Opposition Brief — Gordon v. Lewistown Hospital (No. 05-1000)

6

REASONS FOR DENYING THE WRIT

I. The Petition Does Not Present Any Compelling

Reason(s) For Granting The Writ Of Certiorari

Supreme Court Rule 10 provides) in relevant part,

that “review on a writ of certiorari is not a matter of right,

but of judicial discretion” and that “certiorari will be

granted only for compelling reasons.” Rule 10 further

states that such “compelling reasons” may be found to

exist where a United States Court of Appeals has rendered

a decision that conflicts with a decision of another United

States Court of Appeals on the same important matter, the

United States Court of Appeals has decided an important

federal question in a way that conflicts with the decision

by the highest court of a state or where a United States

Court of Appeals has decided an important issue of federal

law in a way that conflicts with decisions of this Court.

Furthermore, Rule 10 states that “[a] petition for writ of

certiorari is rarely granted when the asserted error con-

sists of erroneous factual findings or the misapplication of

a properly stated rule of law.”

Dr. Gordon’s Petition does not implicate any “compel-

ling reasons” stated in Rule 10(b) for granting certiorari.

Although the reasons cited in Rule 10 are not exclusive,

this Court has held that it should “be consistent in not

granting the writ of certiorari except in cases involving

principles the settlement of which is of importance to the

public, as distinguished from that of the parties, and in

cases where there is a real and embarrassing conflict of

opinion and authority between the Circuit Courts of

Appeal.” Layne & Bowler Corp. v. Western Well Works, 261

U.S. 387, 43 S. Ct. 422, 67 L. Ed. 712 (1923).

The Third Circuit’s determination that Dr. Gordon

failed to satisfy the “solicitation” exception to the “profes-

sional review action” in the Health Care Quality Im-

provement Act (““HCQIA”), 42 U.S.C. §§ 11101-11152, does

not conflict, especially in light of the record, with this

Court’s precedent or with any other court of appeals.

Moreover, certiorari should be denied when a given legal

analysis has not been adequately tested and analyzed by

the lower courts. This ensures that the Court’s review will

benefit from the collective wisdom of those who have

considered, for example, the scope of the HCQIA’s solicita-

tion exception. Certiorari is particularly inappropriate

when, as here, the Third Circuit is the only court of

appeals that has considered the scope of the solicitation

exception to the definition of a “professional review ac-

tion.”

Likewise, the finding of the District Court and Third

Circuit of a vertical] relationship between the Hospital and

Dr. Gordon, which implicates physician discipline and peer

review, is in accord with near unanimous case authority.

To the extent that Dr. Gordon contends that this hospital-

physician relationship is horizontal, as opposed to vertical,

Rule 10 prescribes that a “petition for a writ of certiorari is

rarely granted when the asserted error consists of errone-

ous factual findings or the misapplication of a properly

stated rule of law.” S. Ct. Rule 10.

Accordingly, the Hospital urges that this Court deny

certiorari on all questions presented.

8

II. The Third Circuit Properly Found That Dr.

Gordon’s Unreasonably Broad Construction Of

The “Solicitation” Exception To The HCQIA

Immunity Is Contrary To That Statute’s Plain

Meaning And Legislative History

Dr. Gordon seeks certiorari on the question of

whether, on this record, the solicitation exception to a

professional review action under the HCQIA applies. Dr.

Gordon contends that the definition of “professional review

action” under the HCQIA turns on whether the physician’s

conduct, from the physician’s perspective, was intended to

solicit or retain business. This interpretation is not sup-

ported by a plain reading of the HCQIA itself or the

legislative history.

As the Third Circuit stated, the meaning of a statute

must, in the first instance, be “sought in the language in

which the act is framed, and if that is plain ... the sole

function of the courts is to enforce it according to its

terms.” Gordon v. Lewistown Hospital, 423 F.3d 184, 205

(3d Cir. 2005) (quoting Abdul-Akbar v. McKelvie, 239 F.3d

307, 312 (3d Cir.), cert. denied, 533 U.S. 953, 121 S. Ct.

2600, 150 L. Ed. 2d 757 (2001)). The Third Circuit also

correctly determined:

[tlhe plain language of the solicitation exception

focuses on the basis of the ‘action’ taken by the

professional review body, not on the conduct of

the physician precipitating the action — ‘an ac-

tion is not considered to be based on the compe-

tence or professional conduct of a physician if

the action is primarily based on ... the phy-

sician’s fees or the physician’s advertising or en-

gaging in other competitive acts intended to

solicit or retain business.’

9

Id., 423 F.3d at 205 (citing 42 U.S.C. § 11151(9)(B)) (em-

phasis added).

The clause “primarily based on” refers not to the

physician’s subjective intent, but to the professional

review body’s basis for the challenged professional review

action. Thus, as the Third Circuit concluded, “even when

the solicitation exception is in play, immunity will be

judged by applying the objective standard regarding

whether the Hospital based its actions upon the reason-

able belief that they are in furtherance of quality health-

care.” Gordon, 423 F.3d at 205.’

Importantly, Dr. Gordon did not challenge the Hospi-

tal’s presumptive compliance with the § 11112 immunity

standards, and thus he has conceded that the “basis” for

the Hospital's action was the reasonable belief that it was

in furtherance of quality health care, not his self-styled

“solicitation” efforts.

