Chiropractic Antitrust Suit: Liability of Joint Commission 0n Accreditation of Hospitals

JCAH is a not-for-profit corporation for the purpose of setting standards and conducting a health care accreditation program in conjunction with those standards. JCAH members are the AMA, ACP, ACS, the American Hospital Association (“AHA”), and the American Dental Association. JCAH is governed by its Board of Commissioners. Twenty-one commissioners are appointed by the various members and those commissioners appoint one public commissioner. The two dominant members are the AMA and former defendant AHA, each having seven commissioners for a total of 14 out of a total of 22 votes. ACS and ACP each has three commissioners. Commissioners appointed by a particular member generally ore free to vote their conscience on any issue, but typically a commissioner is a strong organization man who become a commissioner after serving on the national policy board of the member organization. JCAH’s power derives from the power of its member organizations. It would have difficulty surviving if it did not have the support of its powerful members.

Participation by hospitals in the accreditation program is voluntary. However, obtaining accreditation is important to a hospital and loss of accreditation would be devastating. “Denial or loss of accreditation can close a hospital.” (Schlicke Dep. 109110).

As the hospital standard-setting organization, JCAH has the power to define and regulate the activities which take place in hospitals and to eliminate or frustrate competition from non-medical physician health care providers. From before 1958, JCAH had standards which provided that the hospital medical staff shall be limited to fully licensed physicians. It was not until 1970 that dentists were included.

On May 16, 1964, JCAH’s director stated, in a column in the national newsletter of AHA, that the Commission viewed chiropractors as cultists and that any hospital that encouraged cultists to use its facilities in any way would “very probably be severely criticized and lose its accreditation.” This statement was later republished in a reference manual distributed to approximately 6,100 hospitals. At the time this statement was first published, the AMA Committee on Quackery was only f ive months old and the Committee had not yet begun its efforts to get other groups to support the AMA’s policy on chiropractic. There was no direct evidence that JCAH was acting in concert with the AMA in connection with the publication of the statement or its later distribution. The actions appear to be independent.

In 1970 JCAH completed a revision of its standards and published the Accreditation Manual for Hospitals (“AMH”). Standard (drafted by the AMA) was included. Under this standard, the governing board of the hospital had to assure that medical staff members practice in an ethical manner. AMH included a source reference to the AMA’s Principles and the American Dental Association’s Principle of Ethics. The uncontradicted testimony was that JCAH’s Board of Commissioners never discussed the subject of chiropractic and that the subject was never raised in connection with the 1970 revisions and the publication of AMH. I accept this testimony. No chiropractor participated in any way in the revision process despite extensive opportunity to participate. There was no evidence that JCAH adopted Standard X in connection with chiropractors or in furtherance of the AMA boycott.

Throughout the early 1970s, JCAH staff responded to several inquiries from hospitals and others about the role of chiropractors in hospitals by stating that the Commission would withdraw and refuse accreditation of a hospital that had chiropractors on its medical staff or that granted privileges to chiropractors. One of these letters specifically stated that such association would violate Principle 3. Another letter enclosed the article published by the AMA, “The Right and Duty of Hospitals to Exclude Doctors of Chiropractic.” However, these letters were completely consistent with the then-existing accreditation standards. The fact that the letters were written is not surprising and is not convincing evidence that JCAH had joined the conspiracy against chiropractors.

Much of this correspondence was shared with the AMA and AHA, and there were communications between Dr. Donald L. Kessler of JCAH and the AMA regarding chiropractic. In 1973 Dr. Kessler of JCAH cooperated with the AMA in connection with the distribution of “The Right and Duty of Hospitals to Exclude Chiropractors from Hospitals, ” which contained the statement that inclusion of chiropractors would threaten JCAH accreditation.

In 1974, AHA was concerned that the inclusion of chiropractic under Medicare might mandate chiropractic services in health maintenance organizations. AHA was planning to meet with the AMA and JCAH to discuss this problem. The AHA interoffice memorandum that refers to the plan to meet with the AMA and JCAH is not the act or declaration of JCAH, however, and it cannot be considered by the court in determining the JCAH’s membership in the conspiracy.

In 1977, after this lawsuit was filed, JCAH revised its standards to provide that medical staff membership shall be limited unless otherwise provided by low” to fully licensed physicians and dentists. Also, all references to the AMA’s Principles were deleted. JCAH responded to all further inquiries regarding chiropractors by advising that the issue was one of local low. Thus, from 1977, JCAH’s position was that if under local law a limited licensed practitioner could be on a medical staff, the hospital could allow such a practitioner to be on the medical staff without jeopardizing its accreditation. In 1979, JCAH amended its laboratory and radiology standards to provide that hospitals could, if permitted by law, grant non-physician and non-medical staff members access to diagnostic laboratory and radiology services. Many states have laws which deal with the question of which limited licensed health practitioners can be on hospital medical staffs or have hospital privileges. In 1980 JCAH amended AMH to delete Standard X.

