities

P. Areeda and H. Hovenkamp, Antitrust Law,

§ 232.1 (Supp. 1989).........ccecscssssrersrscsrseeersenencseseesees

Gosfield, “Medical Peer Review Protection in the

Health Care Industry,” 52 Temp. L.Q. 552 (1979).

H.R. Rep. No. 99-903, 99th Cong., 2d Sess. 3 (1986),

reprinted in 1986 U.S. Code Cong. & Admin.

Joint Commission on Accreditation of Healthcare

Organizations Accreditation Manual for Hospi-

FRESE TRS aes eee aC O CL Ce

P. Kissam, W. Webber, L. Bigus & J. Holzgraefe,

“Antitrust and Hospital Privileges: Testing the

Conventional Wisdom,” 70 Calif. L. Rev. 595

Ce aintaiiaiertina hited ahicccatierteesenensidiniadenniietiatintmannamen

McCain, “Protection and Disclosure of Medical

Peer Review Information,” Health Law Hand-

ET A ee ie oe ee

Morter, “The Health Care Quality Improvement

Act of 1986: Will Physicians Find Peer Review

More Inviting?” 74 Va. L. Rev. 1115 (1988)...........

Note, “Expanding Federal Antitrust Jurisdiction: A

Close Look at McLain v. Real Estate Board,

Inc.,”” 19 Hous. L. Rev. 143 (1981)....................000000

Ruane, “Antitrust Implications of Medical Peer Re-

view: Balancing the Competing Interests,” 15

Pepperdine L. Rev. 111 (1987) .........ccsscsssscsseeseeeees

Page

11

11

11

1

QUESTION PRESENTED

Does a claim under Section 1 of the Sherman Act, which

fails to allege any nexus between the allegedly anticompeti-

tive activity and interstate commerce, nevertheless meet the

jurisdictional requirements of the Sherman Act, as inter-

preted by this Court in McLain v. Real Estate Board of New

Orleans, 444 U.S. 232, 100 S. Ct. 502, 62 L. Ed. 2d 441

(1980)? 2

2

INTEREST OF THE AMICI CURIAE

Amici Curiae are state hospital associations located in the

Ninth Circuit.! The hospital associations joining in this

brief collectively account for 894 hospitals in Arizona, Cali-

fornia, Hawaii, Idaho, Montana, Nevada, Oregon and

Washington.” Each amicus association and its member hos-

pitals are committed to maintaining high quality medical

and hospital care. An essential part of establishing and

monitoring quality care is local hospital peer review — the

review by physician medical staff members of the profes-

sional practices and patient care at a specific Sospital.

SUMMARY OF ARGUMENT

The Ninth Circuit effectively established a conclusive pre-

sumption that all peer review activity affects interstate

commerce within the meaning of Section 1 of the Sherman

Act, when it held:

[P]jeer-review proceedings have an effect on interstate

commerce, a fact that can hardly be disputed. [Peer re-

view] proceedings affect the entire staff at [a hospital]

and thus affect the hospital’s interstate commerce.

Pinhas v. Summit Health, Ltd., 894 F.2d 1024, 1032 (9th

Cir. 1989). This rule is contrary to this Court’s holding in

' The consents to file this brief, as required by Rule 37, have been sepa-

rately filed with the Clerk.

? The hospital members of each amicus association account for the ma-

jority of the licensed hospitals in their states. The Arizona Hospital

Association represents 83 member hospitals of a total of 100 hospitals in

Arizona. The California Association of Hospitals and Health Systems has

a membership of 477 hospitals out of a total of 560 licensed facilities in

that state. Thirty of the 32 hospitals in Hawaii belong to the Healthcare

Association of Hawaii. The Idaho Hospital Association includes 51 of the

52 hospitals in that state as members. Fifty-eight of the 60 licensed hospi-

tals in Montana are members of the Montana Hospital Association; the

Nevada Hospital Association similarly includes as members 20 of 27 hos-

pitals in that state. The Oregon Association of Hospitals encompasses 69

member hospitals, with only three nonmember hospitals. The Washington

State Hospital Association counts 106 hospital members ‘rom a) tota! of

116 hospitals in Washington.

3

McLain v. Real Estate Board of New Orleans, 444 U.S. 232

(1980), that a plaintiff must allege and prove a demonstrabie

nexus between the defendant’s alleged anticompetitive ac-

tivity and interstate commerce and that “as a matter of

practical economics” the challenged activity has a substan-

tial effect on interstate commerce.