Universal precedent applying an objective standard to

determine immunity from money damages under 42

U.S.C. § 11112(a) further supports this “reasonable basis”

construction. See, e.g., Brader v. Allegheny Gen. Hosp., 167

F.3d 832, 840 (3d Cir. 1999) (“Like other circuits, we have

adopted an objective standard of reasonableness in this

context.”) (cases collected); see also H.R. Rep. 99-903 at 10,

reprinted at 1986 U.S.C.C.A.N. at 6392-93 (adopting

objective standard that a professional] review action must

' In his Petition, Dr. Gordon repeatedly asserts (incorrectly) that —

the Third Circuit’s standard was that “if a hospital believes that

preventing protected conduct by physicians ... will further quality

health care or ‘protect patients’, a hospital would receive immunity.”

(Gordon Petition for Cert. at 12). However, as noted above, the Third

Circuit’s standard was an objective one.

10

be undertaken in the reasonable belief that it is in fur-

therance of quality health care and rejecting a “good faith”

standard as being capable of being misinterpreted as

requiring only a test of the subjective state of mind of the

physicians conducting the professional review action).

Under Dr. Gordon’s interpretation, a review action

would never qualify as a “professional review action” as

long as the offending physician subjectively intended, or

characterized the unprofessional conduct as a “competitive

act.” Under Dr. Gordon’s interpretation, the solicitation

exception would become a license by which an offending

physician could, with impunity, bully, badger, and abuse

patients, all in the name of “competitive acts.” A hospital

would be powerless to put a stop to this abusive behavior.

In enacting the HCQIA, Congress sought to improve

the quality of health care by encouraging professional self-

regulation through immunity protection. 42 U.S.C.

§ 11101. Holding that a disciplined physician’s subjective

intent to “solicit” is all that is required to sidestep the

immunity of the HCQIA would fundamentally undermine

the HCQIA’s self-regulatory goal and effectively chill peer

review. The Third Circuit shared this concern and cor-

rectly concluded:

The record here establishes that the 1997 revoca-

tion of Gordon’s Medical-Dental Staff privileges

resulted from concern for patient welfare.

Gordon’s attempts to couch his telephone calls to

* Even the HCQIA is no defense against a well-heeled, disciplined

physician who seeks vengeance through runaway, bad faith litigation.

The District Court found that Dr. Gordon’s goal was to bankrupt the

Hospital through the relentless prosecution of ruinously expensive

litigation. Gordon, 423 F.3d at 201 n.12.

11

Mrs. Seecora to fit within the parameters of the

solicitation exception are disingenuous based on

the extensive record before this Court chronicling

Gordon’s continued inappropriate conduct under-

taken to advance his personal agenda to the det-

riment of patient welfare. To hold otherwise on a

record such as this would effectively chill effec-

tive peer review by permitting the subject of the

peer review process to control-the application of

HCQIA immunity by couching his or her inten-

tions to fit within the solicitation exception to

‘professional review action.’

Gordon, 423 F.3d at 206.

Dr. Gordon’s strained interpretation of the HCQIA as

providing a total exclusion from HCQIA immunity for

harmful and unprofessional conduct dressed up as busi-

ness solicitation is absurd. Solicitation is no safe haven for

abuse.

As the Third Circuit rightly observed:

if HCQIA immunity hinged on the disruptive

physician’s subjective intent, every disruptive

physician would claim that the unprofessional

conduct being reviewed was intended for a com-

petitive purpose in order to invoke the solicita-

tion exception to professional review action.

Gordon, 423 F.3d at 205 n.14. A disruptive physician’s self-

serving “solicitation” gloss must not be allowed. Other-

wise, the solicitation “exception” will swallow the HCQIA

immunity “rule.”

The Petition should not be granted as to Question

Presented No. 1.

12

II. The Third Circuit Correctly Applied Tradi-

tional Rule Of Reason To The Peer Review-

Based Conditions Of Reappointment As Op-

posed To The Per Se Liability Standard Or The

Quick Look Doctrine

Dr. Gordon’s Petition for a Writ of Certiorari contains

a fundamental “disconnect” between its technical antitrust

jargon and Dr. Gordon’s real world unprofessional conduct.

The Petition depicts Dr. Gordon’s harassing and intimidat-

ing phone calls to vulnerable elderly patients simply as

informational output. The Conditions of Reappointment,

which were applied in the “vertical” context of peer review,

are characterized as a “horizontal” information restraint.

Antitrusi buzzwords, however, neither mask nor excuse

Dr. Gordon’s iong history of disruptive, abusive and

harassing behavior.

Dr. Gordon has also attempted to repackage himself

as a consumer champion. However, his sterilized version of

the case completely ignores that the Hospital, through its

peer review process, took measured, progressive steps over

the course of years and in response to repeated complaints

from patients. Ironically, the Board revoked the Medical

Staff appointment of this self-proclaimed “consumer

champion” because many of the alleged beneficiaries of his

informational output, elderly cataract patients, com-

plained to the Hospital about Dr. Gordon’s rude, invasive

and unsolicited telephone calls.

In his Petition, Dr. Gordon attacks the Conditions

primarily as a per se or near per se violation of Section

One of the Sherman Act. The vertical, peer review-based

Conditions, however, cannot be squeezed into the ever

narrowing per se or “near per se” niche.

