The Federal Trade Commission
The Federal Trade Commission (FTC) is a sovereign organization founded in 1914 by the Federal Trade Commission Act. The organization was to support consumer protection and was agitating against trusts. The FTC developed guidelines or standard rules of analysis to ensure both technical and allocative efficiency. Furthermore, the FTC came up with a rule of a reason that is applicable in courts of law. The mentioned antitrust statutes constitute the counterbalancing of three vital components of restraints. The three include all competitive effects of restriction, the anticompetitive effects of control and the procompetitive effects of restraint. The courts consider the net result and in case it turns out to be anticompetitive, the courts deem the outcome as “per se illegal.” FTC Act provides for promulgations of various federal regulations.
The physician-hospital organization (PHO) structure is per se illegal. The merging of hospitals occurs with an intention of levying higher professional fees. The 500 physicians from 15 hospitals agreed to work together to fix higher professional fees. The mentioned move is an endeavor to eradicate competition and hence contravenes the FTC’s rules since it is anticompetitive (Gaynor & Vogt, 2000). The 90 percent of physicians uniting under PHO limit the options available for patients to choose. Limiting of substitutes to patients is against the FTC’s rules and, therefore, is per se illegal as well. PHO’s annulling of contracts with payers and leaving a sole identity for contracting are anticompetitive moves that lock out other players in the market (Kronick, Goodman, Wennberg, & Wagner, 1993).
Another significant matter leading to per se illegal is fixing of discounts to less than 10 percent off hospital list charges without disclosing the real hospital rates. This practice is contestable under FTC analysis since it is imperative to come out vividly with the discount, as well as the actual fee in the advertisement (Cooper & Rebitzer, 2006). The overall result of FTC analysis is that the PHO arrangement is anticompetitive and evidently hinders competition. Furthermore, PHO limits substitutes to clients and the sole purpose to create profits by levying higher fees is against hospital ethics as well. Health care should be vividly ranked higher than the price of health care.
The PHO could restructure its anticompetitive arrangement not to breach the per se rules. For instance, it could promote healthy competition among its members by not fixing higher professional fees. This act would accord members with a prospect of operating in an open market without restrictions. In turn, the PHO would evade the burden of proof in a court contest (Tom & Pak, 2000). In case the procompetitive effects are plausible, the anticompetitive effects would not be apparent. In the PHO structure, the arrangement is such that there is a fix in the discount percentage. Fixing of discounts does not give the patient room for choice. Therefore, by leaving the discount proportion flexible, the PHO would guarantee prospective pricing and physician purchasing (Cooper & Rebitzer, 2006).
Moreover, the plan consists of 90 percent of available physicians and per se illegal would be eluded by reducing the composition of the structure to a reasonable percentage. Another predominant aspect of per se illegal under the PHO is the geographic market (Kronick et al., 1993). The PHO operates in a wide area, i.e. South Georgia, cities of Valdosta, Tifton, Thomasville, and Moultrie all the way to Waycross. The operational area is so extensive that it affects a large number of clients. Geographic cover reduction by the PHO would protect it from the plausible anticompetitive feature if accosted in a court tussle (Federal Trade Commission, 2007). Finally, the PHO should revoke the canceled contracts in order to be the sole contractor. The mentioned moves would be procompetitive and provide an escape from the burden of proof in case of a court battle.
The alternative analysis to cases that are not plausibly per se illegal would fall under cases named non-consensus per se illegal practices (Kronick et al., 1993). Such cases would warrant a quick look rule-of-reason before passing the verdict in the courts. The above rule implies that the courts do not dismiss a submission of proof that would prevail in an identical case. Instead, the courts screen the evidence to determine whether the practices are conceivably procompetitive (Gaynor & Vogt, 2000). If indeed there are plausible effects, then the analysis stretches to a fuller rule of reason test. Notably, the practice could be condemned without further analysis if there are no probable justifications.
It is imperative to note that in not consensus per se illegal practices, the burden of the proof standard is a requirement of the courts. In addition, the courts do not approve an implicit shift in the burden of the proof. The courts state that, when procompetitive effects are apparent, the anticompetitive effects cannot be admissible (Mains, Coustasse, & Lykens, 2003). However, the government takes a reluctant stance to embrace the quick rule-of-reason because the rule is not exhaustive to all non-consensus per se illegal. The government has become accustomed to the ease of bringing cases under the quick-look rubric. A near-supposition, based only on the government’s awareness of the likely anticompetitive effects, constitutes a case.
It is worth mentioning that the courts put more emphasis on the subjective judicial discernment of the competition among practices and the comprehensiveness of the matters over the expediency of the conjectures. If the government doubts whether courts recognize the validity of a case under the FTC’s per se illegal, it resorts to producing quantities and quality of evidence (Federal Trade Commission, 2007). The above action intends at convincing the courts on the anticompetitive effects of restraint.
Overall, the FTC approaches mentioned are resorted to when cases are suspect, but not found to be per se illegal. The agency has been instrumental in standing against anticompetitive practices like coercive monopoly and antitrust statutes. The burden of proof provides a check to ensure justice prevails and in turn checks the excesses of the PHO to ensure consumer protection. Finally, the application of quick rules assures a thorough check to determine cases accurately. Thus, the FTC per se illegal measures come in handy in erasing any doubt that might be existing in the restraints and thus, very crucial in administering justice directly to patients and indirectly to professionals as well.
References:
Cooper, D. J., & Rebitzer, J. B. (2006). Managed care and physician incentives: The effects of competition on the cost and quality of care. B. E. Journals in Economic and Policy: Contributions in Economic Analysis & Policy, 5(1), 1-30.
Federal Trade Commission. (2007). Improving healthcare: A dose of competition. Berlin: Springer Science & Business Media.
Gaynor, M., & Vogt, W. B. (2000). Antitrust and competition in health care markets. Handbook of health economics, 1, 1405-1487.
Kronick, R., Goodman, D. C., Wennberg, J., & Wagner, E. (1993). The marketplace in health care reform: The demographic limitations of managed competition. New England Journal of Medicine, 328(2), 148-152.
Mains, D. A., Coustasse, A., & Lykens, K. (2003). Physician incentives: Managed care and ethics. The Internet Journal of Law, Healthcare and Ethics, 2(1), 1-8.
Tom, W. K., & Pak, C. (2000). Toward a flexible rule of reason. Antitrust Law Journal, 68, 391-428.