The present case involves a hospital’s decision, as part of

its peer review activities, suspending a physicians medical

staff privileges. The problems presented by the Ninth Cir-

cuit’s opinion are twofold. First, it mischaracterizes hospital

peer review activities by assuming without basis that these

activities always affect a hospital’s entire staff and therefore

have a substantial effect on interstate commerce. This as-

sumption is factually incorrect; while some hospital peer re-

view activities may affect interstate commerce, others clearly

do not. Second, under the Ninth Circuit rule, all peer review

activities automatically meet the interstate commerce re-

quirement for Sherman Act jurisdiction. The Ninth Circuit

improperly eliminates the necessity of proving any nexus be-

tween the illegal conduct and interstate commerce or proving

that the illegal conduct has a substantial impact on in-

terstate commerce.

ARGUMENT

I. Hospital Peer Review Aciivities Address Patient

Care Practices At Individual Hospitals And Are

Fundamentally Noneconomic Activities.

“Hospital peer review” is a catch-all phrase encompassing

a number of different types of professional review activities

4

that take place within individual hospitals.’ While hospital

peer review activities are all generally directed towards es-

tablishing and maintaining the quality of care provided in

individual . only a distinct ton of these intrinei-

ae pa = * Ive limiti es bi ome

cian’s medical staff privileges or membership. There is

certainly no economic basis for assuming, as the Ninth Cir-

cuit did below, that alleged anticompetitive activity dealing

with the termination of a physician’s privileges infects all of

a hospital’s peer review activities or the hospital in general

and interstate commerce.

A. The Range of Hospital Peer Review

Activities.

Hospital peer review activities are an individual local hos-

pital’s mechanisms for reviewing professional practices and

patient care at that facility. See Bredice v. Doctors Hospital,

50 F.R.D. 249 (D.D.C. 1970), aff'd, 479 F.2d 920 (D.C. Cir.

1973). Each of the states represented by the amici mandate

or regulate hospital peer review as a matter of state law.‘

State peer review statutes define the scope of regulated peer

review activities in various ways, and each statute affords in-

* The case before the Court involves hospital peer review activities.

“Peer review” in yet a more general sense encompasses a range of profes-

sional medical review activities, whether related to quality of care or the

appropriate utilization of medical and hospital services. Medical societies,

certifying specialty boards, third-party payors, government health pro-

grams and independent reviewing organizations often engage in some form

of organized review, by peers, of professional medical services. McCain,

“Protection and Disclosure of Medical Peer Review Information,” Health

Law Handbook, p. 423 (1989).

*Ariz. Rev. Stat. Ann. §§ 36-445 et seg. (1986 & Supp. 1989); Cal. Bus.

& Prof. Code §§ 805 et seq, § 2282 (West 1990), Cal. Civ. Code

§§ 43.7-43.8 (West 1982 & Supp. 1990), Cal. Evid. Code §§ 1156-1157

(West 1986 & Supp. 1990); Haw. Rev. Stat. § 624-25.5 (1985), § 663-1.7

(Supp. 1987); Idaho Code §§ 39-1392, 39-1393 (1985 & Supp. 1990); Mont.

Code Ann. § 50-16-201 et seg., §37-2-201 (1989); Nev. Rev. Stat.

§ 449.476, § 49.265 (1990), Nev. Admin. Code § 449.358; Or. Rev. Stat.

§§ 441-015 et seq., § 41.675 (1989); Wash. Rev. Code Ann. § 70.41.200,

§§ 4.24.240-4.24.260 (1988 & Supp. 1990).

privileging and ongoing review, a system for continuous col-

lection of hospital information on negative patient outcomes,

and medical education programs intended to improve patient

care).

The range of hospital peer review activities can be gener-

Temp. L.Q. 552, 563-64 (1979); Morter, “The Health Care

Quality Improvement Act of 1986: Will Physicians Find

Peer Review More Inviting?” 74 Va. L. Rev. 1115 (1988).

The first of these peer review activities, credentialing,

arises from individual hospitals’ responsibility to review the

professional competence of physicians seeking medical staff

membership and privileges. Darling v. Charleston Com-

munity Memorial Hospital, 33 Ill. 2d 326, 211 N.E.2d 253

(1965), cert. denied, 383 U.S. 946 (1966); Elam v. College

Park Hospital, 132 Cal. App. 3d 332, 183 Cal. Rptr. 156

6

(1982); Purcell v. Zimbelman, 18 Ariz. App. 75, 500 P.2d 335

(1972). Usually, the hospital governing board delegates to its

medical staff the duty to establish membership and privilege

criteria, and review the education, training, experience and

qualifications of specific applicant physicians. “The Report

of the Joint Task Force on Hospital-Medical Staff Relation-

ships,” American Hospital Association & the American

Medical Association, pp. 29-32 (Feb. 1985) (“AHA/AMA

Joint Task Force Report”); Ruane, “Antitrust Implications

of Medical Peer Review: Balancing the Competing Inter-

ests,” 15 Pepperdine L. Rev. 111, 114 & n.22 (1987).

