n 1975 the Supreme Court struck down a minimum fee schedule promulgated by the Fairfax County Bar Association in northern Virginia, saying that it violated the federal antitrust prohibition against price-fixing (Goldfarb v. Virginia State Bar, 421 U.S. 773). For physicians, Goldfarb was to become a decision of enormous importance; in essence, it dispelled the prior uncertainty of the extent to which traditional antitrust principles were applicable to the provision of professional services.

Writing two years before Goldfarb, a former Chairman of the Federal Trade Commission (FTC) said with some prescience: “The fact that certain restrictive practices of learned professions have not been subjected to attack is the result of forbearance by the federal antitrust enforcement authorities and the interstate commerce requirement, not any recognized exemption to the antitrust laws” (Kintner, Antitrust Primer [1973] p. 33). With Goldfarb that whole house of cards came tumbling down, and the federal antitrust enforcers were off and running amok through the “house of medicine.”

Among the early casualties were the relative value guides promulgated in 1956 by the California Medical Association (CMA) and a number of national medical specialty societies. These guides essentially compared the relative complexity and cost of various medical procedures each to the other, just as the Medicare Resource-Based Relative Value System does for physician services introduced in 1992 and which are still in effect today. FTC alleged, however, that promulgation of relative value guides by medical associations amounted to price-fixing among its members — just as much as the fee schedule struck down by Goldfarb.

Principally concerned about the cost of litigating the issue with FTC, CMA and the specialty societies each agreed to a consent order by FTC, pursuant to which they were required to cease and desist promulgation of their guides and, indeed, to seek return of those guides previously distributed.

ASA also was one of those specialty societies that had developed a relative value guide. As ASA members know, anesthesiology came of age in the years immediately following World War II, and in the incipiency of the specialty, there were numerous ways by which anesthesiologists charged for their services, including a flat percentage of the surgeon’s fee, elapsed anesthesia time, a charge based on the nature of the procedure or a combination of the last two. Increasingly several national third-party payers — led by Blue Cross/Blue Shield — became frustrated with this diversity in billing approaches. Out of the chaos, the first ASA Relative Value Guide (RVG) was born in 1962.

ASA members also know that the ASA RVG is derived, as it was in 1962, from a combination of base time units (complexity) and elapsed time units. The total of these units involved in a particular procedure is multiplied by a dollar amount “conversion factor” in order to arrive at the appropriate fee. ASA has never recommended what the conversion factor should be — that is a decision to be made by the individual physician or group providing the services or by the third-party payer “purchasing” those services on behalf of the patient.

For reasons never publicly explained, FTC chose not to attack the ASA RVG along with those of other medical associations. Not to be outdone, though, the Department of Justice filed suit in 1975, alleging that the RVG, in purpose and effect, violated the Sherman Antitrust Act’s prohibition against price-fixing. ASA’s long-time legal counsel, Jack Lansdale, Esq., recommended that ASA resist the suit, essentially on the grounds that the guide did not represent an agreement among competitors to fix prices. Instead, if it affected competition at all, it was pro-competitive in purpose and effect.

Jack Lansdale, Esq., (1912-2003) in 1978.

(While the RVG case was pending, FTC — not to be outdone by its fellow antitrust enforcer — issued a proposed complaint against ASA in 1977 alleging that a provision of its ethical guidelines, requiring that members practice on a fee-for-service basis and not as an employee of an entity such as a hospital, impaired competition and thus violated the antitrust laws. Mr. Lansdale advised the Society that the complaint was not worth fighting, and a consent decree was negotiated in early 1979 by which the Society agreed to abandon the fee-for-service ethical standard.)

After several months of discovery were completed, the RVG case went to trial in New York City in November 1978. The trial lasted six days. It was soon apparent that the government lawyers thought they had a “slam dunk” of a price-fixing case and were content to present little more than the existence of the RVG as their evidence. ASA responded with nine witnesses, including former ASA presidents, a nationally known expert on the economics of the health care marketplace, anesthesiology billing experts and a representative of the health insurance industry, all of whom painted a picture of the guide as a response to the industry’s need to establish a method by which to evaluate anesthesia fees.

In January 1979, the trial court concluded that the government had failed to meet its burden of proof and that mere proof of the existence of the guide, “in the unique circumstances surrounding the anesthesiology profession and the adoption of relative value guides, was much too narrow an approach to the problem at hand (United States v. American Society of Anesthesiologists [S.D.N.Y. 1979] 473 F.Supp. 147). In short, ASA had beaten the government on the status of the RVG under the antitrust laws at the same time that other medical associations had decided not to resist. It was truly a seminal moment in the development of the specialty. The guide has been widely used ever since, even by the self-same government that brought suit in 1975.

It must be said in conclusion, however, that despite ASA’s success in the RVG case and the resulting acceptance of the guide, the Goldfarb decision some three decades ago ushered in an era when counsel for ASA and every other medical association must be constantly attentive to the activities of their clients when viewed through the antitrust prism. Association members often express frustration with the antitrust advice of counsel, and quite understandably so. As long as one remembers, however, that a trade or professional association — because it is a fraternity of competitors or potential competitors — is almost by definition a walking potential antitrust violation, perhaps he or she will understand that when counsel says “no,” there may be a very good reason, post-Goldfarb.

Michael Scott, J.D., oversees the federal, state, regulatory, lobbying and legal activities in the ASA Washington Office.