13

In Texaco, Inc. v. Dagher, 2006 U.S. LEXIS 2023

(decided Feb. 28, 2006), this Court further narrowed the

already narrow per se liability standard:

Section 1 of the Sherman Act prohibits “every

contract, combination in the form of trust or oth-

erwise, or conspiracy, in restraint of trade or

commerce among the several states.” 15 U.S.C.

§1. This Court has not taken a literal approach to

this language, however. See, e.g., State Oil Co. v.

Khan, 522 US. 3, 10, 118 S.Ct. 275, 139

L. Ed. 2d 199 (1997) (“This Court has long recog-

nized that Congress intended to outlaw only un-

reasonable restraints.”) (Emphasis added.)

Instead, this Court presumptively applies rule of

reason analysis, under which antitrust plaintiffs

must demonstrate that a particular contract or

combination is in fact unreasonable and anti-

competitive before it will be found unlawful. See,

e.g., id., at 10-19 (concluding that vertical price-

fixing arrangements are subject to the rule of

reason, not per se liability). Per se liability is re-

served only for those agreements that are “so

plainly anticompetitive that no elaborate study of

the industry is needed to establish their illegal-

ity.” National Soc. of Professional Engineers v.

United States, 435 U.S. 679, 692, 98 S. Ct. 1355,

55 L. Ed. 2d 637 (1978). Accordingly, “we have

expressed reluctance to adopt per se rules ...

‘where the economic impact of certain practices is

not immediately obvious.’” State Oil, supra, at 10

(quoting FTC v. Indiana Federation of Dentists,

476 U.S. 447, 458-459, 106 S.Ct. 2009, 90

L. Ed. 2d 445 (1986)).

Texaco, Inc., 2006 U.S. LEXIS 2023, *7-8.

14

Texaco, Inc. represents this Court’s latest refusal to

apply the per se liability standard to challenged conduct.

There, Petitioners, Texaco, Inc. and Shell Oil Co., collabo-

rated in a joint venture, Equilon Enterprises, to refine and

sell gasoline in the Western United States under the

original Texaco and Shell Oil brand names. The Respon-

dents, a class of Texaco and Shell Oil service station

owners, alleged that Petitioners engaged in unlawful price

fixing when Equilon set a single price for both Texaco and

Shell Oil brand gasoline. After Equilon began operations,

the service station owners brought suit in district court

alleging that, by unifying gasoline prices under two

brands, Shell Oil and Texaco had violated the per se rule

against price fixing. See, e.g., Catalano, Inc. v. Target

Sales, Inc., 446 U.S. 643, 647, 100 S. Ct. 1925, 64 L. Ed. 2d

580 (1980) (per curiam).

The district court awarded summary judgment in

favor of Texaco and Shell Oil. The district court deter-

mined that the rule of reason, rather than a per se rule or

the quick look doctrine, governed the . rvice station

owners’ claim, and that, by eschewing rule of reason

analysis, the service station owners had failed to raise a

triable issue of fact.

The Ninth Circuit reversed, characterizing Shell Oil’s

and Texaco’s litigation defense position as a request for an

“exception to the per se prohibition on price fixing,” and

rejecting that request. Jd. at *6. This Court consolidated

and granted Texaco’s and Shell Oil’s separate certiorari

petitions to determine the extent to which the per se rule

against price fixing applies to joint ventures. (/d.)

Holding that the “pricing decisions of a legitimate

joint venture do not fall within the narrow category of

15

activity that is per se unlawful under § 1 of the Sherman

Act,” this Court reversed the judgment of the Ninth

Circuit:

As a single entity, a joint venture, like any other

firm, must have the discretion to determine the

prices of the products that it sells, including the

discretion to sell a product under two different

brands at a single, unified price. I’ Zquilon’s

price unification policy is anticompetitive, then

respondents should have challenged it pursuant

to the rule of reason.... But it would be incon-

sistent with this Court’s antitrust precedents to

condemn the internal pricing decisions of legiti-

mate joint venture as per se unlawful.

(Id. at *10, *12) (footnotes omitted). "

In a footnote, this Court also rejected the service

station owners’ alternative contention that Shell Oil and

Texaco should be held liable under the quick look doctrine.

As this Court observed:

To be sure, we have applied the quick look doc-

trine to business activities that are so plainly

anticompetitive that courts need undertake only

a cursory examination before imposing antitrust

liability. See, California Dental Ass’n v. FTC, 526

U.S. 756, 770, 119 S. Ct. 1604, 143 L. Ed. 2d 935

(1999). But for the same reasons that per se

liability is unwarranted here, we conclude

that petitioners cannot be held liable under

the quick look doctrine.

Texaco, Inc., 2006 U.S. LEXIS 2023, *10 n.3 (emphasis

added).

If it is not per se, or near per se, illegal under Section

1 of the Sherman Act for a non-sham joint venture to set

16

the prices at which it sells its products, a hospital’s appli-

cation and enforcement of conditions of regppointment on

a chronically disruptive staff physician, in the vertical

context of peer review, is not, based on this Court’s prece-

dent, illegal per se or under the quick look doctrine.

In Texaco, Inc., this Court recognized that:

[als a single entity, a joint venture, like any other

firm, must have the discretion to determine the

prices of the products that it sells, including the

discretion to sell a product under two different

brands at a single, unified price.

Texaco, Inc., 2006 U.S. LEXIS 2023, *10.

