Taichung City and 3 other Chinese Medical Associations

Case:

Key Words:

Chinese Medical Association, global budget system, national health insurance

Reference:

Fair Trade Commission Decision of April 1, 2009 (the 908th Commissioners' Meeting), Disposition Kung Ch'u Tzu No. 098057

Industry:

Professional Associations (9422)

Relevant Laws:

Article 14 of the Fair Trade Law

Summary:

1. A report was filed to the FTC, during 2007, that Chinese Medical Associations in Taichung City, Taichung County, Nantou County, and Changhua County held joint counselors and directors meeting on February 14, 2007. The associations resolved that in addition to basic member fees, Chinese medicals now also have to pay a NT$ 300,000"exit funds."The entry barrier is imposed to control the number of Chinese medicals and may violate Article 14 of the Fair Trade Law.
2. Findings of FTC after investigation
   1. Chinese Medical Associations in Taichung City, Taichung County, Nantou County, and Changhua County stipulated the"2007 Plan Controlling the Amount of Medicals in the Central Region"together on February 14, 2007. The contents include: 1. New hospitals, clinics, or cross-region doctors shall pay additional equity funds besides the member fees and opening expense. This also applies to Chinese medicals who practice medicine in the central region after graduation or passing the Chinese medical exam, provided that those assigned to a existing position or practice in other areas need not pay the additional equity fund. 2. Proceeds of the equity fund: if the number of Chinese medicals per 10 thousand people in the Central Region exceeds 1.6 times the number Chinese medicals per 10 thousand people in the whole bureau, then all hospitals and clinics will be encouraged to terminate the contracted health insurance through subsidies from the fund. 3. Effective from February 15, 2007 to December 31, 2007.
   2. The four associations impose the control plan in response to the"2007 Trail Project for Chinese Medical Clinical Payments and Budget Allocation for General Departments"by the Department of Health of the Executive Yuan. Under the said project, if the following condition is met, where the number Chinese medicals per 10 thousand people in the Central Region exceeds 1.6 times the number Chinese medicals per 10 thousand people in the whole bureau for two successive seasons, then the trial project will be suspended. In order to avoid reaching the above condition for Chinese medicals in the Central Region and avoid the termination of project, the four associations stipulate the plan to control the number of Chinese medicals.
3. Grounds for disposition and the resolution:
   1. Since 1998, Department of Health of the Executive Yuan initiated the global budget payment system for various medical divisions. As for Chinese medical clinic, only the eastern region receives a fixed percentage, while the rest five regions will get payments based on actual percentage under certain standards; the standards are subject to changes: prior to 2005, the number of insured in each region is the main index; however after 2006, the actual supply of medical service becomes the major index. There will be a seasonal evaluation based on certain formula, and the results will determine the total payments. Under the current budget allocation for Chinese medical clinic, after the central region receives the total amount for medical expenses, it shall report the average conversion factor based on the total medical service and then multiply it by the amount of service by individual Chinese medical or hospital for the payment. Thus, there are competitions among Chinese medicals in the central region.
   2. The four associations regulated the"2007 Plan Controlling the Amount of Medicals in the Central Region."On one hand, it builds an entry barrier by increasing the equity fund and impeding the number of new doctors; on the other hand, if there are too many Chinese medicals, the fund incentivizes hospitals in the Central Region to terminate contracted health insurance or move to other areas through subsidies in order to lower the number of medicals. Non-market factors are imposed to encourage business exit the market. Even though the associations alleged the plan to be a response to the unreasonable global budget payment system and conversion factor under the national health insurance, the Department of Health and Bureau of National Health Insurance have already indicated that they have not set other measures to avoid violations to the condition terminating the trial project. As a result, the action by the four associations did not comply with the policy of the Department of Health and has not been approved; thus, it cannot be an excuse to justify their action.
   3. Chinese Medical Associations in Taichung City, Taichung County, Nantou County, and Changhua County stipulated the"2007 Plan Controlling the Amount of Medicals in the Central Region"together to control the number of practice Chinese medicals by building a market entry barrier. They use the authority of associations or other means to restrict business activities. Their act was sufficient to affect the supply and demand of Chinese Medical Service of the National Health Insurance in the Central Region and constituted a concerted action in Article 7 of the Fair Trade Law; therefore; it violated Article 14(1) of the Fair Trade Law. Each Association was imposed an administrative fine of NT $50,000 pursuant to Article 41 of the said law.

Summarized by Chiou, Shwu-Fen; supervised by Liao, Hsien-Chou