
USCA1 Opinion

	




          March 17, 1993    UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                _____________________          No. 92-1270                        U. S. HEALTHCARE, INC., ETC., ET AL.,                               Plaintiffs, Appellants,                                          v.                             HEALTHSOURCE, INC., ET AL.,                                Defendants, Appellees                                _____________________                                     ERRATA SHEET               The opinion of  this court  issued on February  26, 1993  is          amended as follows:               In footnote 1, l. 2, replace "1992" with "1991".               On page 7, l. 9, replace "mid-1992" with "mid-1991".          March 12, 1993    UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                _____________________          No. 92-1270                        U. S. HEALTHCARE, INC., ETC., ET AL.,                               Plaintiffs, Appellants,                                          v.                             HEALTHSOURCE, INC., ET AL.,                                Defendants, Appellees                                _____________________                                     ERRATA SHEET               The opinion of  this court  issued on February  26, 1993  is          amended as follows:               On page 7, three lines above section II, replace "1992" with          "1991".          February 26, 1993                            UNITED STATES COURT OF APPEALS                                For The First Circuit                                 ____________________        No. 92-1270                        U. S. HEALTHCARE, INC., ETC., et al.,                               Plaintiffs, Appellants,                                          v.                          HEALTHSOURCE, INC., ETC., et al.,                                Defendants, Appellees.                                 ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                          FOR THE DISTRICT OF NEW HAMPSHIRE                      [William H. Barry, Jr., Magistrate Judge]                                              ________________                                 ____________________                                        Before                      Torruella, Cyr and Boudin, Circuit Judges.                                                 ______________                                 ____________________            Franklin Poul with whom Dana B.  Klinges, Mark L. Heimlich,  Wolf,            _____________           ________________  ________________   ____        Block, Schorr and Solis-Cohen, Andrew D. Dunn, Thomas Quarles, Jr. and        _____________________________  ______________  __________________        Devine, Millimet & Branch were on brief for appellants.        _________________________            Thomas Campbell with whom Deborah H. Bornstein, James W.  Teevans,            _______________           ____________________  _________________        Gardner,  Carton &  Douglas, William  J. Donovan,  Peter S.  Cowan and        ___________________________  ___________________   _______________        Sheehan, Phinney, Bass & Green were on brief for appellees.        ______________________________                                 ____________________                                  February 26, 1993                                 ____________________                 BOUDIN, Circuit Judge.   U.S. Healthcare and two related                         _____________            companies  (collectively  "U.S.  Healthcare")   brought  this            antitrust case  in the district  court against  Healthsource,            Inc.,  its founder and one  of its subsidiaries.   Both sides            are  engaged  in  providing medical  services  through health            maintenance organizations ("HMOs") in  New Hampshire.  In its            suit U.S.  Healthcare challenged an exclusive  dealing clause            in the contracts between the Healthsource HMO and doctors who            provide primary care for it in New Hampshire.   After a trial            in district  court, the magistrate judge  found no violation,            and U.S. Healthcare appealed.  We affirm.                                   I.  BACKGROUND                  Healthsource New Hampshire is an HMO founded in 1985  by            Dr. Norman Payson  and a  group of doctors  in Concord,  N.H.            Its  parent company,  Healthsource,  Inc., is  headed by  Dr.            Payson and it manages or has interests in HMOs in a number of            states.  We  refer to  both the  parent company  and its  New            Hampshire HMO as "Healthsource."                 In  simpler  days, health  care  comprised  a doctor,  a            patient and sometimes a hospital, but the Norman Rockwell era            of medicine  has given  way to  a  new world  of diverse  and            complex insurance and provider arrangements.  One of the more            successful  innovations is  the  HMO, which  acts  both as  a            health  insurer  and  provider,  charging  employers  a fixed            premium for each employee who subscribes.  To provide medical                                         -2-                                         -2-            care to subscribers, an HMO of Healthsource's type--sometimes            called an individual practice association or "IPA" model HMO-            -contracts with independent doctors.  These doctors  continue            to treat other patients,  in contrast to a "staff"  model HMO            whose doctors  would normally  be full-time employees  of the            HMO.                   HMOs  often can  provide health  care at  lower  cost by            stressing  preventative care, controlling  costs, and driving            hard bargains  with doctors or hospitals  (who thereby obtain            more   patients   in   exchange   for   a   reduced  charge).            Healthsource, like other HMOs, uses primary care physicians--            usually internists but  sometimes pediatricians or others--as            "gatekeepers"  who direct  the patients  to specialists  only            when necessary  and who  monitor hospital stays.   Typically,            the contracting primary care physicians do not charge  by the            visit but are paid  "capitations" by the HMO, a  fixed amount            per  month for  each patient  who selects  the doctor  as the            patient's  primary care  physician.   Unlike  a patient  with            ordinary health insurance, the HMO patient  is limited to the            panel of doctors who have contracted with the HMO.                 There  are  familiar  alternatives  to  HMOs.    