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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 1991
- **Citation:** 500 U.S. 322

## Text

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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385012_0748%3A10. Public record. Not legal advice.