As many hospitals expand their footprint using co-management agreements, they will also be subject to greater scrutiny for anticompetitive behavior.
The United States continues to grapple with the widely publicized shortage of healthcare workers. One resulting impact on hospitals and medical institutions is the anticipated shift regarding the application of antitrust laws.
As background, antitrust laws aim to provide individuals who have been victimized by unfair competitive practices by a business or organization with the ability to bring a private lawsuit against the offending business.
For example, the federal Sherman Antitrust Act allows a plaintiff to bring a lawsuit against a business, such as a hospital or healthcare facility, that has entered a contract to restrain trade or withhold necessary resources from a targeted business or individual. States across the country have also enacted similar statutes, including New Jersey’s “New Jersey Antitrust Act” and New York’s “Donnelly Act.”
In the medical profession, antitrust claims may come into play when doctors or similar medical professionals assert claims against a hospital after being denied clinical privileges or having privileges terminated.
Antitrust laws in the medical field
Traditionally, courts have been reluctant to find that a hospital’s refusal to grant clinical privileges or the decision to terminate privileges as being “anticompetitive behavior.”
In a 1992 case in the United States Court of Appeals for the Third Circuit, a doctor’s antitrust claims were dismissed because the alleged anti-competitive acts “amounted to an informal and limited restraint on a single doctor in a single hospital.”
Similarly, in a 2004 New Jersey decision, the Court dismissed a physician’s claim that the defendant hospital engaged in an unlawful restraint of trade by denying his application for clinical privileges. The Court held that the hospital had “absolutely no economic interest in preventing plaintiff from getting privileges since, as the evidence showed, the hospital either would gain from having additional doctors or would suffer no detriment.”
However, courts have occasionally upheld these types of claims if the doctor demonstrated that the hospital’s actions had an adverse effect on marketplace competition, such as where the hospital has engaged in a “group boycott.”
Take Brader v. Allegheny Gen. Hosp., a 1995 federal court case, as an example.The Third Circuit upheld a doctor’s antitrust claims because there were allegations that the hospital unjustly terminated his clinical privileges and reported the action to surrounding hospitals. The Court upheld the complaint because there were allegations that the hospital’s actions prevented the doctor from being hired again, and thus, deprived the surrounding public of a vascular surgeon.
The shifting landscape
As discussed above, the nation has been facing unprecedented staffing shortages in the medical field – with some experts estimating that nearly 22% of hospitals throughout the country being impacted. As a result, we expect courts will begin to further scrutinize how a hospital’s privileges determination could negatively impact the local healthcare landscape, patient care, and physician access.
For example, let’s say the staffing shortages have hypothetically caused there to be only two neurosurgeons in a given demographic, and the hospital decides to terminate one of those two surgeons. The hospital’s decision will likely have a greater impact on the surrounding market than it would have previously, which will significantly impact the outcome of the antitrust case.
In addition, in a recent Seven Circuit case, staffing shortages had caused there to be a lack of local vascular surgeons. As a result, the hospital’s attempt to acquire several surrounding medical practices which consisted of vascular surgeons was perceived to be an “anticompetitive act” because the hospital was perceived to be monopolizing the vascular surgery market.
As many hospitals expand their footprint using co-management agreements, it’s important to keep in mind that they will also be subject to greater scrutiny for anticompetitive behavior.
Moving forward, hospitals and doctors alike should pay close attention to how a decision to grant or deny clinical privileges will affect the surrounding public.
Dylan R. Newton is an attorney in Archer & Greiner’s Business Litigation Group, based in Hackensack, N.J. and New York, N.Y. Michael S. Horn is a partner at Archer.