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

4

throughout the country. In that role, they often pose a

serious competitive threat to hospitals. These facilities,

often owned by physician investors, provide surgical

procedures to patients who do not require overnight care by

physicians or other health care professionals.” As such, they

compete directly with hospitals that provide similar services

in either an inpatient or outpatient setting, often taking

business away from them. Recognizing ASCs’ potential to

reign in health care spending by offering low-risk surgeries

in a lower-cost and patient-friendly environment, Congress

provided in the early 1980s that Medicare should cover the

facility costs of ASCs for certain services as it did for

hospital services. See Omnibus Reconciliation Act of 1980,

Pub. L. No. 96-499, § 934, 94 Stat. 2599 (1980). Since then,

with advances in technology, the range of services safely

provided in ASCs and covered by Medicare and other payers

has greatly expanded.

Since the 1980s, the number of ASCs has grown rapidly,

doubling in the past decade and now totaling over 4,400.’

There are many reasons for this growth. First, ASCs ensure

benefits to patients and physicians alike. They offer

consumers more convenient locations, briefer wait times on-

site, shorter delays in scheduling surgery, and often lower

> See Medicare Payment Advisory Comm'n, Report tc the

Congress: Medicare Payment Policy, § 2F, at 136, 140 (2003)

{hereinafter “MedPAC 2003], available at http://www.médpac.gov/

publications/congressional reports/Mar03 Entire report.pdf.

> See Fed. Trade Comm’n & Dep't of Justice, Improving

Health Care: A Dose of Competition (July 2004), at Chapter 3, at 24,

(July 2004) [hereinafter “FTC/DOJ Report”] available at http://www.

ftc.gov/reports/healthcare/040723healthcarerpt.pdf; Am. Soc’y of

Anesthesiologists Néwsletter, Vol. 69, “Hospital Contracts Survey:

2004 Data,” (April 2005), available at http://www.asahq.org/

Newsletters/2005/04-05/pracMgmt04_05.htm!.

5

coinsurance payments than hospital outpatient departments.”

Their concentration in specialized procedures, using state-of-

the-art medical technology in facilities staffed by specially

trained personnel, enables them to provide better care at

greater satisfaction to patients than more generalized care

providers.’ Physicians in turn benefit from the increased

efficiencies of using facilities designed for specific

outpatient procedures. See MedPAC 2003, supra note 2, at

140. Because physicians retain control over the surgical

calendar at ASCs, they may schedule more surgeries per day,

which increases their fee generation ability, improves

productivity, and decreases downtime. See Casalino,

“Focused Factories,” supra note 5, at 5; Shapiro Testimony,

supra note |, at 4.

Second, innovations in technology have allowed ASCs

to offer an increasing range of services as outpatient

procedures, transforming the way some maladies are treated.

In the late 1990s in particular, physicians began performing

several high-volume procedures in an ambulatory care rather

* See MedPac 2003, supra note 2, at 140 (noting ASC

copayments of 20 percent as compared with hospital outpatient

copayments of up to 55 percent). See also Medicare Payment

Advisory Comm'n, Report to the Congress: Medicare Payment

Policy, Table 3F-1, at 187 (2004) [hereinafter “MedPac 2004”},

available at _http://www.medpac.gov/publications/congressional

reports/June04_ Entire Report.pdf (noting ASC coinsurance tended to

be 10 to 60 percent lower than hospital outpatient coinsurance).

* See Lawrence P. Casalino et al, “Focused Factories?

Physician-Owned Specialty Facilities,” Health Affairs, Vol. 22, No. 6

(Nov./Dec. 2003) at 5-6, available at http://aaasc.org/advocacy/

documents/F ocusedF actoriesHealthA ffairs!103.pdf; Richard P.

Kusserow, Inspector General, Dept. of Health & Human Servs.,

“Patient Satisfaction with Outpatient Surgery: A National Survey of

Medicare Beneficiaries,” at 3-4, (1989), available at http://oig.hhs.

gov/oei/reports/oei-09-88-01002.pdf.

6

than inpatient setting. See MedPAC 2003, supra note 2, at

139. For example, advances in microsurgery and ultrasound

techniques have permitted better cataract lens replacements

to be performed safely and more frequently in ASC settings.

Id., at 140. Migrating services from the inpatient hospital

environment to lower-risk, lower-cost outpatient settings

allows patients and payors alike to reap these benefits and

encourages further technological advances.

Finally, ASCs can offer cost benefits not just to patients

who have smaller copays, but to the government as well. For

example, cataract removal or lens insertion makes up about

half of the Medicare funds received by ASCs, yet ASCs’

Medicare reimbursement rates for these services are at least

19 percent lower than those charged by hospital outpatient

departments. See MedPAC 2003, supra note 2, at 140 &

Table 2F-2; FTC/DOJ Report, supra note 3, at 26.°

Comparing Medicare reimbursement rates generally, the

government pays higher rates to hospitals for 2,267

procedures, and higher rates to ASCs for only 280

procedures.’ Recent legislation, effective January 1, 2007,

brings all higher ASC reimbursements down to the level of

those paid to hospital outpatient departments. See Deficit

Reduction Act of 2005, Pub. L. No. 109-171, § 5103, 120

® In 2006, the rate gap between ASCs and hospitals for this

procedure became even more disparate. Compare 70 Fed. Reg.

68734 (Nov. 10, 2005) (listing hospital reimbursement rate for

cataract procedures with IOL insert at $1,387.71) with U.S. Dep’t of

Health & Human Srvs., Medicare Claims Process Manual, CMS 100-

04, Change Request 4075 (Sept. 30, 2005) (noting 2006 ASC

reimbursement rates for the procedure were unchanged at $973).