At  the            "financing"  end, these include traditional insurance company            policies that reimburse patients for doctor or hospital bills            without  limiting the patient's choice of  doctor, as well as            Blue Cross/Blue  Shield plans  of various types  and Medicare                                         -3-                                         -3-            and  Medicaid programs.  At the "provider" end, there is also            diversity.  Doctors may now form so-called preferred provider            organizations, which may include  peer review and other joint            activities, and contract together to provide medical services            to large buyers like  Blue Cross or to "network"  model HMOs.            There are  also ordinary group  medical practices.   And,  of            course, there are still doctors engaged solely in independent            practice on a fee-for-service basis.                 Healthsource's  HMO operations in  New Hampshire  were a            success.  At the time of suit, Healthsource was the only non-            staff HMO in the  state with 47,000 patients (some  in nearby            areas of Massachusetts), representing  about 5 percent of New            Hampshire's  population.    Stringent controls  gave  it  low            costs,  including a  low  hospital utilization  rate; and  it            sought  and  obtained  favorable  rates  from  hospitals  and            specialists.      Giving   doctors   a   further   stake   in            Healthsource's success  and incentive to  contain costs,  Dr.            Payson apparently  encouraged doctors to  become stockholders            as well, and  at least 400  did so.  By  1989 Dr. Payson  was            proposing to make Healthsource  a publicly traded company, in            part to permit greater liquidity for its doctor shareholders.                 U.S.  Healthcare is  also in  the business  of operating            HMOs.  U.S.  Healthcare, Inc.,  the parent of  the other  two            plaintiff  companies--U.S.  Healthcare, Inc.  (Massachusetts)            and  U.S.  Healthcare  of  New Hampshire,  Inc.--may  be  the                                         -4-                                         -4-            largest  publicly  held  provider  of  HMO  services  in  the            country, serving  over one million patients  and having total            1990 revenues of well over a billion dollars.  Prior to 1990,            its Massachusetts subsidiary had  done some recruiting of New            Hampshire  doctors  to  act  as primary  care  providers  for            border-area residents  served by  its Massachusetts HMO.   In            1989, U.S. Healthcare had a substantial interest in expanding            into New Hampshire.                   Dr.  Payson  was aware  in the  fall  of 1989  that HMOs            operating in other states  were thinking about offering their            services  in New Hampshire.  He was also concerned that, when            Healthsource  went public,  many  of its  doctor-shareholders            would  sell   their  stock,  decreasing  their   interest  in            Healthsource and their incentive to control its costs.  After            considering alternative incentives, Dr. Payson  and the HMO's            chief operating officer conceived the exclusivity clause that            has prompted this litigation.  Shortly after the Healthsource            public offering in  November 1989, Healthsource  notified its            panel doctors that they would receive greater compensation if            they agreed not to serve any other HMO.                 The  new  contract  term, effective  January  26,  1990,            provided for  an increase in the  standard monthly capitation            paid to  each primary  care physician, for  each Healthsource            HMO patient cared for by that doctor, if the doctor agreed to                                         -5-                                         -5-            the  following  optional  paragraph  in   the  basic  doctor-                            ________            Healthsource agreement:                 11.01 Exclusive Services  of Physicians.  Physician                       _________________________________                 agrees  during the  term of  this Agreement  not to                 serve  as a  participating physician for  any other                 HMO  plan;   this  shall  not,   however,  preclude                 Physician  from   providing  professional  courtesy                 coverage arrangements for brief periods of  time or                 emergency services to members of other HMO plans.            A doctor who adopted  the option remained free to  serve non-            HMO patients  under  ordinary indemnity  insurance  policies,            under  Blue  Cross\Blue  Shield  plans,  or  under  preferred            provider  arrangements.   A  doctor who  accepted the  option            could also return to  non-exclusive status by giving notice.1                 Although  Healthsource  capitation  amounts   varied,  a            doctor   who  accepted   the  exclusivity   option  generally            increased his  or her capitation  payments by  a little  more            than $1 per patient  per month; the magistrate judge  put the            amount at  $1.16  and said  that  it represented  an  average            increase of  about 14 percent as  compared with non-exclusive            status.  The dollar benefit of  exclusivity for an individual            doctor  obviously  varies with  the  number  of HMO  patients            handled by the doctor.  Many of the doctors had less than 100            Healthsource patients while about 50 of them had 200 or more.                                            ____________________                 1The  original notice  period was  180 days.   This  was            reduced to  30 days in March  or April 1991.   It appears, at            least  in  practice,  that  a  doctor  could  switch to  non-            exclusive  status more rapidly by returning some of the extra            compensation previously paid.                                         -6-                                         -6-            About 250  doctors, or  87 percent of  Healthsource's primary            care physicians, opted for exclusivity.                 U.S.  Healthcare through  its  New Hampshire  subsidiary            applied  for a New Hampshire  state license in  the spring of            1990, following an earlier  application by its  Massachusetts            subsidiary.  A cease and desist order was entered against it,            limiting its  marketing efforts, because of  premature claims            that it  had approval to operate in the state.  The cease and            desist order  was withdrawn  on February  15,  1991, and  the            license  issued  on  February  21,  1991,  subject  to  later            approval  of marketing materials.  The present suit was filed            in district court by U.S. Healthcare against Healthsource and            Dr. Payson on March  12, 1991.  