VIRGINIA ACADEMY, ETC. v. Blue Shield of Va.

• Decision Date: 09 April 1979
• Docket Number: Civ. A. No. 78-0496-A.
• Court: U.S. District Court — Eastern District of Virginia
• Parties: VIRGINIA ACADEMY OF CLINICAL PSYCHOLOGISTS et al. v. BLUE SHIELD OF VIRGINIA et al.

469 F. Supp. 552

VIRGINIA ACADEMY OF CLINICAL PSYCHOLOGISTS et al. v. BLUE SHIELD OF VIRGINIA et al.

Civ. A. No. 78-0496-A.

United States District Court, E. D. Virginia, Alexandria Division.

April 9, 1979.

COPYRIGHT MATERIAL OMITTED

Warwick R. Furr, II, Lewis, Mitchell & Moore, Vienna, Va., Timothy J. Bloomfield, Dunnells, Duvall, Bennett & Porter, Washington, D. C., for plaintiffs.

R. Gordon Smith, McGuire, Woods & Battle, Richard L. Williams, Gilbert E. Schill, Jr., James H. Walsh, Richmond, Va., for Blue Shield of Va.

Ronald M. Ayers, Heman A. Marshall, III, Woods, Rogers, Muse, Walker & Thornton, Roanoke, Va., for Blue Shield of Southwestern Va.

Joel I. Klein, Rogovin, Stern & Huge, Washington, D. C., Francis J. Prior, Jr., Siciliano, Ellis, Sheridan & Dyer, Arlington, Va., for Neuropsychiatric Society of Va.

MEMORANDUM

WARRINER, District Judge.

This anti-trust action has been brought by the Virginia Academy of Clinical Psychologists (VACP), the professional organization of registered clinical psychologists in Virginia, and a practicing clinical psychologist, Dr. Robert J. Resnick, against Blue Shield of Virginia (BSV), Blue Shield of Southwestern Virginia (BSSWV), and the Neuropsychiatric Society of Virginia (NSV). The action is brought pursuant to Section 1 of the Sherman Act, 15 U.S.C. § 1, and the plaintiffs are seeking injunctive relief pursuant to 15 U.S.C. § 26.

The gravamen of plaintiffs' complaint is that the practice of defendants, allegedly a result of a conspiracy amongst the defendants, of paying the fee of clinical psychologists for out-patient psychological services rendered to subscribers of Blue Shield only when these services are ordered by, supervised by, and billed through a physician, amounts to a conspiracy in restraint of trade in violation of Section 1 of the Sherman Act.

As it is admitted that the policy complained of exists, the question for decision is whether it was the result of a contract, combination, or conspiracy and if so, whether such practice is a restraint of trade in violation of the Sherman Act. In view of the applicability of the McCarran-Ferguson Act to the medical insurance contracts in question here, the additional issue of whether the practice complained of amounts to a boycott will be considered.

The Court, in its previous rulings on defendants' motion to dismiss and motion for summary judgment, has ruled that plaintiff VACP and plaintiff Resnick have standing to pursue this action. The Court has also ruled that plaintiffs are not guilty of laches and that it would not be appropriate to stay this action due to the pending State Corporation Commission proceedings. See memorandum opinion of Court filed 10 October 1978 and memorandum opinion and order of Court filed 13 November 1978.

A conspiracy in restraint of trade that is solely intrastate with no effect on interstate commerce is not prohibited by Section 1 of the Sherman Act, 15 U.S.C. § 1. In a carefully reasoned opinion, the Third Circuit held that where a restraint on commerce decreases the amount of out-of-state equipment and supplies bought by the complainants, such a restraint is affecting interstate commerce and is thus prohibited by the Sherman Act. Doctors, Inc. v. Blue Cross of Greater Philadelphia, 490 F.2d 48, 50-54 (3rd Cir. 1973).

In this case, there is testimony that plaintiff Resnick and other members of the VACP buy substantial amounts of out-of-state equipment and supplies and treat out-of-state patients. The amount of equipment and supplies bought by clinical psychologists decreases when their business decreases and since the complained of policy is shown to adversely affect plaintiffs' business, the Court holds that the policy has an effect on interstate commerce, as explained in Doctors.

Defendant BSV and defendant BSSWV exist pursuant to a Virginia statutory scheme for pre-paid health care plans. Va. Code § 32-195.1 et seq. (1973 Repl.). BSV is authorized by the State Corporation Commission to operate throughout most of the Commonwealth east of the Blue Ridge Mountains, except for a small area in Northern Virginia. BSSWV is authorized by the State Corporation Commission to operate in Southwest Virginia. The plans were organized in the 1940s by medical doctors as a way of guaranteeing payment for provided medical services rendered by them to their subscriber-patients.

