¹ See Heitler, & Adler, , Blue Cross and Blue Shield Plan Contracts with Providers: Cost Containment Objectives Amid Conflicting Legislative Schemes, 2 J. LEGAL MED. 265, 266 (1981)CrossRefGoogle Scholar; J. K. MINTEL, INSURANCE RATE LITIGATION 6 (1983).

² See infra notes 8-9.

³ See infra notes 24-29 and accompanying text. As of 1978, approximately two-thirds of the Blue Shield plans imposed a ban on balance billing. Skyrocketing Health Care Costs: The Role of Blue Shield, Hearings Before the Subcommittee on Oversight and Investigations of the Committee on Interstate and Foreign Commerce, 95th Cong., 2d. Sess. 651 (1978) (testimony of Hon. Michael Pertchuk, Chairman, Federal Trade Commission) [hereinafter cited as 1978 hearings].

⁴ Other restrictions would include a Blue Shield plan which denies reimbursement for any services provided by a non-participating physician (as occurs in Massachusetts).

⁵ See infra notes 46-97 and accompanying text.

⁶ 749 F.2d 922 (1st Cir. 1984).

⁷ As of 1983, 173.1 million people in the United States had physician expense protection type insurance. 62.8 million subscribed to Blue Shield corporations, 36.3% of the market, as compared with all other group, individual, self-insured plans, and HMOs. INSURANCE ASSOC. OF AMER., SOURCE BOOK OF HEALTH INSURANCE DATA 1984-1985 13, Table 1.4; see also Batavia, Blue Cross—Blue Shield Payment Policies: Antitrust Aspects and Implications for the Health Care and Insurance Industries, 1983 F.I.C. Q. 173, \Tb\see also Kallstrom, Health Care Cost Control by Third Party Payors: Fee Schedules and the Sherman Act, 1978 DUKE L. J. 645, 649 n.14. (“The Blues collectively cover about 40% of the insured population.“).

⁸ “This Blue Cross-Blue Shield network is by far the largest private underwriter of health coverage in the Nation, and its impact on our health care system is very great indeed.” 1978 Hearings, supra note 3, at 5; see also Batavia, supra note 7, at 177; D. I. KASS & P. A. PAUTLER, FTC STAFF REPORT ON PHYSICIAN CONTROL OF BLUE SHIELD PLANS OF THE BUREAU OF ECONOMICS TO THE FEDERAL TRADE COMMISSION 1-3 (1979) (not adopted formally by the FTC) [hereinafter cited as FTC Staff Report].

⁹ See FTC Staff Report, supra note 8, at 4-6 & Table 1; Kallstrom, supra note 7, at 651.

¹⁰ Medical service corporations are organized as nonprofit tax-exempt organizations which contract directly with providers to deliver medical services to subscribers. The physician is reimbursed directly by the insurer in accordance with a predetermined system. See, e.g., MASS. GEN. LAWS ANN. chs. 176B, §§ 1, 14 and 176C, §§ 1, 14 (West 1958 & Supp. 1986); see also Kallstrom, supra note 7, at 649; Note, The American Medical Association: Power, Purpose, and Politics in Organized Medicine, 63 YALE L. J. 937, 983 (1954).CrossRefGoogle Scholar [hereinafter cited as Note, YALE L. J.]

¹¹ See, e.g., MASS. GEN. LAWS ANN. ch. 176B, § 14; see abo H. M. SOMERS & A. R. SOMERS, DOCTORS, PATIENTS, AND HEALTH INSURANCE 322 (1961).

¹² Many of the plans “originated as creations of state medical societies in response to the hardships of the Depression … .” Batavia, supra note 7, at 178; see also H.M. SOMERS & A.R. SOMERS, supra note 11, at 318-22.

¹³ This in itself has generated considerable antitrust scrutiny regarding maximum fee setting by Blue Shield. “Although provider control has become attenuated, it still exists in some plans.” Kallstrom, supra note 7, at 650 and n.17. See also Lynk, , Regulatory Control of the Membership of Corporate Boards of Directors: The Blue Shield Case, 24 J. L. & ECON. 159 (1981)CrossRefGoogle Scholar; 1978 Hearings, supra note 3, at 5.

¹⁴ This is most aptly evidenced by the testimony of the executive vice president of the Massachusetts Medical Society before the Massachusetts House of Representatives, urging the Legislature to vote against passage of a bill which would legislatively command the ban on balance billing: “Health care costs in Massachusetts are higher than in any other state in the nation.… Why are our costs so high? Certainly not because of doctor's fees.… Massachusetts doctors charge 20 percent less than the national average… . A big chunk of [the] responsibility belongs to the giant corporation that controls almost every aspect of health care in our state — Massachusetts Blue Cross and Blue Shield.” Testimony by the Massachusetts Medical Society in opposition to H5624, An Act Relative to Medical Service Corporations before the Massachusetts Legislature (April 25, 1984) at 2 (statement by William B. Munier, M.D., Executive Vice President) [hereinafter cited as MMA Testimony].

¹⁵ See generally R. H. BORK, THE ANTITRUST PARADOX: A POLICY AT WAR WITH ITSELF 92-98 (1978) (discussion of model of competitive market); T.R. MARMOR & J.B. CHRISTIANSON, HEALTH CARE POLICY: A POLITICAL ECONOMY APPROACH 29-36 (1982).

¹⁶ Under a competitive market model, consumers must have sufficient information to make rational choices in determining whether and what to purchase. In the physicians’ service market, patients do not possess this information and instead rely on the physician providers to make purchase decisions for them. While many scholars have noted that this impairs the competitive functioning in this market, some have even gone so far as to imply that because of this, we should abandon any attempt to restore competitive forces and should instead try to compensate for the problem by more tightly regulating pricing and output decisions. See generally Blumstein & Sloan, Redefining Government's Role in Health Care: Is a Dose of Competition What the Doctor Should Order?, 34 VAND. L. REV. 849, 854-59, 867-70 (1981); Boubjerg, , Competition Versus Regulation in Medical Care: An Overdrawn Dichotomy, 34 VAND. L. REV. 965 (1981)Google Scholar; Rosenblatt, , Health Care, Markets, and Democratic Values, 34 VAND. L. REV. 1067 (1981)Google Scholar; M. V. Pauly, Economic Aspects of Consumer Use in HEALTH CARE CONSUMERS, PROFESSIONALS, AND ORGANIZATIONS 56 (1981).