” See Lena Robins et al., “Deficit Reduction Act of 2005

Enacts Sweeping Medicare & Medicaid Changes,” Mondaq, Feb. 17,

2006, available at http://www.mondag.com/i article.asp Q

articleid E 37888.

:

Stat. 4, 40 (2006). In this way, ASCs are fulfilling the

purpose for which they were intended by applying increasing

pressure against hemorrhaging health care costs.

For all of these reasons, ASCs have become increasingly

popular with both patients and physicians. Congress has

increased the services for which ASCs can receive Medicare

reimbursement, and those payments to ASCs have more than

tripled between 1992 and 2002, with total Medicare

payments of $1.9 billion to ASCs in 2002. See MedPAC

2004, supra note 4, §3F, at 186." These results have

affected and will continue to impact the bottom line at

hospitals, because hospitals would otherwise perform and

receive facility fees for these services.

Despite - and in some ways because of — the success of

ASCs, physicians who desire to work at or open an ASC

sometimes face hurdles imposed by hospitals, particularly in

local areas where a single hospital has a dominant market

position. | Medicare currently does not offer facility

reimbursement .for all surgical procedures, and some

individual patients may have conditions requiring inpatient

admission. Doctors whose practice depends on their ability

to also perform procedures on a hospital inpatient basis must

retain their hospital privileges in order to practice effectively.

This dependence is especially keen where the law requires

physicians practicing at an ASC to have hospital staff

privileges and/or transfer agreements with hospitals. See

App. at 83; U.S. Dep’t. of Health & Human Srvs., Medicare

® The Department of Health and Human Services announced

that in 2008, Medicare will significantly expand the list of services .

for which ASCs receive facility reimbursement. See AAASC release,

“Medicare Commits to Significantly Expand Coverage of Services

Within ASC,” available at http://www.aaasc.org/advocacy/Medicare

CommitstoSignificantlyExpandCoverageofServices WithinASC. htm.

8

State Operations Manual, App. L, § 416.41 (2004), available

at http://www.cms.hhs.gov/manuals/downloads/som 107 _

Appendicestoc. pdf.

A 2004 joint Federal Trade Commission and

Department of Justice Antitrust Division report, produced

after extensive ‘iearings and submissions, records panelists’

observations of the various ways in which hospitals have

tried to thwart further ASC entry. See FTC/DO! Report,

supra note 3, Chapter 3, at 27.’ Such practices sncluded

“revok[ing] privileges of physician-investors in ASCs, and

us[ing] state certificate of need (CON) laws to inhibit ASC

entry.” /d. Because physicians often remain dependent on

hospitals due to the hospital’s position in the marketplace,

they are vulnerable to such attacks and require the full

protection provided to them by the federal antitrust laws.

B. HCQIA’s Clear Language Limits Antitrust

Immunity Where Hospitals Use The Peer Review

Process In Certain Specified Respects.

The courts below granted Lewistown Hospital (the

“Hospital”) immunity from antitrust damages on the basis of

HCQIA, enacted in 1986. HCQIA was designed to provide

hospitals with legal protection from damage claims in

connection with bona fide peer review of physician

competence and professional conduct, while preserving full

application of the antitrust and other laws to hospital actions

based on enumerated competitive acts by physicians.

Congress was concerned that absent wmmunity, physicians

who were aggrieved by adverse peer review decisions would

* See id. at 22 n.i4i (discussing “economic credentialing”

whereby hospitals facing competition from specialty providers revoke

the admitting privileges of physicians involved with those providers).

9

bring non-meritorious but costly challenges to their peer

reviews. See id., § 11101.

HCQIA provides that “[{i]f a professional review action

(as defined in section 11151(9) of this title) of a professional

review body meets all the standards specified in section

11112(a) of this title,” it shall not be liable for damages

related to that action. /d., § 11111(a)(1). Thus, the plain

language of the Act requires an action to satisfy two tests to

obtain immunity from damages: first, it must meet the

definition set out in Section 11151(9), and second it must

comply with additional standards in Section 111 12(a).

The first test, Section 11151(9), defines a “professional

review action” as “an action or recommendation of a

professional review body which is taken . . . based on the

competence or professional conduct of an_ individual

physician.” /d., §11151(9). Section 11151(9) further

provides, however, that an action will not be deemed to be

based on the competence or professional conduct of a

phys’cian — and therefore will not be a “professional review

action” — if the action is primarily based on one of five

exceptions, including “the physician’s fees or the physician’s

advertising or engaging in other competitive acts intended to

solicit or retain business.” Jd., § 11151(9)(B).'° These limits

'° The four other exceptions are: “the physician’s association, or

lack of association, with a professional society or association,” “the

physician’s participation in prepaid group health plans, salaried

employment, or any other manner of delivering health services

whether on a fee-for-service or other basis,” “a physician’s

association with, supervision of, delegation of authority to, support

for, training of, or participation in a private group practice with, a

member or members of @ particular class of health care practitioner or

professional,” and “any other matter that does not relate to the

competence or professional conduct of a physician.” 42 U.S.C.

§§ I1ISI(9)A), (C)-(E). These exceptions were inserted because

(comtinucd....)

10

on the definition of “professional review action” are explicit

and critical.

The second test, Section 11112(a), sets out additional

standards necessary for a professional review action to

qualify for immunity, including the reviewing body’s

“reasonable belief that the action was in the furtherance of

quality health care.” /d., § 11112(a)(1).""

