Burnham Hospital

--- 	----
ADVISORY OPIMONS
b p o & 	grant of exclusive right to ofler r a d i o l o e 	a t
a hospital would not violate the m\C Ac& [833 CKK)3, Burn-
lram Haspztal j
February 24, 1983
mission would be violated if Bumham, acting pursuant to the eon-
Burnham offers to the public are diagnostic radiology services. The
hospital owns radiology laboratory facilities and employs approxi-
mately 20 radiology technicians. Throughout its history, Burnhano
haa provided radiology eerviceseither through a radiologist employed
You have explained that in 1980 the hospital, aRe
the exclusive right to
oneyear periods and Inay be
notice. The hoepital bills pa-

According Lo your letler, B u d m believes that the contra& is 6n
We hospital" eono~llichteresl and that it hproves the quality of
e~ces	provlided at the hwpieaI. SpecSealIy, the hospital believe
Wat the contract creates wt efficiencies in procuring m&ological
offers no facilities or service not
are not available at Burn-
Antitrust analysisof hospital exclusive contracts can be compliat-
1 f b a r r ~ l h r a c a h a r b a p i t r L i n r h c C h Y o p l i a - U ~ ~ t h . ~ & ~ - t o b . i n . u ~ t i r l ~ ~
with the four meatiooed above.M e W y Memorial H0epit.l hu 31 bed. d L LiRLLted with tbz U n i r d W d
Illinois. H- 	Adler M a u l H 4 t h Contar b 1sm(r-run kmg~armc u e f.eility for childmchildran with & beds.
Mul m t Ch.nu(r Air Fom Bur hu66 ba* but appuaatly L rwt o p ~ ~ 	publc.	
to tbz
cian and the patient, w
court decisions sugges
tient should be consid
cian group the sellers
suggested that the h a
ered the buyer of the
antitmt analysis sh
account the innpa&
patients.
An exclusive cont
petitive and anticon
within the hoepital '
and thereby limitst
cian to chaoee m o l
giete contract in
physicians to enter
eristing group or fi
A contract of re
competition -0%
departnnent, enst
through 8 t a n M
tion of the depart
ties, facilitate nt
support staff end
cians, and Inapm?
perfom enough
incentive to up@
a s t a n w o f "

kDVISORY OPWlONS
cian and the patient, with payment usually made by an insurer Some
murt decisions suggest that in analyzing exclusive contracts the pa-
tient should be considered the buyer and the hospital and the physl-
cian group the sellers of the service in question.2 Another court has
antitnrst analysis should be flexible enough realistically to take into
account the impact of thm contracts on hospitals, physicians, and
ptients.
An exclusive contract for radiology services can Rave both procorn-
petitive and anticompetitive aspects. The contract grants exclusivity
within the hospital to a particular radiologist or group of radiologists
and thereby Limits the ability of the patient and the attendmg physi-
cian to choase among competing radiologists. It may a h , if radiole
gists contract in groups, make it more difficult for individual
It can inrreaee

FEDERAL TRADE COMMISSION DECISIONS 	P
bed, a hospital is better able to c m p e t e with other hospitals. 	sionals. Although radio](
Hospitals must assure that radiology servicesare available as need- 	other 	and facilit;
ed and of acceptable quality if they are to attract attending physicians 	j l ~not a sufficient basis fc
m m d , the function oft]
=tr&t 	represent the
ty to leverage power frt
eompe~tionon the mef
power of the hoepital in question; the purpose of the contract; ite
duration; the manner in which the decision war, made to uee an exclu-
sive arrangement; and the procompetitive benefits of the contract.
T h w courts have not found that the exclusive contracts considered
had significantly anticompetitive effects, and they have found that
the contracts resulted in significant competitive benefita to the hospi-
One recent decision, however, held that an exclueive contnict for
17,1982). The court in
The Cornmiasion is of the opinion that the per se rule of illegality
for tie-insis not applicable to Burnham'scontract with Prairie Pn,fe%- 	COntrdwas intent
radi01ogY d 	e 	w
__C_
7 *n,na.Arnlu=P''bl&
g l 4 Fa lW (3rh (3s. m@,
m @ . w
,,	&,,,.& 	461 US.970 (19
". A'	r a.lJ..
Cir, 	O(. 1W);Krfw'
~ o r p .,,. awmilbd
gas (ED.L..1S6);
BioornrnltDn Ho.pirrJ 422
s & Tampa E k m C O .
4 &,676 'Fa
to 	& l r n i:-nlc