By mid-1991,  U.S. Healthcare            had  only two  New  Hampshire "accounts"  and  only about  18            primary care physicians.                 In  the district court,  U.S. Healthcare  challenged the            exclusivity clause under sections 1 and 2 of the Sherman Act,            15 U.S.C.     1-2, and  under state antitrust  and tort  law.            The parties  stipulated to  trial before a  magistrate judge.            After discovery,  two separate weeks of  trial were conducted            in August and September 1991.  In a decision filed on January            30, 1992, the  magistrate judge found  for the defendants  on            all counts.  This appeal followed.                                    II. DISCUSSION                                         -7-                                         -7-                 In this court,  U.S. Healthcare attacks the  exclusivity            clause primarily  as a  per se  or near per  se violation  of            section 1; accordingly we begin by examining the case through            the per se or  "quick look" lenses urged by  U.S. Healthcare.            We then  consider the claim  recast in the  more conventional            framework of  Tampa Electric Co.  v. Nashville Coal  Co., 365                          __________________     ___________________            U.S.  320   (1961),  the  Supreme  Court's   latest  word  on            exclusivity contracts, appraising them under section 1's rule            of reason.  Finally,  we address U.S. Healthcare's claims  of            section 2 violation and  its attacks on the market-definition            findings of the magistrate judge.                   The Per Se  and "Quick Look" Claims.   U.S. Healthcare's                 ___________________________________            challenge to  the exclusivity clause, calling it  first a per            se violation  and later  a monopolization offense,  invokes a            signal  aspect  of antitrust  analysis: the  same competitive            practice may be reviewed  under several different rubrics and            a plaintiff may prevail by establishing a claim under any one            of  them.   Thus, while  an exclusivity arrangement  is often            considered  under  section 1's  rule of  reason, it  might in            theory play  a role in a  per se violation of  section 1, cf.                                                                      __            Eastern States Retail Lumber Dealers' Ass'n v. United States,            ___________________________________________    _____________            234 U.S. 600 (1914), or as  an element in attempted or actual            monopolization, United States v. United Shoe Machinery Corp.,                            _____________    ___________________________            110 F.  Supp. 295 (D. Mass. 1953), aff'd per curiam, 347 U.S.                                               ________________                                         -8-                                         -8-            521  (1954).   But  each rubric  has  its own  conditions and            requirements of proof.                 We begin, as U.S. Healthcare does, with the per se rules            of section 1 of the Sherman Act.  It is a familiar story that            Congress left the  development of the Sherman  Act largely to            the courts and they in turn responded by  classifying certain            practices as per se  violations under section 1.   Today, the            only serious candidates for this label are  price (or output)            fixing agreements  and  certain group  boycotts or  concerted                                    _______            refusals to  deal.2    The advantage to  a plaintiff is  that            given  a per se violation, proof of the defendant's power, of            illicit purpose and of anticompetitive effect are all said to            be irrelevant,  see United  States v. Socony-Vacuum  Oil Co.,                            ___ ______________    ______________________            310 U.S.  150 (1940); the  disadvantage is the  difficulty of            squeezing a practice into the ever narrowing per se nitch.                 U.S. Healthcare's main argument  for per se treatment is            to  describe the exclusivity clause  as a group  boycott.  To            understand why the claim  ultimately fails one must begin  by            recognizing that per se condemnation is  not visited on every            arrangement  that might, as a matter of language, be called a            group boycott  or concerted refusal  to deal.   Rather, today            that designation  is principally reserved for  cases in which                                            ____________________                 2Tying is sometimes  also described as a  per se offense            but, since some element  of power must be shown  and defenses            are  effectively available, "quasi" per se  might be a better            label.   See Eastman  Kodak Co. v.  Image Technical Services,                     ___ __________________     _________________________            Inc., 112 S. Ct. 2072 (1992).              ___                                         -9-                                         -9-            competitors agree with each other not to deal with a supplier            or distributor  if it  continues to serve  a competitor  whom            they  seek to injure.  This is the "secondary boycott" device            used in  such classic boycott cases as  Eastern States Retail                                                    _____________________            Lumber  Dealers'  Ass'n,  and Fashion  Originators'  Guild of            _______________________       _______________________________            America, Inc. v. FTC, 312 U.S. 457 (1941).            ____________     ___                 We doubt  that the  modern Supreme  Court would use  the            boycott  label to describe, or the rubric to condemn, a joint            venture  among competitors in which participation was allowed            to some but not  all, compare Northwest Wholesale Stationers,                                  _______ _______________________________            Inc. v.  Pacific  Stationery &  Printing  Co., 472  U.S.  284            ___      ____________________________________            (1985), with  Associated Press v.  United States, 326  U.S. 1                    ____  ________________     _____________            (1945), although  such a restriction might well  fall after a            more complete analysis  under the  rule of reason.   What  is            even more  clear is that  a purely  vertical arrangement,  by            which  (for example) a supplier  or dealer makes an agreement            exclusively to supply or serve a manufacturer, is not a group            boycott.   