Contrary to the plain language of the Act, the Third

Circuit effectively held that so long as an action meets the

second test, the action or recommendation of a hospital’s

professional review body will automatically pass the first test

and will be deemed a “professional review action” based on

a physician’s competence or professional conduct. Thus,

according to the Third Circuit, “even when the solicitation

exception , to the definition of professional review action] is

in play, immunity will be judged by applying the objective

standard [of the second test] regarding whether the Hospital

based its actions upon the reasonable belief that they are in

furtherance of quality healthcare.” App. at 31-32. The Third

Circuit’s holding therefore eviscerates Congress’s decision

to categorically limit the range of actions entitled to

immunity, while applying a presumptively reasonable

(continued). . .

“this area presented the greatest potential for abuse of the professional

review process for economic or other reasons under the guise of

improving the quality of health care.” H.R. Rep. No. 99-903, pt. 1, at

6404 (1986).

'' Section 11112(a) further states that “{a] professional review

action shall be presumed to have met tre preceding standards

necessary for [immunity from damages] unless the presumption is

rebutted by a preponderance of the evidence.” Accordingly,

Section 11112(a) will not even apply unless the act in question has

already satisfied the definition of a “professional review action.”

standard to a hospital’s determination. The result expands the

range of physician conduct that can be the basis for adverse

action that qualifies for immunity and broader protection for

anticompetitive behavior than the law provides.

In addition to defeating the plain language of the Act,

this holding confounds the longstanding Supreme Court

teaching that exemptions to the antitrust laws are to be

construed narrowly. See Union Labor Life Ins. Co. v.

Pireno, 458 U.S. 119, 126 (1982); Group Life & Health Ins.

Co. v. Royal Drug Co., 440 U.S. 205, 231 (1979).

By subsuming the categorical exclusion of five specific

exceptions in the test for reasonableness, the Third Circuit

created a split with the Fifth Circuit, which had previously

affirmed the separate application of both tests in their proper

order. See Rogers v. Columbia/HCA, 971 F. Supp. 229, 234

(W.D.La. 1997) (determining act was a professional review

action not fitting any exceptions set out in § 11151(9)(A)-(E)

before proceeding to second test of § 11112(a)), aff'd, 140

F.3d 1038 (Sth Cir. 1998) (mem). As such, the holding is

appropriate for certiorari under Supreme Court Rule 10(a).

C. The Evisceration Of The Exceptions From

HCQIA Immunity Conflicts With The Policies

Underlying HCQIA And The Antitrust Laws.

In the 1970s and early 1980s, following the Supreme

Court’s decision in Goldfarb v. Virginia State Bar, 421 U.S.

773 (1975), antitrust law began to be applied actively in the

health care field and in the professions. The litigation that

followed challenged longstanding practices and premises in

the professions and in the health field. The courts and

antitrust enforcement agencies regularly confronted claims

that restraints were justified because the competition

engendered by otherwise professionally-proscribed market

conduct would be harmful to patients or consumers — in

12

effect, that competition itself was unreasonable. Such

restraints were often directed at advertising and solicitation

activities; discounting; physicians practicing or cooperating

with non-physician health care providers who compete with

some physicians, such as nurse midwives, podiatrists, or

chiropractors; affiliating with health maintenance

organizations (“HMOs”) or prepaid group health plans; and

engaging in the salaried “corporate” practice of medicine.

Numerous antitrust cases successfully challenged many of

these restraints.’ As the Supreme Court reemphasized in

National Society of Professional Engineers v. United States,

435 U.S. 679, 695 (1978), an attempt to justify a restraint

under the rule of reason “on the basis of the potential threat

that competition poses to the public safety and the ethics of

its profession is nothing !ess than a frontal assault on the

basic policy of the Sherman Act.”

'? FTC v. Ind. Fed’n of Dentists, 476 U.S. 447, 463-64 (1986)

(rejecting claim that “an unrestrained market in which consumers are

given access to the information they believe to be relevant to their

choices will lead them to make unwise and even dangerous choices”);

Am. Med. Ass'n v. FTC, 94 F.T.C. 701, 1037-39 (1979) (striking

association’s ethics code-based restrictions on advertising, corporate

practice of medicine, and affiliation with prepaid group health plans),

aff'd as modified, 638 F.2d 443 (2d Cir. 1980), aff'd per curiam by an

equally divided Court, 455 U.S. 676 (1982); In re Mem'] Med. Ctr.,

110 F.T.C. 541, 546-47 (1988) (consent order prohibiting medica!

center staff from denying or restricting hospital privileges to nurse

midwives without basis); Wilk v. Am. Med. Ass'n, 719 F.2d 207, 211,

222-29 (7th Cir. 1983) (reversing jury verdict where jury instructions

suggested that defendants’ boycott of chiropractors was lawful if

boycotting doctors sincerely believed chiropractics to be “dangerous

quackery”); /n re State Volunteer Mut. Ins. Co., 102 F.T.C. 1232,

1236-37 (1983) (consent order prohibiting insurance company from

applying different underwriting criteria to physicians affiliated with

nurse midwives).

13

At the same time, physicians began using the antitrust

laws to challenge individual peer review actions to which

they objected, even where the action was based solely on

their competence or professional conduct, unrelated to their

pricing practices or other competitive activities. These cases

generally failed — but not without exception. See, e.g.,

Patrick v. Burget, 486 U.S. 94, 105 & n8& (1988).'°

Congress, therefore, sought to provide qualified immunity to

traditional peer review actions dirscted at a physician’s

competence or professional conduct, while being careful to

exclude from immunity actions that suppress competitive

activity by physicians, regardless of the belief of those

imposing the discipline that the disciplinary action would

further patient welfare and the quality of care provided.