ADVISORY OPINIONS
sionals. Although radiology services are physidly separable from
other services and facilities supplied by Burnham, mere separability
is not a sufficient basis for characterizing an arrangement as a tie-in.
Instead, the function ofthe aggregation must be examined to see if the
restraint represents the forced purchase of a m o n d distinct commodi-
ty to leverage power from one market to another in order to avoid
of quality and service in its radiology department, according to the
submission. Using a form of vertical integration to combine function-
ally related services, the hospiLal is apparently seeking to bprove the
m a y of health care services that it offers to the public. Moreover, the
~ a a elaw indicates that no tie-in should be found to exist where, as
here, the hospital derives no direct or exploitative frnancial benefit
from requiring that all diagnostic radiology services in the hospital be
provided by a particular group of physicians.8 In short, the contract
is not the type of pernicious, naked restraint of trade to which the per
arrangement, Lhat should be judged under the rule of
and among hospitals are on bal-
relevant to the analysis include
volved in the contract, the pu
Based on the information available to the ammission, it does not
"appear on balance that Burnham's adherence to its contract with
Prairie Professionals would violate the Federal Trade &mission
Act or any other law enforced by the Commission. You report that the
contract was intended to, and does, facilitate emcient operation of the
radiology department. The Commission understands that the decision
'Sa Zlma.AmJvru Publuhinp Co u UnrtedStoteaS45 U S Wg(.	614 (1W);Himh u. Mart2ndak-Hubkll, I K .
@?4 P2d 1SJ3 (9thCu 19621.an d e n 4 51 U S . L W $340 NS Nov 1, 1982)(No.826701;K n h l u. &urC~n-
Jtobbirula Cham Ca.6& F.2d 1348 (9thCu 1982).h m p e L'. MdbnaLII C o w 681 F.2d 903 (4thCir. 10801,
an & n i d (dl U S mo (1961)
* Scc, el.. B a i d v l r r u. A N ~ MS&& &n&I Anh. 880 F3d 66 (19821,1982-2 Trade Cu 	1 64.812(9th
Cir.M M h U ,1962).Keener u S l u k r Family Steak H o w s W7 F.2d 4S3 (5thCu.1879).Kentucky Rud Churtrn
Cbrp, u. ihuniFd h h a g ~ n gCarp.. M 9 F.2d 368 (5thCu 1977);R o d n q w u. C h y r k r Motor Corp.. 421 FSupp
R19 CE.D L. 1976).Cmwford honrporr Co.. Inc u C h y k r Corp.. 3.98 F.2d B.94 (6th Cu 1964).Rumple L
Blmmrngton Hapi&l, 422 N.E ?A 1909 and App 1961)
* Sn T a m p ELerm Co u Nrvhurlb Cool On. 306 U S 320 (1861).7'wxn Qty Sportrrvrn Inc. u Charla 0
A n & h Ca.676 F2d 1291 (9thCu 1982). an & n v d 51 US.LW 3354 W o v . 8,1982)
* Sn Eeltone E k r o n l o Corp., PPC Daka 8928, .Lp op at 34 [I00FT C 68 at #W] (July 6,1982)

