Court Opinion

ID: 9428828
Source: CourtListenerOpinion
Date Created: 2023-08-02 23:24:55.310635+00
Date Added: 2024-06-11T17:23:15.461759
License: Public Domain

Justice Powell,
with whom The Chief Justice and Justice Rehnquist join, dissenting.
The medical care plan condemned by the Court today is a comparatively new method of providing insured medical services at predetermined maximum costs. It involves no coercion. Medical insurance companies, physicians, and patients alike are free to participate or not as they choose. On its face, the plan seems to be in the public interest.
The State of Arizona challenged the plan on a per se antitrust theory. The District Court denied the State’s summary judgment motion, and — because of the novelty of the issue — certified the question of per se liability for an interlocutory appeal. On summary judgment, the record and all inferences therefrom must be viewed in the light most favorable to the respondents. Nevertheless, rather than identifying clearly the controlling principles and remanding for decision on a completed record, this Court makes its own per se judgment of invalidity. The respondents’ contention that *358the “consumers” of medical services are benefited substantially by the plan is given short shrift. The Court concedes that “the parties conducted [only] a limited amount of pretrial discovery,” ante, at 336, leaving undeveloped facts critical to an informed decision of this case. I do not think today’s decision on an incomplete record is consistent with proper judicial resolution of an issue of this complexity, novelty, and importance to the public. I therefore dissent.
t-M
The Maricopa and Pima Foundations for Medical Care are professional associations of physicians organized by the medical societies in their respective counties.1 The foundations were established to make available a type of prepaid medical insurance plan, aspects of which are the target of this litigation. Under the plan, the foundations insure no risks themselves. Rather, their key function is to secure agreement among their member physicians to a maximum-price schedule for specific medical services. Once a fee schedule has been agreed upon following a process of consultation and balloting, the foundations invite private insurance companies to participate by offering medical insurance policies based upon the maximum-fee schedule.2 The insurers agree to offer com-*359píete reimbursement to their insureds for the full amount of their medical bills — so long as these bills do not exceed the maximum-fee schedule.
An insured under a foundation-sponsored plan is free to go to any physician. The physician then bills the foundation directly for services performed.3 If the insured has chosen a physician who is not a foundation member and the bill exceeds the foundation maximum-fee schedule, the insured is liable for the excess. If the billing physician is a foundation member, the foundation disallows the excess pursuant to the agreement each physician executed upon joining the foundation.4 Thus, the plan offers complete coverage of medical expenses but still permits an insured to choose any physician.
I-H
This case comes to us on a plaintiff’s motion for summary judgment after only limited discovery. Therefore, as noted above, the inferences to be drawn from the record must be viewed in the light most favorable to the respondents. United States v. Diebold, Inc., 369 U. S. 654, 655 (1962). *360This requires, as the Court acknowledges, that we consider the foundation arrangement as one that “impose[s] a meaningful limit on physicians’ charges,” that “enables the insurance carriers to limit and to calculate more efficiently the risks they underwrite,” and that “therefore serves as an effective cost containment mechanism that has saved patients and insurers millions of dollars.” Ante, at 342. The question is whether we should condemn this arrangement forthwith under the Sherman Act, a law designed to benefit consumers.
Several other aspects of the record are of key significance but are not stressed by the Court. First, the foundation arrangement forecloses no competition. Unlike the classic cartel agreement, the foundation plan does not instruct potential competitors: “Deal with consumers on the following terms and no others.” Rather, physicians who participate in the foundation plan are free both to associate with other medical insurance plans — at any fee level, high or low — and directly to serve uninsured patients — at any fee level, high or low. Similarly, insurers that participate in the foundation plan also remain at liberty to do business outside the plan with any physician — foundation member or not — at any fee level. Nor are physicians locked into a plan for more than one year’s membership. See n. 1, supra. Thus freedom to compete, as well as freedom to withdraw, is preserved. The Court cites no case in which a remotely comparable plan or agreement is condemned on a per se basis.
Second, on this record we must find that insurers represent consumer interests. Normally consumers search for high quality at low prices. But once a consumer is insured5 — i. e., has chosen a medical insurance plan — he is *361largely indifferent to the amount that his physician charges if the coverage is full, as under the foundation-sponsored plan.
The insurer, however, is not indifferent. To keep insurance premiums at a competitive level and to remain profitable, insurers — including those who have contracts with the foundations — step into the consumer’s shoes with his incentive to contain medical costs. Indeed, insurers may be the only parties who have the effective power to restrain medical costs, given the difficulty that patients experience in comparing price and quality for a professional service such as medical care.
On the record before us, there is no evidence of opposition to the foundation plan by insurance companies — or, for that matter, by members of the public. Rather seven insurers willingly have chosen to contract out to the foundations the task of developing maximum-fee schedules.6 Again, on the record before us, we must infer that the foundation plan— open as it is to insurers, physicians, and the public — has in fact benefited consumers by “enabling] the insurance carriers to limit and to calculate more efficiently the risks they underwrite.” Ante, at 342. Nevertheless, even though the case is here on an incomplete summary judgment record, the Court conclusively draws contrary inferences to support its per se judgment.
Ill