HCQIA reflects careful line-drawing by Congress.

Congress sought, on the one hand, to protect bona fide peer

review focused on the competence or professional conduct of

physicians. On the other hand, Congress recognized that

restraints on certain types of physician activity were not

appropriate for immunity. Among these activities were

professional association memberships; fees; advertising and

competitive acts intended to solicit or retain business;

participation in HMOs or other health plans; and association

with non-physician health care practitioners. Congress

declined to extend immunity to restraints imposed to prevent

a harm emanating from acts of competition themselves.

Congress’s approach tracks basic principles of antitrust law.

'? Bernard D. Reams, Health Care Quality Improvement Act of

1986: A Legislative History of Publ. L. No. 99-660 [hereinafter

“HCQIA Hearings”}, 101-02 (1990) (testimony of Arthur N. Lerner)

(noting reaction to successful cases).

14

As a result, a “professional review action” can qualify

for antitrust damages immunity if it meets specified

standards, including fair process and a reasonable belief that

the action furthers quality health care. But irrespective of the

hospital’s belief to the contrary, if the action is based

primarily on the enumerated types of competitive acts by

physicians, no immunity is provided. Disciplinary actions

based on such conduct are fully subject to the antitrust laws.

The plaintiff still may not win a suit -- after all, actions not

immune under HCQIA are not presumed to violate the

antitrust laws. See HCQIA Hearings, supra note 13, at 6393

(“failure to meet the standards of [the Act] creates no

presumption with respect to the liability or lack of liability of

a health care entity”). Many hospital peer review decisions,

even though not exempt, have no harmful impact on

competition or may actually foster it. Rather, where there is

no immunity, plaintiffs merely get their day in court.

In holding that these categorical exceptions were

subsumed by a reasonableness test focused on furtherance of

quality health care, the Third Circuit undermined Congress’s

approach. Under that court’s analysis, a hospital and its

medical staff would be immune from antitrust damages for

revoking the hospital privileges of a doctor who, for

example, discounts his or her fees, joins an HMO, advertises,

or collaborates with a nurse midwife, if the hospital

reasonably believed that its actions furthered quality health

care. This must be wrong. It was not Congress’s intent to

immunize a hospital that enforced a price-fixing or boycott

scheme through peer review if it proffers a reasonable

argument that it seeks to further quality health care.

Similarly, the Third Circuit’s approach would extend

antitrust damages immunity to hospitals that excluded

physicians who advertised or otherwise communicated the

relative cost, convenience or service advantages of ASC

15

services to prospective patients, so long as_ the

reasonableness standards were met. Such a result could be

devastating for non-hospital affiliated ASCs across the

country, since doctors would have to, in effect, re-litigate in

each instance whether the competition they sought to foster, .

and the hospital to restrain, would further quality health care

or not. Such restraints do not qualify as professional review

actions in the first place, and should enjoy no immunity.

The specific activity by Dr. Gordon that was the primary

basis for the Hospital’s disciplinary action is a fact issue, and

whether that activity fits within any of the enumerated

exceptions to the definition of “professional review action”

is similarly a fact issue. Those issues are not properly

resolved, however, by inquiries into whether the Hospital

believed it was furthering quality health care and into the

reasonableness of such a belief.

D. Legislative History Supports Application Of The

Antitrust Exceptions From HCQIA Immunity.

The legislative history of the Act is compiled in HCQIA

Hearings, supra note 13. The House’s Committee Report on

HCQIA confirms that “[t]o qualify for the [immunity]

protection, the professional review action must meet the

standards specified in section 102(a) [§ 11112(a)] and must

be an action as defined in section 301(9) [§ 11151(9)].” /d.

at 6391 (emphasis added). Other sections of the history

concur that the immunity sections of Section 11112(a) were

not meant to subsume the exceptions to professional review

actions defined in Section 11151(9).'* The Third Circuit's

holding is to the contrary.

See, eg. HCQIA Hearings, supra note 13, at 47-49

(statement of Henry A. Waxman, Chairman, House Subcommittee on

(continued....)

16

Il. This Court Should Consider Whether A Restraint

Imposed On A Potential Or Incipient Competitor

Can Be Horizontal In Nature Even If The

Competitor Has Not Yet Commenced Operations.

The Third Circuit held that the restrictive “Conditions of

Reappointment” that Dr. Gordon entered into with the

Hospital on November 14, 1996 in order to be reinstated did

not unlawfully restrain trade under the rule of reason. The

court applied a “full” rather than a “quick look” rule of

reason analysis, categorizing the relationship between Dr.

Gordon and the Hospital as a “vertical” relationship between

a single hospital and a single physician. In support, the court

relied on a conclusion that “Gordon and the Hospital were

not competitors in the relevant market in November 199[6]'°

when he agreed to the Conditions. His competition in the

facility services market did not commence until MCCSC

opened more than one year later [in 1998].” App. at 41. In

essence, the court found that to the extent proper analysis of

an allegedly anticompetitive restraint depends on the

existence of a relationship of competition between two

(continued) .. .

Health and Environment) (“as redrafied, our bill applies only to

professional review actions based on the competence or conduct of an

individual physician. We completely exclude from the protections of

the bill, any disciplinary action based on a doctor’s membership or

lack of membership in a medical society . . .””); id., at 103, (statement

of Arthur N. Lerner) (noting that the exclusions prevent application of

immunity); see also id., at 6404 (quoted supra at n.10, noting that

antitrust exceptions were inserted due to concern for abuse for

economic and related reasons).