This Court has likewise recognized a “hospital’s

unquestioned right to exercise some control over the

identity and the number of doctors to whom it affords staff

privileges.” Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466

U.S. 2, 30, 104 S. Ct. 1551, 80 L. Ed. 2d 2 (1984). This real

’ world recognition forms this Court’s antitrust analysis.

Using Hyde as a starting point, lower courts have

almost universally applied the rule of reason test, and

eschewed the per se standard or quick look doctrine, when

assessing the antitrust bona fides of hospital staffing

decisions. See, e.g., Diaz v. Farley, 215 F.3d 1175, 1184

(10th Cir. 2000) (“Finally, the fact that the conduct at issue

in this case concerns decisions relating to health care

presents a further reason why we ‘should be cautious in

applying a per se test. Because agreements pertaining to

the provision of health care services often raise issues of

professional medical judgment, it is typically useful to

apply a rule of reason approach... .”); Betkerur v. Aultman

Hospital Ass’n, 78 F.3d 1079, 1093 (6th Cir. 1996) (“Indeed,

Courts have generally concluded that the rule of reason

17

applies to practices based on medical considerations.”);

BCB Anesthesia Care, Ltd. v. Passavant Memorial Area

Hosp. Ass’n, 36 F.3d 664, 667 (7th Cir. 1994) (“This case

involves one hospital’s decisions about staff privileges and

staffing patterns. The cases involving staffing at a single

hospital are legion. Hundreds, perhaps thousands of pages

in West publications are devoted to the issues those

circumstances present. Those cases invariably analyze

those circumstances under the rule of reason — there is

nothing obviously anticompetitive about a hospital choos-

ing one staffing pattern over another or in restricting the

staffing to some rather than many, or all.... A hospital

has an unquestioned right to exercise some control over

the identity and number to whom it accords staff privi-

leges.... Malpractice concerns, quality of care, market

perceptions, cost, and administrative considerations may

all impact those decisions.”) (case citations omitted); Flegel

v. Christian Hospital, 4 F.3d 682, 686 (8th Cir. 1993) (“The

courts of appeals have generally examined the denial or

revocation of hospital privileges under the rule of rea-

son... .”); Lie v. St. Joseph Hosp., 964 F.2d 567, 570 (6th

Cir. 1992) (applying rule of reason to a claimed agreement

to suspend a physician’s surgical privileges); Capital

Imaging Associates v. Mohawk Valley Medical Associates,

996 F.2d 537; 545 (2d Cir. 1993), cert. denied, 510 U.S. 947,

114 S. Ct. 388, 126 L. Ed. 2d 337 (1992) (applying rule of

reason to a radiology group’s exclusion from providing

services to patients of an HMO); Kiepfer v. Beller, 944 F.2d

1213, 1221 (5th Cir. 1991) (applying rule of reason to a

physician’s claim that he was the target of a campaign by

two other physicians to discourage referrals to him).

18

Commentators and case law are in accord:

Allegations of a concerted refusal to deal arise

frequently in the health care industry. Denial of

hospital staff privileges is frequently alleged to

be the product of a group boycott organized by

competing health care providers. In such cases,

the courts have generally applied the rule of rea-

son, holding that a hospital must be allowed, in

conjunction with its medical staff, to exclude in-

dividual doctors on the basis of their lack of pro-

fessional competence or unprofessional conduct.

’ Actions to enforce ethical rules by medical asso-

ciations are also frequently alleged to constitute

a group boycott. Again, the courts generally ap-

ply the rule of reason, examining whether the

rules serve a legitimate purpose in establishing

professional standards of care without unduly

limiting competition among providers.

ABA Section of Antitrust Law, Antitrust Law Develop-

ments 118 (4th Ed. 1997) (citations omitted). The rule of

reason governs challenges to peer review-based staffing

decisions.

The Conditions also were drafted, applied and en-

forced in the vertical context of hospital peer review of a

disruptive physician. The Third Circuit did not “err” in

viewing the peer review relationship between the Hospital

and Dr. Gordon as vertical rather than horizontal despite

Dr. Gordon’s self-proclaimed designation as a “potential

competitor.” Dr. Gordon, again, is plain wrong.

In Business Electronics Corp. v. Sharp Electronics

Corp., 485 U.S. 717, 108 S. Ct. 1515, 99 L. Ed. 2d 808 (1988),

this Court ruled that “[rjestraints imposed by agreement

between competitors have traditionally been denominated

19

as horizontal restraints, and those imposed by agreement

between firms at different levels of distribution as vertical

restraints.” Sharp, 485 U.S. at 730 (footnote omitted).

Both as a matter of law, and on this record, the alleged

“restraints” at issue, the Conditions, are the product of a

vertical relationship between the Hospital and its peer

review of a chronically disruptive member of its Medical

Staff. Dr. Gordon, as the District Court and Third Circuit

both determined, was not in the role of a “competitor,”

whether actual or potential (except in his own mind),

when the Conditions were imposed. Rather, the Conditions

were applied in the context of Dr. Gordon’s reappointment

to the Hospital Medical Staff. An arrangement like this

could not be any more vertical. Courts aimost invariably

view relationships between hospitals and their staff

physicians as vertical. See, e.g., Coffey v. Healthtrust, Inc.,

955 F.2d 1388, 1392 (10th Cir. 1992) (“Any relationship

which existed between the physicians and [Edmond

Memorial Hospital, Inc.] . . . is vertical.”).

