¹ For purposes of this Article “public hospitals” will refer to public-general hospitals owned by state, county and city governments. “Proprietary hospitals” will refer to investorowned hospitals operated for the purpose of making a profit for their owners. Finally, “nonprofit hospitals” will refer to § 501(c)(3) tax-exempt nonprofit organizations which are often partially supported by voluntary contributions. See Randall, & Lambert, , The Private Management of Public Hospitals, 19 HEALTH SERV. RES. 519, 521-23 (1984).Google Scholar

² The health care industry has been described as “in the process of changing its essential character, from a stable and largely self-regulating system financed by passive third-party payors to an unruly competitive industry facing increasing cost-conscious consumers.” Havighurst, Doctors and Hospitals: An Antitrust Prospective on Traditional Relationships, 1984 DUKE L.J. 1071, 1072 n.l; see generally AMERICAN ENTERPRISE INST. FOR PUB POL'Y RES., MARKET REFORMS IN HEALTH CARE: CURRENT ISSUES, NEW DIRECTIONS, STRATEGIC DECISIONS (J. Meyer ed. 1983); P. STARR, THE SOCIAL TRANSFORMATION OF AMERICAN MEDICINE (1982); J. GOLDSMITH, CAN HOSPITALS SURVIVE?: THE NEW COMPETITIVE HEALTH CARE MARKET (1981).

³ Under Medicare's 1983 shift to a prospective payment system (PPS), hospitals are paid a predetermined price for inpatient services based on the average cost of treating a patient in a particular Diagnostic-Related Group (DRG). See Dolenc, & Dougherty, , DRGs: The Counterrevolution in Financing Health Care, HASTINGS CENTER REP., June 1985, at 19;Google Scholar Morone, & Dunham, , Slouching Towards National Health Insurance: The Xew Health Care Politics, 2 YALE J. REG. 263 (1985);Google Scholar Stern, & Epstein, , Institutional Responses to Prospective Payment Based on Diagnostic-Related Groups, 312 NEW ENG. J. MED. 621 (1985);CrossRefGoogle Scholar Verville, , Medicare Rate Setting and Its Problem, 6 J. LEG. MED. 85 (1985).CrossRefGoogle Scholar Hospital reimbursement is not affected by actual hospital costs or services rendered, placing the financial risk for inefficiency with the hospital.

⁴ Theoretically, HMOs should result in increased consumer cost sensitivity and increased pressure from insurers on hospitals and physicians to become more price competitive with HMOs in order to maintain their patient share. See Bonney, , Hospital Survival Strategies for the 1980s, 40 AM. J. HOSP. PHARM. 1483 (1983).Google Scholar Two recent studies, however, suggest that HMOs and other market pressures have not resulted in price competition as of yet. Rather, competition remains focused on nonprice items. See Sandrick, , Will ‘88 Be The Year of Price Competition, HOSPITALS, Dec. 20, 1987, at 3439.Google Scholar

⁵ The demand for inpatient care is being reduced by an increase in ambulatory care services (such as urgent care centers), the development of specialized long term care services (such as rehabilitation hospitals and home health services), and the development of alternative delivery systems such as HMOs. See J. GOLDSMITH, supra note 2, at 17-19.

⁶ See infra notes 22-25 and accompanying text.

⁷ In fact, according to a hospital industry publication, hospital costs are now increasing more rapidly than revenues for the first time in fifteen years. Robinson, Economists See Closures, Cost Cuts Ahead, HOSPITALS, Jan. 5, 1988, at 23, see alsoBonney, supra note 4 (stating that hospi tals must consider diversification and alternative organizational structures in order to survive in the increasingly competitive and financially restrictive health care industry).

⁸ In a recent panel meeting of the House Education and Labor Committee oversight panel it was reported that approximately 100 public hospitals have closed since 1980, including 14 in 1987. See Georgia Hosp. Ass'n, House Panel Examines Impact of Uncompensated Care on Public Hospitals, 5 FEDERALINE, June 17, 1988 at 2. Financial pressures were seen as undermining the viability of public hospitals. It was pointed out in the meeting that hospitals spent 7.6 billion on uncompensated care in 1986, a 1519 & rise from 1980. Also, while public hospitals account for 22% of all hospital care, they provide 40% of all uncompensated care. Id. The concern expressed in the panel meeting is reinforced by many health care economists who feel that public hospitals are most at risk in the present market. See Robinson, supra note 7, at 23.

⁹ See Super, Public Hospitals Restructuring, MOD. HEALTHCARE, Sept. 11, 1987, at 44.

¹⁰ See Rosenfield & Miller, Public Hospitals May Lose Some, Cain More Through Restructuring, MOD. HEALTHCARE, Mar. 1983, at 100; Super, supra note 9, at 44-45.

¹¹ A growing hospital strategy involves entering joint ventures with physicians to develop such programs as ambulatory care facilities. See Ventures Show Cooperation With M.D.s Up; Anderson, , More Hospitals Will Use Joint Ventures To Enter Home Care Market-Experts, MOD. HEALTHCARE, Nov. 8, 1985, at 51;Google Scholar Rosenfield, , Market Forces Set Off Skyrocketing Interest In Hospital-Doctor Ventures, MOD. HEALTHCARE May 1, 1984, at 70;Google Scholar HOSPITALS, Oct. 1, 1985, at 37; but see Yanish, Hospitals Warned of Hidden Costs In Joint Ventures With Physicians, MOD. HEALTHCARE, Oct. 11, 1985, at 102 (arguing that joint ventures carry hidden costs such as possible violations of the Medicare fraud and abuse statutes); Sandrick, Joint I'entures: Why Do 7 Out Of 10 Fail?, HOSPITALS, Dec. 20, 1986, at 40 (“industry experts predicting that as many as seven out of ten joint ventures will fall apart or lose money because they were not planned properly or because they were not good business propositions to begin with“).

¹² See Super, supra note 9, at 45.

¹³ Id. State sunshine acts typically provide that any and all meetings of any board or committee of certain public agencies, entities or political subdivisions, at which official acts are to be taken, are public meetings open to the public at all times. Similarly, public records acts typically provide that all state, county and municipal records must be open for personal inspection by any person.

¹⁴ See Randall & Lambert, supra note 1, at 526-27.

¹⁵ Id. at 525.

¹⁶ See Rosenfield & Miller, supra note 10; Snook, Hospital Diversification: Corporate Restructuring As a Survival Strategy, 44 AMER.J. HOSP. PHARMACY 1056 (1987); see generally Beautyman, & Thallner, , Does Hospital Restructuring Make Sense Today?, 20 HOSP. L., Aug. 1987, at 121.Google Scholar

¹⁷ Hoch, , Corporate Reorganization: Nonprofit Tax-Exempt Hospitals, 11 TOPICS IN HEALTH CARE FINANCING 1 (1984);Google Scholar Wiles, , Corporate Restructuring: One Answer to TEFRA's Challenge, 45 N. C. MED. J. 43 (1981).Google Scholar

¹⁸ For discussion of the parent holding company model, see Squiers, Corporate Restructuring of Tax-Exempt Hospitals: The Bastardization of the Tax-Exempt Concept, 14 L. MED. & HEALTH CARE 66 (1986); Hopkins, & Beckwith, , The Federal Tax Law Of Hospitals: Basic Principles and Current Developments, 24 DUQ. L. REV. 691 (1985);Google Scholar Livingston, Changing Corporate Structure-From Reorganization to Merger, 12 TOPICS IN HEALTH CARE FINANCING 38 (1985); Hock, supra note 17, at 33-70; Wiles, supra note 17.

¹⁹ Many of the benefits typically associated with corporate restructuring, see infra note 10 and accompanying text, are not achieved by creating an affiliated or nonaffiliated nonprofit corporation or using a management corporation to operate the hospital facility. The hospital remains a public facility and subject to the restrictions that inhibit public institutions. Further, such models do not afford a great deal of operational or budgetary flexibility. In addition, private management of public hospitals has been criticized as altering the service structure of the hospital to become increasingly similar to that of a proprietary, investor-owned hospital. See Randall & Lambert, supra note 1, at 529. A management company, however, may be effective in implementing cost control and efficiency mechanisms into the hospital system. The creation of non-affiliated and affiliated corporations may be appropriate when more extensive restructuring is not warranted or possible and the public hospital still wants to expand its ability to enter into joint ventures.

²⁰ Restructuring is likely to include such areas as the statutory and constitutional authority to restructure, the lease agreement, corporate matters, tax implications, matters regarding regulation, licensing matters, reimbursement, insurance, finance and accounting, governmental program concerns, personnel and fringe benefit considerations as well as issues specific to the particular hospital.