'S We note from Dr. Gordon’s petition for certiorari that the

Third Circuit’s opinion makes a typographical error in listing the date

of Dr. Gordon’s agreement as November 1995 rather than 1996. See

Pet. for Cert. at 24 n.2.

17

parties, no competitive relationship will be found when the

new entrant has yet to open for business. The court erred

and the implications of this error are grave. The court’s error

is starkly inconsistent with this Court’s precedents, with

decisions of other circuits, and with accepted antitrust

analysis, importantly undermining a significant aspect of

antitrust analysis in this field.

Antitrust law recognizes the centrality of new entry and

incipient competition to the vitality of the marketplace; this

Court’s precedents apply the antitrust laws to protect such

competition. In United States v. El Paso Natural Gas Co.,

376 U.S. 651, 662 (1964), the Court ordered El Paso Natural

Gas to divest Pacific Northwest, which it had acquired, The

Court found that the acquisition lessened competition even

though Pacific Northwest had not yet sold any natural gas in

competition with El Paso in the California relevant market.

Pacific Northwest had been on the verge of doing so, and

had entered into negotiations and a tentative agreement for a

supply contract with a prospective customer. /d., at 660-61.

In United States v. Marine Bancorporation, 418 U.S. 602,

623-25 & n.24 (1974), the Court discussed the El Paso

ruling, and, notably, described El Paso as an “actual

competition rather than a potential competition case.”'®

In Sherman Act Section | cases, courts often apply strict

scrutiny to restraints directed at the actions of firms in

'© See also In re Brunswick Corp., 94 » ~C. 11 (F.T.C. 1979)

(Pitofsky, C.), aff'd on other grounds sub “,, Yamaha Motor Co. v.

FTC, 657 F.2d 971, 980-81 (8th Cir. 1 . ), cert. denied, 456 U.S.

915 (1982). The FTC had determined that Brunswick’s venture with

Yamaha unlawfully lessened “actual competition” in the United

States outboard motor market, even though Yamaha had made no

sales into the country. The Eighth Circuit held that the joint venture

unlawfully lessened “actual potential competition.”

potential competition, recognizing that such restraints can be

horizontal in character, even though actual competition, in

the sense of commercial business operations in the same

relevant market, has not yet occurred. For example, in

Palmer v. BRG, 498 U.S. 46 (1990) (per curiam), defendants

argued that vertical analysis was appropriate because they

were only potential and not current competitors, and because

the challenged dealings between them were vertical. The

Eleventh Circuit agreed, but this Court reversed, finding the

challenged covenant to be “illegal on its face.” Id., at 50.’

See also United States v. Reicher, 983 F.2d 168, 170 (10th

Cir. 1992) (applying horizontal per se standard although one

of the two competitors did not have the capacity to perforn:

the contract); United States vy. MMR Corp., 907 F.2d 489,

498 (Sth Cir. 1990) (affirming decision that company lacking

capacity to enter the market was a competitor, because it

“was a competitive threat”); Engine Specialties, Inc. v.

Bombardier Ltd., 605 F.2d i, 11 (1* Cir. 1979) (holding that

a contract not to compete between a manufacturer and

potentially competing distributor was per se illegal).

The Third Circuit’s notion that two facilities are not

competitors for purposes of antitrust analysis until the

second facility opens its doors is peculiar and contrary to

past decisions and common sense. The antitrust laws must

protect doctors desiring to affiliate with ASCs against a

dominant hospital’s anticompetitive acts as soon, for

example, as the physician’s definite steps toward opening or

providing services through an ASC makes him or her a

potential or incipient competitor. As the Court explained in

'7 See also Palmer v. BRG, 874 F.2d 1417, 1432-33 (11" Cir. 1989)

(Clark J., dissenting) (“It is firmly established that entities in a

seemingly vertical relationship may be capable of horizontal restraints

if they are actual or potential competitors.”’).

19

El Paso, a firm’s competitive significance in a market “is

determined by the nature or extent of that market and by the

nearness of the absorbed company to it, that company's

eagerness to enter that market, its resourcefulness, and so

on.” 376 U.S. at 660. Under this analysis, “Pacific

Northwest's position as a competitive factor in California

was not disproved by the fact that it had never sold gas

there.” Jd. By any measure, Dr. Gordon was a competitor of

the Hospital when the challenged restraints occurred.

Opening an ASC can be an arduous process. The CON

procedure in some states, such as Pennsylvania’s during the

time in question, was highly regulated, costly, and time-

consuming. Hospitals often hold the key for ASC entry, as

the federal government and many state regulatory agencies

require physicians who seek to open or work at an ASC to

have privileges at a hospital. In this way, ASCs are

particularly vulnerable when they ar still nascent, and the

doctors who support them are then most in need of antitrust

protection. A finding that antitrust protections for ASCs and

doctors who work with them do not fully ripen until their

doors are actually open for business poses severe risks for

ASCs, for competition, and for consumers.

Appropriate antitrust analysis of hospital-physician

interactions can be complicated. Questions regarding

applicability of the per se rule and of “quick look,” “sliding

scale” or full-blown rule of reason standards can arise. The

answer to these questions may depend on a variety of factors,

and the mere fact that parties are in some regards

competitors does not condemn any and all agreements

between them necessarily to per se or “quick look”

treatment. It is equally evident, though, that .. the extent an

agreement’s horizontal character makes a difference in

antitrust analysis, it is wholly unsound to decide that

question by application of an all-or-none “are they

20

—

competitors” test that turns on whether the target of the

restr2int has yet opened his or her doors.

CONCLUSION

The petition for a writ of certiorari should be granted.

