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e of no benefit to the community, the Court rejected Hyde’s claim. Rather than an
endorsement of exclusive contracts as a way to allocate medical staff privileges, this
case should be seen as the Court’s lack of sympathy for would-be conspirators who
are left out. The Court did not rule on the fate of exclusive contracts in the face of
an attack by a physician who offered a competitive alternative in the delivery of
services.
b) State Action Immunity
There is an exemption to the federal antitrust laws for actions taken by states. This
is called the Parker v. Brown immunity, after a famous 1943 case upholding the
right of California to enforce agreements to protect raisin growers. [Parker v.
Brown, 317 U.S. 341 (1943)] The agreements at issue in the “raisin case” allocated
market share to the various growers. This guaranteed a profit to the growers in the
scheme, artificially raised the prices for raisins, and excluded new growers.
Although it would have been illegal for the growers themselves to have entered
into these agreements, the Court found that a state may proscribe competition
among its own citizens. Several courts tried to use this principle to block peer
review lawsuits in states where the board of medical examiners had some role in
reviewing peer review decisions.
This state action immunity was at issue in the much publicized case of Patrick v.
Burget, [Patrick v. Burget, 486 U.S. 94 (1988).] which involved the sole hospital in
a small community. Because of geographic isolation, this hospital had monopoly
power in the local market. As a result of a business disagreement, the other
members of the medical staff conspired to terminate Dr. Patrick’s staff privileges.
This was a blatant conspiracy that included even attempts to manipulate the state
board of medical examiners. Dr. Patrick won a multimillion-dollar verdict at trial,
and the case was appealed to the federal circuit court. Several medical groups filed
briefs urging the court to overturn the verdict, while acknowledging that the review
itself was grossly unfair. The appeals court found that the termination of Dr.
Patrick’s staff privileges did violate the antitrust laws. The court also found that the
peer review process in Oregon was not an independent activity conducted by
private individuals but an extension of state power and thus subject to active
supervision by the state. Based on this regulation by the state, which, on paper at
least, is quite detailed, the court found that the defendant’s conduct was immune
from legal challenge.
Dr. Patrick appealed the circuit court’s decision to the U.S. Supreme Court, with his
request for review supported by the Federal Trade Commission (FTC). The FTC
argued that there was insufficient state involvement to justify state action
immunity. The Supreme Court found:
Because we conclude that no state actor in Oregon actively supervises
hospital peer-review decisions, we hold that the state action doctrine does
not protect the peer-review activities challenged in this case from
application of the federal antitrust laws. In so holding, we are not
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