Second, hospital peer review encompasses ongoing moni-

toring of a hospital’s practices as measured against quality

standards established by the individual institution. Peer re-

view committees within each hospital develop institution-

specific quality criteria for medical procedures. They then

evaluate ongoing patient care against the criteria. AHA/

AMA Joint Task Force Report, pp. 32-33. For example, the

primary hospital accrediting organization, the Joint Com-

mission on Accreditation of Healthcare Organizations

(“JCAHO”) requires a hospital’s medical staff to monitor, as

part of basic quality review programs, a broad spectrum of

patient care concerns, including surgical cases, drug usage,

the quality of medical records, pharmacy and therapeutic

functions and risk management activities relating to patient

care and safety. JCAHO Accreditation Manual for Hospitals,

MS.6.1, pp. 111-15 (1990). These continuous monitoring ac-

tivities allow hospitals to identify potential quality of care

concerns based upon the specific quality standards set by the

institution.

Third, hospital peer review activities also involve reviews

of individual professional practices and identification of sub-

standard physicians. In some cases, this area of peer review

activities may result in disciplinary action against a physi-

cian, including potential limitation or termination of medical

staff membership or clinical privileges. Doe v. St. Joseph's

Hospital of Fort Wayne, 788 F.2d 411 (7th Cir. 1986)

7

(summary suspension of medical staff member’s privileges

because of unprofessional conduct); Sarin v. Samaritan

Health Center, 813 F.2d 755 (6th Cir. 1987) (termination of

medical staff privileges and membership because of profes-

sional competence concerns). The subject of the instant case

involves one aspect of this element of peer review.

However, exclusionary action is by no means the primary

tioner’s patient records. See AHA/AMA Joint Task Force

Report, pp. 33-34; Hayden v. Bracy, 744 F.2d 1338 (8th Cir.

1984) (peer review committee requirement that physician

must attend additional medical education); Setliff v. Memo-

rial Hospital of Sheridan County, 850 F.2d 1384 (10th Cir.

1988) (peer review results in requirement that physician se-

cure second opinion before performing specific procedure);

ongoing monitoring of physician's surgical cases during ex-

tended probationary period).

The Ninth Circuit in this case wrongly assumed, without

engaging in any factual or economic analysis, that peer re-

view activities always affect all medical staff members and

the hospital itself and therefore always have a substantial

effect on interstate commerce. As shown above, the scope of

hospital peer review is wide-ranging; the effects of these

various peer review activities cannot be generalized. A cre-

dentialing or disciplinary decision may affect an individual

physician, but not affect any other medical staff member’s

ability or opportunity to provide care at the facility. General

8

other medical staff members or the provision of hospital ser-

vices.

B. Peer Review Is a Fundamentally

Noneconomic Activity.

The purposes and processes of peer review discussed above

lead to the conclusion that peer review is a fundamentally

noneconomic activity. The United States Congress recog-

nized this point in the legislative history of the Health Care

Quality Improvement Act of 1986:

Unlike other activities that may trigger antitrust law-

suits, properly limited peer review plays no essential or

important economic role in the practice of medicine.

Doctors who are sufficiently fearful of the threat of liti-

gation will simply not do meaningful peer review.

H.R. Rep. No. 99-903, 99th Cong., 2d Sess. 3 (1986), re

printed in 1986 U.S. Code Cong. & Admin. News 6384,

6385.

Congress’ reasoning rests on the very basis of peer review.

A hospital’s peer review activities do not bring the consumer

of health care services and the health care provider together.

As a general matter, no fee is charged for peer review activi-

ties. Peer review activities do not necessarily affect either

the frequency with which medical services are provided or

the economic terms of providing those medical services. Nor

do peer review activities affect the demand for medical ser-

vices. The demand for these services is, in large part,

inelastic. See Hospital Corp. of America v. Federal Trade

Commission, 807 F.2d 1381 (7th Cir. 1986), cert. denied, 481

U.S. 1038 (1987).

Likewise, prices for medical services are not generally bar-

gained for between patient and hospital or patient and

doctor but rather are most frequently set by negotiation be-

tween third-party payors and providers irrespective of the

particular physician-patient-hospital relationship involved.

