Wichita Area Chamber of Commerce

UNITED SPATES OF A,MERIfA
FEDERAL TRADE CBMMISSiTBN
WASHINGTON, D.C. 20980
May 22, 1 9 9 1
F, TJm W&tsmgsr;rri
Presidrrarae
Wichita Il+ea Ch 	r af Comeree
358 	Vest 	Wuglaa 	Avenue
Wichita, 	Kanaaa 	67202-2970
This %a $m 	zF?liclrpsaaeto your 	rwan+ letter ad&eaa& 	to 	.
R a k e Waltos, BII:@c\;x~~voDlrec$or ~f t h e F 	ral "Ilxade Cam$ssion
(eke wC~mAs8ione], Tour L n ~ f q ,which Is b i n 	at& 	as a
rwest 	for 	lnfonearal advice, 	e q n e a s e s a csnicsm 	e; ~eeminglp
umeeerrrsaq dupddcrsLi~no$ health care semic@sin the Wicklta
and rsirslss t w o general ~ ( a ~ l t i ~ n s 	s g 	t h e	a 	u 	t t h a Z E ) B C ~
antitmr%laws8 	fLraB, 	wh@tlr@%tho ant$tmsB latrrs pzshibit
@ hospitals fmn meeting to collectively allocate @onric@~,
~ i p a a e n t ,or: facilities mong thems(01ve81) %rrd dw~ncll, whather
such moatings would vio2al;r 	t h e sn%ltrurrL lsirrrs 	Lf +hay ware
f n i t i a e d and spnferaired by m srrgamLzaeLgsnr w i t h w i d e comurrity
suppore. 	"Phis m e s p n s e generally ad&eases 	yaur cpueetiowa, 	We
would 	be pleased to provide you wieh additfonal Bnfomal 	advice
aar 	you contl 	ore perrsrlble ways om 	facilftatlnq coat
contaimenf 	me of t h e VicPliLa mrcno heath
c~mmnlrty~ E bm rrradkd CfmLel J, F T L n ) r ~ d i r a i l , a senior attorney
i n s u Health C u e ?J)Ivbslonlto b p r o p ~ ~ d &BBI@IPSS this
matte% 	braxthor w i t h youl 	Me can h reach& 	at 	[2@2) 326-2769,

The principal federal antitrust law applicable to t h e health
ear@ i n d u s & q I# t h e Sheman a t i t m e t A c t , 	'%he Supreme Court
har 	Qescrihsdth@ Shcrmsnr A c t 	as ""acomprehensive c h a e e ~of
economic Liberpty a b d at preeezsoring 	free and unfeetered
c o m p t i t i s n a8 th@ 	r'rrle o b trade. 	It t e s t s 	on the premise that
t h e u n r e s t r a f n d 	i n t e ~ a e t i o nsf csmpetit%va fsrcea w i l l 	yield 	the
best allocation 0%o u economic resources 	. I 	. [T]he 	p l i c y
t is ~ o r n p t i t i o n , ~
356 U,S. 	b, 	2-3 	(L9 	8
ct prohibits egzeemesnts that
m u ~ e a s o n a b l y m	realrain c s r n ~ t f t b o n ~
221 U,S. 	1, 52 	[1911)4 	Agree
d t s r a 	that do nothing -re 	than raise price. 	or rertsfet
output, are preclwptivaly 	u m e a ~ o n d l ea a Llrcdxadsrcr, ax@eraid,to
be 	illegal undar 	the Shemenrr A c t ,
h agreemenl:
-- whether on a
illc;ttglal.undcor the Sheman A c t * 	Such agree~errtshave beera
h so bfiexeratly prcn%cle>usas to b cond~fmedw i e h ~ u t
even an inquiry Lato whethe@ ackualLy a f b w t e d by the@.
175 UIS, 2 x 1 (1899)-
governs pzlvate agrneemenes song hoapltals or obBo(%~g	health care
providers to divide markets* 	For exmple, 	F f 	twe% e s m p l l n g
hospitals were to rrgnee that one would exclurtliwely offer
radiation orrcolom semlces while the oth8r 	ld excluaive%y
~ 1 1 " g e q	S C O ~ ~ C O L I ~ 	wt, without more,	such an bgxe
iklega2, even though the IncJa 	a l s might 	have
hat Lk@ 	81 	ation of tbebt ~ L I P ( L ~ ~	same&
has made c l e a that the
t i t o r s 	to s a s t a t u t e their
judment 	as to what 	Ls q 	t o t conawers, 	for B b t of the
tiolrr can b a v a f d a wham c
c a l l 	ugh a l a g i t W t a 	jhsfne v e n o t ~ o
&he 	eclllp place at zisk 	app11:oprltatcrr crrpLLritl
f~~veserrtglnl:	0s angage nrcl olbal: 	fs 	of eLg&c&eftrcy-e&c~p~(=:&ng
bntegzalbon -- f n oz&@r 	t c o creabt