Respectfully submitted,

ARTHUR LERNER *

CLIFTON S. ELGARTEN

DAVID FLORIN

VALERIE HINKO

CROWELL & MORING LLP

1001 Pennsylvania Ave., N.W.

Washington, D.C. 20004-2595

(202) 624-2500

Attorneys for Amici Curiae

~—

March 13, 2006 3 ae * Counsel of Record

MOTION FILED

MAR 13 2006

No. 05-1000

IN THE

Supreme Court of the United States

ALAN D. GORDON; M-BD.;ALAN D. GORDON, M._D., P.C.,

a Corporation; MIFFLIN COUNTY COMMUNITY

SURGICAL CENTER, INC., a Corporation,

Petitioners,

¥.

LEWISTOWN HOSPITAL,

Respondent.

On A PETITION FOR Writ OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

MOTION TO FILE BRIEF AMICI CURIAE AND BRIEF

OF AMERICAN OSTEOPATHIC ASSOCIATION

AND PENNSYLVANIA OSTEOPATHIC

MEDICAL ASSOCIATION IN

SUPPORT OF PETITIONERS

JOSHUA L. PROBER Mark E. Rust

General Counsel Counsel of Record

AMERICAN OSTEOPATHIC DanieL P. ALBERS

ASSOCIATION ELIZABETH M. BEDORE

142 E. Ontario Street BARNES & THORNBURG

Chicago, Illinois 60611 One North Wacker Drive

Suite 4400

Chicago, Illinois 60606

(312) 357-1313

Counsel for Amici Curiae

200079 cr

COUNSEL PRESS

4@rfrwiri 9974 229% « ‘Bsn 2100 42Wh

MOTION FOR LEAVE TO FILE AMICI CURIAE

BRIEF OF THE AMERICAN OSTEOPATHIC

ASSOCIATION AND PENNSYLVANIA

OSTEOPATHIC MEDICAL ASSOCIATION

The American Osteopathic Association (“AOA”) and

Pennsylvania Osteopathic Medical Association (“POMA”)

(collectively the “Amici”) respectfully move this Court,

pursuant to Rule 37.2(b), for leave to file a brief as Amici

Curiae in support of the petition for a writ of certiorari to

the United States Court of Appeals for the Third Circuit.

Petitioners have consented to the filing of this brief, but

respondent has declined to consent, thereby necessitating this

motion. A copy of the proposed amici curiae brief is attached.

As more fully explained at pages 1-2 of the attached brief,

under “Interest of Amici Curiae,” the AOA was founded in

1897 and is the national association that serves more than

56,000 osteopathic physicians practicing in the United States.

The POMA was founded in 1903 and is the state association

for osteopathic physicians who practice in Pennsylvania.

Osteopathic physicians have historically been subjected to

discrimination in the medical community, particularly in the

area of credentialing and privileging at hospitals.

Amici seek leave to file this brief on the narrow question

of the statutory construction of immunity under the Health

Care Quality Improvement Act (“HCQIA”). In passing the

HCQIA, Congress sought to promote and protect peer review

_ Of Medical professionals. At the same time, Congress also

sought to prevent the peer review process from being abused

by creating exceptions to the otherwise blanket immunity

hospitals could enjoy under the HCQIA. The Third Circuit’s

decision threatens to eliminate these protections.

The Amici are uniquely positioned to address the HCQIA

statutory construction question presented from the perspective

of the minority physician population, a population that the

exceptions to immunity under the HCQIA were originally

enacted to protect. The Amici believe they-can assist the Court

by demonstrating how the Third Circuit’s ruling reads the

exception Congress enacted to protect them, and others similarly

situated, out of the statute; and how its approach shifts the burden

of proof in establishing HCQIA immunity from the movant, to

the victim of an improper peer review, of the type Amici’s

members may face.

For these reasons and those set out in the accompanying

brief, AOA and POMA hereby move the Court to allow them to

appear as Amici Curiae, and to submit their brief urging the

Court to grant the Petition and reverse the decision of the Court

of Appeals for the Third Circuit.

Respectfully submitted this 13th day of March, 2006.

Mark E. Rust

Counsel of Record

DANIEL P. ALBERS

ELIZABETH M. BEpDorRE

BARNES & THORNBURG

One North Wacker Drive

Suite 4400

Chicago, Illinois 60606

(312) 357-1313

Josnua L. Proper

General Counsel

~ AMERICAN OSTEOPATHIC

ASSOCIATION

142 E. Ontario Street

Chicago, Illinois 60611

Counsel for Amici Curiae

TABLE OF CONTENTS

TABLE OF CITED AUTHORITIES ............

INTEREST OF AMICI CURIAE .... 06sec sens

SUMMARY CR ARGUMENT joc uc cen edacns.

I.

II.

CERTIORARI SHOULD BE GRANTED

BECAUSE THE RULING BELOW READS

THE EXCEPTIONS TO IMMUNITY OUT

Ce SUAS OPE EE iver cetacean Fhe Oues

A. A Statute Is Read to Give Effect to All its

NR res a we ooh Cee akek on

e ¢ @ Oe Se *.: 8-6 6. 2 & 6-8 @- 8 £ © 35 ¢:-0 0.6 2: 2 4 © 2 €:2. 6-6

C. Even If HCQIA Was Not Clear On Its

Face The Legislative History Directly

Contravenes The Third Circuit’s

RNG 65 555 be ia be ke ee nes

CERTIORARI SHOULD BE GRANTED

BECAUSE THE RULING BELOW

IMPROPERLY SHIFTS THE BURDEN TO

PLAINTIFFS TO ESTABLISH THE

IMMUNITY DOES NOT APPLY .........

A. Immunity is an affirmative defense, the

burden of which is on the party raising it.