See Klor's, Inc. v. Broadway-Hale Stores, 359 U.S.                       ___ ___________     ____________________            207, 212 (1959);  Corey v.  Look, 641 F.2d  32, 35 (1st  Cir.                              _____     ____            1981).  Were the law otherwise, every distributor or retailer            who  agreed with a manufacturer  to handle only  one brand of            television  or bicycle would be engaged in a group boycott of            other manufacturers.                 There are multiple reasons why the law permits (or, more            accurately, does not condemn per se) vertical exclusivity; it                                         -10-                                         -10-            is enough to say here that the incentives for  and effects of            such arrangements  are usually more benign  than a horizontal            arrangement among competitors that none of them will supply a            company that deals  with one  of their competitors.   No  one            would think twice about  a doctor agreeing to work  full time            for a  staff HMO, an  extreme case  of vertical  exclusivity.            Imagine, by contrast, the motives and effects of a horizontal            agreement by  all of the doctors  in a town not to  work at a            hospital that  serves a  staff HMO  which  competes with  the            doctors.                    In this case, the exclusivity arrangements challenged by            U.S. Healthcare are vertical in  form, that is, they comprise            individual  promises  to  Healthsource made  by  each  doctor            selecting  the option  not to  offer his  or her  services to            another HMO.    The closest  that U.S. Healthcare  gets to  a            possible  horizontal  case  is  this: it  suggests  that  the            exclusivity clause in question, although vertical in form, is            in substance an implicit  horizontal agreement by the doctors            involved.  U.S. Healthcare appears to argue that stockholder-            doctors dominate Healthsource and,  in order to protect their            individual interests (as  stockholders in Healthsource), they            agreed  (in their capacity as  doctors) not to  deal with any            other HMO  that might  compete with  Healthsource.   We agree            that  such  a  horizontal  arrangement, if  devoid  of  joint            venture efficiencies, might warrant per se condemnation.                                           -11-                                         -11-                 The  difficulty is that there  is no evidence  of such a            horizontal agreement in this  case.  Although U.S. Healthcare            notes   that   doctor-stockholders    predominate   on    the            Healthsource board that adopted  the option, there is nothing            to  show that  the clause  was devised  or encouraged  by the            panel doctors.   On the  contrary, the record  indicates that            Dr.  Payson  and   Healthsource's  chief  operating   officer            developed the option  to serve Healthsource's own  interests.            Formally  vertical arrangements  used to  disguise horizontal            ones are not unknown, see Interstate  Circuit, Inc. v. United                                      ________________________     ______            States, 306 U.S. 208 (1939), but U.S. Healthcare has supplied            ______            us with no evidence of such a masquerade in this case.                 There  is   less  to  be  said   for  U.S.  Healthcare's            alternative argument that, if per se treatment is not proper,            then at least the exclusivity clause can be  condemned almost            as swiftly based  on "a quick look."   Citing FTC  v. Indiana                                                          ___     _______            Federation of  Dentists,  476 U.S.  447 (1986),  and NCAA  v.            _______________________                              ____            Board of  Regents, 468 U.S. 85 (1984), U.S. Healthcare argues            _________________            that  the exclusivity clause is  so patently bad  that even a            brief  glance at  its impact,  lack  of business  benefit and            anticompetitive  intent suffice  to  condemn it.   The  cases            relied on provide little  help to  U.S. Healthcare  and, even            on  its own  version  of those  cases,  the facts  would  not            conceivably  justify  a  "quick  look"  condemnation  of  the            clause.                                         -12-                                         -12-                 In  the  cited   cases,  the   Supreme  Court   actually            contracted  the  per  se rule  by  refusing  to  apply it  to            horizontal agreements  that involved price  and output fixing            (television rights  by NCAA members) or the  setting of other            terms of trade  (refusal of dentists by  agreement to provide            x-rays  to  insurers).     Given  the  unusual  contexts  (an            interdependent sports league in one case; medical care in the            other), the  Court declined  to condemn the  arrangements per            se, without at least weighing the alleged justifications.  At            the same time it  required only the briefest  inspection (the            cited "quick look") for  the Court to reject the  excuses and            strike  down the  agreements.   Accord,  National Society  of                                            ______   ____________________            Professional Engineers v. United States, 435 U.S. 679 (1978).            ______________________    _____________                 In  any event,  no "quick  look" would  ever suffice  to            condemn  the  exclusivity  clause  at  issue  in  this  case.            Exclusive  dealing arrangements come  with the  imprimatur of            two leading Supreme Court decisions describing the  potential            virtues  of such  arrangements.   Tampa; Standard Oil  Co. of                                              _____  ____________________            California v.  United States,  337 U.S. 293  (1949) (Standard            __________     _____________                         ________            Stations); see also Jefferson  Parish Hospital District No. 2            ________   ________ _________________________________________            v. Hyde,  466 U.S. 2,  46 (1984) (O'Connor,  J., concurring).               ____            To condemn such arrangements  after Tampa requires a detailed                                                _____            depiction of  circumstances and the most  careful weighing of            alleged  dangers and potential benefits, which  is to say the                                         -13-                                         -13-            normal treatment afforded  by the  rule of reason.   