¹⁷ Straight indemnity insurance plans reimburse the patient up to a predetermined amount for physician services. They have no bearing, however, on physicians’ fees for those services, for there is no direct contract between the insurer and provider. See generally HEALTH INSURANCE ASSOCIATION OF AMERICA, SOURCE BOOK OF HEALTH INSURANCE DATA 1984-1985; Note, YALE L. J., supra note 10, at 983.

¹⁸ See generally]. K. MINTEL, INSURANCE RATE LITIGATION 6 (1983); Delbanco, Meyers & Segal, Paying the Physician's Fee: Blue Shield and the Reasonable Charge, 301 NEW ENC. J. MED. 1314(1979); 1978 Hearings, supra note 3, at 15,29-31,651; FTC Staff Report, supra note 8, at 4.

¹⁹ “Fifty-nine of 69 plans have participating-physician agreements, and several more have modifications of such agreements.” Delbanco, Meyers & Segal, supra note 18, at 1315; see also 1978 Hearings, supra note 3, at 651. Certain plans now include other health care providers such as chiropractors and optometrists in the definition of participating providers. See, e.g., MASS. GEN. LAWS ANN. ch. 176B, § 1.

²⁰ See, e.g., MASS. GEN. LAWS. ANN. ch. 176B, § 7.

²¹ See infra notes 27-28 and accompanying text.

²² See Kartell v. Blue Shield of Massachusetts, Inc., 582 F. Supp. 734, 740-41 (D. Mass. 1984), rev'd, 749 F.2d 922 (1984), cert, denied, 105 S.Ct. 2040 (1985); Delbanco, supra note 18, at 1316-18; Kallstrom, supra note 7, at 650; Holahan, Physician Reimbursement in NATIONAL HEALTH INSURANCE; CONFLICTING GOALS AND POLICY CHOICES 73, 81-83 (1980); Yett, Ernst, Der & Hay, A Model of Physician Pricing, Output, and Health Insurance Reimbursement: Findings from a Study of Two Blue Shield Plans’ Claims Data in ECONOMICS OF HEALTH CARE 197, 201-02 (1982).

²³ See, e.g., MASS. GEN. LAWS ANN. ch. 176B, § 4; Kartell, 582 F. Supp. at 740; Brief for Plaintiff/Appellees, Kartell v. Blue Shield of Massachusetts, Inc., 582 F. Supp. 734 on appeal to the U.S. Ct. of Appeals for the First Circuit [hereinafter cited as Plaintiffs’ Brief) at 15.

²⁴ Approximately two-thirds of the states have Blue Shield plans which proscribe balance billing. See 1978 Hearings, supra note 3, at 651.

²⁵ Such is the case in Massachusetts where 74 percent of the privately insured are Blue Shield subscribers. Kartell, 582 F. Supp. at 741; see also Plaintiffs’ Brief, supra note 23, at 20: [T]he effect of the ban on balance billing is to produce homogeneous prices. Patients are insulated from any concern whatsoever with the relative costs and values … ‘the price to them is zero, regardless of who they go to. So as regarding those customers, it completely eliminates any possibility of price competition.’ “ (citations omitted).

²⁶ Plaintiffs’ Brief, supra note 23, at 16 n.15: “So far as has been determined [except for Massachusetts] only two small plans in the state of Washington refuse to cover the services of doctors who do not agree to forego balance billing. All others cover nonparticipating physicians’ services up to Blue Shield's allowable amount.” See also 1978 Hearings, supra note 3, at 30.

According to Blue Shield representatives in the three largest service areas in the state of Washington, Blue Shield typically does not cover any services provided by non-participating physicians (M.D.s) except in emergency situations. It will neither pay the non-participating physician directly for services rendered to a Blue Shield subscriber, nor reimburse the subscriber for payment made to a non-participating medical doctor. Certain large group contracts may contain provisions for such coverage, although this is the exception rather than the rule. In all three areas, it was indicated that at least 95 percent of physicians (M.D.s) were participating providers. Telephone interviews with Waultraut Lehmann, Supervisor, Product Information Department of King County Medical Blue Shield; Roger E. Armstrong, Manager, Legal Affairs, Medical Service Corporation of Eastern Washington; and Julie Pisto, Manager of Corporate Communications, Pierce County Medical Blue Shield (December 8, 1986).

Although non-coverage for services rendered by non-participating medical doctors appears to be the prevailing practice in the state of Washington, its legislature has provided for payment mechanisms if Blue Shield chooses to reimburse for such services. WASH. REV. CODE § 48.44.026, amended by 1984 Wash. Laws ch. 283, § 1, provides that:

²⁷ Id.

²⁸ See infra notes 31-32, 37-40 and accompanying text.

²⁹ See infra notes 46-48 and accompanying text.

³⁰ MASS. GEN. LAWS ANN. ch. 176B, § 7.

³¹ See supra note 26.

³² MASS. GEN. LAWS ANN. ch. 176B, § 7; Plaintiffs’ Brief, supra note 23, at 16 n.15.

³³ MASS. GEN. LAWS ANN. ch. 176B.

³⁴ H. 5808 enacted by the Senate and House of Representatives in General Court as Chapter 192 of the Acts of 1984, amending Section 7 of the General Laws.

³⁵ 582 F. Supp. 734 (D. Mass. 1984).

³⁶ 1979-1 Trade Cas. (CCH) II 62,480 (D. Mass. 1978), 592 F.2d 1191 (1st Cir. 1979), remanded, 384 Mass. 409, 425 N.E.2d 313 (1981), 542 F. Supp. 782 (D. Mass. 1982), 687 F.2d 543 (1st Cir. 1982), appeal dismissed, 582 F. Supp. 734 (D. Mass. 1984), rev'dinparl, affdin part, 749 F.2d 922 (1st Cir. 1984), cert, denied, 105 S. Ct. 2040 (1985).

