SCOTUS Review of NC Board Case 'A Very Big Deal' to Providers

A legal matter in North Carolina, concerning whether or not a state board is exempt from federal antitrust laws, could have far-ranging effects, which explains the interest in the case from the AMA and other provider associations.

The U.S. Supreme Court said this week that it would review an antitrust ruling against a dentistry board in North Carolina in a case that could have broad implications for state regulatory boards overseeing professional activities, including those of physicians and hospitals.

The case, NC Board of Dental Examiners v. Federal Trade Commission, asks whether or not a state board is exempt from federal antitrust laws under the "state action" doctrine.

The North Carolina Board of Dental Examiners had been the subject of an administrative complaint by the Federal Trade Commission in 2010 for violations of the FTC Act after the board banned non-dentists operating in mall kiosks and other venues from performing discount teeth-whitening procedures.

A federal district court rejected the board's initial complaint. Last spring the U.S. Court of Appeals for the Fourth Circuit sided with the FTC and noted that the dental examiners board was composed of dentists who stood to gain financially by restricting the practice.

"At the end of the day, this case is about a state board run by private actors in the marketplace taking action outside of the procedures mandated by state law to expel a competitor from the market," the appeals court said in its ruling.

The American Medical Association disagreed with the appeals court and this week called the FTC action an "infringement on states' powers." The AMA filed a friend-of-the-court brief with the American Dental Association and 12 other provider professional organizations that support the dentistry board.

AMA President Ardis Dee Hoven, MD, said that the decisions of state regulatory boards "meet exemption criteria from federal antitrust challenges under the 'state action doctrine' created by the U.S. Supreme Court."

"The American Medical Association is grateful that the U.S. Supreme Court has agreed to re-evaluate a case in which the federal government is interfering with the ability of state regulatory boards to protect public health and safety," Hoven said this week in prepared remarks.

"The decision in North Carolina State Board of Dental Examiners v. Federal Trade Commission allows a federal agency with no particular knowledge of medicine or dentistry to strip authority away from experts who are charged by a state legislature to shield patients from unlawful practice."

"State regulatory boards acting to fulfill the directives of state law should be free to make decisions on public health issues without fear of second-guessing under the federal antitrust laws," she said.

However, Jay L. Levine, a Washington, D.C.-based healthcare antitrust lawyer and a partner at Porter Wright Morris & Arthur LLP, says the FTC has built a strong case that has already been affirmed by lower courts. "If I had to place a bet, it would be on the FTC winning," Levine told me. "The courts have stressed that exemptions are narrowly applied. The FTC has a fair argument and I don't think the state action doctrine is one that the Supreme Court is looking to expand."

A ruling in favor of the FTC could have far ranging effects beyond the ability to limit teeth-whitening procedures in mall kiosks, which explains the interest in case from the AMA and other provider associations.

"There are a number of quasi governmental bodies that license professions that are made up of the professionals themselves. So, this is not merely teeth whitening," Levine says. "The question is: If you have boards like the North Carolina Dental Board made up of essentially private citizens who are in the professions, who are otherwise competitors in the given profession, and they enact rules and regulations that keep out would be entrants, is that conduct subject to antitrust laws or not? In a number of professions, and especially in healthcare, that is going to be a very big deal."

The board of dentistry case marks the second time in less than two years that the high court has taken on a case involving antitrust issues within healthcare. In February 2013 in FTC v. Phoebe Putney Health System, Inc. a unanimous Supreme Court ruled that the appeals court had "loosely" interpreted a Georgia law cited by Phoebe Putney to justify a merger that would give the consolidated health system control of about 85% of the market in the Albany, GA service region.  

Levine says the issues driving the two suits are different, but related, and that could bode well for the FTC.

"The question in Phoebe Putney was 'was the enabling legislation that created the hospital authority sufficiently explicit in that it allowed the hospital authority to essentially authorize anticompetitive acquisitions?'" Levine says.

"The 11th Circuit Court of Appeals had said that the legislation authorizing the hospital authority essentially was broad enough to contemplate the anticompetitive consequences of it acting on its authority. The Supreme Court basically said that is too loose of a standard and that essentially exemptions to the antitrust laws are disfavored."

"The FTC has a very powerful argument, and the fact that the Supreme Court went out of its way in Phoebe Putney to deliver the message that exemptions are disfavored doesn't help the North Carolina Dentistry Board."