To  that            subject we now turn.                 Rule of  Reason.  Exclusive  dealing arrangements,  like                 _______________            information exchanges or standard settings, come in a variety            of  forms and  serve a  range  of objectives.    Many of  the            purposes are benign, such as assurance of supply  or outlets,            enhanced ability to plan, reduced transaction costs, creation            of  dealer loyalty, and the like.  See Standard Stations, 337                                               ___ _________________            U.S. at 307.  But there is one common danger for competition:            an  exclusive  arrangement may  "foreclose"  so  much of  the            available supply or outlet capacity that existing competitors            or new entrants may be limited or excluded and, under certain            circumstances,  this may  reinforce  market  power and  raise            prices for consumers.                   Although   the   Supreme   Court   once  said   that   a            "substantial"  percentage foreclosure of suppliers or outlets            would violate section 1, Standard Stations, the Court's Tampa                                     _________________              _____            decision effectively replaced  any such quantitative  test by            an  open-ended  inquiry into  competitive  impact.   What  is            required  under Tampa is to determine "the probable effect of                            _____            the [exclusive]  contract on  the relevant area  of effective            competition,  taking into  account . .  . .  [various factors            including]  the probable immediate  and future  effects which            pre-emption  of  that  share  of  the  market  might have  on            effective  competition therein."  365 U.S. at 329.  The lower                                         -14-                                         -14-            courts have followed Tampa  and under this standard judgments                                 _____            for  plaintiffs are not  easily obtained.   See ABA Antitrust                                                        ___            Section, Antitrust  Law Developments 172-73,  176-78 (3d  ed.            1992) (collecting cases).                 On  this appeal  we  are handicapped  in appraising  the            extent and impact of  the foreclosure wrought by Healthsource            because  U.S.  Healthcare  has  not  chosen  to  present  its            argument in these traditional terms.  Tampa is not even cited                                                  _____            in the opening or reply briefs.  Some useful facts pertaining            to  the extent  of the  foreclosure are  adverted to  in U.S.            Healthcare's  opening  "statement  of  the  case"  but  never            seriously  developed in  the argument  section of  its brief.            Since the brief itself also describes countervailing evidence            of Healthsource, something more is  assuredly needed.  In the            two paragraphs  of its "quick look"  formulation addressed to            "anticompetitive impact," U.S. Healthcare simply asserts that            competitive impact  has already  been discussed and  that the            exclusivity clause has  completely foreclosed U.S. Healthcare            and any other non-staff HMO from operation in New Hampshire.                 This  is not a persuasive treatment of a difficult issue            or, rather, a host of issues.  First, the extent to which the            clause operated economically to restrict doctors is a serious            question.3   True,  most doctors  signed up  for it;  but who                                            ____________________                 3Even with no notice period, Healthsource's differential            pricing policy--paying  more to those  who exclusively  serve            Healthsource--would disadvantage competing HMOs.  Some courts                                         -15-                                         -15-            would not take the extra compensation  when no competing non-            staff HMO was  yet operating?   The extent  of the  financial            incentive to remain in an  exclusive status is unclear, since            it varies with patient  load, and the least loaded  (and thus            least constrained  by the  clause) doctors would  normally be            the  best  candidates  for  a competing  HMO.    Healthsource            suggests that  by relatively modest amounts,  U.S. Healthcare            could offset  the exclusivity bonus for  a substantial number            of  Healthsource  doctors.    U.S.  Healthcare's reply  brief            offers no response.                   Second, along with the  economic inducement is the issue            of duration.  Normally an exclusivity clause terminable on 30            days' notice would be close to a de minimus constraint (Tampa                                             __________             _____            involved a 20-year contract, and  one year is sometimes taken            as the trigger  for close scrutiny).   On the other  hand, it            may be that  the original 180-day  clause did frustrate  U.S.            Healthcare's initial efforts to enlist panel doctors, without            whom it would  be hard to sign up employers.   Perhaps even a            30-day  clause  would  have  this  effect,  especially  if  a            reimbursement penalty were visited  on doctors switching back            to non-exclusive status.  Once again, U.S. Healthcare's brief            offers conclusions  and a few record  references, but neither                                            ____________________            hesitate to apply the  exclusivity label to such arrangements            because  there  is no  continuing  promise not  to  deal (see            Antitrust Developments, supra, at  176), but the differential                                    _____            pricing  plan is  unquestionably part  of  a contract  and so            subject to section 1, whatever label may be applied.                                         -16-                                         -16-            the  precise  operation  of the  clause  nor  its effects  on            individual doctors are clearly settled.                 Third, even  assuming that the  financial incentive  and            duration  of the  exclusivity clause did  remove many  of the            Healthsource  doctors  from the  reach  of  new HMOs,  it  is            unclear how much this foreclosure impairs the ability  of new            HMOs to  operate.    