³⁷ See MMA Testimony, supra note 14.

³⁸ See Kartell, 582 F. Supp. at 740-41.

³⁹ See, e. g., Kartell, 582 Supp. at 740-41: “Blue Shield payments for most services on the fee schedules has not been raised since 1952… . By 1967-68 Blue Shield payments were on the average 30% below the fees usually charged by doctors.” Under the 1977 Amended Schedule, giving Blue Shield the sole discretion to determine percentage increases and the reporting periods, Blue Shield now “bases its usual and customary payment levels on actual charges that are between 6 and 30 months old;” see also Brief of Intervenor-Plaintiffs/Cross Appellants, Grant v. Rodkey, Henry Brown, Massachusetts Medical Society, Kartell v. Blue Shield of Massachusetts, Inc., on appeal to the U.S. Ct. of Appeals for the First Circuit [hereinafter cited as Intervenor-Plaintiffs’ Brief] at 10.

⁴⁰ See Kartell, 582 F. Supp. at 740-41, 748-53.

⁴¹ This practice was found by the Massachusetts Supreme Judicial Court to have been legislatively commanded in MASS. GEN. LAWS ANN. ch. 176B, § 7, Kartell v. Blue Shield of Massachusetts, Inc., 384 Mass. 409, 425 N.E.2d 313 (1981), and by the United States District Court for the District of Massachusetts to be immunized by the state action doctrine. Kartell v. Blue Shield of Massachusetts, Inc., 542 F. Supp. 782 (D. Mass. 1982).

⁴² Kartell, 582 F. Supp. at 741.

⁴³ Kartell, 582 F. Supp. at 739.

⁴⁴ Kartell, 582 F. Supp. at 739.

⁴⁵ Despite the fact that Massachusetts has the highest health care costs in the nation (Unpublished report - Massachusetts Medical Society testimony In Opposition to Amendment by W.B. Munier, Executive Vice President [hereinafter cited as Mass. Med. Soc. Testimony] at 2 (1984)), Massachusetts physicians’ rates have been lower than in other states. (Intervenor Plaintiffs’ Brief, supra note 39, at 11. “Massachusetts doctors charge 20% less than the national average“; Mass. Med. Soc. Testimony at 2. “Blue Shield reimbursement rates are approximately 25-30% less than physicians’ charges.” (Intervenor-Plaintiffs’ Brief, supra note 39, at 11 and 14 n.4.). As one example of this, the American Medical News reports that “[a] review of customary fee allowances for 10 selected procedures comparing the Massachusetts Blue Shield allowance and that of Northern and Southern California Blue Shield shows that Massachusetts fees are approximately 60% to 75% of the fees allowed in California.” American Medical News, April 6, 1984, at 22, col. 4.

⁴⁶ This is the most generally accepted objective of the antitrust laws. ABA ANTITRUST SECTION, ANTITRUST LAW DEVELOPMENTS 18 (2d ed. 1984) [hereinafter cited as ABA] (citing Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 488 (1977)); Brown Shoe Co. v. United States, 370 U.S. 294, 320 (1962). Others have also recognized that protection of consumers and small businesses is important. United States v. Aluminum Co. of America, 148 F.2d 416, 429 (2d Cir. 1945) (stating goal to “preserve … organization of industry in small units which can effectively compete with each other.“); Brown Shoe Co. v. United States, 370 U.S. 294 (1962) (goal to protect small producers). These are but several of the many goals noted by courts and commentators. Cf. R.H. BORK, THE ANTITRUST PARADOX 51 (1978) “[t]he only legitimate goal of American antitrust law is the maximization of consumer welfare“; ABA ANTITRUST SECTION, MONOGRAPH NO. 2, VERTICAL RESTRICTIONS LIMITING INTRABRAND COMPETITION 77 (1977): “[T]he general economic objective is to promote free and open competition and to proscribe restraints which raise or stabilize prices, limit production, and reduce product quality to the detriment of the American consumer … . [Social purposes of the laws are recognized to include obtaining] the desired economic objective of free and open competition [by] the preservation of the freedom of economic units to act according to their own choice and discretion … [and] the preservation of a large number of small business units and the avoidance of economic concentration.” [hereinafter cited as ABA MONOGRAPH]; cf. also R.A. POSNER, ANTITRUST LAW: AN ECONOMIC PERSPECTIVE 18-22 (1976).

⁴⁷ 15 U.S.C. §§ 1, 2 (1982).

⁴⁸ See id.

⁴⁹ “Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several states, or with foreign nations, is declared to be illegal.” 15 U.S.C. § 1.

⁵⁰ In Standard Oil of New Jersey v. United States, 221 U.S. 1, 58-60 (1911), the Court indicated that Section 1 was intended to condemn only those activities which posed an unreasonable or undue restraint of trade.

⁵¹ Chicago Board of Trade v. United States, 246 U.S. 231 (1918); see also Kartell v. Blue Shield of Massachusetts, Inc., 582 F. Supp. 734 (D. Mass. 1984).

⁵² 246 U.S. 231 (1918).

⁵³ Id. at 238.

⁵⁴ The court stated:

Id.

⁵⁵ 435 U.S. 679(1978).

⁵⁶ Id. at 691.

⁵⁷ Id. at 688.

⁵⁸ Id. at 696.

⁵⁹ Id. at 692.

⁶⁰ Id. at 695.

⁶¹ See Professional Engineers, 435 U.S. at 690; ABA MONOGRAPH, supra note 46, at 17.

⁶² ABA MONOGRAPH, supra note 46, at 17 and n.116.

⁶³ Id. at 18 & nn.l 19-20.

⁶⁴ Id. at 22.

⁶⁵ Others include tying arrangments, boycotts and refusals to deal, and division of markets. See, e.g., United States v. Topco Associates, Inc., 405 U.S. 596 (1972) (horizontal market division per se unlawful); United States v. General Motors Corp., 384 U.S. 127 (1966) (reaffirming that certain boycotts are per se unlawful); Northern Pacific Ry. Co. v. U.S., 356 U.S. 1, 5 (1958) (tying arrangement per se unlawful). See generally M.J. THOMPSON, ANTITRUST AND THE HEALTH CARE PROVIDER 2-10 (1979).