It is settled law that once an arrangement has been labeled as “price fixing” it is to be condemned per se. . But it is equally well settled that this characterization is not to be ap*362plied as a talisman to every arrangement that involves a literal fixing of prices. Many lawful contracts, mergers, and partnerships fix prices. But our cases require a more discerning approach. The inquiry in an antitrust case is not simply one of “determining whether two or more potential competitors have literally ‘fixed’ a ‘price.’ . . . [Rather], it is necessary to characterize the challenged conduct as falling within or without that category of behavior to which we apply the label ‘per se price fixing.’ That will often, but not always, be a simple matter.” Broadcast Music, Inc. v. Columbia Broadcasting System, Inc., 441 U. S. 1, 9 (1979).
Before characterizing an arrangement as a per se price-fixing agreement meriting condemnation, a court should determine whether it is a “ ‘naked restraint] of trade with no purpose except stifling of competition.’” United States v. Topco Associates, Inc., 405 U. S. 596, 608 (1972), quoting White Motor Co. v. United States, 372 U. S. 253, 263 (1963). See also Continental T. V., Inc. v. GTE Sylvania Inc., 433 U. S. 36, 49-50 (1977). Such a determination is necessary because “departure from the rule-of-reason standard must be based upon demonstrable economic effect rather than . . . upon formalistic line drawing.” Id., at 58-59. As part of this inquiry, a court must determine whether the procom-petitive economies that the arrangement purportedly makes possible are substantial and realizable in the absence of such an agreement.
For example, in National Society of Professional Engineers v. United States, 435 U. S. 679 (1978), we held unlawful as a per se violation an engineering association’s canon of ethics that prohibited competitive bidding by its members. After the parties had “compiled a voluminous discovery and trial record,” id., at 685, we carefully considered — rather than rejected out of hand — the engineers’ “affirmative defense” of their agreement: that competitive bidding would tempt engineers to do inferior work that would threaten pub-*363lie health and safety. Id., at 693. We refused to accept this defense because its merits “confirmed] rather than refiit[ed] the anticompetitive purpose and effect of [the] agreement.” Ibid. The analysis incident to the “price fixing” characterization found no substantial procompetitive efficiencies. See also Catalano, Inc. v. Target Sales, Inc., 446 U. S. 643, 646, n. 8, and 649-650 (1980) (challenged arrangement condemned because it lacked “a procompetitive justification” and had “no apparent potentially redeeming value”).
In Broadcast Music, Inc. v. Columbia Broadcasting System, Inc., supra, there was minimum price fixing in the most “literal sense.” Id., at 8. We nevertheless agreed, unanimously,7 that an arrangement by which copyright clearinghouses sold performance rights to their entire libraries on a blanket rather than individual basis did not warrant condemnation on a per se basis. Individual licensing would have allowed competition between copyright owners. But we reasoned that licensing on a blanket basis yielded substantial efficiencies that otherwise could not be realized. See id., at 20-21. Indeed, the blanket license was itself “to some extent, a different product.” Id., at 22.8
In sum, the fact that a foundation-sponsored health insurance plan literally involves the setting of ceiling prices among competing physicians does not, of itself, justify condemning the plan as per se illegal. Only if it is clear from the record that the agreement among physicians is “so plainly *364anticompetitive that no elaborate study of [its effects] is needed to establish [its] illegality” may a court properly make a per se judgment. National Society of Professional Engineers v. United States, supra, at 692. And, as our cases demonstrate, the per se label should not be assigned without carefully considering substantial benefits and procompetitive justifications. This is especially true when the agreement under attack is novel, as in this case. See Broadcast Music, supra, at 9-10; United States v. Topco Associates, Inc., supra, at 607-608 (“It is only after considerable experience with certain business relationships that courts classify them as per se violations”).
IV
The Court acknowledges that the per se ban against price fixing is not to be invoked every time potential competitors literally fix prices. Ante, at 355-357. One also would have expected it to acknowledge that per se characterization is inappropriate if the challenged agreement or plan achieves for the public procompetitive benefits that otherwise are not attainable. The Court does not do this. And neither does it provide alternative criteria by which the per se characterization is to be determined. It is content simply to brand this type of plan as “price fixing” and describe the agreement in Broadcast Music — which also literally involved the fixing of prices — as “fundamentally different.” Ante, at 356.
In fact, however, the two agreements are similar in important respects. Each involved competitors and resulted in cooperative pricing.9 Each arrangement also was prompted *365by the need for better service to the consumers.10 And each arrangement apparently makes possible a new product by reaping otherwise unattainable efficiencies.11 The Court’s effort to distinguish Broadcast Music thus is unconvincing.12
*366The Court, in defending its holding, also suggests that “respondents’ arguments against application of the per se rule . . . are better directed to the Legislature.” Ante, at 354-355. This is curious advice. The Sherman Act does not mention per se rules. And it was not Congress that decided Broadcast Music and the other relevant cases. Since the enactment of the Sherman Act in 1890, it has been the duty of courts to interpret and apply its general mandate — and to do so for the benefit of consumers.
As in Broadcast Music, the plaintiff here has not yet discharged its burden of proving that respondents have entered a plainly anticompetitive combination without a substantial and procompetitive efficiency justification. In my view, the District Court therefore correctly refused to grant the State’s motion for summary judgment.13 This critical and disputed issue of fact remains unresolved. See Fed. Rule Civ. Proc. 56(c).
*367V
I believe the Court’s action today loses sight of the basic purposes of the Sherman Act. As we have noted, the antitrust laws are a “consumer welfare prescription.” Reiter v. Sonotone Corp., 442 U. S. 330, 343 (1979). In its rush to condemn a novel plan about which it knows very little, the Court suggests that this end is achieved only by invalidating activities that may have some potential for harm. But the little that the record does show about the effect of the plan suggests that it is a means of providing medical services that in fact benefits rather than injures persons who need them.
In a complex economy, complex economic arrangements are commonplace. It is unwise for the Court, in a case as novel and important as this one, to make a final judgment in the absence of a complete record and where mandatory inferences create critical issues of fact.