Ge 6 ee ¢ 26 @ 6 2 @ £¢.o 6.82 @)'t #2 oe 8 OO. 68 @ @ £99

B. There is no presumption in § 11151. ...

be hi. | eae ee Terre rer eee

13

13

15

17

il

TABLE OF CITED AUTHORITIES

Page

FEDERAL CASES

Barnhart v. Sigmon Coal Co., 534 U.S. 438 (2002)

obser aura ga alien Rik ep Ria aac eM ope ete RO 9, 16

Cooper Industries, Inc. v. Aviall Services, Inc., 543

Ric ROE AGE ee rts ee CA ee VeRO 8

Duncan v. Walker, 533 U.S. 167 (2001) .......... Rate

Ironside v. Simi Valley Hosp., 103 F.3d 482 (6th Cir.

SO 6 os Cie ene eee eR aN be eae 13

K. P. Permanent Make-Up, Inc. v. Lasting Impression

Fife POO Wed. EAE COON 66 esa ei whe 9, 13, 16

Weiss v. York Hospital, 745 F.2d 786 (3d Cir. 1984)

Ee OD ONO CLONES OPO RMD Be ette Sa Mra cdr tp 1,4,7

Welchin v. Tenet Healthcare Corp., 366 F. Supp. 2d

FOE CE a PE AREER RE OER ORES l

Yeager’s Fuel v. Pennsylvania Power & Light Co.,

Se Fie FEO CIGAR TD) ik i ee ees 13

lil

Cited Authorities

Page

STATE CASES

Baptist Health v. Murphy, et al., 2006 Ark. Lexis 58,

2006 WL 242670 (Ark. Feb. 2, 2006) ......... 7

Fritz v. Huntington Hospital, 39 N.Y.2d 339 (NLY.

SOEs bs gb aoe Hee ae ae een Ba eee eeee |

Pe Kr eeeS POE Eas or eh ee hee ees I

FEDERAL STATUTES

Ge Ee BAER $4 oes ook bea woe OEM RM 9,14

ee Me EE CEES hn eee eae hse chee passim

Ska yy: |: Dean ae apenne Umea yal ey passim

SUPREME COURT RULE

Serres COW RUS TG) 36 occ ce eek ea eae cei 3

lv

Cited Authorities

Page

LEGISLATIVE MATERIALS |

132 Cong. Rec. H9954-01, 1986 WL 788373 (daily ed.

Oct. 14, 1986) (statement of Rep. Edwards) .... 10

Health Care Quality Improvement Act of 1986:

Hearing on H.R. 5540 Before the Subcomm. on

Civil Rights and Constitutional Rights of the

Comm. on the House Judiciary, 99th Cong., 2d

Sess. (1986) (statement of Hon. Henry A. Waxman,

WN GE Be eo bee sash wen wees Gaeos 6, 11

H.R. Rep. No. 99-903, pt. 1 (1986) ............. 6, 12

SECONDARY MATERIAL

AMA Code of Medical Ethics, Section 4.07 (2004) .. 2

INTEREST OF AMICI CURIAE '

The American Osteopathic Association (“AOA”) is the

national association for osteopathic medicine. The AOA serves

as the professional association for more than 56,000 osteopathic

physicians (“Doctors of Osteopathic Medicine or “DOs”)

practicing in the United States. The AOA is also recognized by

the United States Department of Education as the accrediting

agency for osteopathic medical schools »*d also accredits

osteopathic graduate medical educational programs (i.e.,

internships, residencies and fellowships) and continuing medicai

education programs throughout the United States. The

Pennsylvania Osteopathic Medical Association (“POMA”) is

the state association for the approximately 6,000 osteopathic

physicians who practice in Pennsylvania. POMA has the largest

number of osteopathic physicians of any state and Pennsylvania.

There are two osteopathic medical schools in Pennsylvania.

Osteopathic physicians (Doctors of Osteopathy or DOs)

are eligible to be licensed for the full scope of medical and

surgical practice in every state in the United States, but

osteopathic physicians remain a minority of the physician

work force, accounting for roughly 8% of that work force.

Historically, DOs have been subject to discrimination in the

medical community, particularly where economic forces

bring DOs into competition for patients. The discrimination

has been most prevalent in the area of credentialing and

privileging at hospitals. E.g., Weiss v. York Hospital, 745 F.2d

786 (3d Cir. 1984); Welchin v. Tenet Healthcare Corp., 366

F. Supp. 2d 338 (D.S.C. 2005); Fritz v. Huntington Hospital,

39 N.Y.2d 339 (N.Y. 1976); Greisman v. Newcomb Hospital,

40 N.J. 389 (N.J. 1965). While ethical principles indicate

that hospital medical staff privileges shouid not be based on

“personal friendships, antagonisms, jurisdictional disputes,

1. Counsel for a party did not author this brief in whole or in

part. No person or entity, other than the Amici Curiae, has made a

monetary contribution for the preparation and submission of this

brief.

2

or fedr of competition” (AMA Code of Medical Ethics,

Section 4.07 (2004)), credentialing, privileging and peer

review decisions can, and do, turn on issues of competition

disguised as quality of care issue.

Because it is essential for osteopathic physicians to be

able to admit their patients into hospitals and for osteopathic

specialty physicians to have access to hospital facilities,

osteopathic physicians must be able to secure relief in the

event that peer review processes are abused for economic

advantage of competing physicians. Until the Third Circuit's

decision below, the exceptions from immunity Congress

provided under the Health Care Quality Improvement Act

(“HCQIA”) afforded that protection and permitted health care

providers in the minority (such as osteopathic physicians and

podiatrists), to sue for, inter alia, antitrust violations, for

actions primarily based on the physician’s association with

a particular class of health care professional. The Court

should grant certiorari, reverse the decision below, and

confirm that a “reasonable belief” that an anti-competitive

action was taken in the interest of patient care does not void

the plain statutory exceptions Congress provided.