⁶⁶ “The aim and result of every price-fixing agreement, if effective, is the elimination of one form of competition. The power to fix prices, whether reasonably exercised or not, involves power to control the market and to fix arbitrary and unreasonable prices. The reasonable price fixed today may through economic and business changes become the unreasonable price of tomorrow. Once established, it may be maintained unchanged because of the absence of competition … .”

United States v. Trenton Potteries, Co., 273 U.S. 392,397 (1927); see also United States v. Joint Traffic Ass'n, 171 U.S. 505 (1898); United States v. Socony-Vacuum Oil Co., 310 U.S. 150 (1940).

⁶⁷ ABA, supra note 46, at 22-23; see also Kentucky Fried Chicken Corp. v. Diversified Packaging Corp., 549 F.2d 368, 374-75 (5th Cir. 1977); H. HALPER & J. MILES, ANTITRUST GUIDE FOR HEALTH CARE COALITIONS 99-100 (1983).

⁶⁸ See R.A. POSNER & F.H. EASTERBROOK, ANTITRUST CASES, ECONOMIC NOTES, AND OTHER MATERIALS 597 (1980); Comment, The Middleman as Price Fixer: Columbia Broadcasting System, Inc. v. American Society of Composers, Authors 6? Publishers, 91 HARV. L. REV. 488, 488 (1977).CrossRefGoogle Scholar Compare P. MARCUS, ANTITRUST LAW & PRACTICE § 133 at 177 & n. 46 (1980).

⁶⁹ The extent to which consumers will pay more than they otherwise would have is a function of the price elasticity of the product—that is, how much consumer demand will lessen as the price increases. See generally R.L. HEILBRONER & L.C. THUROW, UNDERSTANDING MICROECONOMICS 122-129 (6th ed. 1984); R.H. BORK, supra note 46, at 90-115; R.A. POSNER, supra note 46.

⁷⁰ See R.H. BORK, supra note 46, at 57-72.

⁷¹ Kiefer-Stewart Co. v. Joseph E. Seagram & Sons, Inc., 340 U.S. 211 (1951). In Kiefer- Stewart, the Court for the first time condemned maximum resale prices imposed on a retailer. This occurred, however, in the context of a horizontal conspiracy between two manufacturers.

⁷² Kiefer-Stewart Co., 340 U.S. at 213: “For such agreements, no less than those to fix minimum prices, cripple the freedom of traders and thereby restrain their ability to sell in accordance with their own judgment.“

⁷³ Albrecht v. Herald Co., 390 U.S. 145 (1968). Because Kiefer-Stewart occurred in the context of a horizontal conspiracy between manufacturers, it did not, however, provide direct precedent for Albrecht's holding that the per se rule applies to vertical maximum price-fixing arrangements.

⁷⁴ Id. at 152-53.

⁷⁵ Although no cases subsequent to Albrecht have condemned vertical maximum price-fixing under the per se rule, the Court has adhered to the per se rule regarding vertical price restraints. See Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752, 761, 763 (1984); Arizona v. Maricopa County Medical Society, 457 U.S. 332, 345-48 (1982); see also ABA MONOGRAPH, supra note 46, at 71-97 (1977); Note, Prepaid Prescription Drug Plans Under Antitrust Scrutiny: A Stem Challenge to Health Care Cost Containment, 75 Nw. U.L. REV. 506, 513 (1980)Google Scholar [hereinafter cited as Note, Nw. U.L. REV.].

The Court has considered the legality oinon-price restraints such as location clauses, and has determined that in this context the rule of reason is the more appropriate standard for review. Continental T.V., Inc. v. GTE Sylvania, Inc., 433 U.S. 36 (1977), overruling United States v. Arnold, Schwinn & Co., 388 U.S. 365 (1967) (Schwinn had held the perse standard applied to vertical territory restrictions). Although the Court in Sylvania held that a vertical location restriction should not be judged under aperse standard, it indicated that this did not apply to vertical price restrictions, which had long been established asperse illegal. Sylvania, 433 U.S. at 51 n.18. See ABA, supra note 46, at 19. Cf. text discussing ancillary restraints and accompanying notes 85-96.

⁷⁶ ABA, supra note 46, at 23-24 & nn.167-68, 173. See also Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752, 761, 763 (1984) (The Court reasserted the distinction between concerted action to set prices, which requires the use of the per se rule, and concerted action on non-price restraints, which warrants use of the rule of reason).

⁷⁷ ABA, supra note 46, at 57 & n.392, 64-65 & nn.443 and 444. A territorial restraint which in form only resembled resale price maintenance was evaluated under a rule of reason standard in the First Circuit. See Eastern Scientific Co. v. Wild Heerbrugg Instruments, Inc., 572 F.2d 883 (1st Cir. 1977), cert, denied, 439 U.S. 833 (1978).

⁷⁸ It has been argued that the decision in Albrecht was not actually premised on applying the per se rule to vertical price fixing.

Kallstrom, supra note 7, at 666; see also Harrison, Price Fixing, the Professions, and Ancillary Restraints: Coping with Maricopa County, 1982 U. Ill. L. REV. 925. “[T]he per se standard seems most vulnerable to reconsideration in the area of setting maximum prices. Powerful arguments founded in price theory can be made that both vertical restraints on maximum resale prices and horizontal maximum price fixing may be in the interest of consumers and should, therefore, be reviewed on a rule of reason basis giving complete consideration to competitive impact.” (citations omitted) Id. at 926. The author nonetheless recognized that “[i]n light of the apparent inflexibility of per se rules, a statutory approach to relaxing the prohibition on maximum price fixing may be in order.” Id. at 927.

⁷⁹ “Interbrand” competition is therefore increased—a desirable result, while “intrabrand” competition (which occurs within different components of a single corporation) is retarded. See Justice Harlan's dissent in Albrecht, 390 U.S. at 157-58; see also R.H. BORK, supra note 46, at 290; Blair, & Fesmire, , Maximum Price Fixing and the Goals of Antitrust, 37 SYRACUSE L. REV. 43 (1986)Google Scholar (denouncing the Albrecht rule).

