Exclusive contracts between hospitals and physicians: The antitrust issues

Health Economics

Volumn 7, Issue 2, 1998, Pages 175-178

  Frech III, H E ^a,b   Danger, Kenneth L ^a  

^a UNIVERSITY OF CALIFORNIA   (United States)

^b UNIVERSITY OF CALIFORNIA   (United States)

Author keywords

Exclusive contracts; Hospital and physician market power; Tie in sales

Indexed keywords

COMPETITION; CONTRACT; HEALTH ECONOMICS; HOSPITAL PHYSICIAN; LAW; MARKET; PRIORITY JOURNAL; RURAL AREA; SHORT SURVEY;

ANTITRUST LAWS; CONTRACT SERVICES; ECONOMIC COMPETITION; HEALTH CARE SECTOR; HOSPITAL-PHYSICIAN JOINT VENTURES; HOSPITALS, RURAL; HUMANS; MANAGED CARE PROGRAMS;

EID: 0031977322     PISSN: 10579230     EISSN: None     Source Type: Journal    
DOI: 10.1002/(SICI)1099-1050(199803)7:2<175::AID-HEC338>3.0.CO;2-Z     Document Type: Short Survey

References (20)

1. They were based on constitutional deprivations and contract breaches. See Note 16.
2. Per se offences are those restraints that have been deemed so antithetical to competition that proof of their actual effects upon competition is not necessary. This category includes price-fixing, market division agreements, and at least some tie-in sales.
3. The rule of reason requires a fuller analysis of the pro- and anticompetitive effects of such relationships.
4. Lynk, W. Tying and exclusive dealing: Jefferson Parish Hospital v. Hyde (1984), 376-399. In: Kwoka, J.E. and White, L.J. (eds.) The antitrust revolution: the role of economics. New York. Harper Collins College.
5. When the hospital, physicians, and an insurance organization all integrate, tying should be examined more closely, especially in rural markets.
6. For example, reducing the variety of equipment and procedures by reducing the number of physicians and correspondingly increasing the intensity with which the remaining equipment and procedures are used may increase efficiency. Allowing physicians to appropriate the gains from relationship specific investments in training and monitoring that would otherwise have been diluted by free riders enhances quality. For further details see: Blackstone, E.A. and Fuhr, J.P. Jr. Antitrust and exclusive agreements: the case of hospital-based physicians. The Antitrust Bulletin 1984; 29: 739-758; and Lynk, W. and Morrisey, M.A. The economic basis of Hyde: are market power and hospital exclusive contracts related? The Journal of Law and Economics 1987; 30: 399-421.
7. For example, reducing the variety of equipment and procedures by reducing the number of physicians and correspondingly increasing the intensity with which the remaining equipment and procedures are used may increase efficiency. Allowing physicians to appropriate the gains from relationship specific investments in training and monitoring that would otherwise have been diluted by free riders enhances quality. For further details see: Blackstone, E.A. and Fuhr, J.P. Jr. Antitrust and exclusive agreements: the case of hospital-based physicians. The Antitrust Bulletin 1984; 29: 739-758; and Lynk, W. and Morrisey, M.A. The economic basis of Hyde: are market power and hospital exclusive contracts related? The Journal of Law and Economics 1987; 30: 399-421.
8. Closed medical staffs provide similar benefits to incumbent physicians and are, therefore, analytically similar. But, they are very rare. See Morrisey, M.A. and Brooks, D.C. The myth of the closed medical staff. Hospitals July 1985; 1: 75-77.
9. For a model of a physician-controlled hospital where exclusivity may result, see: Pauly, M. and Redisch, M. The not-for-profit hospital as a physicians' cooperative. American Economic Review 1973; 63(1): 87-100.
10. Frech, H.E. III. Preliminary Report: Economic Analysis of Quinn v. Kent General Hospital, July 6 1990: 16.
11. Monica Langley describes an example of a double-sided exclusive contract at a Texas hospital. Roughly one-month after Langley's report in the Wall Street Journal, Texas passed legislation prohibiting hospitals from refusing staff privileges to physicians because they practice at another hospital; see: Langley, M. M.D. vs. M.B.A.: Columbia Tells Doctors at a Hospital to End Their Outside Practices. Wall Street Journal, May 2 1997: A1; and Wall Street Journal, Columbia/HCA Reaches Accord With Radiologists, September 16 1997: B10.
12. Monica Langley describes an example of a double-sided exclusive contract at a Texas hospital. Roughly one-month after Langley's report in the Wall Street Journal, Texas passed legislation prohibiting hospitals from refusing staff privileges to physicians because they practice at another hospital; see: Langley, M. M.D. vs. M.B.A.: Columbia Tells Doctors at a Hospital to End Their Outside Practices. Wall Street Journal, May 2 1997: A1; and Wall Street Journal, Columbia/HCA Reaches Accord With Radiologists, September 16 1997: B10.
13. Statements of Antitrust Enforcement Policy in Health Care. United States Department of Justice and the Federal Trade Commission, Section 9, 1996.
14. SHMSO. Survey of Hospital Medical Staff Organizations, American Hospital Association, 1990.
15. Liang, B.A. An overview and analysis of challenges to medical exclusive contracts. The Journal of Legal Medicine 1997; 18: 1-45.
16. Borkon, P.E. Exclusive contracts: Are constructively terminated incumbent physicians entitled to a fair hearing. The Journal of Legal Medicine 1996; 17: 143-168.
17. See Note 6.
18. Frech, H.E. III. Competition and Monopoly in Medical Care, American Enterprise Institute Press, Washington D.C. Goldfarb v. Virginia State Bar, 421 U.S. 773 (1975), 1996.
19. Danger, K.L. and Frech, H.E. III. Exclusive Contracts Between Hospitals and Physicians, University of California, Santa Barbara, Working Paper 1997: 14-97.
20. Oltz v. St Peter's Community Hospital, 861 F.2d 1440 (9th Cir. 1988).