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High Court Gives Teeth to Physician Exclusion Cases


Can a Supreme Court ruling on teeth whitening make the case against physician exclusion in narrow networks, exchange plans, etc.? Perhaps.

A Supreme Court dust up involving teeth whitening could have far reaching implications for physicians practices. Understanding why, will require a short introduction. The Sherman Antitrust Act, 15 USC §1 is frequently invoked in healthcare disputes where a physician or group feels they are  being shut out of the chance to compete or participate within in a desired group. The act provides a private cause of action (anyone harmed can sue) when private parties conspire to restrict competition.

The antitrust claim usually goes hand-in-hand with a complaint surrounding the denial of hospital privileges, peer review, or denial of admission into ever-narrowing preferred provider networks. It's also the reason groups of practices (competitors) aren't supposed to discuss rates they are willing to accept from PPO insurance plans; it could be price fixing.             

According to the Federal Trade Commission (FTC), the one thing groups of competitors are really, really not supposed to do, is get together and agree to put the competition out of business; especially if the result will keep prices artificially higher.

The problem is, that's precisely the function of almost any state licensing board - be it the licensing of taxi cabs, plumbers, or the practice of medicine. (Of course it would be cheaper if anyone could do it.) In order to protect the state's interest in protecting the public from "hacks," the U.S. Supreme Court developed an exception called "the Parker immunity doctrine," exempting state activities from Sherman Antitrust liability. In other words, if established businesses want to put upstart competition out of business, get the state to do it. That makes it legal.

The North Carolina State Board of Dental Examiners was understandably shocked, therefore, when the FTC accused it of Sherman Antitrust violations regarding cease and desist letters it issued to 47 teeth-whitening companies. The case eventually reached the U.S. Supreme Court which handed down its decision February 25.

According to the Supreme Court Opinion, teeth whitening is hugely profitable for dental practices, but less so, ifanyone could do it. After dentists complained to the board that "nondentists" were charging lower prices for such services than dentists did, the board issued at least 47 official cease-and-desist letters to nondentist teeth whitening service providers and product manufacturers, often warning that the unlicensed practice of dentistry is a crime. This and other related board actions led nondentists to cease offering teeth whitening services in North Carolina.

The FTC filed an administrative complaint, alleging that the board's concerted action to exclude nondentists from the market for teeth whitening services in North Carolina constituted an anticompetitive and unfair method of competition under the Federal Trade Commission Act.

Bobby White, chief operating officer of The North Carolina State Board of Dental Examiners, is quoted in a TWC News article as saying, "We never had any economic interest in this case whatsoever. In a matter of fact, we encouraged teeth whitening [to] people who were asking, look, go down to the legislature and get an exemption. Get them to say tooth whitening is not the practice of dentistry."

Because most state legislators are not license holders, most state legislative bodies defer to boards composed of licensed healthcare providers to police themselves. According to the FTC, there was not enough "state action" in the board's action, to satisfy Parker immunity. Thus the board could be liable for anti-competitive activities.

The Supreme Court agreed. "Because a controlling number of the board's decisionmakers are active market participants in the occupation the board regulates, the board can invoke state-action antitrust immunity only if it was subject to active supervision by the State, and here that requirement is not met," the court ruled.

This ruling could have far-reaching implications for physicians and groups who feel excluded in one way or another by private, or quasi-government, conduct.  Often, attorneys for private litigants adopt the reasoning behind Supreme Court opinions, by analogy, in order to assert fresh challenges. Because the Sherman Antitrust Act and state versions of the same idea offer private causes of action, the North Carolina dental board case will likely be cited by physicians and physician groups in fresh challenges to mandatory maintenance of certification (MOC) litigation, challenges to the narrow networks in PPO panels (including those offered by the reform law's healthcare exchanges), hospital exclusive provider contracts, credentialing and peer review, among others.

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