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Hastings Law Journal

Abstract

In response to concern regarding escalating health care costs, "cost-containment" programs, such as Preferred Provider Organizations ("PPOs"), have experienced rapid growth. A PPO is a direct, prepaid health care purchasing arrangement between a particular employer or insurer and a health care provider. The increase in PPOs has been accompanied by substantial litigation and intense antitrust scrutiny. This Note examines whether the fixed-fee component of the PPO violates the Sherman Act. The Note discusses several foundational cases and then examines current litigation over fixed-fee arrangements under Sherman Act sections 1 and 2. The Note determines that an accurate characterization of the insurer's role, as a third party to the provider-patient relationship, establishes the necessary components of resale price maintenance, a section 1 violation. The Note also demonstrates that section 2 is violated when an insurer is a monopolist in the market for health insurance because anticompetitive effects result in the secondary market of physicians' services.

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