²¹ See Rosenfield & Miller, supra note 10, at 100. The analysis of corporate reorganization as an option for public hospitals should involve a comprehensive weighing of the benefits of reorganization against the governmental benefits which may be lost in the restructuring process. The benefits of corporate restructuring will vary according to the particular hospital involved, the particular enabling statute, and differences in state law. Commentators have pointed to general areas where possible benefits can be found such as management efficiency, diversification, avoidance of governmental requirements, operational flexibility, reimbursement enhancement, protection of assets from reimbursement offset, and removal of political forces from hospital operations. See id.; Beautyman & Thallner, supra note 16, at 121.

²² 421 U.S. 773 (1975). In Goldfarb, the Supreme Court, in reversing a decision of the Fourth Circuit, eliminated any doubt as to whether the antitrust laws apply to the activities of professionals. The Court stated:

Id. at 787.

²³ 425 U.S. 738 (1976). In Rex Hospital, the Court held that a restraint on competition, even in a local hospital market, can substantially and adversely impact interstate commerce, and thus meet the jurisdictional requirement of the antitrust laws. The Goldfarb and Rex Hospital decisions are widely seen as opening the way for the application of antitrust principles to the health care industry. See Miles & Philp, Hospitals Caught in the Antitrust Net: An Overview,

²⁴ DUQ. L. REV. 489 (1985). 24 These major areas are identified and comprehensively discussed in Miles & Philp, supra note 23.

As a general matter, the health care antitrust cases reveal that as the industry moves from a regulatory or cooperative setting, mandated or induced by the government, to a more aggressive, competitive environment, antitrust principles become an increasing concern because the economic and legal rules change. Id. at 495. In the hospital industry, “many hospital executives have been subjected to what best can be called an ‘antitrust adjustment period,’ during which their entire approach to many business problems facing their facilities has had to change.” Id.

²⁵ See Lancaster Community Hosp. v. Antelope Valley Hosp. Med. Center, 1988-1 Trade Cas. (CCH) 67,933 (CD. Cal. 1988); Coastal Neuro-Psychiatric Assoc, v. Onslow Mem. Hosp., 795 F.2d 340 (4th Cir. 1986); Hosp. Dev. & Serv. Corp. v. North Broward Hosp. Dist., 619 F. Supp. 535 (S.D. Fla. 1985); Hatch v. North Colo. Med. Center, 1986-2 Trade Cas. (CCH) 67,268 (D. Col. 1986); but see Jiricko v. Coffeyville Mem. Hosp. Med. Center, 628 F. Supp. 329 (D. Kan. 1985)(holding that board of trustees of hospital owned by city was not entitled to immunity under Parker, as the legislature had not explicitly declared hospital to be a governmental function).

Midcal Aluminum, 455 U.S. at 97 (1980)(quoting Parker, 317 U.S. at 352); see aho Jorde, Antitrust and the Xew State Action Doctrine: A Return to Deferential Economic Federalism, 75 CALIF. L. REV. 227, 230-34 (1987) (elaborating on the underlying principles of federalism and state sovereignty). Many commentators espousing an economic efficiency theory have criticized Parker immunity as being based on a discredited confidence in the value of regulation.’ Confidence in regulation, according to the commentators, has been eroded by the “capture” of the regulatory process by special interest groups. These commentators argue for a narrowing of the state action doctrine. See, e.g., Wiley, , A Capture Theory of Antitrust Federalism, 99 HARV. L. REV. 713 (1986);CrossRefGoogle Scholar Lopatka, , State Action and Municipal Antitrust Immunity: An Economic Approach, 53 FORDHAM L. REV. 23 (1984).Google Scholar

²⁸ For background discussion on the development of the state action doctrine, see Garland, , Antitrust and State Action: Economic Efficiency and the Political Process, 96 YALE L.J. 486 (1987);CrossRefGoogle Scholar Jorde, supra note 27; Gifford, The Antitrust State-Action Doctrine After Fischer v. Berkeley, 39 VAND. L. REV. 1257 (1986); Note, Antitrust Immunity: The State of State Action, 88 WEST VA. L. REV. 783 (1986); Steuer, , Coming Full Circle On State Action, 7 CARDOZO L. REV. 439 (1986);Google Scholar Wiley, supranote 27; Freidman, Antitrust III: The State Action Doctrine, 1985 ANN. SURV. A.L. 491; Lopatka, supra note 27. For an excellent summary of the state action doctrine, see also Cine 42nd St. Theatre v. Nederlander Org., 790 F.2d 1032 (2d Cir. 1986).

²⁹ Parker, 317 U.S. at 351-52.

³⁰ See Hoover v. Ronwin, 446 U.S. 558 (1984)(adjunct committee to state supreme court); Bates v. State Bar Ariz., 433 U.S. 350 (1977)(state's highest court when exercising its judicial authority acts as the state); Parker, 317 U.S. at 351-52 (state legislature).

³¹ 445 U.S. 97 (1980).

³² Id, at 105. In Midcal Aluminum, the Supreme Court focused on a California price maintenance and price posting statute for the wholesale wine trade. The statute was found to be a clearly articulated legislative policy but the Court concluded that the State did not actively supervise the policy. Consequently, the parties were subject to antitrust laws. The Court found that the state simply authorized price setting and enforced prices that had been established by private parties, without itself establishing or reviewing those prices for reasonableness. The State could not immunize parties from the Sherman Act by merely authorizing them to violate it. Id. at 105-06.

³³ Community Communications Co. v. City of Boulder, 455 U.S. 40 (1982)(municipality considered instrumentality of the state if the state policy is “clearly articulated and affirmatively expressed,” but “home rule” powers are insufficient to meet this standard because “home rule” powers take a neutral stand on anticompetitive activities); City of Lafayette v. Louisiana Power & Light Co., 435 U.S. 389, 390 (1978)(municipalities are not themselves sovereign except insofar as the municipality acts as an instrumentality of the state by engaging in an act “pursuant to state policy to displace competition with regulation or monopoly public service”).

³⁴ Much of the confusion concerning the applicability of the two-part Midcal test to mu nicipalities resulted from the Supreme Court's opinion in Boulder where the Court suggested that the need for active supervision by the state over the anticompetitive conduct of a municipality was an open question. Boulder, 455 U.S. at 51-52 n.14. The Midcal two-prong standard has been criticized by economic theorists as a bad procedural compromise that neither satisfies concerns over state sovereignty nor addresses the fears of “capture” that erode confidence in regulation. See Wiley, supra note 27; Lopatka, supra note 27. Professor Wiley proposes a new test under which the Sherman Act would preempt state or local regulation that restrains market rivalry without responding directly to a substantial market inefficiency, and originates from the decisive political efforts of producers who stand to profit from the restraint. See Wiley, supra note 27, at 743; but see Garland, supra note 28, at 508-18 (criticizing the economic “revisionist's” analysis and asserting that the Midcal two-prong test exhibits appropriate judicial restraint for the political process).

³⁵ See Town of Hallie v. City of Eau Claire, 471 U.S. 34 (1985). In Hallie, the City of Eau Claire was named in a Sherman Act suit that alleged that it had acquired a monopoly over sewage treatment services and had tied the delivery of those services to its providing sewage collection and transportation services. The Court held that the Midcal test's first prong was met because the statute plainly showed that “the legislature contemplated the kind of acts complained of.” Id. at 44. The Supreme Court held, for the first time, that a municipality need not satisfy the second prong of the Midcaltest. Absent a contrary showing, a municipality will be seen as presumptively acting in the public interest. Id. at 45.

³⁶ 471 U.S. 34 (1985).

³⁷ 471 U.S. at 48.

³⁸ 455 U.S. 40 (1982). The Supreme Court noted in Hallie that “it is not necessary … for the state legislature to have stated explicitly that it expected the City to engage in conduct that would have anticompetitive effects.” Hallie, 471 U.S. at 42. It is only necessary that the state as sovereign clearly intends to replace competition in a particular field with a regulatory scheme. Southern Motor Carriers, 471 U.S. at 48.

³⁹ In Southern Motor Carriers, the Supreme Court held that a state policy that merely permits, rather than compels, a restraint of trade can qualify under the first prong of the Midcal test. Southern Motor Carriers, 471 U.S. at 58. This holding departs from the language of earlier cases. See, e.g., Goldfarb v. Virginia State Bar, 421 U.S. 773, 791 (1975)(“it is not enough that … anticompetitive conduct is ‘prompted’ by state action; rather, anticompetitive activities must be compelled by direction of the state acting as a sovereign”).

⁴⁰ The statutes at issue in Hallie made no express mention of anticompetitive conduct, and left the municipality “free to pursue either anticompetitive conduct or free-market competition in the field of sewage services.” Hallie, 471 U.S. at 43.