improve existing products sr semiees, 	A 	joint vanlure, however
does no% automatically paas 	muster under 	t h e arrtitese 	laws;
rather it is s*ject 	to t h e 	"pule o h 	reasonMstandard, whleh
revires 	the weighing of procsmptltive bene%its and
includes an srncilla- 	gr'ovision 	$hat eBb%na+es09: 	l b i t s 	same
aspect of 	commtition mong the camptitors, 	thm venture will 	be
held to b 	"reason&Ie" 	uader the a t i t m a t 	law., 	md thus 	legal,
if i t s overall effwt 	is g r ~ c o r n p t i t i v e ~
The join% pmrcm?iasing 02 	eooplnist%catdmadiean
e x a p l e l 	ma 	a a j e c t to $he mle of 	reaaon, 	Ce
em%ptocrrrntt 	s 	a large capikal outlay a d a hfgh lev@% 	of
utllizaelsn 	r d u c e unie 	costs t o a m % n h u , 	mere .the demand
fay the semicee o b f e r d By auch 	ipmenl in a 	local market 	is
sufeieient only to utilize one ma 	ne 	f~$ly#	ef%icieneiesmay b
achieved and canamer welfare enhanced .&a sb~vernallocal p~owiders
form a joint venrure to purchase 	that	@ and costs oL o p 	on, 	Such a ventur 	uld apwar to have a
procompetltlve p 	se -- it ir 	L n t e n d d to crrc~ateeffieielireies
so that a aemic 	n b offered in tho 	locab mark@& 	that
othemise would 	no+-BeavaLOrrbLe* 	Nonetheless, t s deternine 	t h e
venture" 	sreclsc;m&lenese 	and hence BawLulnessr, 	undel: the
a n t i t m a t 	laws, we wound need to ga fu-hor. 	We would ask
whetiderr: t h e vmntune@rrrestleainrtrsl on the L ~ d o p n 	conduct 	af
its par"cicipmts 	nB1cesraq to achfe'zpa the p
objective. 	The -&cling 	L s that restrain%a	grL~~c&plbe 	a d on
t h e 	joint v e n t w e r r 	ahauld h 	r ~ d t r l ~ t & v ~ c ~ ~g;	na mt@ 	on
ability to compte than A s 	reerssnrsIbly %a.=es@cr~ - *
to b u t h e r : the
procompetitive o b j ~ t L v eof the venture- 	Pat e 	P@# 	an
enturexs to allmate ut&Bi 	on of itha
ipm~nrr:would rs-rn 	rearron&lay 	n w e s a a q to
as 0 6 the wentuee, 	gas%# an
n t u e x a 	to h p a e 	tho r 	chargee 	b a r 	u s e
me appsm eo k =@as 	+O	2 ~ i l m a ~ ~ ~ ~ i i q
are oL the v@nLwQ),Such m apmmrrt,
cil h u l a w F u l , 	mcl depnd&nq ern tho
cim\lmarr%asrccllratcoulcl .ha'cpcrlibte t h e 	joi%ihBv"@neux@ 	g 	the
of 3 ~ ) a ~ a n .
There n r q b marmy o p p f l u n i t i e r s 	for b@alLh 	c 	to	p z ~ ~ i & e x s
joint ventrrre 	Ln =@as 	where B h i L d cm~:dimt%on 	Id h
procompetitive and c o n t r i b u t e 	to cost contai 	rrt, 	shued
aerclriclilrr a d gtoup purrebrsaiag can h appx~pa~:fa+ab 	Lox

