Arizona v. Maricopa County Medical Society
73 L. Ed. 2d 48, 1982 U.S. LEXIS 5, 457 U.S. 332 (1982)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
An agreement among competing professionals to set the maximum fees they will claim for their services constitutes a per se violation of Section 1 of the Sherman Act. Such horizontal price-fixing agreements are not subject to a rule of reason analysis, even if they have alleged procompetitive justifications or involve a professional industry.
Facts:
- The Maricopa Foundation for Medical Care and the Pima Foundation for Medical Care were nonprofit corporations organized by local medical societies in Arizona.
- Approximately 70% of the physicians in Maricopa County and 30-80% in Pima County were members of these foundations.
- The foundations established schedules of maximum fees that their member doctors agreed to accept as payment in full for services.
- These fee schedules were formulated by the foundation boards and submitted to a vote of the entire physician membership.
- To gain foundation approval, insurance companies agreed to pay doctors' charges up to the scheduled maximums.
- In exchange for the insurers' agreement, the member doctors agreed to accept those maximum amounts as full payment for services rendered to patients covered by these plans.
- Patients insured under these plans were guaranteed full coverage for their medical bills only if treated by a foundation member.
- Member doctors remained free to charge less than the maximum fee to any patient and could charge uninsured patients any amount.
Procedural Posture:
- The State of Arizona filed a civil complaint against two county medical societies and their affiliated foundations in the U.S. District Court for the District of Arizona, alleging illegal price-fixing.
- Arizona moved for partial summary judgment on the issue of liability, arguing the fee agreements were per se illegal.
- The District Court, a trial court, denied the motion, holding that the rule of reason was the appropriate standard of analysis.
- The District Court certified its order for an immediate interlocutory appeal to the U.S. Court of Appeals for the Ninth Circuit.
- A divided three-judge panel of the Court of Appeals, an intermediate appellate court, affirmed the District Court's decision to deny summary judgment.
- The U.S. Supreme Court, the highest court, granted certiorari to review the appellate court's decision.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does an agreement among competing physicians to set maximum fees for their services constitute a per se violation of Section 1 of the Sherman Act?
Opinions:
Majority - Justice Stevens
Yes, an agreement among competing physicians to set maximum fees for their services constitutes a per se violation of Section 1 of the Sherman Act. The Court's long-standing precedent establishes that horizontal price-fixing agreements, including those that set maximum prices, are automatically illegal without inquiry into their reasonableness, purpose, or effect. This per se rule applies uniformly across all industries, including the medical profession, because such agreements inherently threaten the central nervous system of the economy by tampering with price structures. The argument that the arrangement has procompetitive justifications, such as containing costs or creating a new insurance product, is irrelevant under the per se doctrine and does not distinguish this case from other unlawful price-fixing schemes. The agreement is not a new, integrated product like the one in Broadcast Music, Inc., but a straightforward agreement among independent competitors concerning the price of their individual services.
Dissenting - Justice Powell
No, the agreement should not be condemned as a per se violation without a more complete factual record and analysis under the rule of reason. The per se rule should only be applied to conduct that is plainly anticompetitive after considerable judicial experience, which is not the case with this novel arrangement in the complex health care industry. The foundations' plan appears to have procompetitive benefits, such as containing costs and enabling a new type of insurance coverage that benefits consumers, which warrants a full inquiry. The court should not make a final judgment on an incomplete summary judgment record, especially when the arrangement forecloses no competition and insurers, representing consumer interests, willingly participate. The plan is more analogous to the arrangement in Broadcast Music, Inc., which the Court found was not a per se violation, than to a classic price-fixing cartel.
Analysis:
This decision solidified the principle that horizontal maximum price-fixing is a per se violation of the Sherman Act, just like minimum price-fixing. It unequivocally rejected attempts to create exceptions to the per se rule for learned professions or for arrangements with purported procompetitive justifications like cost containment. The ruling serves as a strong deterrent to any collaboration on price among competitors, signaling that courts will not engage in a complex analysis of the reasonableness of the prices or the goals of the agreement. This precedent significantly constrains the ability of professional associations to engage in collective fee-setting activities, even if intended to benefit consumers.
Unlock the full brief for Arizona v. Maricopa County Medical Society