The Conditions were agreed to in the course of Dr.

Gordon’s biennial reappointment to the Hospital’s Medical

Staff. This is quintessentially a vertical relationship. Both

vertical price and non-price agreements are subject to the

rule of reason. Sharp, 485 U.S. at 735-36 (rule of reason

applicable to vertical non-price restraints); State Oil Co., 522

U.S. at 10-19) (vertical price-fixing arrangements subject to

rule of reason, not per se liability). Assuming the Conditions

constitute a “restraint,” they constitute a non-price vertical

restraint and are subject to rule of reason analysis.”

* Dr. Gordon's self-described status as a “potential competitor” is a

canard. The District Court did not find that Dr. Gordon and the

Hospital were competitors w’ °n, in November 1996, Dr. Gordon agreed

(Contin »-* on following page)

20

For the same reasons that per se liability is unwar-

ranted here, the Hospital is not liable under the quick look

doctrine. Texaco, Inc., 2006 U.S. LEXIS 2023, *10 n.3. In

California Dental Ass’n v. FTC, 526 U.S. 756, 119 S. Ct.

1604, 143 L. Ed. 2d 935 (1999) (“CDA”), this Court in-

structed the lower courts to apply a quick look rule of

reason analysis only when an observer with even a rudi-

mentary understanding of economics could conclude that

the arrangement in question would have an anticompeti-

tive effect on customers and markets. CDA, 526 U.S. at

770.

In CDA, however, this Court rejected the quick look

analysis for a horizontal restraint involving a near total

suppression of price and quality consumer information

among 75% of all dentists in California. It is simply

incredible for Dr. Gordon to argue in favor of a quick look

at a non-price vertical restraint between one hospital and

a single physician — a hospital that sought to protect

elderly patients from the “restrained” physician’s bullying,

harassing and intimidating phone calls. The Hospital

imposed the Conditions to protect elderly patients, not

gain market share.

This Court therefore should deny the Petition as to

Questions Presented Nos. 2 and 3.

,%

a

to the Conditions of his reappointment to the Medical Staff. Dr. Gordon

did not begin competing against the Hospital until after his privileges

were revoked and his Surgi Center opened almost a year later. Dr.

Gordon agreed to the Conditions as a member of the Hospital’s Medical

Staff seeking reappointment, not as a competitor.

21

CONCLUSION

For the reasons set forth above, the Lewistown Hospi-

tal respectfully requests that the Petition for a Writ of

Certiorari be denied.

Respectfully submitted,

JONATHAN B. SPRAGUE

Counsel of Record

KATHLEEN M. CHANCLER

MARK L. MATTIOLI

Post & SCHELL, P.C.

Four Penn Center, 14th Floor

1600 John F. Kennedy Blvd.

Philadelphia, PA 19103

(215) 587-1155

Counsel for Respondent

3) | “FILED

ow

No. 05-1000 MAR 2 1 2006

Se ee ee oe cand

K

SUPREME COURT, U.S. _

3n The

Supreme Court of the Anited States

*

ALAN D. GORDON, M.D.; ALAN D. GORDON, M.D., P.C.,

A CORPORATION; MIFFLIN COUNTY COMMUNITY

SURGICAL CENTER, INC., ACORPORATION,

Petitioners,

v.

LEWISTOWN HOSPITAL,

Respondent.

+

On Petition For A Writ Of Certiorari

To The United States Court Of Appeals

For The Third Circuit

2

PETITIONERS’ REPLY BRIEF

¢

STEVEN B. VARICK

Counsel of Record

HENRY S. ALLEN, JR.

HOLLAND & KNIGHT LLP

131 S. Dearborn Street

30th Floor

Chicago, Illinois 60603

(312) 263-3600

GEORGE M. SANDERS

LAW OFFICES OF

GEORGE M. SANDERS

150 North Michigan Avenue

Suite 2800

Chicago, Illinois 60601

(312) 624-7645

Counsel for Petitioners

COCKLE LAW BRIEF PRINTING CO (800) 225-6964

OR CALL COLLECT (402) 342-2831

TABLE OF CONTENTS

Page

REPLY TO COUNTERSTATEMENT ..................00eeseeeee 1

REASONS FOR GRANTING THE PETITION ............ 3

I. The Hospital Misstates The Legal Issue Under

PRPMIEERS circciic buh idscat at Bleaslesceedusevoorsebeinswevceserece 3

II. The Hospital’s Antitrust Analysis — Like The

Third Circuit’s — Relies On Labels And Catego-

rization Inconsistent With This Court’s Deci-

ii

TABLE OF AUTHORITIES

Page

CASES

Business Electronics v. Sharp Electronics rete 485

EEGs AE 1 SED nclecéetcasavesdeardinsaiiocvnnnaahduictcbibcaniieenn 7

California Dental Ass’n v. FTC, 224 F.3d 942 (9th

UK. TNO? cccnccicivbscsbasccntsensmibesbeshsadeseustandnnn tntealeuliasiaiaie 8

California Dental Association v. FTC, 526 U.S. 756

CID tisiccroSndiensiteginisinitetticontas tastichtdendeinaamtedilaisaaa isaeaeaae 8,9

Coffey v. Healthtrust, Inc., 955 F.2d 1388 (10th Cir.