Unlike the issue in Albrecht, the issue in Kartell is not the effect on intrabrand competition. In this case, Blue Shield (as well as commentators) has characterized itself as the buyer. Following Blue Shield's characterization, the buyer must then be seen as acting upon individual sellers, the contracting physicians, thereby hindering interbrand competition—an even more highly anticompetitive scenario than that posed in Albrecht. Blue Shield, having argued that it is a buyer of physicians’ services, must presumably then also be a seller of prepaid insured physicians’ services to its subscribers, and one component of the product/service it sells is the favorable selling point of assured maximum prices.

It is important to note that the imposition of fixed maximum prices by Blue Shield on physicians cannot be characterized as resale price maintenance which was at issue in Albrecht. Nonetheless, the scrutiny of resale price maintenance law is relevant. It encompasses maximum price setting in a vertical relationship, and the unique interplay between the health insurance market and the physicians’ services market may be seen to resemble such a vertical arrangement, as demonstrated above. Courts assessing health insurance schemes may refer to the law established in these cases in their attempts to properly characterize the arrangement. See Arizona v. Maricopa County Medical Soc, 457 U.S. 332, 347 (1982) (the Court referred to Albrecht even though Maricopa's maximum price fixing scheme took place in a horizontal arrangement—recognized as consistently anticompetitive); Kartell v. Blue Shield of Massachusetts, Inc., 749 F.2d 922, 930 (1st Cir. 1984). But see Medical Arts Pharmacy of Stamford, Inc. v. Blue Cross & Blue Shield of Connecticut, Inc., 675 F.2d 502, 505-06 (2d Cir. 1982) (The court stated that the “prescription drug plan differs significantly from the vertical arrangements to restrict resale prices that were invalidated in Albrecht and Kiefer-Stewart.“). One author has commented that prepaid pharmacy insurance plans are too dissimilar from a typical resale price maintenance scheme to warrant the same judicial treatment. See Note, Nw. U.L. REV., supra note 71 at 513-14.

⁸⁰ Ball Memorial Hospital, Inc. v. Mutual Hospital Insurance, Inc., 784 F.2d 1325 (7th Cir. 1986) (affirmed denial of hospital's motion to enjoin implementation of a preferred provider organization); Brillhart v. Mutual Medical Insurance, Inc., 768 F.2d 196 (7th Cir. 1985) (provider agreement between insurers and doctors not illegal vertical price fixing); Pennsylvania Dental Ass'n v. Medical Service Ass'n of Pennsylvania, 745 F.2d 248 (3d Cir. 1984), cert, denied, 105 S. Ct. 2021 (1985) (prepaid dental service not engaged in illegal price fixing or boycott of non-participating dentists); Glen Eden Hospital, Inc. v. Blue Cross and Blue Shield of Michigan, 740 F.2d 423 (6th Cir. 1984) (hospital failed to show insurer possessed and abused monopoly power); Medical Arts Pharmacy of Stamford, Inc. v. Blue Cross & Blue Shield of Connecticut, Inc., 675 F.2d 502 (2d Cir. 1982) (reimbursement agreements between insurer and pharmacies are not anticompetitive restraints); Feldman v. Health Care Service Corp., 562 F. Supp. 941 (N. D. 111. 1982) (insurer's prepaid prescription drug plans which included a ban on balance billing type provision not per se illegal); Quality Auto Body, Inc. v. Allstate Insurance Co., 660 F. 2d 1195 (5th Cir. 1981), cert, denied, 455 U.S. 1020 (1982) (insurance agreements restricting payment to participating shops but which did not include a ban on balance billing type arrangement not an illegal restraint); Sausalito Pharmacy, Inc. v. Blue Shield of California, 544 F. Supp. 230 (N.D. Calif. 1981), aff'd per curiam, 677 F.2d 47 (9th Cir.), cert, denied, 459 U.S. 1016 (1982) (agreements including ban on balance billing arrangement which did reimburse participating providers not illegal restraints).

⁸¹ Arizona v. Maricopa County Medical Society, 457 U.S. 332 (1982).

⁸² Id. at 339-41 & n.ll.

⁸³ Id. at 351.

⁸⁴ Id. at 352., n.26, 353, n.28, & 356, n.33.

⁸⁵ See Justice Harlan's dissent in Albrecht, 390 U.S. at 156-59; R.H. BORK, supra note 46, at 281-98.

⁸⁶ The concept behind the doctrine was first enunciated in Addyston Pipe & Steel Co. v. United States, 175 U.S. 211 (1899), used sparingly throughout the years, and recently applied in a key case, Broadcast Music, Inc. v. Columbia Broadcasting System, Inc., 441 U.S. 1 (1979). See ABA MONOGRAPH, supra note 46, at 29-30.

⁸⁷ One formulation would find a restraint lawful under the rule of reason if it “(1) is reasonably necessary to the legitimate primary purpose of the arrangement, and of no broader scope than reasonably necessary; (2) does not unreasonably affect competition in the marketplace; and (3) is not imposed by a party or parties with monopoly power.” Kallstrom, supra note 7, at 659; see also Note, Nw. U.L. REV., supra note 71, at 517.

⁸⁸ See, e.g., National Collegiate Athletic Ass'n v. Board of Regents, 468 U.S. 85 (1984); Broadcast Music, Inc. v. Columbia Broadcasting System, Inc., 441 U.S. 1 (1979); United States v. Studiengesellschaft Kohle, 670 F.2d 1122, 1130-31 (D.C. Cir. 1981); see also AhA, supra note 46, at 30.

⁸⁹ “[T]he circumstances in which the rule of reason will be applied are limited and the per se rule remains the principal mode of analysis for restraints that have the purpose or effect of limiting price competition.” ABA, supra note 46, at 30 & nn. 211 & 213. See, e.g., Arizona v. Maricopa County Medical Society, 457 U.S. 332 (1982); Catalano, Inc. v. Target Sales, Inc., 446 U.S. 643 (1980).

