FTC guidance means state medical boards may need to revamp

Many state medical boards may find themselves on the wrong side of the Federal Trade Commission's new guidelines laying out how groups consisting of active members of a profession they regulate can operate without violating antitrust laws.

The U.S. Supreme Court ruled in February that regulatory boards aren't immune from antitrust laws just because they carry out their duties under the auspices of state governments. Boards consisting of active market participants must be “actively supervised” by the state to be immune, Justice Anthony Kennedy wrote in the majority opinion.

Last week, the FTC explained how it would interpret Kennedy's terms, and the document may lead boards and state officials to makes changes.

“As a practical matter, it's likely to be a simpler process and perhaps a quicker process to change the way in which a board is supervised, rather than how it's constituted,” said Richard Feinstein, a former director of the FTC's Bureau of Competition. Feinstein, now a partner in the law firm Boies, Schiller and Flexner, noted that the FTC says a board can be construed as controlled by active market participants even if they aren't a majority of its members.

In the Supreme Court case that yielded the new guidelines, the court held 6-3 that it was illegal for a board composed mostly of practicing dentists, the North Carolina Board of Dental Examiners, to tell non-dentists working in mall kiosks to stop offering teeth-whitening services. The dental board tried to claim it wasn't subject to federal antitrust laws because it was a state agency. But the court said it would have to be actively supervised by the state to be immune.

The FTC's guidance describes various scenarios that might raise questions about whether a board member is an active market participant, whether the board is “controlled” by such members and whether the board is “actively supervised” by the state.

For example, an orthodontist on a dental board would still be considered an active market participant—even when deciding cases regarding procedures performed only by dentists—because that orthodontist is licensed and regulated by the board. If a board can't make decisions without at least one vote from an active participant member, then the active participant members are considered to control the board. And a state can't claim that it's actively supervising a board just because a state official is monitoring it. That official also must be able to veto a board's actions.

The Federation of State Medical Boards is still reviewing the guidance, but it presents more questions than answers, said Dr. Humayun Chaudhry, the federation's president and CEO. He expressed concern about parts of the document, which he said were created without input from state medical boards.

“The added layers that this guidance seems to be calling for will certainly lead to delays and slowing down of a regulatory process which ultimately was set up to protect the public,” Chaudhry said.

That the FTC weighed in at all in the wake of the opinion is somewhat surprising, said Robert Leibenluft, a former head of the healthcare division of the FTC's Bureau of Competition. The commission, he said, typically prefers to examine situations on a case-by-case basis. He said the document may prove helpful to boards and their advisers.

“Whether that's ultimately upheld by the courts is another question, but I think it's useful to find out where the FTC is coming down on these things,” said Leibenluft, now a partner in the law firm Hogan Lovells in Washington.

And the courts may be where all this is headed, said Robert Fellmeth, executive director of the Center for Public Interest Law at the University of San Diego. Fellmeth, who has been a critic of the FTC, said the vast majority of boards don't meet the FTC's requirements for “active supervision”—and he doubts many will do anything about it anytime soon.

“They will keep doing it until you have four or five or six major treble damages and the credit ruination of board members,” Fellmeth said. “Then you'll see them act.”