Excerpted from The Biggest Legal Mistakes Physicians Make: And How to Avoid Them
Edited by Steven Babitsky, Esq. and James J. Mangraviti, Esq. (©2005 SEAK, Inc.)

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Executive Summary Physicians are often dismayed by both the application and complexity of the federal antitrust laws that apply to their practices and to the multiphysician organizations in which they participate. Unfortunately, many physicians believe that antitrust laws pertain only to large corporations, and they often do not take the opportunity to acquaint themselves with antitrust laws and the increasing relevance of these laws to modern American health care. This lack of understanding often leads to unfortunate consequences. Increasingly, physicians and physician practice groups, such as physician hospital organizations (PHOs) and independent practice associations (IPAs), are the target of enforcement actions brought by one of the two antitrust enforcement agencies–the Antitrust Division of the federal Department of Justice (DOJ) and the Federal Trade Commission (FTC)–as well as civil actions brought by private parties. In addition, antitrust issues are developing during negotiations between physicians and managed care organizations or other payers. The criminal nature of the antitrust offense, the heavy fines and sanctions that accompany conviction, and the possibility of treble damages for successful private litigants all suggest that physicians must pay careful attention to the antitrust laws and take any antitrust complaint seriously. The consequences of failing to do so are far too severe.

Mistake 1        Failing to Understand the Relevant Law Although failing to understand the relevant law is a mistake that actually arises before the first antitrust complaint is received, it is important enough to mention. Avoiding the antitrust complaint is just as important as properly defending it when it arrives. Antitrust cases are some of the most complex and expensive to defend. Many antitrust defendants have settled cases that likely could have been won because of the cost of litigating them. Understanding the antitrust laws and their application to physicians, PHOs, and IPAs not only helps the physician avoid the conduct that spawns the antitrust complaint, but also helps him or her distinguish the winnable claims from those that should be settled. 

Action Step     Physicians should take affirmative steps to educate themselves regarding the antitrust laws, including the possible hiring of antitrust counsel to provide both training and periodic counseling. Physicians should also ensure that any IPAs and PHOs in which they participate have sought antitrust advice with respect to their activities. 

Mistake 2        Failing to Have and Abide by an Appropriate Document Retention Program Failing to have and abide by an appropriate document retention program is a mistake that also can be made both before and after an antitrust complaint is received. After a complaint is received, there may be a natural reaction to want to search for and purge from physician files any incriminating or “bad” documents. This is not the time to undertake such an endeavor. In fact, when an antitrust complaint is received, an affirmative statement to employees is in order to the effect that no destruction of relevant documents should occur. A well-designed document retention program will include such guidelines. Furthermore, adherence to the document destruction schedule of a well-designed document retention program may prevent document destruction from looking as if it were part of a plan to hide relevant information from the government or a private plaintiff. 

Action Step     Physicians should develop a document retention program and adhere to it. They should review this policy with relevant personnel upon receiving a complaint. 

Mistake 3        Failing to Take Complaints Seriously Because many physicians think of the antitrust laws as something for big companies to worry about, there may be a tendency to dismiss the severity of an antitrust complaint. Physicians must take antitrust complaints seriously, whether they are formal complaints filed in court or informal complaints brought to the physician’s attention by competitors, payers, or patients. If victorious, private antitrust plaintiffs stand to receive not just their proven damages, but three times their actual damages (known as “treble damages”). This concept provides the plaintiff with a windfall and gives the plaintiff tremendous incentive to pursue antitrust claims. In addition, the successful antitrust plaintiff also receives what may be an even bigger bounty in some instances: payment of his attorney’s fees by the losing defendant.

Action Step     Physicians should treat any antitrust complaint, formal or informal, as a “bet the practice” case. 

Mistake 4        Failing to Hire Antitrust Counsel in a Timely Manner Physicians may use the services of general legal practitioners to handle business and litigation matters. Such counsel may be fully prepared to respond to an antitrust complaint alone, just as they would any other complaint. However, if physician’s counsel has never handled antitrust claims, the failure of such counsel to associate co-counsel experienced with antitrust matters could be a serious disadvantage. The antitrust laws are complex and not always intuitive; therefore, experience is crucial.

Action Step     Physicians should consult with counsel as soon as possible upon receiving an antitrust complaint. If counsel is not experienced in dealing with antitrust matters, physicians should ask that he or she associate with special antitrust counsel.

Mistake 5        “Creatively” Reconstructing the Facts Involved Remembering the specific details of previous meetings or the content of old documents is often difficult. Physicians, like most attorneys, remember past events in the most favorable light. However, this recollection may be inconsistent with discoverable documents or the testimony of multiple witnesses. Guessing at what happened or misleading investigators could create more significant problems than the initial antitrust investigation itself. Providing inaccurate information could subject the physician to charges of perjury and could cause the investigators to seek criminal penalties or move the investigation to a more serious stage. It may be embarrassing to confide damaging information to counsel or to an investigator. However, absolute honesty with a physician’s defense team is essential. Counsel needs to learn the incriminating information from the client first before the plaintiff or investigators present the information in a hostile environment. With prior knowledge of the problematic information, counsel can construct a defense and be ready to respond with exonerating documentation.

Action Step     A physician must be completely candid with his or her counsel in responding to an antitrust complaint. Although on advice of counsel, a physician may refrain from answering questions, a physician should never mislead an investigator or a third party by creating a false explanation for past behavior or by fabricating rules or policies retroactively. 