⁴¹ Id. at 46. The Hallie and Southern Motor Carriers decisions have been described as evidencing a movement away from a “rigorous process review” established in Boulder to a “lenient process review”. Jorde, supra note 27, at 234-47.

⁴² Southern Motor Carriers, 471 U.S. at 62.

⁴³ Hallie, 471 U.S. at 47 (emphasis in original). The distinction between municipalities and private parties has been viewed as revealing an increasing deference towards state regulation and a narrowing of antitrust application to state regulations that seek to delegate to private parties the power to restrain market competition. Garland, supra note 28, at 487-88. In essence, the courts are policing only private parties. Some commentators argue that active supervision of private parties still subverts federalism because it requires costly command and control supervision, and limits the methods a state may use to implement a program of regulation. See Jorde, supra note 27, at 248-49; Page, Antitrust Federalism, and the Regulatory Process: A Reconstruction and Critique of the State Action Exemption After Midcal Aluminum, 61 B.U.L. REV. 1099, 1128-30(1981).

⁴⁴ See Lancaster Community Hosp. v. Antelope Valley Hosp. Med. Center, 1988-1 Trade Cas. (CCH) 67,933, at 57,732 (CD. Cal. 1988)(stating that “before the [public hospital] can be protected by state action immunity this Court must decide whether a hospital district qualifies as a municipality eligible for immunity”).

⁴⁵ See Interface Group v. Massachusetts Port Auth., 816 F.2d 9 (1st Cir. 1987); Commuter Trans. Sys., Inc. v. Hillsborough County Aviation, 801 F.2d 1286 (11th Cir. 1986).

⁴⁶ See Fuchs v. Rural Elec. Convenience Coop., Inc. 672 F. Supp. 1111, 1114-15 (CD. 111. 1987), aff'd, 1988-2 Trade Cas. (CCH) 68,247, at 59,543 (7th Cir. 1988).

⁴⁷ See, e.g., Fuchs, 1988-2 Trade Cas. (CCH) at 59,542 (finding that a nonprofit cooperative was a “hybrid entity with sufficient non-private attributes that its activities require some lower level of supervision to ensure that it is acting pursuant to state policy [and] … it may be held immune as a state actor without the active scrutiny of market conditions which is a necessary prerequisite for holding a private entity immune“); Ambulance Serv. Reno v. Nevada Ambulance Serv., Inc., 819 F.2d 910 (9th Cir. 1987)(holding that a Regional Emergency Medical Services Authority occupied a position closer to a public entity than a private entity and that, therefore, active supervision was not required).

⁴⁸ 816 F.2d 9 (lst Cir. 1987).

⁴⁹ Id. at 13.

⁵⁰ See Lancaster Community Hosp. v. Antelope Valley Hosp. Med. Center, 1988-1 Trade Cas. (CCH) 67,933, at 57,734 (CD. Calif. 1988); Wicker v. Union County Gen. Hosp., 673 F. Supp. 177 (N.D. Miss. 1987); Coastal Neuro-Psychiatric Assoc, v. Onslow Mem. Hosp., 795 F.2d 340 (4th Cir. 1986); but see jiricko v. Coffeyville Mem. Hosp. Med. Center, 628 F. Supp. 329 (D. Kan. 1985)(suggesting that a public hospital acts in a proprietary rather than governmental capacity).

⁵¹ 1988-1 Trade Cas. (CCH) 67,933 (CD. Calif. 1988).

⁵² Id. at 57,732; see also Hospital Dev. Serv. Corp. v. North Broward Hosp. Dist., 619 F. Supp. 535 (S.D. Fla. 1985)(apparently assuming that a special tax district under Florida law was analogous to a municipality); Coastal Neuro-Psychiatric Assoc, 795 F.2d at 340 (apparently assuming without discussion, that the public hospital was a “municipality” needing to satisfy only the first prong of the Midcal test).

⁵³ 673 F. Supp. at 186.

⁵⁴ Id. at 186.

⁵⁵ Id.; see also Hatch v. North Colo. Med. Center, 1986-2 Trade Cas. (CCH) 67,268, at 61,369 (D. Col. 1986)(stating a county medical center qualifies as the “county” for state action immunity purposes because “the county acts in its governmental capacity for the welfare and protection of its inhabitants when, through its board of trustees, it operates a county hospital”).

⁵⁶ 628 F. Supp. 329 (D. Kan. 1985).

⁵⁷ Id. at 332. The court reasoned that only in its “governmental capacity” was a municipality acting for the public good as an arm of the state, rather than itself, and found that the relevant Kansas statutes did not expressly declare the operation of a hospital to be a public governmental function. Id. at 333.

⁵⁸ Id. The court indicated that if the hospital's state action argument were taken to its conlusion, then all municipal hospitals would be treated differently from private hospitals, even though the relevant statutes were designed to apply to all hospitals in the state.

⁵⁹ Id.

⁶⁰ See Hatch v. North Colo. Med. Center, 1986-2 Trade Cas. (CCH) 67,268, at 61,370 (D. Colo. 1986).

⁶¹ See Wall v. City of Athens, 663 F. Supp. 747, 761 (M.D. Ga. 1987); Lancaster Community Hosp. v. Antelope Valley Hosp. Med. Center, 1988-1 Trade Cas. (CCH) 67,933, at 57,733 (stating that “most courts have essentially ignored any distinction between proprietary and traditional functions of the state”); see also Garcia v. San Antonio Metro. Transit Auth., 469 U.S. 528 (1985)(rejecting distinction between traditional and integral governmental functions when determining state immunity from federal regulation under the Commerce Clause).

⁶² The court's hesitation to distinguish between municipal hospitals and other types of hospitals may be based on the federal courts’ emphasis on the purpose of a statutory scheme in determining statutory authorization and foreseeability under the clear articulation standard. See infra notes 108-09 and accompanying text. This reliance on Kansas’ statutory policy, however, does not seem related to the threshold issue of the hospital's status as a “municipality.”

⁶³ See infra notes 113-26 and accompanying text.

⁶⁴ See Hospital Dev. & Serv. Corp. v. North Broward Hosp. Dist., 619 F. Supp. 535, 538 (D.C. Fla. 1985).

⁶⁵ Sufficient state authority to engage in anticompetitive conduct may be found where it is determined “from the authority given a governmental entity to operate in a particular area, that the legislature contemplated the kind of action complained of,” or where the kind of action complained of is an “anticompetitive effect” that logically would result from the authority to regulate. City of Lafayette v. Louisiana Power & Light Co., 435 U.S. 387, 389 (1978); see Town of Hallie v. City of Eau Claire, 471 U.S. 34 (1985).

⁶⁶ 1988-1 Trade Cas. (CCH) 67,933 (CD. Calif. 1988).

⁶⁷ Id. at 57,731.

⁶⁸ Id.

⁶⁹ Id. at 57,732.

⁷⁰ Id. In its discussion, the court rejected plaintiff's argument that recent legislative amendments revealed a legislative intent to promote competition. The court stated that a recognition that competition exists “is not persuasive evidence that the California legislature did not intend or foresee that hospital districts would engage in anticompetitive activities. Moreover, these amendments appear to have been an effort to strengthen the position of district hospitals rather than to announce a policy favoring competition.” Id. at 57,733.

⁷¹ See Kern-Tulare Water Dist. v. City of Bakersville, 828 F.2d 514 (9th Cir. 1987), cert, denied, 108 S. Ct. 1752 (1988)(emphasizing where anticompetitive activity is a foreseeable and logical result from a broad grant of regulatory authority to a city the ‘clear articulation’ requirement is satisfied); Grason Elec. Co. v. Sacramento Mun. Util. Dist., 770 F.2d 833, 837 (9th Cir. 1985), cert, denied, 474 U.S. 1103 (1985)(holding municipality's anticompetitive techniques in connection with its administration of a public utility were immunized based on its statutory grant of power to “acquire, construct, own, operate, control or use … works for supplying the inhabitants of the district … with light [and] power … and may do all things necessary or convenient to the full exercise of the powers herein granted“) (citing CAL. PUB. UTIL. CODE § 12801 (West 1984)); see also Mercy Peninsula Ambulance, Inc. v. County of San Mateo, 791 F.2d 755 (9th Cir. 1986) (holding that enabling statute was so broad that virtually any anticompetitive effect could logically result from broad authority to regulate).

⁷² Lancaster Community Hosp. v. Antelcpe Valley Hosp. Med. Center, 1988-1 Trade Cas. (CCH) 67,933, at 57, 734 (CD. Calif. 1988).

