## Facts

- Blue Shield of Virginia and Blue Shield of Southwestern Virginia offered prepaid health service plans covering outpatient psychotherapy.
- Before 1972, the plans covered psychotherapy provided by psychiatrists or licensed clinical psychologists.
- In 1972, Blue Shield revised coverage to pay for psychological services only if they were (1) ordered and supervised by a physician and (2) billed through a physician (the “bill-through” requirement).
- The Virginia Academy of Clinical Psychologists and individual psychologists challenged the policy, alleging it functioned as a concerted refusal to deal that disadvantaged psychologists and favored physicians and psychiatrists.
- Plaintiffs asserted the policy reduced competition in outpatient psychotherapy by making psychologists dependent on physician referrals and billing channels.
- The dispute arose against the background of a Virginia statute requiring payment for covered services rendered by licensed psychologists acting within their scope of practice.

## Issues

1. Whether Blue Shield’s physician-supervision and bill-through requirements for reimbursing outpatient psychological services constituted an unreasonable restraint of trade under Sherman Act § 1.
2. Whether the restraint should be treated as a per se unlawful group boycott or evaluated under the rule of reason.
3. Whether the challenged conduct was exempt from federal antitrust liability under the McCarran–Ferguson Act as part of the “business of insurance.”

## Decision

- The Fourth Circuit reversed the district court and held the policy violated Sherman Act § 1 under a rule-of-reason analysis.
- The court rejected the district court’s conclusion that psychologists and psychiatrists were not competitors in the relevant market.
- The court found the policy had substantial anticompetitive effects, including reducing price competition and weakening psychologists’ economic independence.
- The court determined Blue Shield’s asserted quality-control and medical-necessity justifications did not outweigh the anticompetitive impact.
- The court held the McCarran–Ferguson Act did not immunize the policy from antitrust scrutiny.
- The case was remanded for the district court to fashion appropriate relief.

## Legal Principles

- A concerted reimbursement restriction that materially disadvantages competing providers can violate Sherman Act § 1 if, under the rule of reason, its anticompetitive effects outweigh any legitimate justifications.
- Competing health professionals may be treated as economic competitors where their services overlap and they serve similar patients in the same treatment market.
- Insurer rules governing which providers are paid, and on what conditions, may be subject to Sherman Act review when they distort provider competition without adequate procompetitive justification.
- The McCarran–Ferguson Act does not automatically exempt insurer conduct from antitrust law; conduct must fall within the protected “business of insurance” to receive immunity.

## Conclusion

The Fourth Circuit held that Blue Shield’s requirement that outpatient psychological services be ordered, supervised, and billed by a physician unreasonably restrained competition between psychologists and psychiatrists in the psychotherapy market, was not shielded by McCarran–Ferguson, and required remand for appropriate relief.


Va. Acad. of Clinical Psychologists v. Blue Shield of Va., 624 F.2d 476 (4th Cir. 1980)