⁹⁰ See Medical Arts Pharmacy of Stamford, Inc. v. Blue Cross of Connecticut, Inc., 675 F.2d 502 (2d. Cir. 1982); Sausalito Pharmacy, Inc. v. Blue Shield of California, 544 F. Supp. 230 (N. D. Cal. 1981), aff'dper curiam, 677 F.2d 47 (9th Cir. 1982), cert, denied, 459 U.S. 1016 (1982).

⁹¹ Medical Arts Pharmacy, 675 F.2d at 503; Sausalito Pharmacy, 544 F. Supp. at 232.

⁹² Medical Arts Pharmacy, 675 F.2d at 503; Sausalito Pharmacy, 544 F. Supp. at 232.

⁹³ Medical Arts Pharmacy, 675 F.2d at 507; Sausalito Pharmacy, 544 F. Supp. at 241-42.

⁹⁴ Subsequent challenges to similar insurance plans in districts within the 3d, 6th and 7th circuits have also been unsuccessful in proving violations of Sections 1 and 2 of the Sherman Act. Sec, e.g., Brillhart v. Mutual Medical Insurance, Inc., 768 F.2d 196 (7th Cir. 1985); Ball Memorial Hospital, Inc. v. Mutual Hospital Insurance, Inc., 603 F. Supp. 1077 (S. D. Ind. 1985); Pennsylvania Dental Ass'n v. Medical Service Ass'n of Pennsylvania, 745 F.2d 248 (3d Cir. 1984) reh'gand reh'gen bane denied 1984; Glen Eden Hospital, Inc., v. Blue Cross and Blue Shield of Michigan, 555 F. Supp. 337 (E. D. Mich. 1983); Feldman v. Health Care Service Corp., 562 F.2d 940 (N. D. 111. 1982).

⁹⁵ Sausalito Pharmacy, 544 F. Supp. at 237.

⁹⁶ Id.

⁹⁷ Medical Arts Pharmacy, 675 F.2d at 505-06.

⁹⁸ Id. at 503, 505-06.

⁹⁹ 15 U.S.C. § 2 (1982).

¹⁰⁰ Sec BLACK's LAW DICTIONARY 908 (5th ed. 1979).

¹⁰¹ See id.

¹⁰² SeeL. A. SULLIVAN, HANDBOOK OF THE LAW OF ANTI TRUST 21 (1977). See generally R. H. POSNER, supra note 69, at 8-22.

¹⁰³ See generally R. H. POSNER, supra note 69, at 8-22.

¹⁰⁴ See Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263, 272-73 (1979) (citing United States v. Aluminum Co. of America, 148 F.2d 416,427 (2d Cir. 1945)); United States v. United Shoe Machinery Corp., 110 F. Supp. 295, 345 (D. Mass. 1953), aff'd. per curiam, 347 U.S. 521 (1954).

¹⁰⁵ United States v. Grinnel Corp., 384 U.S. 563, 570-71 (1966).

¹⁰⁶ United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 391 (1956).

¹⁰⁷ This is only an approximation. Federal circuit courts have found 60 percent in the relevant market to constitute monopoly in two separate cases, despite the fact that the Supreme Court had held that no monopoly existed where the defendant possessed 64% of the market (in United States v. International Harvester, 274 U.S. 693 (1977)). See L.A. SULLIVAN, supra note 100, at 75-76.

¹⁰⁸ See Grinnel, 384 U.S. at 571. See generally L.A. SULLIVAN, supra note 100, at 94-105.

¹⁰⁹ 15 U.S.C. §§ 12-27 (1982).

¹¹⁰ 15 U.S.C. § 15 (treble damages) and 15 U.S.C. § 26 (injunctive relief).

¹¹¹ E.W. KINTNER, 2 FEDERAL ANTITRUST LAW § 39.3 (1980).

¹¹² Mandeville Island Farms, Inc. v. American Crystal Sugar Co., 334 U.S. 219, 236 (1948).

¹¹³ Illinois Brick Co. v. Illinois, 431 U.S. 720, 733-36 (1977).

¹¹⁴ See Blue Shield of Virginia v. McCready, 457 U.S. 465, 478 (1982); Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977); see also E. W. KINTNER, supra note 108, at § 39.5.

¹¹⁵ Brunswick, 429 U.S. at 489.

¹¹⁶ 457 U.S. 465 (1982).

¹¹⁷ Id. at 484.

¹¹⁸ Id. at 479. ∼

¹¹⁹ Id.

¹²⁰ Id. at 480-81 (quoting In Re Multidistrict Vehicle Air Pollution M.D.L. No. 31, 481 F.2d 122, 129 (9th Cir. 1973)).

¹²¹ 459 U.S. 519 (1983).

¹²² Id. at 536-47.

¹²³ Amey, Inc. v. Gulf Abstract & Title, Inc., 758 F.2d 1486, 1495 (11th Cir. 1985).

In 1985, the First Circuit in CVD, Inc. v. Raytheon cited Associated General, but applied a Brunswick type standard of whether the injury flowed from the anticompetitive nature of the defendant's acts. 769 F.2d 842, 858 (1985). inKartell, it referred to the indirect standard raised in Associated General. Kartell, 749 F.2d at 933. The United States District Court for the District of Puerto Rico stated that the First Circuit uses a “target area” test, but cited neither McCready or Associated General Contractors. CIA. Petrolera Caribe, Inc. v. Avis Rental Car Corp., 576 F. Supp. 1011, 1017 (1983).

¹²⁴ See supra text accompanying notes 37-45.

¹²⁵ Kartell v. Blue Shield of Massachusetts, Inc., 1979-1 Trade Cas. (CCH) H 62,480 (D. Mass. Aug. 3, 1978).

¹²⁶ Kartell v. Blue Shield of Massachusetts, Inc., 384 Mass. 409, 410-11, 425 N.E.2d 313, 314 (1981).

See also Kartell v. Blue Shield of Massachusetts, Inc., 582 F. Supp. 734, 736 (D. Mass. 1984).

¹²⁷ Brief for the Defendants-Appellees at 27, Kartell v. Blue Shield of Massachusetts, Inc., 749 F.2d 922 (1st Cir. 1984).

¹²⁸ See Kartell v. Blue Shield of Massachusetts, Inc., 582 F. Supp. 734, 743, 745-46 (D. Mass. 1984).