See Kartell v. Blue Shield of Massachusetts, 749 F.2d 922,

925-26 (ist Cir. 1984), cert. denied, 471 U.S. 1029 (1985);

Ball Memorial Hospital v. Mutual Hospital Insurance, Inc.,

784 F.2d 1325, 1334 (7th Cir. 1986); Hospital Corp. of

America, 807 F.2d at 1388. Hospital peer review activities do

not affect the price at which a hospital will provide its ser-

C. Peer Review Activities May or May Not

Substantially Affect Interstate Commerce.

:

3

inevitably follow. The excluded physician’s patients

and at the same price. In that case there is no demonstrable

10

Va. 1989), aff'd, 896 F.2d 547 (4th Cir. 1990), petition for

cert. filed, April 27, 1990 (no showing that “gain or loss of

one [doctor] would have a noticeable effect on the amount of

competition”); Hayden v. Bracy, 744 F.2d at 1343 (peer re-

view requirement on physician to attend three months of

post-graduate training did not have substantial competitive

impact, since others covered his practice until his return).

On the other hand, cases may exist in which the result of

a particular peer review activity does affect interstate com-

merce. For example, in a highly specialized practice area, ex-

clusion of a physician from the staff in a given hospital may

mean that the services are performed at a different hospital

in a different state. There may be types of medicine where

the demand is elastic or where the price is sufficiently ne-

gotiable that the presence or absence of given physicians

may affect the quantity of dollars or goods that flow across

state lines.

In short, the “practical economic analysis” must be case-

specific. Broad generalizations in this area ignore the varied

nature and effects of hospital peer review activities.

Il. A Per Se Rule That Hospital Peer Review

Activity Affects Interstate Commerce Is Not

Required By McLain.

A. McLain Does Not Mandate or Support the

Ninth Circuit's Decision in Pinhas.

This Court’s most recent ruling on the interstate com-

merce requirement of the Sherman Act is in McLain v. Real

Estate Board of New Orleans. We believe, along with the

majority of circuits considering this issue’ and many com-

* See, e.g., Stone v. William Beaumont Hospital, 782 F.2d 609, 613-14

(6th Cir. 1986); Seglin v. Esau, 769 F.2d 1274, 1280 (7th Cir. 1985); Hay-

den v. Bracy, 744 F.2d 1338, 1342-43 (8th Cir. 1984); Furlong v. Long Is-

land College Hospital, 710 F.2d 922, 925, 926 (2d Cir. 1983); Crane v.

Intermountain Health Care, Ine., 637 F.2d 715, 719, 722-24 (10th Cir.

1980).

11

mentators® that McLain requires a plaintiff to plead and

prove a demonstrable nexus between the alleged illegal ac-

tivity and interstate commerce. The minority view only re-

quires that the plaintiff prove that “defendants’ business

activities, independent of the violations, affected interstate

commerce.” Western Waste Service Systems v. Universal

Waste Control, 616 F.2d 1094, 1097 Om Cir.), cert. denied,

449 U.S. 869 (1980).’

In Pinhas, the Ninth Circuit’s application of the Western

Waste test to peer review resulted in Sherman Act jurisdic-

tion whenever any hospital-specific peer review activities are

challenged. The expansive test adopted in Western Waste

and adapted to peer review in Pinhas effectively reads the

interstate commerce requirement out of the Sherman Act,

ignores critical analysis found in McLain, and automatically

transports fundamentally local hospital peer review activity

into the federal realm.

This Court held in McLain that to establish jurisdiction

in a Sherman Act case, the defendants’ activities infected by

the price-fxing conspiracy must be shown “ ‘as a matter of

practical economics’ to have a not insubstantial effect on the

interstate commerce involved.” 100 S. Ct. at 511. The plain-

tiff has the burden of proof. The McLain Court then tested

the facts against this standard, and determined that they

demonstrated the existence of a practical economic effect:

It is clear, as the record shows, that the function of res-

pondent real estate brokers is to bring the buyer and

seller together on agreeable terms. For this service the

*P. Areeda and H. Hovenkamp, Antitrust Law, § 232.1, at 238-39

(Supp. 1989); P. Kissam, W. Webber, L. Bigus & J. Holzgraefe, “Antitrust

and Hospital Privileges: Testing the Conventional Wisdom,” 70 Calif. L.

Rev. 595, 634 (1982); Note, “Expanding Federal Antitrust Jurisdiction: A

Close Look at McLain v. Real Estate Board, Inc.,” 19 Hous. L. Rev. 143,

168-73 (1981).

7 See, e.g., Shahawy v. Harrison, 778 F.2d 636, 639-40 (11th Cir. 1985),

amended, 790 F.2d 75 (11th Cir. 1986); Cardio-Medical Assocs. v. Crozer-

Chester Med. Ctr., 721 F.2d 68, 74-75 (3d Cir. 1983).