Defendant NSV is a not-for-profit nonstock corporation whose members are psychiatrists-physicians who practice in Virginia. It is the professional organization of Virginia psychiatrists.

Plaintiff VACP is the professional organization of clinical psychologists in Virginia. Clinical psychologists, including plaintiff Resnick and members of the VACP, are licensed as practitioners of "the healing arts" by the Virginia State Board of Medicine. Va.Code § 54-274 (1978 Repl.). In order to apply for a license as a clinical psychologist, a candidate must have a Ph. D. degree in clinical psychology and must have at least two years of approved supervised clinical experience, one of which must be post-doctoral. The candidates are then given written and oral examinations by the Virginia Board of Psychology, and if they pass those examinations, the Board recommends to the Virginia State Board of Medicine that they be licensed. It is the Virginia State Board of Medicine which actually issues the license and subsequently regulates and monitors their activities.

Since about 1962 major medical plans issued by the two Blue Shield defendants have included coverage for mental and nervous disorders and for psychotherapy as a method of treating those disorders. Since about 1972, defendant BSV has reimbursed a patient for psychotherapy rendered outside a hospital only if he is treated by a psychiatrist or if he is treated by a clinical psychologist upon reference to and supervision by a physician with the psychologist's services billed through the physician. BSSWV has followed such policy since its inception in 1945 with certain exceptions noted hereafter.

Virginia law licenses both psychologists and psychiatrists to perform psychotherapy, Va.Code § 54-273 (1978 Repl.). Plaintiffs' complaint is that the policy of the Blue Shield defendants, allegedly arrived at by combination or conspiracy, of reimbursing patients who are treated by psychiatrists for psychotherapy but only reimbursing patients who are treated by clinical psychologists if the additional requirement of physician billing, supervision, and referral are met, adversely affects plaintiffs' competitive position as a result of a conspiracy in restraint of trade.

Plaintiffs allege that in addition to the parties defendant, the Medical Society of Virginia, Blue Cross of Virginia, and Blue Cross of Southwestern Virginia are part of this cooperative undertaking in restraint of trade. These latter entities are not named as defendants. Unlike Blue Shield plans, Blue Cross plans deal solely with hospital costs and in-patient services. Plaintiffs acknowledged at trial that clinical psychologists are not capable of rendering in-patient psychotherapy in competition with psychiatrists in the absence of physician supervision. Thus only out-patient care is in contention in this case.

The Court will first address the issue of whether BSV and BSSWV have combined or conspired together in restraint of trade.

I

Defendant BSSWV now directly reimburses patients for psychologists' out-patient services if the definition of "physician" in the subscriber's contract includes "psychologists." Such a definition is contained in approximately 75 per cent of the current contracts issued by BSSWV. Nervous and mental disorders are covered only in major medical contracts and in more than 90 per cent of these contracts the definition of "physician" includes "psychologists."

BSSWV has always opposed the payment of psychologists directly but has agreed to direct payment in most of its contracts, as noted above, because the Bureau of Insurance of the State Corporation Commission had disapproved the form of a major medical contract submitted which did not include "psychologists" in the definition of "physician."

This disapproval by the Bureau of Insurance followed the enactment of Va.Code § 32-195.10:1 (Supp.1978) by the General Assembly in 1973. This section is interpreted to require that psychologists, among others, must be reimbursed directly for covered services by prepaid health care plans where they are rendering services that they are licensed to perform.¹ Unbeknownst to the Board of Directors of BSSWV the contract language was changed by subordinate officials of BSSWV to meet the Bureau's objection. When the Board of Directors subsequently learned of the change inserted in their contracts, the Board decided to honor the provision but at the same time reiterated its opposition, as a matter of principle, to direct payment to unsupervised clinical psychologists.

Collaboration between BSSWV and BSV concerning the issue of payment to clinical psychologists has revolved in the main around the challenge in State tribunals to the Virginia statutory scheme requiring such direct payment. BSSWV and BSV sought to bring a declaratory judgment action in the State court. Then it was decided, in consultation with counsel for VACP, that a suit by a patient who was not reimbursed for the services of a clinical psychologist would be the best means of challenging the statute. This test case was filed but was subsequently non-suited at the instance of VACP. Finally, BSV brought the matter before the State Corporation Commission where it is pending or from which it is being appealed.

Though BSSWV is not now directly participating in the State legal actions, its collaboration with BSV cannot afford a basis for a Sherman Act suit since the activity is protected by the First Amendment. California Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508, 510-11, 92 S.Ct. 609, 30 L.Ed.2d 642 (1972); United Mine...