⁷³ See Independent Taxicab Drivers’ Employees v. Greater Houston Transp. Co., 760 F.2d 607 (5th Cir. 1985), cert, denied, 474 U.S. 903 (1985)(immunizing city's exclusive contract with a taxicab company at a city airport). In spite of statutory silence, the court interpreted “the statute's broad phrasing [as] a strong indication of the state's desire to abdicate in favor of municipal presence with regard to airport management.” Id. at 61; see also Riverview Investments, Inc. v. Ottawa Community Improvement Corp., 769 F.2d 324, modified, 774 F.2d 162 (6th Cir. 1985)(immunizing a municipality's regulation of the issuance of industrial revenue bonds and holding that the clear articulation requirement is satisfied when the restrictive action by the municipality is a “logical and necessary outcome of the authority granted“); L & H Sanitation, Inc. v. Lake City Sanitation, Inc., 769 F.2d 517 (8th Cir. 1985)(immunizing a city which granted an exclusive solid waste disposal franchise); see also Hospital Dev. & Serv. Corp. v. North Broward Hosp. Dist., 619 F. Supp. 535 (D.C. Fla. 1985); see generally Gifford, supra note 28, at 1272-76 (discussion of Eighth, Sixth and Ninth Circuit decisions which hold that the clear articulation standard is met when the legislature addresses a subject and broadly grants discretion to local governments to handle the problem as seems best to them); Gifford, supra note 28, at 1274 (stating that the clear articulation standard as administered by the lower federal courts became largely meaningless); Note, supra note 28, at 818-21 (concluding federal decisions after Hallie give liberal interpretation to the clear articulation requirement, deeming that requirements to be satisfied on the basis of a mere “indication” or a “logical, reasonable, or necessary” inference of state legislative intent to displace competition); Jorde, supra note 28, at 241-47 (characterizing the clear articulation standard after Hallie and Southern Motor Carriers as “lenient process review” as compared to the “rigorous process review” under Community Communications). A liberal interpretation, therefore, appears to be the norm among federal jurisdictions.

⁷⁴ 790 F.2d 1032 (2d Cir. 1986).

⁷⁵ Id. al 1043-44.

⁷⁶ Id. at 1045. The court found that the enabling statute provided a “method of regulation” which included UDC authority to acquire real, personal or mixed property by a variety of means. Id. The court reasoned “these and other specific powers show that UDC would lease property in an anticompetitive manner.” Id.

⁷⁷ 1986-2 Trade Cas. (CCH) 67,401 (S.D.N.Y. 1987); but see Ole Hansen & Sons, Inc. v. Atlantic County Transp. Auth., 1986-2 Trade Cas. (CCH) 67,279, at 61,420 (D.N.J. 1986)(employing the Second Circuit test and immunizing a county transportation authority based on statutory scheme which authorized county to develop an integrated and adequate transportation system and included entering a variety of contracts with third parties).

⁷⁸ Driscoll, 1986-2 Trade Cas. (CCH) at 62,106.

⁷⁹ Id.

⁸⁰ Id.

⁸¹ 816 F.2d 9 (1st Cir. 1987).

⁸² Id. at 13.

⁸³ Id.

⁸⁴ Id.

⁸⁵ 795 F.2d 340 (4th Cir. 1986).

⁸⁶ 673 F. Supp. 177 (N.D. Miss. 1987).

⁸⁷ See N.C. GEN. STAT. § 131E-7(a)(6) & -8(a) (1988).

⁸⁸ N.C. GEN. STAT. § 131E-8(a) (1988).

⁸⁹ Id.

⁹⁰ Coastal Neuro-Psychiatric Assoc, P.A. v. Onslow Mem. Hosp., 795 F.2d 340, 342 (4th Cir. 1986). The Onslowdecision has been relied on as precedent for a liberal construction of the state action doctrine after Hallie.In Hillman Flying Service, Inc. v. City of Roanoke, the court described the Onslow opinion as finding “that the hospital was immune even though it operated under a broad and unspecified state grant of authority to construct, operate and maintain hospitals.” Hillman, 652 F. Supp. 1142, 1145 (W.D. Va. 1987).

⁹¹ Union County Gen. Hosp., 673 F. Supp. at 181.

⁹² Id. at 186.

⁹³ Id. at 185.

⁹⁴ Id. The Mississippi statute was designed to “clarify and expand the power of board of trustees of community hospitals so as to allow such community hospitals to operate efficiently, to offer competitive health care services to respond more effectively to new developments and regulatory changes in the health care area and to continue to serve and promote the health and welfare of the citizens of the state of Mississippi. This act shall be liberally construed so as to give effect to such intent and purpose.” Miss. CODE ANN. § 41-13-35 (1972)(emphasis added).

⁹⁵ Union County Gen. Hosp., 673 F. Supp. at 185. The court stated:

Id.

It should be noted, however, that while the court refused to immunize the county hospital based on the state action doctrine, the plaintiff's claim was restricted to injunctive relief because of the applicability of the Local Governmental Antitrust Act to the county hospital. Id. at 186.

⁹⁶ City of Lafayette, 435 U.S. at 389.

⁹⁷ Hallie, 471 U.S. at 43-44.

⁹⁸ See supra notes 66-73 and accompanying text; see also Note, supra note 28, at 818-21 (reviewing federal court cases after Hallie and concluding that the clear articulation standard has been deemed satisfied on the basis of a mere “indication” or a “logical, reasonable, or necessary” inference of state legislative intent to displace competition”).

⁹⁹ See Freidman, supra note 28, at 510 (“In Hallie … the Court returned to a less demanding standard for immunity“); Garland, supra note 28, at 487 (stating that the most recent cases involving municipal action “reflect an increasing deference toward state regulation“); Jorde, supra note 27, at 228 (characterizing the state action doctrine for municipalities as now involving a lenient process review); Steuer v. National Med. Enterprises & Latham, 672 F. Supp. 1489-90 (D.S.C. 1987)(acknowledging the wide reach of immunity, and expressing the opinion that the only time immunity is unavailable to a city is when the city's political process is “corrupted by such evils as self-dealing or bribery“); Note, supra note 28, at 809 (concluding that Hallie “reduced all previous documentations of municipal antitrust immunity to a state of obsolescence, save for their historical significance“). Several commentators argue that the Supreme Court should actually narrow state action immunization of municipalities because of the inefficiencies of the regulatory process, which is viewed as being “captured” by special interests. See Wiley, supranote 27; Lopatka, supra note 27. For further analysis of the impact of Hallie, see Comment, Antitrust: Sherman's March Through Municipalities is Halted at Eau Claire, 25 WASHBURN L.J. 357 (1986); Quinlan, Do Local Government Lawyers Really Have To Worry About Antitrust Laws﹜, 57 N.Y.S. BAR J. (Nov. 1985); Stewart, Supreme Court Report: Suing Local Governments, 71 ABA J. 112 (June 1985).

¹⁰⁰ See Wall v. City of Athens, 663 F. Supp. 747 (M.D. Ga. 1987); Ole Hansen & Sons, Inc. v. Atlantic County Transp. Auth., 1986-2 Trade Cas. (CCH) 67,279, at 61,422 n.3 (D.N.J. 1986); Falk v. Chicago, 1986-1 Trade Cas. (CCH) 67,128, at 62,809-10 (N.D. 111. 1986).

¹⁰¹ Ole Hansen, 1986-2 Trade Cas. (CCH) 67,279, at 61,421.

¹⁰² Id. at 61,422 & n. 3.

¹⁰³ 663 F. Supp. 747 (M.D. Ga. 1987).

¹⁰⁴ Id.In its discussion, the Court stated:

Id. at 760. The court specifically noted that it was in the minority among federal courts by refusing to find certain municipal activities foreseeable. Id.

¹⁰⁵ 1986-1 Trade Cas. (CCH) % 67,128, at 62,807 (N.D. 111. 1986).

¹⁰⁶ Id. at 62,809 (quoting LaSalle Nat'l Bank Chicago v. County DuPage, 777 F.2d 377, 381 (7th Cir. 1985), cert, denied, 476 U.S. 1170 (1986)).

¹⁰⁷ Id. at 62,810.

¹⁰⁸ 777 F.2d 377 (7th Cir. 1985), cert, denied, 476 U.S. 1170 (1986).

¹⁰⁹ Id. at 382; accord Unity Ventures v. County of Lake, 631 F. Supp. 181 (N.D. 111. 1986); see also Interface Group, Inc. v. Massachusettes Port Auth., 631 F. Supp. 483 (D. Mass. 1986) (suggesting that immunity applied because the conduct was close to the heart of the primary statutory purpose of the authority); Wicker v. Union County Gen. Hosp., 673 F. Supp. 177 (N.D. Miss. 1987) (denying immunization partially because of Mississippi's peer review statutes which evidenced a purpose to promote competition rather than to replace competition with regulation); Lancaster Community Hosp. v. Antelope Valley Hosp. Med. Center, 1988-1 Trade Cas. (CCH) 67,933 (CD. Calif. 1988)(rejecting plaintiff's argument that recent statutory amendments evidenced a legislative intent to promote competition, thereby foreclosing defendant's reliance on the state action defense); Consolidated Gas Co. of Fla., Inc. v. City Gas Co. of Fla., Inc., 1987-2 Trade Cas. (CCH) 67,741, at 51,915 (S.D. Fla. 1987)(stating that one method to determine legislative intent involves a “central purpose” test, which looks at the primary objective of the relevant statutory scheme).

