Remarks of Deputy Attorney General Eric H. Holder, Jr.
Annual Meeting of the Medical Society of the District of Columbia
Wyndham City Center Hotel, Washington, DC
November 8, 1999

I would like to thank you for the invitation to the speak to the Annual Meeting of the Medical Society of the District of Columbia. As a long-time resident of the District - and, more importantly, as the husband of a practicing physician - I appreciate the work that the Medical Society is doing to improve the quality of health care in the District.

Today, I would like to touch upon the Department's responsibility for promoting vigorous competition in the health care marketplace through our enforcement of the federal antitrust laws and on the Administration's initiatives to address some serious flaws in the current health care system.

For over a century, the United States has committed itself to protecting competition in the U.S. economy. Free-market competition is the engine that has made the American economy the envy of the world. In general, the United States operates a free-market economy that allows free and unfettered competition -- competition that is promoted and fostered through enforcement of federal antitrust laws. Time and again, relying on free-market competition has allowed consumers numerous benefits, including more innovation, more choice and lower prices than in markets where competition is limited.

In particular, our nation's economic vitality depends upon the competitive structure of the health care industry. In 1997 -- the latest year for which data are available -- annual revenues of health care professionals covered by the Sherman Act ranged between $300-400 billion, about 4-5% of the GDP.

As in other markets, the goal for health care markets should be to ensure that consumers benefit from a competitive marketplace where neither the buyers nor sellers unlawfully exercise market power. Policy should focus on ensuring that there is a competitive marketplace where neither health insurance plans nor health care professionals are able to obtain or exercise market power to distort the competitive outcome. Any other result inevitably will lead to governmental regulation of the health care market -- an outcome that is not likely to produce desirable results for consumers. We have learned this lesson over time from other industries, and we should be sure we continue to apply it to health care markets as well. The injection of competition into health care markets over the past decade has helped hold down increases in health care costs.

Under the so-called "labor exemption" to the federal antitrust laws, physicians who are employed by health care organizations can organize and form a union, which, among other things, could engage in collective bargaining with employers without antitrust scrutiny. The AMA and some state medical societies are seriously pursuing this option. The Department, as an enforcement agency, hasn't taken a position on this issue, which is really an issue that physicians and other health care professionals who are employees of health care companies must decide on their own.

However, federal law prohibits individuals who are self employed, are partners in professional corporations, or otherwise independent contractors to engage in anticompetitive behavior, such as engaging in boycotts or setting minimum fee schedules. For example, the antitrust laws prohibit the D.C. Bar from establishing minimum fees for lawyers in the District of Columbia and boycotting firms that might refuse to pay such fees. Similarly, physicians and other self-employed individuals are barred from engaging in anti-competitive behavior.

We think the better approach is to address issues raised by managed care directly - through tough and effective managed care reform legislation.

I understand there are many health care professionals who are frustrated by the changes they are seeing in the health care system. In the past, treatment decisions were made by doctors seeking the best possible treatment for their patients. Today, doctors feel challenged by people who are less interested in the patient health than they are in the bottom line. I also understand many health care professionals feel we should address these problems by giving health care professionals a unique exemption from the federal antitrust laws. The theory is that doctors could band together to seek changes in the behavior of managed care companies. We have serious reservations about this approach, because it could lead to anti-competitive behavior that drives up costs, decreases patient choice, and stifles innovation.

The better approach, we believe, is to address the problems in the managed care system directly, through tough and effective managed care reform legislation. We recognize that there are fundamental flaws in the managed care system. Too often, decisions about the medical needs of patients are made by business executives rather than health care professionals. Too often the promise of high-quality care is subverted to the bottom line. And too often, managed care companies are able to escape accountability for their decisions because federal law(1) preempts traditional state tort laws.

That's why President Clinton has called on Congress to pass a comprehensive Patient Bill of Rights. If enacted, this legislation would restore an appropriate balance in the system - most importantly, by ensuring that patients have access to fundamental medical services and by putting physicians and other health care professionals back in the position to exercise their professional judgment about what's in the interest of their patients. Specifically, the President has called for legislation that would:

This latter point is particularly important. If managed care plans are making decisions about the medical necessity of treatment for particular individuals, and such decisions are negligent and result in patient harm, patients should be able to file a lawsuit against the managed care plan to hold them accountable for their decisions - just as physicians and other health care professionals are held accountable for their decisions.

In addition, physicians and other health care professionals have a long and proud tradition of serving as advocates for their patients. The Department of Justice has made clear that such concerted advocacy does not violate federal antitrust laws.(2) For example, the American College of Physicians-American Society of Internal Medicine and 21 other physician groups recently wrote letters to national managed care organizations urging them not to adopt mandatory hospitalist programs, that is, programs requiring primary-care physicians to turn over care of their patients to hospital-based physicians when a patient needs hospital care. In response, the health plans clarified that their hospitalist programs were voluntary.

We believe this is a much more sensible approach to the problems in the managed care system than amending federal antitrust laws, which would promote serious anti-competitive consequences and, in turn, would harm patients and consumers.

In conclusion, I want to emphasize that the Department is committed to the rigorous enforcement of federal antitrust laws in order to promote competition in the health care marketplace. A competitive health care marketplace will keep costs down, increase consumer choice, and foster innovation.

At the same time, we recognize the flaws in the current managed care system, and we strongly support the President's call for Congress to enact comprehensive managed care reform legislation. In our view, direct managed care reform efforts will be the most effective way to improve quality of care.

1. The Employee Retirement Income Security Act, ERISA, preempts state tort laws and bars lawsuits by patients against certain health benefit plans.

2. See, e.g., United States Department of Justice and Federal Trade Commission, Statements of Antitrust Enforcement Policy in Health Care, issued August 28, l996, 4 Trade Reg. Rep. (CCH) 13,153, at Statement 4 ("Providers' Collective Provision of Non-Fee-Related Information to Purchasers of Health Care Services") and Statement 5 ("Providers' Collective Provision of Fee-Related Information to Purchasers of Health Care Services").