 The Pima Foundation is open to any Pima County area physician licensed in Arizona. It has a renewable 5-year membership term. A voluntary resignation provision permits earlier exit on the January 1 following announcement of an intent to resign.
The Maricopa Foundation admits physicians who are members of their county medical society. The Maricopa Foundation has a renewable 1-year term of membership. Initial membership may be for a term of less than a year so that a uniform annual termination date for all members can be maintained.
The medical societies are professional associations of physicians practicing in the particular county. The Pima County Medical Society, but not the Pima Foundation, has been dismissed from the case pursuant to a consent decree.

 Three private carriers underwrite various Pima Foundation-sponsored plans: Arizona Blue Cross-Blue Shield, Pacific Mutual Life Insurance Co'., *359and Connecticut General Life Insurance Co. The latter two companies also underwrite plans for the Maricopa Foundation, as do five other private insurance companies. Apparently large employers, such as the State of Arizona and Motorola, also act as foundation-approved insurers with respect to their employees’ insurance plans.

 The foundations act as the insurance companies’ claims agents on a contract basis. They administer the claims and, to some extent, review the medical necessity and propriety of the treatment for which a claim is entered. The foundations charge insurers a fee for their various services. In recent years, this fee has been set at 4% of the insurers’ premiums.

 This agreement provides in part that the physician agrees “to be bound . . . with respect to maximum fees ... by any fee determination by the [foundation consistent with the schedule adopted by the [foundation physician] membership .. . .” App. 31-32. The agreement also provides that foundation members “understand and agree that participating membership in the [foundation shall not affect the method of computation or amount of fees billed by me with respect to any medical care for any patient.” Ibid.

 At least seven insurance companies are competing in the relevant market. See n. 2, supra. At this stage of the case we must infer that they are competing vigorously and successfully.
The term “consumer” — commonly used in antitrust cases and literature — is used herein to mean persons who need or may need medical services from a physician.

 The State introduced no evidence on its summary judgment motion supporting its apparent view that insurers effectively can perform this function themselves, without physician participation. It is clear, however, that price and quality of professional services — unlike commercial products — are difficult to compare. Cf. Bates v. State Bar of Arizona, 433 U. S. 350, 391-395 (1977) (opinion of Powell, J.). This is particularly true of medical service. Presumably this is a reason participating insurers wish to utilize the foundations’ services.