joint venearxcsr song or beeween comp$itors, 	my goropraed
agreement 	or h . & ; w e e r a coaptitoms 	to (3Ct jointlyg how eve^,
should be review4 by counse% eqcrrcLelrceQ1in awtitmst maklers 	to
ensure that t h e goals ob the vengute are indeed prsc~mpetftive
and the restraints sought to b h p s d uwn t h e veral=urers are
searsnsrPiy nwe8saw to accomplish t h s a e goal@,
Tibrexa Fa, 	o f 	course, na a n t i t m a t proscription against 	t h e
z of Csmerce, 	or any oehmr cornunity group, encouraging
health cam@ provider8 to dwLd 	ae
restraint w i t h res 	pmenat or
a@x~\pieea	t h a t m a y 	hemore,
%he a n g i t m s t laws do not 	categorically b a eommity
reporesernt(rt%vesfrom exploring with lma2 heal&fa care ggooiders
o p p n ~ a i t i r r sfore p$:ocomptitiv@ jonne; v e r a t ~ a s ~	Yeru 	slrcauld F e e l
c-e 	d i s ~ u a ~ l i o n l ~	fro@ t a r 	errgaga the h@alt%r 	camunity 119 	ovez what
yorr p x e i v e 	to b armeearrrsaq and claetly duplication, 	You
alrould, 	h8wb)vofl 	b aw-8 	that 	the mare 	fact 	that the esmun%&y
b\rrrlness 	leaders s u p p a om pamicipale La ~lnrawcoeaeat aarong
I t h care providers to allocate ressuxcea or @emice@ 	not	w i l l
f 	h o p thfs disduaaion proves h e l p f u l 	to you, 	Please note,
however, 	$hat as psovided 	Ln Rule 	l e 3 of t h e Federal Txade
e o ~ l ~ ~ i o n	mles of Practice, 	the Comirrbalorr i r a i 	wat b u n & by 	th8s
or sther ogflalorrrr xenderd 	the Comirrrabcan" 	staff.
ceo 	Ha- 	Zlou Steptm
2s ce 	g g m # as*
Daniel J, Y&~&%an

THE 	BER
Federal Trade Comisaion
S h t b Street L Pemsylvmfa Avenue PkI
Varhhgton, 	D,C. 	28380
bol a b u e b a r r c o m m i t y wta are concamcad with vbgnt we parcara$o;.et o
eceerasg. duplication o f t e c b s l o g r and resvricer by our
h e i r l a e r r @providers. 	mrd comga(zitAvc8 foream i n the hecrga cape
h d u r t s g crests a pnollferatioa of equipneat a&semlcer e h r t
drbwe up the c o s t of health care, 	In the health cars hdustrg. it
appease that the brlmse between supply m d damlnd ~QII 	mt teach
m a q u i l i b s i w , 	bur that supply create8 decrrmd,
ga hawe talked indLviduslly with our hoepftalr md olher h o a f a
care providers who tell us they are in jeopardy 	plradar tha
a n t i t m s t Iaiirr if they meet coogeratlvely t t o dirscuse a 8 ace OD
duplication o f aam$ces, 	m e y Believe that even 16 a lowar mit
cost could be achieved by agreelag to allocate the purchase of
eeebo l o g y 0s:tba d e l l v a v a$ semlces between difdaraab
h s t i t u t i a n s , 	they are prohibited $ran d o h g a i s by m~itmat
law@.
"$BAS 	raises two wrrtfcns* 	F i r s t , 	do ebts -tiemre 	larr prohibit
boegltals from m e a t h g together to decide how the e o m u f s y eouLd
bast be semcd by volmtargr Iiraits placed on, semicas, 	01adi~a1
equipmeat, 	o r PaclLLtisa2 	Second, 	If arucb msethgs wsmts h i t i a t a d
811d slp~assfcrdby h orgmization with bro66 c o m u i t y
partlclgaefoo., 	r a a e r t h w By health ear@prowldare asmre$vaag
could prmidaar then coma togeeher in tbZa 	to dlrcurr
cooprrsatbw efforsesr to beet@%same csmmltg. acredr?
Ve are aware that 091. 	alternative would be to p r r u e IegfoLativa
remedies but we r i r h t o firre ermIrPa wbeOaar -7 	solutimr are
available t o ur wdrs prersnt law, 	Your prompt sesgcnare t o the
abawa questlone &a appraciated,