¹¹⁰ 639 F. Supp. 1501 (N.D. 111. 1986), aff'd, 823 F.2d 1182 (1987).

¹¹¹ Id. at 1506-07. For other cases holding that state legislatures have granted the authority to municipalities to regulate service areas where local public safety is implicated, see also Wellwoods Dev. Co. v. City of Aurora, 631 F. Supp. 221, 225-26 (N.D. 111. 1986), aff'd, 823 F.2d 1182 (7th Cir. 1987)(authority over airport expansion and development of runways); Unity Ventures v. County Lake, 631 F. Supp. 181, 190 (N.D. 111. 1986)(sewage treatment in expansion); Independent Taxicab Drivers’ Employees v. Greater Houston Transp. Co., 760 F.2d 607 (5th Cir. 1985)(supplying taxi service to the airport); Woolen v. Surtran Taxi Cab, Inc., 615 F. Supp. 344 (N.D. Tex. 1985), cert, denied, 479 U.S. 903 (1985)(airport taxi cab service); Central Ambulance Serv., Inc. v. City of Dallas, 631 F. Supp. 366 (N.D. Tex. 1986)(emergency ambulance service). The court in Campbell noted that the powers to tax, license, and regulate necessarily implied limitations on a free market economy. Campbell, 639 F. Supp. at 1505 n.5; see also Easterbrook, , Antitrust and The Economics Of Federalism, 26 J.L. & ECON. 23, 27-29 (1983)CrossRefGoogle Scholar(sometimes legislation may be justified as necessary to correct ‘imperfections’ in the market, but in most cases legislation is designed to defeat the market all together).

¹¹² Id. at 1505. This point was elaborated on in Vartan v. Harristown Dev. Corp., 655 F. Supp. 430 (M.D. Pa. 1987). The Vartan court immunized a city's activities in relation to the development of its downtown area. The court concluded the city had acted pursuant to a statutory authorization, and then addressed foreseeability. The court stated:

Id. at 434-35; see also Hillman Flying Serv., Inc. v. City of Roanoke, 652 F. Supp. 1142, 1145- 46 (W.D. Va. 1987)(stating that Virginia's aviation laws do not expressly anticipate exclusive or anticompetitive arrangements but that a legislature's express endorsement of anticompetitive behavior is unnecessary for a municipality's immunity under the antitrust laws).

¹¹³ For cases imposing a good faith requirement, see Fisichelli v. Town of Methuen, 653 F. Supp. 1494 (D. Mass. 1987); DiVerniero v. Murphy, 635 F. Supp. 1531 (D. Conn. 1986); Oberndorf v. City & County of Denver, 653 F. Supp. 304 (D. Col. 1986); Preferred Coram., Inc. v. City of Los Angeles, 754 F.2d 1396 (9th Cir. 1985); Corey v. Look, 641 F.2d 32 (1st Cir. 1981); Mason City Center Assoc, v. Mason City, 468 F. Supp. 737 (N.D. Iowa 1979); Whitworth v. Perkins, 559 F.2d 378 (5th Cir. 1977). For cases refusing to incorporate a good faith requirement, see Interface Group Inc. v. Mass. Port Auth., 816 F.2d 9, 13 (1st Cir. 1987); Humana of 111. v. Board of Trustees of S.I.U., 1986-1 Trade Cas. (CCH) f 67,127, at 62,802 (CD. 111. 1986); City Communications, Inc. v. City of Detroit, 650 F. Supp. 1570 (E.D. Mich. 1987); Vartan, 655 F. Supp. 430, 436-37 (M.D. Pa. 1987); Sonitrol of Fresno, Inc. v. American Tel. & Tel. Co., 629 F. Supp. 1089 (D.D.C. 1986); Campbell v. City of Chicago, 639 F. Supp. 1501 (N.D. 111. 1986); aff'd, 823 F.2d 1182 (1987); Llewellyn v. Crothers, 765 F.2d 769 (9th Cir. 1985).

¹¹⁴ 653 F. Supp. 1494 (D. Mass. 1987).

¹¹⁵ Id. at 1501; see also DiVerniero v. Murphy, 635 F. Supp. 1531, 1537 (D. Conn. 1986) (refusing to apply state action immunity because municipal defendants’ actions were viewed as going beyond legislatively authorized activities because of allegations of a conspiracy to inhibit lawful business activities by harassing legitimate vendors).

¹¹⁶ See, e.g., Weiss v. York Hosp., 745 F.2d 786 (3d Cir. 1984), cert, denied, 470 U.S. 1060 (1985)(holding that the medical staff members conspired among themselves and with the hospital to boycott the plaintiff).

¹¹⁷ Id..

¹¹⁸ Jericko v. Coffeyville Mem. Hosp. Med. Center, 628 F. Supp. 629-333 (D. Kan. 1985).

¹¹⁹ 650 F. Supp. 1570 (E.D. Mich. 1987).

¹²⁰ The court stated:

Id. at 1576.

¹²¹ Id. at 1576-77.

¹²² Id. at 1577. The court noted that the good faith requirement had developed in federal courts from Justice Brennan's statement that for the state action exemption to apply, it must be found “from the authority given a governmental entity to operate in a particular area, that the legislature contemplated the kind of action complained of.” City of Lafayette v. Louisiana Power & Light Co., 435 U.S. 389, 415 (1978)(quoting City of Lafayette v. Louisiana Power & Light Co., 532 F.2d 431, 434 (1976)). The court in City Communications,however, noted that the context for this Supreme Court language was not the explicit establishment of a good faith requirement, “but rather the clarification that, in order for state action immunity to apply to a municipality, the municipality needed more than a neutral policy of the state but less than a specific and detailed state authorization of its activity.” City Communications, 650 F. Supp. at 1576.

¹²³ The court relied on the following language from Hoover v. Ronwin:

Id. at 1577 (quoting Hoover v. Ronwin, 466 U.S. 558, 574 (1984)).

¹²⁴ see Llewellyn v. Crothers, 765 F.2d 769 (9th Cir. 1985)(holding defendant immune from antitrust liability despite allegations that a bad faith motivation (dislike of chiropractors) had led him to reduce the number and types of chiropractic treatments compensable by workers compensation); Metro Cable Co. v. CATV of Rockford, Inc., 516 F.2d 220 (7th Cir. 1975)(holding that the Sherman Act did not apply to otherwise valid acts that might have been influenced by unethical campaign contributions); Sonitrol of Fresno, Inc. v. American Tel. & Tel. Co., 629 F. Supp. 1089 (D.D.C. 1986) (applying state action immunity despite charges that the defendant had engaged in tactics of deceit and misrepresentation).

¹²⁵ City Communications, 650 F. Supp. at 1577. This reasoning has been supported by one commentator who noted:

Areeda, Antitrust Immunity For State Action After Lafayette, 95 HARV. L. REV. 435, 449-50 (1981).

¹²⁶ City Communications, 650 F. Supp. at 1578.

¹²⁷ Ole Hansen & Sons, Inc. v. Atlantic County Transp. Auth., 1986-2 Trade Cas. (CCH) H 67,279, at 61,421 (D.N.J. 1986).

¹²⁸ 428 U.S. 579(1976).

¹²⁹ Id. at 584. The Cantor decision has been characterized as a brief flirtation with substantive review which has been retreated from in the antitrust context in later cases. See Jorde, supra note 28, at 234-35; see also Cine 42nd St. Theater v. Nederlander Org., 790 F.2d 1032, 1046 (2d Cir. 1986)(extensively discussing the secondary market concept and its limitations).

¹³⁰ 1987-2 Trade Cas. (CCH) 67,741, at 58,941 (S.D. Fla. 1987); see P. AREEDA & D. TURNER, ANTITRUST LAW 214B4 (1978).

¹³¹ See supra note 109 and accompanying text.

¹³² For instance, the ability to expand services outside of certain geographical limits or enter into equity joint ventures may be questionable or limited under certain enabling statutes or constitutional provisions. See supra notes 10-11 and accompanying text.

¹³³ Southern Motor Carriers Rate Conf. v. United States, 471 U.S. 48 (1985); see supra notes 42-43 and accompanying text.