996 	FEDERAL TRADE COMMISSION DECISIONS
to enter into the contract, and thus to deny radiology privileges to
other physicians, was made unilaterally in the interest of the hospl-
tal,and was neither coerced by members of the medical staff nor
taken in furtherance of a combination between the hoaspital and the
medical st& 	or any of its members to restrain competition among
physicians. B u r n h m compe(eij with at least thrw other hospitals,
and does not occupy a dominant mition in the market. It k not s
unique facility. Tlhe contract hsr~an h i t i d Cem of three yeam vi.itk
one-year extensions thereaRer, and is terninable on ltlOdays notice
by either party. Thus, opportunities for competition among radiology
groups to secure the contract are preserved, and there is evidence that
some competition for contracts does occur. In addition, radiology can
cticed to a t least sorne extent on an outpatient basis, and Cham-
-Urbana radiologists apparently have sorne a c m to hospitals
surrounding area. In addition, there is no reason to believe that
effectuation of the contract would result in higher prices for radiology
services. Based on these factors, it appears that the contract does not
unreasonably restrict competition among radiologists and that it may
facilitate competition among hospitals.
Based on its understanding of the facts sunoundrng the decision to
enter into the exclusive contract and the planned denial to other
applicants of the right to practice radiology in the hospital, punsuant
to that contract, as those facts are outlined above and further d
in your submission, it is the &mission's 	opinion that Bu
Hospital's adherence to its grant 	Professionals of the exclu-
sive right to offer radiology senti 	hospital would not violate
the Federal Trade Conomission Act or any other statute enforced by
the &mmission.ll
This advisory opinion, like all those issued by the Connmission, is
limited to the proposed condu 	in the petition being consid-
ered. Because by necessity it 	factual representations by
the hoepital, it does not constitute approval of action taken by the
hospital on any specific application for privileges that may become
the subject of litigation before the Commission or any court,when
those facts may be controverted. The conclusions stated in this letter
are based on the Commission's understanding of present market con-
ditions in the Champaign-Urbana area and in the health care field
generally. The Commission retains the right to reconsider the ques-
tions involved or to rescind or revoke its opinion if the public interest
so requires in accordance with Section 1.3(b)of the Rules of Practice.
By direction of the Commission.
I ' By mponihg to Burnham'?m q u a t for ra a d w r y opmon m n a m g the dwnbed fa* 	the Cornmuroo
aka no poaoon on the p+arace or sbaence of any or IU oftbe ~undrcormlp r r w m to a Lv anio-1
p r o c s e d u y l u a d . I ~ o a 6 o f t b c F P C A c t 1 6 U S C(5
ADV
Le
Mr. Thorn-:
1aw i t k g on behalf of E
a b o i s , for an 	ad*^
entitled to 	it
render radiological *rviees 	'
the Hospital has exc
vices.
~ ~ ~ h a z n	Hoepid is a F
provides
laborato
vided radiology services
employed by the Wm~ital,0
contract to the Hoepital.
~n April 9,1980, the HOf
of radiolOgie& practicing
that gives that P U P Woe
laboratory and
the ~ ~ p i t a l ' s	facilities. T
~n,f-iona]s 	include P 	~ 	V
vising and disc
Woapital;
merit of equipment; and P
t i ~ t i mat 	the 	Hospital
technic-. 	In addition, P
gist who serves a@ch
responsible for oP'atin43
W w P i ~to control that di
tienb for use of its radio
sublonits its own bill to the
on a fee-for-service basis. "
may be renewed the
at any time by either Tu
Agreement between Burr
attached.'
physicians in Prairie Pi
a large multi-epecidt~P
.N~~ rrp&ucsd herem Cop1- 	* 'B& 	~dsnlm d e rhn-=on3 (Ith '

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E CX)MMISSION DEeZSIONS
linois. Non-radiologists practicing as members of Christie Clinic also 	I
hold privileges at Burnham Hospital. By a separate contract, which
preceded and is unrelated to the exclusive contract that is pertinent
to this request, Christie Clinic has installed a full body CT scanner the
Clinic owns a t Burnham Hospital. Wlrsuant to that separa
ment, ehristie ainic receives a percenLage of revenuw a 	& 	~
to use of the GT scanner, and limits the physicians who may
CT scanner to certain specified radiologists and neurologists.
The Hospital believes that the exclusive contrgct with Prairie
Pmfe88ionals is in the Hospital's economic interest, and that it irn-
proves the quality of services provided at the Hospital. S p e c i f ~ d y ,
the contract creates cost efficienciesin procuring radiological services
for its patients, operating and maintaining its equipment, and super-
vising its radiology technicians.
A fomer employee of Prairie h f e s s i o n b has requested that the
Hospital pemit hins to use the Hospital" 	quipment and render
radiologid sewices ta in-patients, notwiths-ding 	the Hwpita19g
exclusive agreement with the phpician group. The physician with-
drew from practice and resigned from Prairie Professionals due to
disability. He retains privileges a t Burnharn Hospital and recently
sought permission from the Hospital to rea&ivate his practice. The
Hospital would like to adhere to its exclusive mntract with the physi-
cian group and deny this physician access to its radiological facilities
for that reason.
In addition to Burnharn Hospital, three other general, ac
hospitals serve the same area (Champaign-Urbana, Illino
Force base of that name, has 55 beds). Without considering these
hospitals that serve specific patient populations, Burnham Hospital
has about 26 percent of the hospital beds in the relevant geographic
Burnhm offers no facilities or services not available at one or more
of the other area hospitals. Both Carle Foundation Hospital and Burn-
ham Hospital have full body GT scanners (the one at Burnham being
owned by Christie Clinic, rather than the Hospital). Both Carle Foun-
dation Hospital and Mercy Hospital offer therapeutic radiological
services that are not available at Burnham Hospital. Mercy Hospital
and Gole Hospital are believed to have exclusive contracts for radiolo-
I