Certainly the  number  of  primary  care            physicians  tied to Healthsource  was significant--one figure            suggested  is 25  percent or  more of  all such  primary care            physicians  in New  Hampshire--but this  still leaves  a much            larger number not  tied to Healthsource.  It may  be, as U.S.            Healthcare  urges,  that  many of  the  remaining "available"            doctors cannot  fairly be counted (e.g.,  those employed full                                               ____            time elsewhere, or reaching retirement, or unwilling to serve            HMOs at all).   But  the dimensions of  this limitation  were            disputed  and, by the same  token, new doctors are constantly            entering the market with an immediate need for patients.                 U.S. Healthcare lays great stress upon claims, supported            by some meeting notes of Healthsource staff members, that the            latter was aware of new HMO entry and conscious that new HMOs            like  U.S.  Healthcare could  be  adversely  affected by  the            exclusivity clause.4   Healthsource  in turn says  that these                                            ____________________                 4Two examples  of these  staff notes give  their flavor:            "Looking at '90 rates - and a deterent [sic] to joining other            HMOs (like Healthcare)"; and "amend contract (sending this or            next  week) based on  exclusivity.  HMOs  only (careful about            restraint  of trade) will be sent to even those in Healthcare                                         -17-                                         -17-            were notes made in the absence  of policy-making officers and            that  its  real motivation  for  the  clause  was to  bolster            loyalty and cost-cutting incentives.   Motive can, of course,            be a guide  to expected  effects, but effects  are still  the            central concern of the antitrust laws, and motive is mainly a            clue,  see Barry Wright Corp. v. ITT Grinnell Corp., 724 F.2d                   ___ _________________     _________________            227  (1st  Cir. 1983).   This  case  itself suggests  how far            motives in business arrangement  may be mixed, ambiguous, and            subject to dispute.   In any event, under Tampa  the ultimate                                                      _____            issue in  exclusivity cases remains the  issue of foreclosure            and its consequences.                 Absent   a   compelling   showing  of   foreclosure   of            substantial dimensions, we think  there is no need for  us to            pursue any  inquiry into  Healthsource's precise  motives for            the clause, the existence and measure of any claimed benefits            from exclusivity, the balance  between harms and benefits, or            the possible existence and  relevance of any less restrictive            means of achieving the benefits.  We are similarly spared the            difficulty of assessing the  fact that the clause  is limited            to  HMOs, a fact  from which more  than one  inference may be            drawn.   The point is  that proof of  substantial foreclosure            and  of  "probable  immediate  and  future  effects"  is  the            essential basis under  Tampa for an attack  on an exclusivity                                   _____            clause.  U.S. Healthcare has not supplied that basis.                                            ____________________            already . . . ."                                         -18-                                         -18-                 In formal terms U.S.  Healthcare has preserved on appeal            its claim that the exclusivity clause  unreasonably restrains            competition  in violation  of  section 1.    That concept  is            embraced  by  its complaint,  and  the  limited depiction  of            evidence  in its  appellate  briefs stirs  curiosity, if  not            suspicion.  But  putting to one  side its  per se claims  and            alleged  market  definition errors,  U.S.  Healthcare's basic            argument  in this court  must be that  the evidence compelled                                                                _________            the  magistrate judge to  find substantial foreclosure having            an  unreasonable   adverse  effect  on   competition.    U.S.            Healthcare,  as  plaintiff at  trial  and  appellant in  this            court,  had  the burden  of  fully  mustering the  facts  and            applying the  analysis to establish such a claim.  It has not            done so.                 In this  discussion, we  have placed little  weight upon            the  formal  finding  of   the  magistrate  judge  that  "the            [exclusivity] restriction does not constitute an unreasonable            restraint of trade under Section 1 of the Sherman Act."   His            finding  rested primarily  on the  premise that  whatever the            impact  of the clause on HMOs, ample competition remains in a            properly defined market,  which he found to  be one embracing            all  health   care  offered  throughout  the   state  of  New            Hampshire.5  On this view of the antitrust laws,  it does not                                            ____________________                 5On  the other hand, we do  not accept U.S. Healthcare's            effort  to salvage something from the decision by arguing the            magistrate judge found substantial  foreclosure in fact.  For                                         -19-                                         -19-            matter whether substantial foreclosure of new entrants occurs            so long  as widespread  competition prevails in  the relevant            market, thereby protecting consumers.6                 Whether  the  law requires  such  a  further showing  of            likely impact on consumers is open  to debate.  Our own  case            law  is not crystal clear  on this issue.   Compare Interface                                                                _________            Group, Inc. v. Mass Port Authority, 816 F.2d 9, 11 (1st  Cir.            ___________    ___________________            1981), with Corey v.  Look, 641 F.2d at  36.  Ultimately  the                        _____     ____            issue turns upon antitrust  policy, where a permanent tension            prevails  between  the "no  sparrow  shall  fall" concept  of            antitrust,  see Klor's, 359 U.S. at 213 (violation "not to be                        ___ ______            tolerated  merely because  the  victim is  just one  merchant            whose business is so small that his destruction makes  little            difference  to the  economy"),  and the  ascendant view  that            antitrust  protects  "competition,  not  competitors".    