Focusing on JCAH’s conduct from 1964 through 1980, 1 find that it was undertaken independently of the AMA boycott. JCAH’s conduct during this period was consistent with its stated purpose of promoting high quality health care. From a time well before the AMA boycott, JCAH believed that only fully licensed physicians should be on medical staffs of hospitals. That belief was incorporated into the earliest standards and it was carried through 1980 except for the addition of dentists in 1970 and changes dictated by expanding state low. At the most, the evidence establishes exchange of information among JCAH and the AMA and AHA on the subject of chiropractic. Undoubtedly, JCAH was manipulated by the AMA to promote and expand its boycott – getting JCAH to adopt Standard X is but one example – but the evidence falls for short of establishing a conscious commitment to the scheme on the part of JCAH.

I note that JCAH’s standards were largely consistent with federal low. From 1966 on, the conditions of hospital participation under Medicare provided that members of the medical staff be qualified professionally and ethically, that participating hospitals assure that patients were admitted to the hospital only on the recommendation of a physician, that the medical staff be responsible for all medical care, that the hospital’s bylaws contain provisions concerning professional ethics, and that laboratory and radiological services be performed only on the order of a physician. It was not until 1972 that the Medicare statute defined physician as including chiropractors, and even then there was some question whether the inclusion was for reimbursement for office services only, or whether by including chiropractors within the definition of physician Congress was allowing chiropractors on medical staffs of participating hospitals. The consistency between the JCAH standards and Medicare requirements is further evidence that JCAH was acting independently rather than in concert with the AMA.

(b) Liability of JCAH Members for JCAH Standards

Plaintiffs argue that even if JCAH was acting independently of the AMA boycott, JCAH members ore responsible for the actions of JCAH. Thus, if JCAH was acting to exclude chiropractors from hospitals, the JCAH members were acting in concert to exclude them. The plaintiff s’ first theory is that the JCAH is the alter ego of each of its members. The evidence is simply insufficient to establish this theory. There is almost no evidence on the participation of the members in the creation and revision of JCAH standards prior to the 1983 revisions. The general evidence is that JCAH standards are created as a result of an elaborate deliberative process involving many organizations and public hearings. Chiropractors were not involved in the process despite the fact they could have elected to become involved. There is no evidence as to how the commissioners appointed by the defendants voted in connection with revisions prior to the 1983 revisions. I reject the alter ego theory.

Next plaintiffs argue that mere membership in JCAH is evidence that the member was engaged in a conspiracy to violate the antitrust lows. Plaintiffs rely on Phelps Dodge Refining Corp. v. F.T.C., 139 F.2d 393, 396-97 (2nd Cir. 1943). The Court held that the circul6tion of a price list to members of a trade association put recipients on notice of illegal activities and provided a basis for imposing civil liability:

Thus the issue is reduced to whether a member who knows or should know that his association is engaged in an unlawful enterprise and continues his membership without protest may be charged with complicity as a confederate. We believe he may. Granted that his mere membership does not authorize unlawful conduct by the association, once he is chargeable with knowledge that his fellows are acting unlawfully his failure to dissociate himself from them is a ratification of what they are doing. He becomes one of the principals in the enterprise and cannot disclaim joint responsibility for the illegal uses to which the association is put.

Others have followed this view. Chain Institute v. F.T.C., 246 F.2d 231, 240 (8th Cir. 1957); Vandervelde v. Put & Call Brokers and Dealers Assn., 344 F. Supp. 118, 155 (S.D.N.Y. 1972); Expert Electric Inc. v. Levine, 554 F.2d 1227, 1235 (2nd Cir. 1977) (noting Phelps rule in dicta) and 399 F. Supp. 893, 897-98 (S.D.N.Y. 1975).

The membership-ratification theory articulated in Phelps has not retained the force of law. More recent cases have tended to require a greater showing to establish proof of conspiracy. See Moore v. Boating Industry Associations, No. 83-2148 and 83-2210, slip op. at 36 (7th Cir. April 29, 1987) (to be published at 819 F.2d 693), quoting T. Vokerics, Antitrust Basics, Section 6.13 at 6-37 to 6-38 (1985) (“There must … be some evidence of actual knowledge of, and participation in, an illegal scheme in order to establish a violation of the antitrust lows by a particular association member. Kline v. Caldwell, Banker & Co., 508 F.2d 226, 231 – 33 (9th Cir. 1974) (to be liable, trade association member must have “knowingly, intentionally, and actively participated in an individual capacity in the scheme”); Hunt v. Mobil Oil Corp., 465 F. Supp. 195, 231 (S.D.N.Y. 1978), gftA,610 F.2d 806 (2d Cir. 1979) (association even coupled with knowledge of wrongful conduct by other members, does not create liability); James Julian Inc. v. Raytheon Co , 557 F. Supp. 1058, 1065 (D. Del. 1983) (membership in trade association, including attendance at meetings, will not give rise to inference of conspiracy). By minimizing the importance of a member knowledge of his association’s wrongful conduct, these Courts hove reformulated the membership-ratification doctrine virtually out of existence. Kline, 508 F.2d at 231. This emasculation of the Phelps rule is consistent with the Supreme Court’s decision in Monsanto and Matsushita. Accordingly, I conclude that mere membership in JCAH does not make each member liable for the acts of JCAH, and that the acts of JCAH prior to the 1983 revisions were not the result of a conspiracy among the JCAH members.

