457 U.S. 332, 343–44, 102 S.Ct. 2466, 2473 (1982)
In October 1978 the State of Arizona filed a civil complaint against two county medical societies and two foundations for medical care organized by those societies, alleging engagement in illegal price-fixing conspiracies.1 After the defendants answered, one medical society was dismissed by consent, the parties conducted limited pretrial discovery, and Arizona moved for partial summary judgment on liability.2 The District Court denied the motion but certified for interlocutory appeal the question whether the foundation membership agreements containing promises to abide by maximum fee schedules are illegal per se under section 1 of the Sherman Act.3 The Court of Appeals affirmed the denial by divided vote, and the Supreme Court granted certiorari in 1981.4
The Maricopa Foundation for Medical Care is a nonprofit Arizona corporation composed of approximately 1,750 licensed physicians, osteopaths, and podiatrists in private practice, representing about 70 percent of practitioners in Maricopa County.5 Organized in 1969 to promote fee-for-service medicine and offer a competitive alternative to existing health insurance plans, the foundation establishes schedules of maximum fees that participating doctors agree to accept as full payment for services to patients insured under foundation-approved plans, reviews the medical necessity of treatment, and acts as an insurance administrator by drawing checks on insurer accounts.6 The Pima Foundation for Medical Care performs similar functions with about 400 member doctors, and the parties treat the two foundations' activities as essentially the same for this litigation.7
At the time suit was filed each foundation compiled its fee schedule using relative values assigned to individual medical services and conversion factors that set dollar amounts for particular specialties.8 The foundation board solicited advice from medical societies, formulated proposed schedules, and submitted them for a vote of the entire membership, with periodic revisions.9 The resulting schedules limit the amount member doctors may recover for services to patients covered by approved insurance plans.10
To obtain foundation approval, insurers agree to pay doctors' charges up to the scheduled maximum amounts, and in exchange the doctors agree to accept those amounts as payment in full.11 Seven insurance companies underwrote plans approved by the Maricopa Foundation and three underwrote plans approved by the Pima Foundation.12 Insured patients receive complete coverage for the full amount of medical bills only when treated by a foundation member; they may choose a nonmember physician but must pay any excess over the scheduled maximum.13
The foundations' impact on actual medical fees and insurance premiums is disputed, with Arizona contending that periodic upward revisions stabilize and enhance physician charges and thereby increase premiums, while the foundations maintain that the schedules impose meaningful limits on charges and serve as an effective cost-containment mechanism.14 For purposes of the summary judgment motion the parties' version of disputed facts is taken as correct, including the foundations' claim that the arrangements have saved patients and insurers millions of dollars.15
Whether agreements among competing physicians setting maximum fees by majority vote for services to policyholders of approved insurance plans violate section 1 of the Sherman Act?16
Section 1 of the Sherman Act prohibits every contract, combination, or conspiracy in restraint of trade, and price-fixing agreements, including those fixing maximum prices, are unlawful per se.17
Yes. The established facts demonstrate that the Maricopa and Pima Foundations, composed of competing physicians representing 70 percent of practitioners in their counties, established maximum fee schedules through board formulation and membership vote that participating doctors agreed to accept as full payment for services to patients under approved insurance plans.18 These agreements constitute horizontal price fixing among independent competitors in the market for medical services.19
The agreements violate section 1 of the Sherman Act.20
Whether such horizontal maximum-price agreements among physicians are subject to per se condemnation under the Sherman Act?21
Horizontal agreements among competitors to fix maximum prices are per se unlawful under the Sherman Act, as the rule against price fixing applies equally to maximum and minimum price restraints.22
Yes. The undisputed facts establish that the foundations' membership agreements bound competing physicians to maximum fee schedules approved by majority vote, directly restraining the ability of individual doctors to set their own prices for services to insured patients.23 This arrangement falls squarely within the per se prohibition on price fixing regardless of the maximum character of the prices or the health care setting.24
Such horizontal maximum-price agreements are subject to per se condemnation under the Sherman Act.25
Whether the professional status of the physicians, the health care industry context, or alleged procompetitive justifications preclude application of the per se rule against price fixing?26
The per se rule against price fixing applies to members of the professions and in all industries alike, and claims of procompetitive justifications or public service do not exempt such agreements from per se condemnation.27
No. The facts show that the price-fixing agreements were not premised on public service or ethical norms but instead facilitated insurance plans.28 The health care industry receives no special exemption from the uniform rule against price fixing.29 Alleged benefits such as cost containment through maximum fees do not alter the per se analysis because the agreements eliminate price competition among physicians.30
The professional status of the physicians, the health care industry context, and alleged procompetitive justifications do not preclude application of the per se rule against price fixing.31
Related opinions on this issue
Justice Powell dissented, arguing that the per se rule should not be applied on an incomplete summary judgment record to condemn a novel arrangement that insurers, physicians, and patients voluntarily joined and that appeared to benefit consumers by imposing meaningful limits on charges and enabling more efficient risk calculation.32 He emphasized that the foundations preserved freedom to compete outside the plans, that insurers represented consumer interests in containing costs, and that the agreements achieved procompetitive efficiencies akin to those recognized in Broadcast Music, making per se condemnation inappropriate without a full trial under the rule of reason.33