Death by Antitrust: Mountain Health Care, R.I.P.

by | Apr 14, 2003 | Antitrust & Monopolies

Last Friday, Mountain Health Care of Asheville, North Carolina, will close its offices for good. The 11 year-old company died not from bankruptcy or poor business judgment, but of antitrust poisoning. More accurately, the United States Department of Justice executed Mountain, imposing the corporate death penalty without so much as a trial or even the […]

Last Friday, Mountain Health Care of Asheville, North Carolina, will close its offices for good. The 11 year-old company died not from bankruptcy or poor business judgment, but of antitrust poisoning. More accurately, the United States Department of Justice executed Mountain, imposing the corporate death penalty without so much as a trial or even the semblance of constitutional due process. Just two days after U.S. armed forces decapitated Saddam Hussein’s Iraqi dictatorship, Justice Department lawyers imposed their own unique brand of tyranny over Mountain’s shareholders.

What was Mountain’s crime? According to the Justice Department, the company violated antitrust laws simply through its existence. Mountain, you see, was a physician-owned network of more than 1,800 healthcare providers working in the greater Asheville area. Essentially, Mountain functioned as a marketing group, selling provider services to local HMOs and other health care payors. By working together, Mountain’s providers were able to obtain better compensation from the health plans. This is hardly a novel concept. Every labor union in this country operates on the exact same premise: collective bargaining.

But in the world of antitrust, physicians are singled out for special treatment. Under a 1993 policy imposed by the Justice Department and Federal Trade Commission (without congressional approval), doctors may not collectively bargain with health plans. The ban is absolute, save for very limited exceptions that are only vaguely described by the government. The exceptions, as best one can tell, require physicians to assume all financial risk in a limited collective bargaining operation, thereby absolving health plans and their consumers of any potential risk. In other words, the customers are never liable for their poor judgment, but physicians must voluntarily serve as scapegoats.

The government argues that Mountain engaged in illegal price fixing by establishing a uniform “fee schedule” which its members refused to deviate from in dealing with health plans. Even if that were the case, this is no different from the practice of every other labor union. But, in fact, Mountain was not imposing such a fee schedule. Mountain operated a non-exclusive network, meaning individual providers participated according to their own terms. This means a Mountain physician could (and did) provide services to other networks or health plans without restriction. Furthermore, Mountain never contracted directly with health plans, but rather sold network access to individual business which already possessed insurance coverage.

Nevertheless, the Justice Department maintains Mountain engaged in “price fixing.” The reason for this is that, under antitrust case law, price fixing is “per se” illegal, meaning a defendant charged with such conduct has no defense under the law. The government need not prove any harm resulted from price fixing, since the behavior itself is always illegal. This rule proves to be quite a time-saver. In this case, it saved the government from actually having to present evidence against Mountain, because the company was never given a chance to go to trial.

Mountain settled immediately after the government announced its intention to prosecute. While you can fault Mountain for capitulating too quickly, the truth is the deck was stacked against them. In any antitrust case, the defendant is presumed guilty until proven innocent, and given the lack of objective standards in judging antitrust conduct (after all, what precisely is a “restraint of trade”?) it would have been a losing battle at trial. Mountain simply lacked the financial resources to mount the type of challenge necessary to even give them a chance of prevailing on the merits.

It’s easy to settle when the government need not produce actual evidence against you. In Mountain’s case, the government’s complaint was filled with omissions, unproven speculation, and even outright lies. The Justice Department falsely defined Mountain as an exclusionary network that engaged in price-fixing. The government refused to provide any evidence supporting its claim that Mountain’s activities forced consumers to pay “artificially” high prices for health care (indeed, the government never defined what “artificially” high meant.) Nor did the government make any effort to acknowledge Mountain’s recent history of attempting to comply with Justice Department mandates for health care antitrust enforcement. Instead, the Justice Department provided the public with a carefully manipulated version of events designed to put Mountain in the worst light possible. It was political propaganda worthy of an Iraqi information minister, but a disgrace in the context of a society committed to justice and objective law.

Perhaps the oddest facet of this case is the lack of planning by the Justice Department. Aside from forcing the dissolution of Mountain, the government makes no pretensions about what is to happen next. Mountain simply ceases to exist after today, and the health care market in Asheville is now left to fend for itself. Presumably, they’re won’t be health care looting a la Baghdad, but there is a great sense of confusion among the locals. Indeed, this case is a departure from normal antitrust practice, where a physician group is punished but not disbanded. It’s not even clear how the remainder of the settlement–in effect for 10 years–will be enforced given that the only defendant no longer exists. It’s unclear if Mountain’s doctors can form another network, or even what rules they’re expected to follow.

Mountain Health Care’s untimely death serves as an ominous warning. The message: there are people within the United States government who so hate capitalism and freedom, they’re willing to employ raw force against innocent corporations. While it would be unfair to compare the Justice Department’s antitrust lawyers to the murderous thugs of Iraq’s deposed Baath Party, there are certain intellectual parallels. Both groups support government-run economies, both oppose individual rights on principle, and both are willing to initiate force against those who oppose them. The only question which remains is, are the people of this country willing to take this form of tyranny lying down, or will we take action now to ensure there are no more Mountain Health Cares?

S. M. Oliva is president of Citizens for Voluntary Trade and a senior fellow at the Center for the Advancement of Capitalism.

The views expressed above represent those of the author and do not necessarily represent the views of the editors and publishers of Capitalism Magazine. Capitalism Magazine sometimes publishes articles we disagree with because we think the article provides information, or a contrasting point of view, that may be of value to our readers.

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