¹³⁴ Ole Hansen, 1986-2 Trade Cas. (CCH) 67,279, at 61,423.

¹³⁵ 790 F.2d 1032 (1986).

¹³⁶ Id at 1048; see also Price v. City of Fort Pierce, 625 F. Supp. 979, 981-82 (S.D. Fla. 1986); Humana of Ill., Inc. v. Board of Trustees of S. Ill. U., 1986-1 Trade Cas. (CCH) 67,127, at 62,806 (CD. Ill. 1986).

¹³⁷ 660 F. Supp. 952 (E.D. Mich. 1977). This case involved a reconsideration of the court's earlier determination that municipal defendants were immunized under the state action doctrine while private defendants were not immunized. The reconsideration only focused on the decision concerning the private defendants. In the earlier decision, the court had rejected the private defendant's argument that any time a municipality is one of the defendants, the second prong of the Midcal test is waived for all of the defendants, including private defendants. The court found this argument to contradict the rationale for the state supervision requirement. The court also refused to allow supervision by the municipality to satisfy the state supervision requirement. In its reconsideration the court loosened its treatment of private parties under the active supervision standard.

¹³⁸ City Communications, 1987-1 Trade Cas. (CCH) 67,618, at 60,700 (E.D. Mich. 1987).

¹³⁹ The court in City Communications described the decisions in other circuits as declining “to allow plaintiffs to attack municipal decisions through the ‘back door,’ holding that private parties are entitled to immunity once the municipality is held to be immune … .” Id. at 60,711.

¹⁴⁰ Id. at 60,711-12. In applying this principle to its facts, however, the court found that there was a question of fact as to whether the private defendants might have had so much influence that the decision to grant the exclusive franchise was actually that of the company and thus, summary judgment on the issue was found to be inappropriate. Id.

¹⁴¹ 637 F. Supp. 930 (W.D. Pa. 1986).

¹⁴² Id. at 932.

¹⁴³ See supra note 21 and accompanying text.

¹⁴⁴ See, e.g., Campus Commun. v. Shands Teaching Hosp. & Clinics, Inc., 512 So. 2d 999 (Fla. Dist. Ct. App. 1987)(holding that a restructured nonprofit hospital was not a state agency for purposes of Florida's sunshine act or public records act).

¹⁴⁵ See supra notes 12-13 and 22 and accompanying text.

¹⁴⁶ This limitation is supported, by analogy, by New York Citizens Committee on Cable TV v. Manhattan Cable TV. 651 F. Supp. 802 (S.D.N.Y. 1986)(holding that refusal to permit unaffiliated programmers to use franchisee's system could result in an antitrust injury).

¹⁴⁷ Some states have specific legislation concerning reorganization, and these statutes should be scrutinized for possible intent to replace competition. See, e.g., FLA. STAT. ANN. § 155.40 (West 1988).

¹⁴⁸ See, e.g., Sandcrest Outpatient Serv., P.A. v. Cumberland County Hosp. Sys., 853 F.2d 1139 (4th Cir. 1988)(infusing the Midcal two-prong test into the analysis under the LGAA and holding a management company operating a public hospital immune from antitrust damage claims pursuant to the LGAA); Skoblow v. Ameri-Manage, Inc., 483 So. 2d 809 (Fla. Dist. Ct. App. 1986)(holding that management company operating a public hospital was a state agency which enjoyed sovereign immunity from § 1983 civil rights actions).

¹⁴⁹ See supra notes 41-42 and accompanying text.

¹⁵⁰ A good example of the mode of analysis employed when both a municipality and a private party are defendants is Folk v. Chicago. 1986-1 Trade Cas. (CCH) 67,128, at 62,807 (N.D. 111. 1986). The court first found that the municipality which was granting concessions and privileges to certain private parties was immunized and then addressed the private defendant's status. In terms of the clear articulation standard the court stated:

Id. at 62,812.

¹⁵¹ 623 F. Supp. 1505 (D.C.S.C. 1985).

¹⁵² Id. at 1512; see also Folk, 1986-1 Trade Cas. (CCH) at 62,812 (noting that the contract between the municipality and the private party reveals supervision by the municipality to satisfy the second prong of Midcal); Wellwoods Dev. Co. v. City of Aurora, 631 F. Supp. 221 (N.D. 111. 1986)(court found active supervision by the municipalities and a municipal agency based on the fact that (1) the details of taxicab service at the airport were set forth comprehensively in a contract between the municipal agency and the private party, and (2) the succession of contracts showed a gradually changing approach to ground transportation at the airport); Gold Cross Ambulance & Transfer v. City of Kansas City, 538 F. Supp. 956, 966-67 (W.D. Mo. 1982), aff'd, 705 F.2d 1005, (8th Cir. 1983)(“regulation by the City itself satisfies the active supervision requirement … since its regulation of ambulance service is exercised under the authorization and direction of state policy“).

¹⁵³ Riverview Investments, Inc. v. Ottawa Community Improvement Corp., 769 F.2d 324, modified, 774 F.2d 162, 163 (6th Cir. 1985).

¹⁵⁴ As a preliminary observation, any asserted supervision must cover the conduct which has been challenged. See, e.g., Englert v. City of McKeesport, 637 F. Supp. 930 (W.D. Pa. 1986)(holding that relevant statutes supervised electrical inspections but not fee-setting in the industry, and thus, no state action immunity).

¹⁵⁵ Savage, 623 F. Supp. at 1512; see also Humana of Ill., Inc. v. Board of Trustees of S. Ill. Univ., 1986-1 Trade Cas. (CCH) H 67,127, at 62,802 (CD. Ill. 1986)(finding active supervision based partially on the details of an affiliation agreement between a private hospital and the Southern Illinois University School of Medicine).

¹⁵⁶ 801 F.2d 159 (5th Cir. 1986).

¹⁵⁷ Id. at 164; see also Ambulance Serv. of Reno v. Nevada Ambulance Serv., 819 F.2d 910 (9th Cir. 1987); Coin Call, Inc. v. Southern Bell Tel. & Tel. Co., 636 F. Supp. 608 (N.D. Ga. 1986).

¹⁵⁸ 1987-2 Trade Cas. (CCH) 67,741 (S.D. Fla. 1987).

¹⁵⁹ Id.

¹⁶⁰ Structuring the reorganization to have the public entity retain significant control over hospital operations, however, may defeat in many cases the objectives of the reorganization.

¹⁶¹ See, e.g., Patrick v. Burget, 108 S. Ct 1658 (1988); Doe v. St. Joseph's Hosp. of Fort Wayne, 788 F.2d 411 (7th Cir. 1986); Marrese v. Interqual, Inc., 748 F.2d 373 (7th Cir. 1984) cert, denied, 472 U.S. 1027 (1985); see generally Havighurst, supra note 2 (discussing the application of antitrust principles to hospital privileges decisions and concluding that the legal rules under which practitioners have challenged denials of hospital admitting privileges should be clarified in order that hospitals can more effectively carry out their new cost-containment and other responsibilities).

¹⁶² See, e.g., General Hosp. of Humana v. Baptist Med. Sys., 1986-1 Trade Cas. (CCH) 66,996, at 62,114 (E.D. Ark. 1986); Huron Valley Hosp. Inc. v. City of Pontiac, 612 F. Supp. 654 (E.D. Mich. 1985); State of N.C. ex. rel. Edmisten v. P.I.A. Asheville, 740 F.2d 274 (4th Cir. 1984); see generally Miles & Philp, supra note 23, at 594-632 (compiling and analyzing the antitrust cases relating to health planning); Ponsoldt, Immunity Doctrine, Efficiency Promotion, and the Applicability of Federal Antitrust Law to State-Approved Hospital Acquisitions, 12 J. CORP. L. 37 (1986)(discussing the application of the implied immunity doctrine to hospital acquisitions approved pursuant to state health planning procedures).

¹⁶³ Id. 108 S. Ct. 1658 (1988).

¹⁶⁴ Id. at 1659-60.

¹⁶⁵ Patrick v. Burget, 800 F.2d 1498, 1509 (9th Cir. 1986).

¹⁶⁶ Id. at 1506.

¹⁶⁷ Patrick, 108 S. Ct. at 1662. The Court stated that “in this case, we need not consider the ‘clear articulation’ prong of the Midcal test because the ‘active supervision’ requirement is not satisfied.” Id. at 1663.

¹⁶⁸ Id. The Court stated:

¹⁶⁹ Id.

¹⁷⁰ Id. at 1664.

¹⁷¹ Id. The state agency's statutory authority over peer review was found to relate only to a hospital's procedures and not to encompass the actual decisions made by a hospital's peer review committee. Id. Similarly, the Court emphasized that the BOME, even though it had the power to regulate the licensing of physicians and hospitals were required to notify it promptly after a termination decision, did not have the statutory power to disapprove private privilege decisions. Id.