See                                                                      ___            Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 488            _______________    _______________________            (1977).   We need not confront this issue in a case where the            cardinal   requirement   of   a    valid   claim--significant            foreclosure  unreasonably  restricting  competitors--has  not            been demonstrated.                                            ____________________            the most part, the statements to which it points appear to us            to  be  efforts  by  the  magistrate  judge to  describe  the                                                                      ___            allegations made by U.S. Healthcare.            ___________                 6See, e.g., Dep't of Justice Merger Guidelines,    4.21,                  ___  ___   __________________________________            4.213, June 14,  1984, 49 Fed.  Reg. 26824, 26835-36  (1984),            adopting  this position.    The 1992  DOJ-FTC guidelines  are            directed  only to horizontal  mergers and do  not address the            issue.  49 Fed. Reg. 26823 (1992).                                         -20-                                         -20-                 Section 2.  Exclusive contracts might in some situations                 _________            constitute  the  wrongful  act   that  is  an  ingredient  in            monopolization  claims  under section  2.    See United  Shoe                                                         ___ ____________            Machinery Corp.  The  magistrate judge resolved these section            _______________            2 claims in  favor of Healthsource primarily  by defining the            market broadly  to include all  health care financing  in New            Hampshire.   So  defined, Healthsource  had a  share  of that            market  too small to support an attempt charge, let alone one            of  actual monopolization.   U.S. Healthcare argues, however,            that the market was misdefined.                 It may be  unnecessary to consider this claim  since, as            we  have already held, U.S.  Healthcare has failed  to show a            substantial foreclosure effect  from the exclusivity  clause.            After all, an act can be wrongful in the context of section 2            only  where  it  has  or  threatens  to  have  a  significant            exclusionary  impact.  But a  lesser showing of likely effect            might  be  required if  the actor  were  a monopolist  or one            _____            within striking  distance.   Compare   Berkey  Photo Inc.  v.                                         _______   __________________            Eastman  Kodak Co., 603 F.2d  263, 272 (2d  Cir. 1979), cert.            __________________                                      _____            denied, 444 U.S. 1093 (1980).  More important, the magistrate            ______            judge  dismissed  the  section   2  claims  based  on  market            definition and, if his  definition were shown to be  wrong, a            remand might  be required  unless we  were certain  that U.S.            Healthcare could never prevail.                                         -21-                                         -21-                 There is no subject in antitrust law more confusing than            market definition.  One  reason is that the concept,  even in            the pristine  formulation of economists,  is deliberately  an            attempt  to  oversimplify--for  working   purposes--the  very            complex economic interactions between a number of differently            situated  buyers and  sellers,  each of  whom in  reality has            different costs,  needs, and substitutes.   See United States                                                        ___ _____________            v.  E.I.  du  Pont De  Nemours  &  Co, 351  U.S.  377 (1956).                _________________________________            Further, when  lawyers and judges  take hold of  the concept,            they  impose   on  it  nuances  and   formulas  that  reflect            administrative and antitrust policy  goals.  This adaption is            legitimate (economists have no patent on the concept), but it            means that normative and descriptive ideas become intertwined            in the process of market definition.                 Nevertheless,   rational   treatment   is  assisted   by            remembering  to ask, in defining the market, why we are doing                                                         ___            so: that is, what is the antitrust question in this case that            market  definition aims  to answer?   This  threshold inquiry            helps  resolve U.S.  Healthcare's claim  that  the magistrate            judge  erred at the outset  by directing his  analysis to the            issue whether HMOs or health  care financing was the relevant            product  market.    This  approach,   says  U.S.  Healthcare,            mistakenly  focuses on  the  sale of  health  care to  buyers                                         ____            whereas its  concern is Healthsource's buying  power in tying                                                   ______            up doctors needed by other HMOs in order to compete.                                          -22-                                         -22-                 The magistrate  judge's approach  was correct.   One can            monopolize a  product as either a seller or a buyer; but as a            buyer of doctor services,  Healthsource could never achieve a            monopoly (monopsony is  the technical term),  because doctors            have  too   many  alternative  buyers  for  their  services.7            Rather,  the only way to cast Healthsource as a monopolist is            to  argue,  as  U.S.  Healthcare  apparently  did,  that  HMO            services  (or  even  IPA  HMOs) are  a  separate  health care            product sold  to consumers  such as employers  and employees.                    ____            If so, it  might become possible  (depending on market  share            and other  factors) to describe Healthsource  as a monopolist            or  potential  monopolist in  the sale  of  HMO (or  IPA HMO)            services in  New Hampshire, using the  exclusionary clause to            foster or reinforce the monopoly.                 Thus,  the  magistrate judge  asked the  right question.            Even  so U.S. Healthcare argues that he gave the wrong answer            in finding that HMOs were not a  separate market (it uses the            phrase  "submarket" but this does not alter the issue).  This            is a legitimate contention  and U.S. Healthcare has  at least                                            ____________________                 7U.S.  