Jefferson Parish Hospital District No. 2 v. Hyde

PETITIONER: Jefferson Parish Hospital District No. 2
RESPONDENT: Hyde
LOCATION: Internal Revenue Service Building

DOCKET NO.: 82-1031
DECIDED BY: Burger Court (1981-1986)
LOWER COURT: United States Court of Appeals for the Fifth Circuit

CITATION: 466 US 2 (1984)
ARGUED: Nov 02, 1983
DECIDED: Mar 27, 1984

ADVOCATES:
Frank H. Easterbrook - on behalf of the Petitioners
Jerrold J. Ganzfried - on behalf of the United States as amicus curiae
John M. Landis - on behalf of the Respondent

Facts of the case

Question

Media for Jefferson Parish Hospital District No. 2 v. Hyde

Audio Transcription for Oral Argument - November 02, 1983 in Jefferson Parish Hospital District No. 2 v. Hyde

Warren E. Burger:

We will hear arguments next in Jefferson Parish Hospital District v. Hyde.

Mr. Easterbrook, you may proceed whenever you are ready.

Frank H. Easterbrook:

Mr. Chief Justice, and may it please the Court:

The question in this case is whether an arrangement by which a hospital obtains full-time services of four anesthesiologists in exchange for a promise not to admit others to practice there is a tying unlawful per se under the Sherman Act.

The first contract was signed in 1971 when East Jefferson General Hospital opened.

Dr. Roux pledged to work full time in the hospital for a year.

The hospital pledged to give him all of the hospital business.

The contract also called for Dr. Roux to hire, fire, supervise and train the nurse anesthetists at the hospital and to run the hospital's department of anesthesia.

The contract was extended year by year until 1976 when a new five-year agreement was signed.

By the time of trial Roux and Associations, four anesthesiologists, were supervising 14 operating rooms.

Respondent attacked this arrangement as a tying because a patient could not use the hospital's operating rooms without taking one of the hospital's anesthesiologists.

After a trial the District Court held for the hospital.

The Court concluded that the hospital faced competition from many other local hospitals and could not charge a monopoly premium for its services without driving patients away plus it found no market power or any other source of dominance, and it held that under the rule of reason the contract is pro-competitive, beneficial and lawful.

The Fifth Circuit reversed.

It found that operating rooms and anesthesia are separate products, and then it concluded that although the market is not concentrated and although under traditional standards of market power... There would be none in this case... the arrangement nonetheless was unlawful per se because of generic imperfections in the market for medical services.

The Court of Appeals observed that many patients are insured.

Many patients would like to use hospitals near their home and that there is a lack of perfect information in the market.

Consequently according to the Court of Appeals the hospital had market power and the per se rule against tyings applied.

When the Court turned to the hospital's arguments about pro-competitive benefits from this arrangement, the Court of Appeals simply observed that because the per se rule had been invoked these benefits could be considered only if this contract was the least restrictive alternative to arrange them, and the Court held that it was not.

The arguments we make in our brief about this subject really boil down to three: no tie, no market power and no enhancement of market power.

I would like to take them up in that order.

Our basic proposition is that an arrangement such as this is best analyzed as an exclusive dealing or employment contract and not as a tying.

To understand this you can think of a continuum by which hospital services can be arranged.

At one end of that continuum is the perfectly open hospital in which all qualified professionals may practice.

If 8 anesthesiologists or 14 anesthesiologists want to practice in East Jefferson General Hospital they may do so, and if there are more anesthesiologists who want to work there and there is work to be had they will all work part time.

That clearly would be lawful.

Many hospitals are operated in exactly that way.

At the other end is group practice of medicine similar to the group health association here in the District of Columbia.

Such a group practice is closed on all sides.

All physicians are under full-time contract.