BD shes cnitpete edie: < coheed idl Seeeiphcabsnk cities ci gee cilities 7

FTC v. Indiana Federation of Dentists, 476 U.S. 447

CRI cosnsakidcaitebupiessnticedacshiniatcetpaehdadstadiiticackedalobeibaioe 7

Lie v. St. Joseph Hospital, 946 F.2d 567 (6th Cir.

5: PORES RS ESE erie a eee ome ee oN ence Neer Ere Ure eA 9

National Collegiate Athletic Ass’n v. Board of

Regents of the University of Oklahoma, 468 U.S.

I Ge tikccchetpabvestesenceadénnebiahebasiedtauadbupibokdceliebtadhdutaimaes 2

National Society of Professional Engineers v. U.S.,

Si rea COTE eiciccairaiiteints cdeebbecbcmiaceunibdbblaeiebaabeipainiiin 2

Polygram Holding, Inc. v. FTC, 416 F.3d 29 (D.C.

CE: SHPITERD wind tticeitncailasicad okamsisisaicktediuntibiieiscber Dinketienlib els 7,8

Texaco, Inc. v. Dagher, 2006 U.S. LEXIS 2023 (Feb.

By SI i sicociccinisis aislicedcaadalomeipinibliispldapiosingictabcide ndlikacia antl 5, 6

STATUTES

Ge ac © Re siincscaeseesaclsivceiciletsabidcabieeatpitinnaniiatags 5

Se SEs ee ies os eednsichsdandandpentacorinsandhababieena 5

GE SIG. BSE re cht ciacicesininsddesecsiiatidedeengiikcadetseeeases 4

ii

TABLE OF AUTHORITIES — Continued

Page

MISCELLANEOUS

Improving Health Care, Report By The Federal

Trade Commission, and the Department of Jus-

SOU INNING SNUINED seco cceeipicaciniics pocatientdteciina Doahawebiccceeses 9

REPLY TO COUNTERSTATEMENT

Lewistown Hospital’s Brief In Opposition to the

Petition for Writ of Certiorari (“Hospital Opposition”)

consists almost entirely of vituperative personal attacks

on Dr. Gordon in which the Hospital claims that on some

prior occasions Dr. Gordon acted unprofessionally and in a

disruptive manner.’ At issue in this case, however, is

whether it is anticompetitive for a hospital to impose by

agreement an information restraint that limits the content

of truthful physician-patient communications concerning

the comparative risks and benefits of different surgical

procedures.

Nowhere in its Opposition does the Hospital specifi-

cally address the information restraints or even try to

explain how its agreement, that restrains the content of a

physician’s truthful comparative information concerning

different procedures that the physician may communicate

to patients, is anything but anticompetitive. Instead, the

Hospital seeks to shift the focus of this case to whether it

was appropriate for the Hospital to insist that Dr. Gordon

‘ The Hospital’s personal attacks against Dr. Gordon are not

supported by the record, were not tested through the litigation process

below, and are not relevant to the matters before the Court. The

Hospital had repeatedly made accusations in internal Hospital hearings

in which it relied entirely on hearsay statements by persons who did

not testify, and who Dr. Gordon was prohibited from contacting. Before

trial, the district court ruled that the truth of the Hospital’s accusations

and the consequent internal findings of Hospital hearings would not be

admitted for their truth, and barred Petitioners from challenging them.

The district court, however, reversed its pre-trial evidentiary rulings a

year and a nalf after trial (App. at 231), and then based its judgment

almost entirely on the very facts it had barred the parties from litigat-

ing (simultaneously preventing motions for reconsideration). The Third

Circuit, in an extensive footnote, addressed only the hearsay objection

and concluded, erroneously, that the district court had discretion to

admit hearsay for the truth of the matter asserted. App. at pp. 51-2,

n.21.

2

agree to the information restraints because of the alleged

complaints the Hospital received from several consumers.”

The alleged complaints did not challenge the veracity of

the information Dr. Gordon provided. Indeed, the Hospital

has never claimed that Dr. Gordon gave patients informa-

tion that was false or misleading. Accordingly, the Hospi-

tal’s alleged justification (Dr. Gordon’s purported bad

conduct) does not support the content-based information

restraints. Without such support, the information re-

straints are nothing more than blatant limitations on

competition. See, National Collegiate Athletic Ass’n v.

Board of Regents of The University of Oklahoma, 468 U.S.

85, 119 (1984) (restraints must be narrowly tailored to

serve procompetitive goals). A hospital may not gag impor-

tant comparative treatment information and hence impair

competition because the hospital can point to a few con-

sumers who dislike the information. See, National Society

of Professional Engineers v. U.S., 435 U.S. 679, 693-95

(1978) (defendant could not justify a restraint on the

ground that competition will injure consumers).

The healthcare ramifications of this case are impor-

tant. Both the Third Circuit and the district court held

that Dr. Gordon is an excellent surgeon, that he offered

patients a safer and less invasive surgical procedure than

his competitor and that his competitor misled patients

concerning the type of procedure he used. Indeed, the

district court held that the procedure used by Dr. Gordon

was the preferred procedure for removing cataracts by the

mid-1990s. The Third Circuit and the district court none-

theless held that a hospital’s efforts to prevent a superior

* The only evidence at trial of a complaining patient was Mrs.

Seecora who testified by deposition that the information Dr. Gordon

gave her made her feel that she had made the wrong decision having

Dr. Nancollas treat her. App. at 28.