 See Broadcast Music, Inc. v. Columbia, Broadcasting System, Inc., 441 U. S., at 25 (Stevens, J., dissenting in part) (“The Court holds that ASCAP’s blanket license is not a species of price fixing categorically forbidden by the Sherman Act. I agree with that holding”).

 Cf. Continental T. V., Inc. v. GTE Sylvania Inc., 433 U. S. 36, 54 (1977) (identifying achievement of efficiencies as “redeeming virtue” in decision sustaining an agreement against per se challenge); L. Sullivan, Law of Antitrust § 74, p. 200 (1977) (per se characterization inappropriate if price agreement achieves great economies of scale and thereby improves economic performance); id., §66, p. 180 (higher burden might reasonably be placed on plaintiff where agreement may involve efficiencies).

 In this case the physicians in effect vote on foundation maximum-fee schedules. In Broadcast Music, the copyright owners aggregated their copyrights into a group package, sold rights to the package at a group price, and distributed the proceeds among themselves according to an agreed-upon formula. See Columbia Broadcasting System, Inc. v. American Society of Composers, Authors and Publishers, 562 F. 2d 130, 135-136 (CA2 1977).

 In this case, the foundations’ maximum-fee schedules attempt to rectify the inflationary consequence of patients’ indifference to the size of physicians’ bills and insurers’ commitment to reimburse whatever “usual, customary, and reasonable” charges physicians may submit. In Broadcast Music, the market defect inhered in the fact that “those who performed copyrighted music for profit were so numerous and widespread, and most performances so fleeting, that as a practical matter it was impossible for the many individual copyright owners to negotiate with and license the users and to detect unauthorized uses.” 441 U. S., at 4-5.

 In this case, the record before us indicates that insurers — those best situated to decide and best motivated to inspire trust in their judgment— believe that the foundations are the most efficient providers of the maximum-fee scheduling service. In Broadcast Music, we found that the blanket copyright clearinghouse system “reduce[d] costs absolutely . . . .” Id., at 21.

 The Court states that in Broadcast Music “there was little competition among individual composers for their separate compositions.” Ante, at 355. This is an irrational ground for distinction. Competition could have existed, 441 U. S., at 6; see also 562 F. 2d, at 134-135, 138, but did not because of the cooperative agreement. That competition yet persists among physicians is not a sensible reason to invalidate their agreement while refusing similarly to condemn the Broadcast Music agreements that were completely effective in eliminating competition.
The Court also offers as a distinction that the foundations do not permit the creation of “any different product.” Ante, at 356. But the foundations provide a “different product” to precisely the same extent as did Broadcast Music’s clearinghouses. The clearinghouses provided only what copyright holders offered as individual sellers — the rights to use individual compositions. The clearinghouses were able to obtain these same rights more efficiently, however, because they eliminated the need to engage in individual bargaining with each individual copyright owner. See 441 U. S., at 21-22.
In the same manner, the foundations set up an innovative means to deliver a basic service — insured medical care from a wide range of physicians of one’s choice — in a more economical manner. The foundations’ maximum-fee schedules replace the weak cost containment incentives in typical *366“usual, customary, and reasonable” insurance agreements with a stronger cost control mechanism: an absolute ceiling on maximum fees that can be charged. The conduct of the insurers in this case indicates that they believe that the foundation plan as it presently exists is the most efficient means of developing and administering such schedules. At this stage in the litigation, therefore, we must agree that the foundation plan permits the more economical delivery of the basic insurance service — “to some extent, a different product.” Broadcast Music, 441 U. S., at 22.

 Medical services differ from the typical service or commercial product at issue in an antitrust case. The services of physicians, rendered on a patient-by-patient basis, rarely can be compared by the recipient. A person requiring medical service or advice has no ready way of comparing physicians or of “shopping” for quality medical service at a lesser price. Primarily for this reason, the foundations — operating the plan at issue— perform a function that neither physicians nor prospective patients can perform individually. On a collective — and average — basis, the physicians themselves express a willingness to render certain identifiable services for not more than specified fees, leaving patients free to choose the physician. We thus have a case in which we derive little guidance from the conventional “perfect market” analysis of antitrust law. I would give greater weight than the Court to the uniqueness of medical services, and certainly would not invalidate on a per se basis a plan that may in fact perform a uniquely useful service.
*367Affirmance of the District Court's holding would not have immunized the medical service plan at issue. Nor would it have foreclosed an eventual conclusion on remand that the arrangement should be deemed per se invalid. And if the District Court had found that petitioner had failed to establish a per se violation of the Sherman Act, the question would have remained whether the plan comports with the rule of reason. See, e. g., United States v. United States Gypsum Co., 438 U. S. 422, 441, n. 16 (1978).