¹⁷² Id.

¹⁷³ Id. at 1664-65.

¹⁷⁴ Id. at 1665.

¹⁷⁵ Id. It should be noted that before concluding, the Court addressed a policy argument forwarded by the hospital and their amici that “effective peer review is essential to the provision of quality medical care and that any threat of antitrust liability will prevent physicians from participating openly and actively in peer review proceedings.” Id. This argument was supervirelied on by an earlier Seventh Circuit decision in order to determine that a state peer review statute immunized a private hospital's peer review proceedings. Marrese v. Interqual, Inc., 748 F.2d 373 (7th Cir. 1984), cert, denied, 472 U.S. 1077 (1985). The Supreme Court, however, rejected this argument by stating: “[T]his argument, however, essentially challenges the wisdom of applying the antitrust laws to the sphere of medical care, and as such is properly directed to the legislative branch.” Patrick, 108 S. Ct. at 1663.

¹⁷⁶ See Shah v. Memorial Hosp., 1988-2 Trade Cas. (CCH) 68,199 (W.D. Va. July 27, 1988); Bolt v. Halifax Hosp. Med. Center, 1988-2 Trade Cas. (CCH) 68,174 (11th Cir. 1988), vacated. Bolt v. Halifax Hosp. Med. Center, 1988-2 Trade Cas. (CCH) 68365 (11th Cir. 1988). As an alternative to sufficient judicial review, a statutory scheme may satisfy the Patrick test by providing a mechanism whereby a state agency is empowered to review all adverse peer review decisions and to reverse those decisions if necessary. Such a statutory mechanism, however, is extremely unlikely. Decisions prior to Patrickdetermining that state peer review statutes immunize private hospital peer review proceedings from antitrust challenges did not involve such mechanisms, but rather, involved statutory schemes similar to Oregon's. See, e.g., Marrese, 748 F.2d at 373. Also, the development of a satisfactory statutory mechanism would involve a new and potentially burdensome overlay of agency review of privilege determinations. See Bierig, , Peer Review After Patrick, 21 J. HEALTH & HOSP. L. 135, 138 (June 1988).Google Scholar

¹⁷⁷ 1988-2 Trade Cas. (CCH) 68,199 (W.D. Va. July 27, 1988).

¹⁷⁸ Shah, 1988-2 Trade Cas. (CCH) at 59,325-26. In contrast, prior to being vacated for rehearing, the Eleventh Circuit in Bolt had found Florida's judicial review of peer review decisions sufficiently probing to constitute active state supervision. The Eleventh Circuit emphasized Florida case law, rather than the statutory language, to conclude that the Florida courts adequately review the fairness of the procedures, the validity of the criteria employed and the sufficiency of the evidence. The Eleventh Circuit's decision after rehearing is likely to be extremely influential in that it will be one of the first federal court applications of the Patrick decision. Further, the case involves both private and public hospital defendants, and thus, the decision may highlight many of the distinctions discussed in this article.

¹⁷⁹ See Tambone v. Memorial Hosp. for McHenry County, 825 F.2d 1132 (7th Cir. 1987); Posner v. Lankenau Hosp., 645 F. Supp. 1102 (E.D. Pa. 1986); Quinn v. Kent Gen. Hosp., Inc., 617 F. Supp. 1226 (D.C. Del. 1985).

¹⁸⁰ See Miles & Philps, supra note 23, at 506-07 (finding it “impossible to discern how [the functions relied on by decisions such as Marrese to substantiate active supervision] possibly can satisfy the requirement that the allegedly anticompetitive conduct be actively supervised by the state“); Enders, , Federal Antitrust Issues Involved In The Denial of Medical Staff Privileges, 17 LOY. U. CHI. L.J. 331 (1985).Google Scholar

¹⁸¹ See Miles & Philps, supra note 23, at 504-05.

¹⁸² The rigorous analysis employed for private parties in Patrick also suggests that Professor Garland is correct in his view that the state action cases are reflecting an increasing deference toward state regulation except when the state regulation seeks to delegate to private parties the power to restrain market competition. Garland, supra note 28, at 487.

¹⁸³ 1986-2 Trade Cas. (CCH) 11 67,268 (D. Colo. 1986).

¹⁸⁴ Id. at 61,370.

¹⁸⁵ As a word of caution, however, even the applicability of the state action doctrine to county hospital peer review decisions is by no means certain. First, in the Patrick opinion, the “clear articulation” prong was not considered because the “active supervision” requirement was not satisfied. Patrick v. Burget, 108 S. Ct. 1658, 1663 (1988). Second, some federal courts have expressly found that certain state statutory schemes regarding peer review procedures do not satisfy the clear articulation standard. See Posner v. Lan Kenau Hosp., 1986-2 Trade Cas. (CCH) 67,351 (E.D. Pa. 1986); Quinn v. Kent Gen. Hosp., Inc., 617 F. Supp. 1226 (D. Del. 1985); Wicker v. Union County Gen. Hosp., 673 F. Supp. 177 (N.D. Miss. 1985).

¹⁸⁶ Patrick, 108 S. Ct. at 1658 n.8.

¹⁸⁷ See 42 U.S.C. §§ 11101-11152 (Supp. 1988). The HCQIA, however, contains certain limitations. In order for the statutory immunity to apply, the professional review action must be taken (1) “in the reasonable belief that the action was in the furtherance of quality of health care,” (2) after a reasonable effort to obtain the facts, (3) after adequate notice and procedures, and (4) with reasonable belief that the action was warranted by the facts. Id. at § 11112(a). Also, the HCQIA does not prevent antitrust actions brought by the Antitrust Division or Federal Trade Commission. Id. at § 11111(a)(1)(D). Further, the HCQIA specifically applies only to professional review actions involving physicians, and arguably, therefore, does not apply to non-physicians. Id. at § 11151 (8).

The notice and procedures requirement is conclusively presumed to have been met if certain notice and procedural steps listed in the HCQIA are followed. Id. at § 11112(b). These steps are more stringent than normally found in a private hospital's bylaws or under a constitutional due process analysis. The formal nature of the review procedure proceedings under the HCQIA are most clearly evidenced in the requirements concerning the conduct of a hearing. The HCQIA attempts to ensure the impartiality of the individuals involved in the hearing, provides the physician under review with the right to be represented by an attorney, to have a record made of the proceeding, to call and cross-examine witnesses, to present evidence regardless of its admissibility in a court of law, to submit a written statement at the closing of the hearing, and to receive written recommendations and decisions upon the completion of the hearing. Id. at § 11112(b). In sum, it often becomes a judgment call as to whether the hospital is willing to subject itself to the formal procedures set forth in the HCQIA.

¹⁸⁸ See Miles & Philp, supra note 23, at 515-18.

¹⁸⁹ Id.

¹⁹⁰ Id.

¹⁹¹ CON laws and other governmental regulatory programs are premised on the concepts of output restriction and resource allocation by governmental decision rather than by market forces. Under the CON law “hospitals and other health care facilities ‘must’ obtain prior approval from the state before undertaking certain capital expenditures or providing new institutional health services.” These regulatory principles conflict with the antitrust law's basic precepts of competition, unrestricted market entry and free enterprise. See Miles & Philp, supra note 23, at 595-96. The inherent conflict between CON law and antitrust principles reflects the more general debate concerning the appropriate means of reforming the health care system in order to contain escalating health care costs resulting from the present inefficient structure of the health care market. See Marmor, , Boyer, & Greenberg, , Medical Care and Procompetitive Reform, 34 VAND. L. REV. 1003 (1981);Google Scholar Bovbjerg, , Competition I'ersus Regulation In Medical Care: An Overdrawn Dichotomy, 34 VAND. L. REV. 965 (1981).Google Scholar

¹⁹² 452 U.S. 378 (1981).

¹⁹³ The doctrine of “implied repeal” immunizes from antitrust liability actions that are undertaken to implement a federal regulatory scheme that is inconsistent with antitrust laws. See Miles & Philp, supra note 23, at 602.

¹⁹⁴ For cases holding that the CON process serves to immunize a hospital's conduct, see General Hosp. Humana v. Baptist Med. Sys., 1986-1 Trade Cas. (CCH) 66,996 (E.D. Ariz. 1986); Trident Neuro-Imaging Lab. v. Blue Cross & Blue Shield, 1982-3 Trade Cas. (CCH) 65,674 (D.S.C. 1983). For cases holding that the CON process does not result in state action immunity, see, e.g., North Carolina v. P.I.A. Asheville, Inc. 740 F.2d 274 (4th Cir. 1984); see alsoMiles & Philp, supra note 23, at 619-26 (discussing the conflicting federal authority on this issue).

