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Pennsylvania Dental Association v. Medical Service Association of Pennsylvania

argued: January 20, 1987.

PENNSYLVANIA DENTAL ASSOCIATION; DELAWARE COUNTY DENTAL SOCIETY; ERIE COUNTY DENTAL ASSOCIATION, INC.; HARRISBURG AREA DENTAL SOCIETY; LUZERNE COUNTY DENTAL SOCIETY; MONTGOMERY-BUCKS DENTAL SOCIETY; ODONTOLOGICAL SOCIETY OF WESTERN PENNSYLVANIA; SCRANTON DENTAL SOCIETY; AND YORK COUNTY DENTAL SOCIETY;
v.
MEDICAL SERVICE ASSOCIATION OF PENNSYLVANIA, D/B/A PENNSYLVANIA BLUE SHIELD, APPELLANT V. YORK COUNTY DENTAL SOCIETY, FIFTH DISTRICT DENTAL SOCIETY, DENNIS W. KING, D.D.S., CHARLES M. LUDWIG, D.D.S., THEODORE R. PALADINO, D.D.S., THOMAS L. PERKINS, D.M.D., AND KAY F. THOMPSON, D.D.S., 3RD PARTY COUNTERCLAIM DEFTS



ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA - SCRANTON, D.C. Civil No. 81-1187.

Author: Gibbons

Before GIBBONS, Chief Judge, WEIS and HUNTER, Circuit Judges.

Opinion OF THE COURT

GIBBONS, Chief Judge :

Medical Service Association of Pennsylvania, doing business as Pennsylvania Blue Shield (Blue Shield), appeals from a summary judgment in favor of ten dental associations and five individual dentists (collectively referred to as "the organized dentists")*fn1 dismissing Blue Shield's claims under section 4 and section 16 of the Clayton Act, 15 U.S.C. §§ 15, 26 (1982 & Supp. III 1985), as well as pendent state law claims. Blue Shield alleges that the organized dentists engaged in concerted activity in violation of section 1 of the Sherman Act, 15 U.S.C. § 1 (1982 & Supp. III 1985), by successfully exhorting Pennsylvania dentists to refuse to contract with Blue Shield to provide dental services to Blue Shield subscribers. The district court granted the organized dentists' motion for summary judgment on the antitrust claims and dismissed Blue Shield's pendent state law claims without discussion.*fn2 We reverse.

I.

Blue Shield is a non-profit health services insurance company incorporated under the Pennsylvania Health Services Plan Corporations statute. 40 Pa. Cons. Stat. Ann. §§ 6301-6335 (Purdon 1986). It provides subscribers with prepaid medical, dental, and related health services. Blue Shield's dental coverage plan invites dentists to become participants by agreeing to accept reimbursement from Blue Shield for services rendered, but it limits such reimbursement to a percentile of the usual charges of dentists of a similar specialty. Blue Shield subscribers are permitted, under the plan, to use the services of non-participating dentists, but those dentists are free to charge patients the difference between what Blue Shield will pay and what they decide to charge. This practice is known as balance billing. The participating dentists undertake not to engage in that practice. Thus, the economic effect of becoming a participating dentist is to agree to sell services to Blue Cross for its subscribers at what in many cases will be a discount. The benefits of becoming a participating dentist are direct payment from Blue Cross and increased patronage from Blue Cross subscribers seeking to avoid balance billing.

To assure itself that insured and non-insured dental care prices are commensurable, Blue Shield requires dentists to submit to in-office reviews. These reviews of insured and non-insured patients' files take place at both participating and non-participating dentists' offices. Comparisons are made by Blue Shield for the purpose of determining standard dental service fees. Blue Shield also requires both participating and non-participating dentists to certify on claim forms that the charges are their most frequent charges.

Blue Shield sells its prepaid dental services plan on a group-only basis. It sold its first group plan in January of 1972. That plan met with initial market success. By the middle of 1974, Blue Shield had achieved the goal of having 70% of the state's dentists as participating dentists. About that time, however, Blue Shield began to encounter resistance from the organized dentists. Eventually, a large number of dentists withdrew from participation.

II.

The summary judgment in this case does not present the problem of drawing inferences of conspiracy from circumstantial evidence. See Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986). The record contains an abundance of direct evidence of concerted action by the organized dentists intended to encourage Pennsylvania dentists to withdraw from or to avoid the status of Blue Shield participating dentists. That evidence includes: action by the Executive Board of the Erie County Dental Association, Inc., recommending that its members drop their participating dentist relationship: a resolution by the Erie County Dental Association membership opposing the concept of participating dentists and recommending that its members withdraw; publication by the Harrisburg Area Dental Society of its Dental Insurance Manual, which advocates a uniform and unified position by dentists in opposition to Blue Shield review of patient records for the purpose of determining commensurability of charges; a resolution by Fifth District Dental Society -- which includes the Harrisburg Area Dental Society and other groups -- that its membership should avoid contractual relationship with intermediaries like Blue Shield; a resolution by the Scranton District Dental Society that its members should not become participating dentists; and a resolution by the Luzerne County Dental Society requesting that its members become non-participants in the Blue Shield program.

There is also evidence that written pledges were circulated requiring undertakings by dentists to resign from participation. Various individual defendants, particularly Charles M. Ludwig, president-elect and later president of the Pennsylvania Dental Association, conducted individual meetings with dentists in which the dentists were urged to withdraw from participation. Moreover, officials of the Pennsylvania Dental Association met with Blue Shield representatives and informed Blue Shield that unless it modified the cost containment efforts to which the organized dentists objected, more resignations would take place. At the annual meeting of the Pennsylvania Dental Association House of Delegates, the Association's president expressed the hope that Blue Shield would yield. When Blue Shield did not yield, further departicipation resolutions were passed by other organized dental groups, including the York County Dental Society and the Montgomery-Bucks Dental Society. The Erie County Dental Association and the House of Delegates of the Pennsylvania Dental Association, organizations which had already passed departicipation resolution, renewed them. Not surprisingly, there is ample direct evidence that all of the defendants acted in concert on the issue of departicipation to put maximum pressure on Blue Shield to yield on its cost containment program. There is also ample direct evidence that the Pennsylvania Dental Association advised dentists by letter that they should resist disclosure to Blue Shield of certain patient information sought by it in the course of in-house reviews.

Following the meetings at which departicipation resolutions were adopted, there were mass withdrawals of participation by dentists. The percentage of participating dentists statewide, as compared to all dentists who submitted claims to Blue Shield, declined from greater than 72% in 1974 to less than 54% in the early 1980s.

In 1978, following the decisions in National Society of Professional Engineers v. United States, 435 U.S. 679, 55 L. Ed. 2d 637, 98 S. Ct. 1355 (1978), Bates v. State Bar of Arizona, 433 U.S. 350, 53 L. Ed. 2d 810, 97 S. Ct. 2691 (1977), and Goldfarb v. Virginia State Bar, 421 U.S. 773, 44 L. Ed. 2d 572, 95 S. Ct. 2004 (1975), one of the defendants, the Harrisburg Area Dental Society, was advised by counsel with respect to the legality of its Dental Insurance Manual dealing with participation in third-party dental plans. Accordingly, the Harrisburg Area Dental Society passed a resolution suspending its previously adopted policy of departicipation. That suspension resolution was not distributed to all dentists, however, and no effort was ...


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