SUMMARY OF ARGUMENT

The AOA and POMA petition in support of certiorari

here on the narrow issue of whether a “reasonable belief in

furtherance of quality health care” should be allowed to

override the enumerated exceptions to HCQIA-conferred

immunity, and whether the burden of establishing such an

immunity falls on a plaintiff. The AOA and POMA

respectfully submit that the reasonable belief should not

override the law and the burden to establish immunity should

remain with a defendant. Certiorari should be granted to

confirm this precisely so that health care entities, such as

hospitals, do not use the Third Circuit decision below to

attempt to shield anti-competitive actions from liability by

placing the decisions in the guise of a “reasonable belief.”

3

The stakes are high here not only for physicians who

may be viewed as competi. rs by hospitals, but also for health

care providers in the minority such as osteopathic physicians.

Hospitals could, for exumple, based on the Third Circuit

decision, take action against osteopathic physicians and order

other physicians or hospital employees not to refer to

osteopathic physicians or associate with them because of a

purported “concern for patient health and welfare.” Under

the Third Circuit’s ruling, such blatantly anti-competitive

behavior would be immune so long as the hospital based its

actions upon the “reasonable belief” that they were acting in

furtherance of the quality of health care. (Petitioner’s

Appendix 31-32). This interpretation strips the law of any

practical effect and reads the exceptions out of the law. This

dangerous precedent eviscerates Congressional intent and

puts health care practitioners and health care itself at risk.

Under Supreme Court Rule 10(c) “it is an important question

of Federal law that has not been, but should be, settled by

this Court.”?

The Third Circuit’s decision also contradicts other

Circuit decisions and established Supreme Court precedent

that placed the burden of establishing an affirmative defense,

such as immunity, rests on the defendant. Again, the decision

contradicts the plain language of the statute that creates a

presumption that the health care entity had a reasonable belief

it was acting in furtherance of quality health care only if its

actions first qualify as a “professional review action.” The

2. Respondent may suggest there is no circuit split on this issue

and, therefore, certiorari should not be granted. Amici respectfully

submits there is no split because the decision on this issue directly

contravenes the plain language of the statute. Waiting for

“percolation” will only allow the precedent to create more harm and

is not a reason to permit it to stand. The decision does contradict

established Supreme Court law on statutory construction and other

Circuit decisions on where the burden of proving immunity lies.

4

Statute establishes no presumption that any act is a

professional review action or that it is a plaintiff's burden to

show it is not. Certiorari should be granted.

I. CERTIORARI SHOULD BE GRANTED BECAUSE

THE RULING BELOW READS THE EXCEPTIONS

TO IMMUNITY OUT OF THE STATUTE.

A. A Statute Is Read to Give Effect to All Its Parts.

The Health Care Quality Improvement Act (“HCQIA”)

is a statute that grants health care delivery organizations

immun’ty from money damage suits based on defined peer

review activities. When Congress enacted the HCQIA,

however, it recognized that hospitals and other health care

organizations had a long history of abusing the credentialing

and peer review processes for anticompetitive and

exclusionary purposes, including the exclusion of physicians

in a particular class of health care professionals such as DOs.

_ See, e.g., Weiss v. York Hospital, 745 F.2d 786 (3d Cir. 1984).

“As a result, the HCQIA contains a series of exceptions that

deny immunity to a health care entity when a disciplinary

action is primarily based on a physician’s association with a

class of professional (like DOs) or a physician’s competitive

conduct such as advertising or patient solicitation, both of

which have been traditionally attacked as “unprofessional”

by interested parties in the hardscrabbie world of healthcare

—detivery. The decision below, if allowed to stand, makes those

statutory exceptions created by Congress a dead letter.

The relevant portions of the HCQIA at issue here are

plain on their face. Hospital disciplinary actions that amount

to a “professional review action” are entitled to immunity if

the professional review action was taken in furtherance of

quality health care and meets other due process requirements.

The HCQIA, at 42 U.S.C. § 11151(9), defines a “professional

review action” as:

(9) [A]n action or recommendation of a

professional review body which is taken or made

5

in the conduct of professional review activity,

which is based on the competence or professional

conduct of an individual physician (which conduct

affects or could affect adversely the health or

welfare of a patient or patients), and which affects

(or may effect) adversely the clinical privileges

... Of the physician...

The definition of a “professional review action,”

however, then goes on to exclude or “carve out” certain

actions from the scope of a “professional review action”:

[A]n action is not considered to be based on the

competence or professional conduct of a physician

[and thus is not a professional review action] if the

action is primarily based on (A) [text omitted here]

\

(B) the physician’s fees or the physician’s

advertising or engaging in other competitive acts

intended to solicit or retain business . . .

(C) [text omitted here]

(D) a physician’s association with, supervision

of, delegation of authority to, support for, training

of, or participation in a private group practice with,

a member or members of a particular class of health

care practitioner or professional, or. . .

(E) [text omitted herej

42 U.S.C. § 1115109).

As the language above plainly reveals, Paragraphs 9(D)

and 9(B) deny a hospital immunity when it decides to

discipline a physician primarily for competitive conduct or

for associating with or delegating authority to osteopathic

physicians and other classes of practitioners. In those

circumstances, the tion is not considered a “professional

review action” un’ r the statute and, consequently, its