(c) 1983 Revisions of JCAH Standards

The 1983 revisions of the JCAH standards have already been described and discussed in connection with the AMA. The 1983 revisions liberalized the prior standards regarding admission to medical staffs of, and allowance of hospital privileges to, limited licensed practitioners (which include chiropractors). The revisions were prompted by changes in state law which recognized the increased significance of limited licensed practitioners in the health care field. Despite the liberalization achieved by the revisions, the plaintiffs claim that the JCAH members’ insistence that the medical staff of each accredited hospital must have an executive committee, the majority of which had to be medical and osteopathic physicians, is evidence that the conspiracy agains chiropractors continued into 1983. (Plaintiffs do not claim that the 1983 JCAH standards violate the antitrust laws.)

The evidence supports the conclusion that the 1983 revisions concerning the medical staffs of hospitals were the act of the defendants who ore JCAH members. These members aggressively sought the revisions and the commissioners appointed by them appear to have been instructed on how to vote on the issue. There was also some evidence that the defendant members were concerned about chiropractors and the possibility of competition from chiropractors in the hospital setting. However, I reject plaintiffs’ conclusion that the 1983 revisions constitute evidence that the boycott or conspiracy against chiropractors continued into 1983.

The proposed liberalization of the standards governing limited licensed practitioners created the theoretical possibility that a medical staff of a hospital could become dominated by limited licensed practitioners. That in turn created a discussion of whether JCAH ought not insure that patient care in acute care hospitals be controlled by fully licensed physicians. The overwhelming response was that patient care and medical staffs must remain under medical and osteopathic physician control. Although the revision process was wide-open in that many drafts were distributed, public hearings were held, and comments were received and considered, no chiropractor participated in the process. No argument was made with respect to the proper role of chiropractors, if any, in the hospital setting. No complaint was made on behalf of chiropractors that the requirement of an executive committee of the medical staff would work against the admission of chiropractors to hospitals.

The evidence supports the conclusion that the JCAH members were acting to assure that responsibility for patient care in acute care hospitals remained in the hands of medical and osteopathic physicians, and that this was an appropriate goal for JCAH. Today, acute care hospitals treat patients who are very sick or in need of surgery. Generally, they are patients who require treatment with drugs or surgery, that is treatment by fully licensed physicians. A chiropractor may have a patient in a hospital who is in need of chiropractic treatment, and there may be some justification for chiropractic services in hospitals, but these facts do not justify hospital standards less rigorous than the ones adopted by JCAH in 1983. The evidence supports no conclusion other than that patient care in acute care hospitals, and the medical staffs of acute care hospitals, ought to be under the control of fully licensed physicians rather than limited licensed practitioners. I am persuaded that the JCAH members were not acting to prevent chiropractors from being admitted to hospitals or obtaining hospital privileges.

Current federal regulations have similar requirements. Under the current Medicare conditions of participation, if a medical staff has an executive committee, a majority of the members of the committee must be doctors of medicine or osteopathy, and the responsibility for organization and conduct of the medical staff must be assigned only to an individual doctor of medicine or osteopathy. 42 CFR Section 482.22(b)(2), (3). Even though a chiropractor may have responsibility for a patient (but under the regulations only with respect to “treatment by means of manual manipulation of the spine to correct a subluxation demonstrated by x-ray to exist”), a physical examination and medical history of that patient must be done by a medical or osteopathic physician. 42 CFR Section 481.11 (c)(5).

Under current JCAH standards, a hospital may grant chiropractors medical staff membership, clinical privileges, admission privileges, and access to diagnostic services without fear of loss or threatened loss of JCAH accreditation. Hospitals may select chiropractors to serve on the medical staff executive committee without affecting their accreditation. The hospital’s governing board has the responsibility and ultimate authority for making individual medical staff appointments and delineations of clinical privileges, even though the governing board must resolve any differences it has with the medical staff. Since 1983, hospitals in fact have been allowing chiropractors on medical staffs. The uncontradicted evidence is that the current JCAH standards are reasonable because of the severity and complexity of conditions treated in the hospital setting, and plaintiffs’ expert, Dr. Freita so testified.

Since I have found that JCAH’s acts before the 1983 revisions were independent of the AMA boycott and were not the acts of its members, and that the 1983 revisions are not evidence that the conspiracy against chiropractors continued into 1983, 1 find that the plaintiffs have failed to prove that JCAH was a member of the conspiracy. Accordingly, judgment shall enter for JCAH.

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