3

surgeon from competing by giving patients comparative

information about the “preferred procedure” and the older

procedure is only subject to the most deferential antitrust

scrutiny and that a hospital’s efforts to enforce such a

restraint is entitled to immunity from damage claims.

That is why the medical community is up in arms over

the decision below, and many of its most prominent or-

ganizations seek to file amicus briefs supporting the

Petition. Healthcare markets cannot function efficiently if

patients cannot receive information informing them about

treatment alternatives and information showing which of

those alternatives is the “preferred procedure.” Informa-

tion restraints that prevent physicians from giving pa-

tients such information will only lessen competition

between physicians and will insulate outdated and less

efficient treatment methods from competition. Such

restraints will also permit hospitals to limit the ability of

physicians who need hospital privileges to open competing

outpatient surgery centers.

The facts that are relevant to the legal issues here

could not more plainly frame the importance of these

issues. Dr. Gordon was promoting to his patients what was

recognized as the superior treatment method and had

taken significant steps to open an outpatient surgery

center when the Hospital made him agree to the informa-

tion restraints. Consequently, this case presents a critical

opportunity for this Court to clarify and explain the type of

antitrust analysis such information restraints should

receive.

REASONS FOR GRANTING THE PETITION

I. The Hospital Misstates The Legal Issue Under

HCQIA.

The Hospital’s response is to set up a “straw man”

issue under the Healthcare Quality Improvement Act

(“HCQIA”). Without citation, the Hospital claims that Dr.

Gordon’s position is that the relevant statutory carve-out

4

from the definition of a “professional review action” turns

on “whether the physician’s conduct, from the physician’s

perspective, was intended to solicit or retain business.”

Hospital Opposition, p. 8. This is a red herring. Petitioners

maintain simply that the statute means what it says —

that a hospital has no HCQIA protection (and must there-

fore defend its actions on the merits) if the hospital’s

action is “primarily based on... [a physician’s] advertising

or engaging in other competitive acts intended to solicit or

retain business.”

It is undisputed that the Hospital primarily based its

exclusion of Dr. Gordon on his call to a patient, Mrs.

Seecora, which was a “competitive act intended to solicit or

retain business.” Both the Hospital and Mrs. Seecora

interpreted Dr. Gordon’s call as an effort by Dr. Gordon to

solicit or retain Mrs. Seecora as a patient. (A9002-9005).

Indeed, the district court found, as a matter of fact after

trial, that Mrs. Seecora “felt that Dr. Gordon was trying to

solicit her to use him to remove her remaining cataract.”

App. at 75. Thus, this case does not present the circum-

stance where a physician disingenuously and “subjec-

tively” characterizes his conduct as competitive to avoid ©

immunity, as the Hospital argues repeatedly. The conver-

sation for which Dr. Gordon was expelled was unques-

tionably competitive conduct to solicit or retain business,

conduct that falls squarely within the competitive act

carve-out from HCQIA immunity. 42 U.S.C. § 11151(9)B).

The HCQIA issue actually framed by the Petition —

which the Hospital ignores — is whether a hospital has

statutory immunity whenever it reasonably believes that

its action against a doctor is “in furtherance of quality

healthcare,” even if its action is based on a physician’s

advertising or other competitive acts. The words of the

statute provide that hospital actions based on physician

advertising or other competitive acts are not entitled to

immunity, regardless of the hospital’s belief, even good

faith belief. The Third Circuit held to the contrary: “even

when the solicitation exception is in play, immunity will be

5

judged by applying the objective standard regarding

whether the Hospital based its actions upon the reason-

able belief that they are in furtherance of quality health-

care.” App. at 31-32. That is wrong, as explained in the

Petition, and in the separate amicus briefs of the Ameri-

can Osteopathic Association and the American Association

of Ambulatory Surgery Centers. It confuses and combines

the separate statutory requirements of 42 U.S.C.

§ 11151(9) with those of 42 U.S.C. §11112(a), and it

creates an alternative definition for a “professional review

action” found nowhere in the statutory definition.

The Third Circuit was the first court of appeals to

interpret the statutory carve-outs from immunity. By

nullifying the carve-outs and substantially broadening

immunity from damages (leading to the corresponding

denial of a jury trial), the Third Circuit’s decision will

deter future challengers, leaving this error to stand long

into the future. That is why healthcare organizations

representing potential competitors of hospitals — osteo-

paths, ophthalmologists and ambulatory surgery centers,

for instance — have asked this Court to hear this case to

correct the Third Circuit’s immunity decision before any

more damage is done.

II. The Hospital’s Antitrust Analysis - Like The

Third Circuit’s - Relies On Labels And Categori-

zation Inconsistent With This Court’s Decisions.

The Hospital Opposition fails to address the substance

of Petitioners’ antitrust arguments. The Hospital ad-

dresses the antitrust issues by: (1) continuing its personal

attacks against Dr. Gordon, (2) falsely claiming that

Petitioners have argued that the information restraints

are subject to per se condemnation, (3) erroneously claim-

ing that this Court’s decision in Texaco, Inc. v. Dagher,

2006 U.S. LEXIS 2023 (Feb. 28, 2006) requires full-blown

rule of reason treatment of the information restraints at

issue here, and (4) claiming that, regardless of the nature

of the restraint or the actual economic reality underlying

6

the physician-hospital relationship, courts must character-

ize the physician-hospital relationship as always vertical

and subject to deferential treatment under Section One of

the Sherman Act. :

First, the Hospital suggests this Court should ignore

“technical antitrust jargon” and simply focus on Dr.