Healthcare,  of  course, is  not  concerned  with            Healthsource's ability  as a monopsonist  to exploit doctors;            it is concerned with its own ability to find doctors to serve            it. The latter  question--one of foreclosure--depends  on the            available supply  of doctors,  the constraint imposed  by the            exclusivity  clause, the  prospect for  entry of  new doctors            into the market, and similar issues.  Whether U.S. Healthcare            is foreclosed, however, does  not depend on whether consumers            treat HMOs  as a part of health care financing or as a unique            and separate product.                                         -23-                                         -23-            some basis  for it:   HMOs are often cheaper  than other care            methods because they emphasize illness prevention  and severe            cost  control.   U.S.  Healthcare also  seeks to  distinguish            cases defining  a broader  "health  care financing  market"--            cases heavily relied on by the magistrate judge--as involving            quite  different types of antitrust claims.   See, e.g., Ball                                                          ___  ____  ____            Memorial Hosp.,  Inc. v.  Mutual Hosp.  Ins., Inc., 784  F.2d            _____________________     ________________________            1325  (7th Cir. 1986).  Once again,  we agree that the nature            of the claim can affect the proper market definition.                 The  problem with  U.S.  Healthcare's argument  is  that            differences in  cost and quality between  products create the            possibility of  separate markets, not  the certainty.   A car            with  more features and a higher price is, within some range,            in the  same market  as one  with less  features and  a lower            price.     The  issue  is  sometimes   described  as  one  of            interchangeability   of  products  or  services,  see  duPont                                                              ___  ______            (discussing  cross-elasticity  of   demand),  although   this            formula is itself only an aid in trying to infer the shape of            the invisible demand curve facing the accused monopolist.  In            practice, the frustrating but  routine question how to define            the product market  is answered in antitrust  cases by asking            expert  economists  to  testify.    Here,  the  issue  for an            economist would  be whether a  sole supplier of  HMO services            (or IPA  HMOs if that  is U.S. Healthcare's  proposed market)            could raise price far enough over cost, and for a long enough                                         -24-                                         -24-            period, to enjoy monopoly  profits.  Usage patterns, customer            surveys,  actual profit levels,  comparison of features, ease            of entry, and many other facts are pertinent in answering the            question.                 Once again,  U.S. Healthcare  has not  made its  case in            this court.  The (unquantified) cost advantage of HMOs is the            only important fact supplied;  consumers might, or might not,            regard this benefit as just about offset by the limits placed            on  the patient's choice  of doctors.  To  be sure, there was            some  expert testimony in the district court on both sides of            the market  definition issue.   But if  there is any  case in            which counsel has the obligation to cull the record, organize            the  facts, and present them in the framework of a persuasive            legal  argument, it  is a  sophisticated antitrust  case like            this one.  Without such a showing on appeal, we  have limited            ability  to reconstruct so complex  a record ourselves and no            basis for overturning the magistrate judge.                 Absent the showing of  a properly defined product market            in which  Healthsource could approach monopoly  size, we have            no reason to consider the geographic dimension of the market.            If  health  care financing  is  the  product market,  as  the            magistrate  judge determined,  plainly  Healthsource  has  no            monopoly or anything close  to it, given the number  of other            providers  in New  Hampshire, such  as insurers,  staff HMOs,            Blue  Cross/Blue  Shield and  individual  doctors.   This  is                                         -25-                                         -25-            equally  so whether  the  geographic market  is southern  New            Hampshire  (as U.S. Healthcare claims) or the whole state (as            the magistrate judge found).                                   III. CONCLUSION                 Once  the federal  antitrust claims  are  found wanting,            this appeal is resolved.  U.S. Healthcare offers no authority            to  suggest that  New Hampshire  antitrust law  diverges from            federal law;  indeed, the state statute  encourages a uniform            construction.   N.H. Rev.  Stat. Ann.    356:14.   As for the            state  tort-law claims, primarily interference with potential            contractual   relationships,   the  magistrate   judge  dealt            effectively  with them,  and U.S.  Healthcare says  little on            appeal  to undercut his dismissal of those counts.  Given the            arguments made and the record evidence arrayed in this court,            affirmance of  the magistrate judge's judgment  on all counts            is clearly in order.                 Nevertheless,  we  do  not  think  that  this  case  was            inherently frivolous.  The  timing and original 180-day reach            of the  exclusivity clause could reasonably excite suspicion;            the clause may  have some  impact though the  extent of  that            impact remains  unclear; and  the motives of  Healthsource in            adopting the clause  may well have  been mixed.   Competition            remains an essential force in controlling costs and improving            quality  in health  care.  Courts are  properly available  to            settle  claims  that  one   business  device  or  another  is                                         -26-                                         -26-            unlawfully  suppressing competition  in this  vital industry.            Although  U.S. Healthcare's per se shortcut has taken it to a            dead  end, we  have addressed  the antitrust  issues at  such            length precisely because of the importance of the subject.                 Affirmed.                   ________                                         -27-                                         -27-