¹²⁹ The district court dismissed the case based on state action immunity. In 1979, the First Circuit vacated the district court judgment, finding that the question of statutory construction should be first decided by the state court. Kartell v. Blue Shield of Massachusetts, Inc., 592 F.2d 1191, 1195 (1st Cir. 1979). The district court was ordered to abstain pending a decision then before the Massachusetts Supreme Judicial Court (SJC) in Nelson v. Blue Shield of Mass., Inc., 377 Mass. 746, 387 N.E.2d 589 (1979). When this case was decided, the district court determined it was not on point, and certified to the SJC in essence these two questions: (1) Is Blue Shield compelled to limit reimbursement to physicians who agree to become participating providers?; (2) Is Blue Shield compelled to ban balance billing? Kartell, 384 Mass, at 410, 425 N.E.2d at 314. The SJC held that it was compelled to deny reimbursement to nonparticipating physicians, but that the ban on balance billing was not compulsory.Id. at 427,425 N.E.2d at 323. The case was then heard by the district court and decided in 1984. Kartell v. Blue Shield of Massachusetts, Inc., 582 F. Supp. 734 (D. Mass. 1984). The Court of Appeals for the First Circuit reversed in 1984. Kartell v. Blue Shield of Massachusetts, Inc., 749 F.2d 922 (1st Cir. 1984).

¹³⁰ Kartell, 749 F.2d at 923.

¹³¹ Kartell v. Blue Shield of Massachusetts, Inc., 582 F. Supp. 734 (D. Mass. 1984), 749 F.2d 922 (1st Cir. 1984), cert, denied, 105 S. Ct. 2040 (1985).

¹³² Kartell, 582 F. Supp. at 745-46.

¹³³ Id. at 747.

¹³⁴ Id. at 746-47.

¹³⁵ Id. at 747.

¹³⁶ Id. at 747, 755.

¹³⁷ Id. at 751-52, 755. This was proven to its satisfaction by evidence presented that several physicians had been forced to use less efficient combinations of treatment modalities due to Blue Shield's usual and customary system combined with the ban on balance billing. See Kartell, 582 F. Supp. at 751-53. See generally R.A. POSNER & F.H. EASTERBROOK, ANTITRUST CASES, ECONOMIC NOTES, AND OTHER MATERIALS 501-05 (2d ed. 1981).

¹³⁸ Kartell, 582 F. Supp. at 749.

¹³⁹ Id. at 748.

¹⁴⁰ Id. at 747-49.

¹⁴¹ See id.

¹⁴² Id. at 754.

¹⁴³ Id. at 755.

¹⁴⁴ Id.

¹⁴⁵ Id.

¹⁴⁶ Id. at 744 (citing Blue Shield of Virginia v. McCready, 475 U.S. 465 (1982)).

¹⁴⁷ See Kartell, 749 F.2d at 932.

¹⁴⁸ See generally R.A. POSNER AND F.H. EASTERBROOK, supra note 137, at 353.

¹⁴⁹ See Kartell, 749 F.2d at 932-33.

¹⁵⁰ Kartell, 582 F. Supp. at 744. See generally supra text accompanying footnote 116.

¹⁵¹ Id.

¹⁵² Id.

¹⁵³ Kartell, 749 F.2d at 931.

¹⁵⁴ Id. at 924-25.

¹⁵⁵ Id. at 925.

¹⁵⁶ Id. at 927-28.

¹⁵⁷ Id. at 927.

¹⁵⁸ Id. at 928-29.

¹⁵⁹ Id. at 928, 931.

¹⁶⁰ Id. at 925.

¹⁶¹ Id. at 925-26.

¹⁶² See id. at 929-31; Kartell, 582 F. Supp. at 746-47, 751.

¹⁶³ Kartell, 749 F.2d at 928.

¹⁶⁴ Id.

¹⁶⁵ Id.

¹⁶⁶ Id. at 931.

¹⁶⁷ Id. at 928.

¹⁶⁸ See, e.g., Kartell, 582 F. Supp. at 745-6; M.J. THOMPSON, supra note 65, at 25,33-35. See generally, E. Rayack, The Physicians’ Service Industry in THE STRUCTURE OF AMERICAN INDUSTRY 401-441 (W. Adams ed. 1977); P. STARR, THE SOCIAL TRANSFORMATION OF AMERICAN MEDICINE 225-32 (1982); R. ALFORD, HEALTH CARE POUTICS: IDEOLOGICAL AND INTEREST GROUP BARRIERS TO REFORM 1 (1975).

¹⁶⁹ Kartell, 749 F.2d at 928.

¹⁷⁰ Id. at 928, 930-31.

¹⁷¹ Id. at 931.

¹⁷² The First Circuit itself in 1979 stated “It is, of course, axiomatic that agreements to establish maximum prices stand no better than those to fix minimums.” Kartell, 592 F.2d at 1193 n.2.

¹⁷³ Kartell, 749 F.2d at 931.

¹⁷⁴ Id. at 930, 932.

¹⁷⁵ Arizona v. Maricopa County Medical Soc'y, 457 U.S. 332 (1982).

¹⁷⁶ Kartell, 749 F.2d at 924.

¹⁷⁷ Id. at 931.

¹⁷⁸ See supra notes 159 & 165 and accompanying text.

¹⁷⁹ Kartell, 749 F.2d at 931.

¹⁸⁰ Kartell v. Blue Shield of Massachusetts, Inc., 749 F.2d 922,928,930-31 (1st Cir. 1984).

¹⁸¹ The court addressed as particularly significant three concerns: 1) the fact that this arrangement tries to keep prices low by setting a maximum, whereas the Sherman Act is concerned with high prices; 2) the cost of medical services is a complex issue with greater social impact than merely economic considerations; and 3) the price system is regulated by a state commissioner. Kartell, 749 F.2d at 930-31. These are not issues which are to be addressed in an antitrust analysis of price restraints, however. It has been noted that: “the Kartell court made a few holdings that appear to contradict what the Supreme Court said in Markopa. The Kartell court expressed an impression that the judiciary should be reluctant to be involved in health care and stated that Blue Shield's low prices constituted a consumer benefit mitigating in favor of the scheme. The Supreme Court, in Markopa, expressly rejected the argument that it should not overturn the arrangement in question because of the judiciary's inexperience in health care and did overturn maximum fees (not minimum fees), which presumably were a consumer benefit.” K. MAY, MASSACHUSETTS HEALTH LAW 144 (1985).