Gordon’s alleged “real world unprofessional conduct.”

Hospital Opposition, pp. 12, 19, 20. The complained-of

conduct, however, was not that Dr. Gordon gave patients

false or misleading information. Therefore, the Hospital

has not and could not present a plausible claim that the

information restraints, which directly restrained the

content of truthful comparative information, were procom-

petitive. See, supra, pp. 1-2.

Second, the Hospital claims that Petitioners seek to

have the information restraints condemned as per se

unlawful. Hospital Opposition, p. 12. The Hospital’s

argument is frivolous because Petitioners did not claim in

their Petition that the information restraints were subject

to per se condemnation. Indeed, Petitioners did not present

a per se theory to either the district court or the Third

Circuit.

Third, this Court’s decision in Texaco, Inc. v. Dagher,

2006 U.S. LEXIS 2023 (Feb. 28, 2006) has no relevance to

this case. In Dagher this Court held that “it would be

inconsistent with this Court’s antitrust precedents to

condemn the internal pricing decisions of a legitimate joint

venture as per se unlawful” or to apply the “quick look

doctrine.” Id., at p. *10. How courts should review the

pricing decisions of lawful integrated joint ventures has no

relevance to the level of antitrust scrutiny that should be

given to an information restraint a hospital imposes by

agreement on a physician or a potential competitor.

Finally, the Hospital apparently claims that quick

iook analysis is never applicable to restraints entered into

by hospitals and physicians because physicians and

hospitals are vertically related and the full-blown rule of

reason test is the only one applicable to vertical restraints.

Hospital Opposition, pp. 16-20. The cases cited by the

Hospital do not support such a sweeping statement and

the Hospital does not dispute the economic analysis of the

physician-hospital relationship presented in the Petition.

For example, the Hospital cites Business Electronics v.

Sharp Electronics Corp., 485 U.S. 717 (1988) to support its

argument that physician-hospital relationships are verti-

cal. In Sharp, however, this Court stated that restraints

are vertical when “firms at different levels of distribution”

enter into agreements. The Hospital, however, has not

identified any “distribution” relationship between the

Hospital and Dr. Gordon that would make Sharp relevant

here.

The only physician-hospital case the Hospital cites to

support its claim that physician-hospital relationships are

always vertical is Coffey v. Healthtrust, Inc., 955 F.2d 1388

(10th Cir. 1992). The court in Coffey, however, did not

make a general holding concerning the nature of all

physician-hospital relationships. Instead, the court, with

no analysis, held that the relationship between the plain-

tiff physicians and the defendant hospital were vertical.

Coffey, however, involved an exclusive contract for radiol-

ogy services. A contractual relationship whereby a hospital

procures radiology services for its patients is significantly

different from a hospital contract that restrains an oph-

thalmologist from providing information to his or her

patients.

The Hospital’s second mistake is its argument that a

quick look analysis is completely different from the type of

analysis used under the rule of reason. Several holdings by

this Court and by courts of appeals have “steadily moved

away from the dichotomous approach — under which every

restraint of trade is either unlawful per se .. . or subject to

a full blown rule of reason analysis.” Polygram Holding,

Inc. v. FTC, 416 F.3d 29, 34 (D.C. Cir. 2005). In FTC v.

Indiana Federation of Dentists, 476 U.S. 447 (1986), and

8

California Dental Association v. FTC, 526 U.S. 756 (1999)

this Court held that labels and pigeon holes cannot substi-

tute for careful economic analysis. As this Court directed

in California Dental, courts are supposed to perform a rule

of reason analysis that is “meet for the case.” 586 U.S. at

781. The D.C. Circuit accepted that direction, and recently

described the law as follows: “the extent of the inquiry is

tailored to the suspect conduct in each particular case.”

Polygram Holding, 416 F.3d at 34. Accordingly, the Hospi-

tal’s claim that the information restraints are subject to

the rule of reason, while it states the obvious, does not

address the correct issue. The actual issue is the level of

scrutiny the information restraints will receive under the

rule of reason.

The only effort the Hospital makes to address that

issue comes at the very end of its brief where it argues

that an abbreviated rule of reason analysis is not appro-

priate here because in California Dental “this Court

rejected the quick look analysis for a horizontal restraint

involving a near total suppression of price and quality

consumer information....” Hospital Opposition, p. 20.

This mischaracterizes the Court’s opinion, which merely

found that the Ninth Circuit had taken too quick a look at

ethical rules that were “designed to avoid false or decep-

tive advertising” and that could well have had “a net

procompetitive effect.” California Dental Ass’n v. FTC, 526

U.S. at 771. Indeed, even in California Dental, this Court

did not require a full rule of reason market analysis. Then,

on remand, the Ninth Circuit held that the CDA’s re-

straints were anticompetitive; however, because of the

possible procompetitive benefits, the Federal Trade Com-

mission needed to present some empirical evidence that)

the restraints had a net-anticompetitive effect. California

Dental Ass’n v. FTC, 224 F.3d 942, 949 (9th Cir. 2000).

Here the information restraints, imposed on-a poten-

tial competitor, barred entirely truthful and nondeceptive