Mistake 6        Talking to Government Enforcement Agencies or Plaintiff’s Representatives without Counsel In the event that either the FTC or the DOJ undertakes an investigation, these agencies will likely seek to gather information from the target of their investigation. While it is wise to be cooperative (see Mistake 7), it is also wise to have the benefit of counsel when speaking with the enforcement authorities. One must remember that enforcement agencies can and will use every statement that has been made to them. Off-hand comments about the relevant market (see Mistake 8), competitors, and other matters may carry more meaning than the physician would expect. Counsel should be able to assist the physician about the true meanings of some terms. These comments apply with equal force in the civil action setting when dealing with a plaintiff’s counsel.

Action Step     If approached by representatives of the FTC or the DOJ, physicians should ask to have counsel present. Likewise, physicians should never talk with counsel or representatives for a plaintiff in an antitrust investigation unless their attorney is participating in the meeting. 

Mistake 7        Being Uncooperative with Enforcement Agencies While being cooperative with enforcement agencies is a point that may seem to be inconsistent with the previous suggestions to request the presence of counsel when speaking with the FTC or the DOJ, a physician should strive to be cooperative with enforcement authorities. The enforcement agencies often need information from the target physician(s) in order to determine if a complaint should be filed, or if already filed, whether it should be pursued. Counsel may be able to communicate with the agencies to determine exactly the type of information they require. The agencies can and will use subpoena powers to gain information if needed; however, the more cooperation that is shown to them, the more likely that the situation may be resolved in a reasonable time.

Action Step     Physicians should cooperate, under the guidance of counsel, to the fullest extent possible with enforcement agencies. 

Mistake 8        Relying on Unsophisticated Market Definitions Many physicians have proceeded to defend antitrust claims without an expert conversant with market definition in antitrust cases. In many but not all antitrust cases, whether brought by the enforcement agencies or by private parties, a necessary prerequisite will be proof of a proper relevant market, including a geographic component and a product or service component. The definition of the relevant market often is determinative. For example, market definition is most crucial in cases of claimed monopolization or attempted monopolization. If the market is defined too narrowly, it is far easier for a claimant to prove its case. Proper market definition often involves complex analysis that requires assistance from qualified economic experts and can be very expensive.

Action Step     Physicians should consult with counsel early after receiving an antitrust complaint to determine if an economist should be retained. If so, it should be an economist experienced in antitrust litigation. 

Mistake 9        Engaging in Misuse of or Overreliance on the Peer Review Process Many antitrust suits have been brought following a plaintiff physician’s loss of privileges through a peer review process. The peer review process itself, and participation in it, has been recognized as affording protection from antitrust suits when done properly. A problem often arises, however, if certain physicians set about to disparage the target physician outside the peer review process. Obviously, the peer review process is a valued tool used to ensure high-quality medical care, but to protect oneself from suits stemming from a loss of privileges, all statements about the subject physician’s qualifications and practice should be maintained within the bounds of a properly run peer review process.

Action Step     If asked to participate in a peer review process, a physician should consider retaining independent counsel. He or she should also ask if the relevant hospital has its own counsel involved as well as adequate insurance coverage for the peer review process. 

Mistake 10      Asserting a Defense Based on Policy Arguments That Physician’s Conduct Is Acceptable Selective prosecution arguments rarely redirect the investigator or prosecutor. In fact, they may encourage these individuals to devote additional resources to the area and to make an example of the physician or group they are pursuing. Policy arguments can often be used by government investigators to reconstruct the alleged intent behind the physician’s activities. If physicians indicate they must “band together” to obtain better reimbursement and to increase their leverage with managed care organizations, government officials may have the outline of the anticompetitive argument they are seeking in their case or investigation. Moreover, the investigator will probably indicate that he or she is not a policymaker and that such arguments are irrelevant to his or her investigation.

Action Step     Physicians should refrain from making policy arguments to government representatives or plaintiff’s counsel. Likewise, physicians should avoid the temptation to point out potentially anticompetitive conduct by their colleagues at another hospital or in another geographic region. 

Conclusion Antitrust complaints are serious matters that deserve the attention of a physician and his or her qualified antitrust counsel. Government antitrust investigators or plaintiff’s counsel are often seeking to discredit the physician, the PHO, or the IPA that is the subject of the complaint, and will seek significant damages, attorney’s fees, and/or criminal penalties. A physician should provide honest, reasoned responses to the inquiries of such investigators or plaintiff’s counsel after receiving advice from his or her counsel. All physicians, particularly those involved in multiphysician contracting organizations, must seek to understand the fundamentals of antitrust law before and during a response to any antitrust complaint.

Additional Resources

  • W. Berlin,Antitrust Issues Affecting Physicians and Physician Organizations, (American Health LawyersAssociation) (written for the Physicians and Physician Organizations Law Institute Conference, Feb. 11-12, 2004, in Hollywood, Fla.).
  • Department of Justice and Federal Trade Commission Statements of Antitrust Enforcement Policy in Health Care, http://www.ftc.gov/reports/hlth3s.htm
  • FTC Antitrust Actions in Health Care Services and Products, http://www.ftc.gov/bc/hcupdate0404.pdf 

Written by: Phillip A. Nichols, Esq and Colin H. Luke, Esq.

Peer reviewed by: Kenneth M. Turnipseed, Esq.

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