Justice Dept. Warns AMA on Price-Fixing Violations

The Justice Department’s antitrust chief warned the medical profession Tuesday that doctors and dentists are under investigation by federal grand juries in three cities for possible price-fixing and that violators face up to three years in prison if convicted.

In the first such public warning, Assistant Atty. Gen. Charles F. Rule told a Dallas meeting of the American Medical Assn.’s house of delegates: “We are on the lookout for other possible violations that merit criminal investigation.”

A Justice Department spokesman in Washington, where Rule’s speech was distributed, said that a federal grand jury is investigating alleged price-fixing by allergists in Boston, another is looking at dentists in Tucson and the third is examining allegations of similar conduct by obstetricians in Savannah, Ga.

The spokesman, Mark Sheehan, declined to provide any other specifics about the inquiries. However, Rule said in his remarks: “We have heard about doctors organizing to block new (health) delivery systems not by lobbying the government, but by agreeing to withhold their services or to boycott doctors who do agree to provide their services.”

Rule also cited “allegations that groups of independent doctors, while in the process of negotiating with preferred provider organizations (PPOs), meet secretly to agree to a minimum price or to other terms that they will insist upon when they discuss their participation in the PPO.

“Even when they are not negotiating with new PPOs or health maintenance organizations, we have heard allegations that some doctors agree to allocate patients among themselves on the basis of the patient’s residence or some other criteria,” Rule said.

He cautioned the doctors not to confuse the “greater sensitivity and rationality” that he said characterize current antitrust enforcement with an “anything goes” policy.

“Naked” agreements to fix prices, allocate territories or boycott competing health-care providers are unlawful regardless of their purpose and effect, Rule said. “It makes no difference whether the enriched doctors line their pockets with these profits or use them to increase the quality of care.”

“Competition and the market discipline it generates are simply the last best hope to slow sky-rocketing health-care costs that endanger the prospects for universal health care and threaten to hemorrhage the federal deficit,” Rule said.

Under antitrust law, convicted violators can be sent to prison for as long as three years and fined up to $250,000 for each violation, he noted, and the new sentencing guidelines now in effect require courts to put antitrust violators behind bars for at least four months.

Citing the devastation to families, careers and community standing that he said results from the stigma attached to convicted felons, Rule added: “The consequences are even more severe when violators try to cover up their deeds, lie to investigators, or otherwise obstruct our investigations.”

Politely Received

Rule’s speech was politely received by the nearly 1,000 attending the AMA meeting in Dallas, but Dr. George Alexander of Houston drew near-unanimous applause when he went to the microphone as the session ended to call Rule’s speech an “offensive attempt to bolster the legal profession.”

“I’ve been handled pretty roughly by some Texas policemen from time to time,” said Alexander, former head of the Texas Medical Assn., “but I’ve never been so intimidated as I have been from this gentleman this morning.”

According to wire service reports, Alexander accused Rule of threatening the AMA and providing no useful advice.

In his speech, Rule offered the doctors rules to live by to avoid criminal prosecution, which include:

--Not agreeing with competing independent doctors on any term of price, quantity or quality, including fee schedules and relative value scales.

--Not agreeing with competitors “on the patients that you are willing to serve, the locations from which you are permitted to draw patients or where you will locate your offices.”

--Not agreeing with competing independent doctors to refuse to offer services to alternative delivery systems.

There can be exceptions to the rules, particularly when the agreement covers participation in a legitimate alternative delivery system, Rule said. But he cautioned doctors not to assume anything and to consult with an experienced antitrust lawyer or to determine that competent counsel has structured the system to eliminate antitrust problems.