¹⁸² See supra notes 55-57 and accompanying text.

¹⁸³ See Kartell, 749 F.2d at 927, 929.

¹⁸⁴ See id. at 924-25. In contrast, this classification of Blue Shield as a buyer places greater emphasis on form than on substance. While it is true that Blue Shield in fact pays physicians for providing services to its subscribers, the real purchaser of physicians’ services in the market is the patient. The third-party payor's involvement developed as a mechanism for easing the buyer's financial difficulties in purchasing medical services. The third-party payor is better viewed as a financing mechanism, not a representative of the buyer. Blue Shield neither seeks or provides information to its subscribers, nor does it make purchase decisions or recommendations. Despite many courts’ classifications of insurers as buyers of physician services, the United States District Court for the District of Massachusetts would appear to more accurately address the substance of the relationship.

¹⁸⁵ Sec supra text accompanying notes 140-41.

¹⁹⁶ See supra notes 51-63 and accompanying text.

¹⁸⁷ Kartell v. Blue Shield of Massachusetts, Inc., 582 F. Supp. 734, 746-47, 751 (D. Mass. 1984).

¹⁸⁸ Id. at 751, 753.

¹⁸⁹ See supra note 66 and accompanying text.

¹⁹⁰ Kartell, 582 F. Supp. at 747.

¹⁹¹ Id. at 755. See also id. at 748-49.

¹⁹² See supra notes 71-78 and accompanying text.

¹⁹³ See Kartell, 582 F. Supp. 748-55.

¹⁹⁴ See supra note 72.

¹⁹⁵ See supra notes 71-79 and accompanying text.

¹⁹⁶ See supra note 80 and accompanying text.

¹⁹⁷ Quality Auto Body, Inc. v. Allstate Insurance Co., 660 F.2d 1195 (7th Cir. 1981).

¹⁹⁸ Kartell v. Blue Shield of Massachusetts, Inc., 384 Mass. 409, 425 N.E. 2d 313 (1981).

¹⁹⁹ See supra notes 145-154 and accompanying text.

²⁰⁰ Kartell, 582 F. Supp. at 744; see also Amey, Inc. v. Gulf Abstract & Title, Inc., 758 F.2d 1486, 1495 & n.4 (11th Cir. 1985).

²⁰¹ Blue Shield of Virginia v. McCready, 451 U.S. 465, 480-81 (1982).

²⁰² Kartel, 749 F.2d at 932-33.

²⁰³ See Comment, Blue Shield's Ban on Balance Billing and the Sherman Act: Kartell v. Blue Shield of Massachusetts, Inc., 19 SUFFOLK U.L. REV. 1001, 1009-11 (1985).

²⁰⁴ See, e.g., Arizona v. Maricopa County Medical Soc'y, 457 U.S. 332, 350 & n. 20 (1982); Kartell v. Blue Shield of Massachusetts, Inc., 582 F. Supp. 734, 745-46 (1984); Boubjerg, supra note 16, at 967 (citing E. KENNEDY, IN CRITICAL CONDITION: THE CRISIS IN AMERICA's HEALTH CARE (1972)); Blumstein & Sloan, supra note 16, at 855-59 (general discussion of varying views).

²⁰⁵ See generally F. A. ROZOVSKY, CONSENT TO TREATMENT: A PRACTICAL GUIDE (1984); A. ROSOFF, INFORMED CONSENT (1981).

²⁰⁶ Compare Rosenblatt, supra note 16, at 1081, who suggests that physicians would probably not price compete anyway. He argues that in small communities there may be only one hospital and few practitioners, and claims that even in more populated areas, “more or less conscious professional collusion,” will inhibit price competition. Id. However, independent practitioners no longer operate in an insulated environment. They are indeed experiencing competition as the ranks of doctors swell and as large corporations enter the industry. It is not unlikely that this provides a healthy infusion into the industry which would generate more price conscious behavior by physicians.

²⁰⁷ See Boubjerg, supra note 16, at 969, Rosenblatt, supra note 16, at 1070.

²⁰⁸ Ball Memorial Hosp., Inc. v. Mutual Hosp. Ins., 784 F.2d 1325, 1334 (7th Cir. 1986); Brillhart v. Mutual Medical Insurance, Inc., 768 F.2d 196 (7th Cir. 1985).

²⁰⁹ Brillhart differed horn Kartell, however, in that patients using nonparticipating providers still get reimbursed for services rendered. There also seems to be no discussion of any findings of market power held by Blue Shield, as found in Kartell.

²¹⁰ Ball, 784 F.2d at 1331 (emphasis added).

²¹¹ See supra text accompanying notes 153-186.

²¹² See supra note 16 and accompanying text; see also Thompson, supra note 65, at 25, 33-36.

²¹³ Parker v. Brown, 317 U.S. 341 (1943).

²¹⁴ Id. at 350-52.

²¹⁵ Id.

²¹⁶ California Retail Liquor Dealers Ass'n v. Midcal Aluminum, Inc., 445 U.S. 97 (1980).

²¹⁷ Midcal, 445 U.S. at 105.

²¹⁸ See L. A. SULLIVAN, ANTITRUST 734 (1977); ABA, supra note 46, at 606-09.

²¹⁹ Kartell v. Blue Shield of Massachusetts, Inc., 384 Mass. 409,423, 425 N.E.2d 313, 321 (1981).

²²⁰ Kartell, 384 Mass, at 414-15, 425 N.E.2d at 316.

²²¹ H. 5624, An Act Relative to Medical Service Corporations, amending MASS. GEN. LAWS ANN. ch. 176B.

²²² See Mass. Gen. Laws Ann. c. 176B.

²²³ The proposed bill, H. 5624, expressly provides that physicians shall be proscribed from balance billing.