12

broker charges a fee generally calculated as a percentage

of the sale price. Brokerage activities necessarily affect

both the frequency and the terms of residential sales

transactions. Ultimately, whatever stimulates or retards

the volume of residential sales, or has an impact on the

purchase price, affects the demand for financing and

title insurance, those two commercial activities that on

this record are shown to have occurred in interstate

commerce.

100 S. Ct. at 511. As discussed in Section I, this sort of

practical economic analysis frequently yields a much

different result when applied as a factual matter to peer re-

view activities. Peer review is not a commercial activity

bringing the patient and physician together for a fee, nor do

peer review activities necessarily affect the frequency, price

or medical availability of the provision of medical services.

Those advocating a broad reading of McLain misconstrue

the Court’s statement that:

Petitioners need not make the more particularized

showing of an effect on interstate commerce caused by

the alleged conspiracy to fix commission rates, or by

those other aspects of respondents’ activity that are al-

leged to be unlawful.

100 S. Ct. at 509. McLain involved a brokerage price-fixing

case where there was simply no way to separate the price-

fixing activity on the brokerage fee from brokerage services

generally. Therefore, the plaintiffs met the interstate com-

merce requirement once they demonstrated that real estate

brokerage activities in general affected interstate commerce.

If the Court had intended to adopt the broader view, it

would not have been necessary to engage in its practical eco-

nomic analysis or concern itself with whether the price-

fixing activity infected the defendants’ business. The only

question would have been whether there was any relation-

ship between the defendants’ business and interstate com-

merce.

13

B. Pinhas Ignores McLain’s Standards.

Initially, the Ninth Circuit opinion below seemed to rec-

ognize that it is not appropriate to include any and all

hospital activities in analyzing the interstate commerce jur-

isdictional question. The court held that:

Pinhas must show that “as a matter of practical eco-

nomics” the activities of the appellees — the peer

review process in general — have a “not insubstantial

effect on the interstate commerce involved.”

894 F.2d at 1032. However, in the next sentence the Ninth

Circuit assumed its conclusion rather than engaging in any

economic analysis, holding that plaintiff “need only prove

that peer-review proceedings have an effect on interstate

commerce, a fact that can hardly be disputed. The proceed-

ings affect the entire staff at [the hospital] and thus affect

the hospital’s interstate commerce.” Jd. (emphasis supplied).

As shown in the first section of this brief, there can be very

great dispute over the interstate impact of particular peer re-

view activities. The court’s broad overgeneralization finds no

support in the record and demonstrates a profound misun-

derstanding of the scope and individuality of peer review ac-

tivities.

Amici do not urge a blanket rule that hospital peer review

activities do not affect interstate commerce; what we object

to is the conclusive presumption adopted by the Ninth Cir-

cuit. The overwhelming majority of courts which have ex-

the Sherman Act’s interstate commerce requirement cor-

rectly concluded that an excluded or disciplined physician

must allege, and if challenged, prove, that the particular ex-

clusionary activities themselves have a substantial effect on

interstate commerce. See, e.g., Sarin v. Samaritan Health

Center, 813 F.2d 755 (6th Cir. 1987); Doe v. St. Joseph’s

Hospital of Fort Wayne, 788 F.2d 411 (7th Cir. 1986); Stone

v. William Beaumont Hospital, 782 F.2d 609 (6th Cir. 1986);

Hayden v. Bracy, 744 F.2d 1338 (8th Cir. 1984); Furlong v.

Long Island College Hospital, 710 F.2d 922 (2d Cir. 1983);

14

Crane v. Intermountain Health Care, Inc., 637 F.2d 715

(10th Cir. 1980) (en banc). In some of these cases the plain-

tiff makes a sufficient showing of substantial effect upon in-

terstate commerce; in others the opposite occurs. However,

each of those cases focuses, as this Court mandated in

McLain, on the practical economics of how the allegedly ex-

clusionary peer review activities affected interstate com-

merce. The Pinhas court improperly bypasses that necessary

analysis.

The Ninth Circuit assumes the conclusion that peer re-

view always affects interstate commerce. As a result, the

Ninth Circuit’s decision mandates federal antitrust jurisdic-

tion in every antitrust challenge to peer review, no matter

how local the specific activity involved. This result is in-

correct under McLain.

CONCLUSION

The judgment of the Ninth Circuit should be vacated and

the judgment in the district court affirmed.

RESPECTFULLY SUBMITTED.

By

John P. Frank

Counsel of Record

Andrew S. Gordon

Beth Schermer

40 North Central Avenue

Phoenix, Arizona 85004

(602) 262-5311

Attorneys for Amici Curiae