¹⁹⁵ 1986-1 Trade Cas. (CCH) 1 66,996 (E.D. Ariz. 1986).

¹⁹⁶ Id. at 62,115-17.

¹⁹⁷ 688 F.2d 847 (9th Cir. 1982), cert, denied, 462 U.S. 1123 (1983).

¹⁹⁸ id.

¹⁹⁹ Id.

²⁰⁰ 740 F.2d 274 (4th Cir. 1984), cert, denied, 471 U.S. 1003 (1985).

²⁰¹ Id. at 278-79.

²⁰² Id.

²⁰³ See Miles & Philp supra note 23, at 624-25.

²⁰⁴ It should be noted that the Noerr-Pennington doctrine also is available to immunize a hospital participating in the health planning process. See id. at 609-19.

²⁰⁵ Pub. L. No. 98-544 (98 Stat.)(codified as amended at 15 U.S.C. §§ 34-36), reprinted in, 1984 U.S. CODE CONG. & ADMIN. NEWS 2750.

²⁰⁶ id. at § 35.

²⁰⁷ Id. at § 34.

²⁰⁸ Id. at § 36.

²⁰⁹ 628 F. Supp. 454 (CD. Calif. 1986); see also Mayo, , The Local Governmental Antitrust Act: A Comment on the Constitutional Questions, 50 J. LAW & COMMERCE 805 (1985).Google Scholar

²¹⁰ 628 F. Supp. at 459; see S. REP. NO. 98-593, 98th Cong., 2d Sess., reprinted in [July- Dec.] Antitrust & Trade Regulations Rep. (BNA) No. 1179, at 379 (Aug. 23, 1984) [hereinafter Senate Report].

²¹¹ See Garland, supra note 28, at 495. The Boulder decision was met by a flurry of political and academic criticism stressing its threat to municipal policy making. See H.R. REP. NO. 965, 98th Cong., 2d Sess., reprinted in 1984 U.S. CODE CONG. & ADMIN. NEWS 4602,4608 [hereinafter House Report]; Senate Committee Reviews Options For Legislation In Wake of Boulder, 46 Antitrust & Trade Reg. Rep. (BNA) No. 1162, at 813-14 (Apr. 26, 1984); Civiletti, The Fallout From Community Communications Company v. City of Boulder: Prospect For A Legislative Solution, 32 CATH. U.L. REV. 379 (1983); Lopatka, supra note 38, at 23-25; Note, Community Communications Com pany v. City of Boulder: The Emasculation of Municipal Immunity From Sherman Act Liability, 32 CATH U.L. REV. 413 (1983); Local Governmental Antitrust Liability: The Boulder Decision: Hearing Before The Commission On The Judiciary, 97th Cong., 2d Sess. (1982).

²¹² See Palm Springs Med. Clinic, 628 F. Supp. at 459 & 460 n.4; House Report, supra note 212, at 2.

²¹³ See Palm Springs Med. Clinic, 628 F. Supp. at 460 n.4.

²¹⁴ Id. at 457.

²¹⁵ See Sandcrest Outpatient Serv., P.A. v. Cumberland County Hosp. Sys., 853 F.2d 1139 (CCH) f 68,184 (4th Cir. 1988)(holding in part that a county hospital was immune from antitrust damage actions pursuant to the LGAA because of its status as a local government); Palm Springs Med. Clinic, 628 F. Supp. at 454 (court granted hospital district's motion to dismiss claims for damages, holding that the LGAA provided it with absolute immunity against damages under the antitrust laws, regardless of whether its actions were “official conduct”); Northern Valley Indian Health Clinic v. Indian Valley Hosp., No. S-83-1421 (E.D. Calif. June 13, 1985) (granting motion to strike claims for damages, attorneys’ fees and costs as to hospital district defendants); Everts v. South Lincoln Hosp. Dist., 604 F. Supp. 40 (D. Wyoming 1985)(court viewed the LGAA as giving it discretion to award plaintiff actual, rather than treble damages against hospital district defendant); Lancaster Community Hosp. v. Antelope Valley Hosp. Med. Center, 1988-1 Trade Cas. (CCH) 67,933 (CD. Calif. 1988)(immunizing hospital district from damage claims under the LGAA and reinforcing the Palm Springs Medical Clinic decision); Hatch v. North Colo. Med. Center, 1986-2 Trade Cas. (CCH) 67,268 (D. Colo. 1986)(finding that the acts of a county hospital were the acts of the county and, therefore, immune under the LGAA); Wicker v. Union County Gen. Hosp., 673 F. Supp. 177 (N.D. Miss. 1987) (refusing to immunize a county hospital under the state action doctrine, but limiting plaintiff's remedy to injunctive relief due the applicability of the LGAA to the county hospital).

²¹⁶ 628 F. Supp. 454 (CD. Calif. 1986).

²¹⁷ Id. at 457 n.2; see also Zapata Gulf Marine Corp. v. Puerto Rico Maritime Shipping Auth., 682 F. Supp. 1345, 1350-51 (E.D. Calif. 1988)(citing the rationale from Palm Springs Medical Clinic as support for its holding that a shipping authority was a “local government” under the LGAA).

²¹⁸ Palm Springs Med. Clinic, 628 F. Supp. at 457.

²¹⁹ Id. at 457 n.2 (citing Huron Valley Hosp. v. City of Pontiac, 612 F. Supp. 654, 664-56 (E.D. Miss. 1985)).

²²⁰ Id.; see also Hatch v. North Colo. Med. Center, 1986-2 Trade Cas. (CCH) 67,268, at 61,369 (D. Colo. 1986).

²²¹ Palm Springs Med. Clinic, 628 F. Supp. at 458.

²²² Id. at 458-464. The court pointed out that the House Committee Report accompanying HR 6027 supports the view that the “official capacity” language incorporates a good faith requirement. This report states:

Id. at 458 n.3; cf. Lancaster Community Hosp. v. Antelope Valley Hosp. Auth., 1988-1 Trade Cas, (CCH) 67,933, at 57,733 (CD. Calif. 1988); see also Zapata Gulf Marine Corp. v. Puerto Rico Maritime Shipping Auth., 682 F. Supp. 1345, 350-51 (E.D. La. 1988)(holding that a local government is covered by the LGAA regardless of whether it acted within its lawful regulatory authority. This is derived from the legislative history re: the fact that taxpayers should not be forced to bear the treble damage remedies recoverable from local governments under antitrust law, and on the belief that local governments should not be forced to spend public funds in defending baseless antitrust suits).

²²³ Palm Springs Med. Clinic, 628 F. Supp. at 459.

²²⁴ 673 F. Supp. 177, 186 (N.D. Miss. 1987).

²²⁵ Id.; see also Hillman Flying Serv., Inc. v. City of Roanoke, 652 F. Supp. 1142, 1146 (W.D. Va. 1987)(stating that the “official capacity” requirement should be interpreted in light of Congress’ desire to grant broad immunity from noncriminal acts by local officials); but see Fisichelli v. Town of Methuen, 653 F. Supp. 1494, 1502-03 (D. Mass. 1987)(finding that the LGAA does not preclude recovery of money damages from government officials sued individually and acting in their individual capacities).

²²⁶ 854 F.2d 1139 (4th Cir. 1988).

²²⁷ Id. at 1143.

²²⁸ Id.; see also Montauk-Caribbean Airways, Inc. v. Hope, 784 F.2d 91, 94 (2d Cir. 1986) (holding that sn affirmative grant of explicit authoiity is not required for an employee or governmental official to be acting in an official capacity under the LGAA in light of the legislative intent for the phrase “acting in an official capacity” to be given broad meaning).

²²⁹ Sandcrest, 853 F.2d at 1144.

²³⁰ Id.

²³¹ Id. at 1145.

²³² 15 U.S.C. § 36 (1984).

²³³ Sandcrest, 853 F.2d at 1143.

²³⁴ Id. at 1144; see also City Communications, Inc. v. City of Detroit, 650 F. Supp. 1570 (E.D. Mich. 1987) (applying the Midcal test under an LGAA analysis but refusing to grant summary judgment because genuine issues of material fact existed as to the level and nature of the municipality's supervision). The legislative history of the LGAA indicates:

H.R. CON. NO. 98-1158, 98th Cong., 2d Sess., reprinted in 1984 U.S. CODE CONG. & ADMIN. NEWS 4602, 4627.

²³⁵ Sandcrest, 853 F.2d at 1144.

²³⁶ 108 S. Ct. 1658 (1988).

²³⁷ Sandcrest, 853 F.2d at 1144.

²³⁸ Id.

²³⁹ Id. at 1145.

²⁴⁰ Id.

²⁴¹ Id.