Journal of Corporation Law, Vol. 12, No. 1 (Fall 1986), pp. 37-72


The question whether hospitals should be regarded as private businesses, or alternatively as public utilities, in order to maximize productive and allocative efficiency, remains controversial. In recent years, the ability of American hospitals and doctors to provide excellent health care services has been hindered by rising costs and distribution problems. This combination of rising costs and decreased distribution has prevented medical services from reaching the portion of the American population that has the greatest need for these services.

In response to these problems, Congress in 1974 passed the National Health Planning and Resources Development Act (NHPRDA). The NHPRDA is designed to regulate health care providers as if they were public utilities. The NHPRDA provides for comprehensive regulation of health care on the state level. The NHPRDA does not specifically preempt the application of federal antitrust laws to the health care professions; rather, it professes to make the health care system more competitive and therefore more efficient.

In North Carolina ex rel. Edmisten v. P.I.A. Asheville, Inc. (Asheville II), the Fourth Circuit Court of Appeals was presented with the question of whether federal antitrust laws apply to actions undertaken pursuant to the NHPRDA. Asheville II involved a contention by a defendant hospital corporation, the Psychiatric Institutes of America (PIA), that its monopolization of psychiatric hospital care in western North Carolina enhanced operating efficiencies. The PIA further asserted that its monopolization was immune from antitrust challenges. This assertion was based upon grounds of federal implied immunity and state action immunity. In other words, antitrust regulation and public utility regulation of hospitals pursuant to the NHPRDA were inconsistent and mutually exclusive, and Congress had chosen the latter form of regulation in order to maximize efficiency.

First, this Article presents an overview of the National Health Planning and Resources Development Act (NHPRDA). Second, the Article will discuss the doctrine of implied immunity from antitrust regulation. Third, this Article will examine the state action immunity doctrine. Fourth, the Article will discuss the Fourth Circuit Court of Appeals decision in Asheville II. Fifth, this Article will use Asheville II, with its analysis of the implied and state action immunity doctrines, as a vehicle to examine the policy choice between federal antitrust and public utility regulatory approaches in the context of the NHPRDA. Sixth, the Article will suggest that the controversial, but increasingly accepted, ‘Chicago school’ view of antitrust and free market regulation, which contends that competition necessarily is increased as productive and allocative efficiencies are increased through self-regulation and integration, runs afoul of the long-standing doctrinal analysis of implied and state action immunity from antitrust regulation. Last, the Article will conclude that, despite the appearance that federal antitrust laws presently apply to the health care industry, policymakers in the future may recognize a need to choose more specifically between an ‘inefficient’ free market approach and a traditional public utility regime in the health care field.