Illinois Hospital Brings Antitrust Suit Against Rival Hospital Alleging it Pressured Insurers not to Contract with Plaintiff

On February 5, Methodist Medical Center, in Peoria, Illinois, announced that it had filed an antitrust lawsuit in the United States District Court for the Central District of Illinois against OSF Saint Francis Hospital, Peoria’s largest hospital, accusing Saint Francis of impeding Methodist’s ability to compete with it for hospital patient admissions. Methodist contends that Saint Francis is the only area hospital that provides certain essential services, such as tertiary pediatric services, solid organ transplants, and NICU treatment of low birth rate babies, and that Saint Francis has sought to leverage that circumstance to pressure health insurers not to permit Methodist into their preferred provider networks. Specifically, Methodist alleges that Saint Francis has “threatened to withdraw from [insurers’] networks and take along with it the essential services that only Saint Francis can provide…if an insurer contracts with [Methodist],” and that, given Saint Francis’s status as a “must-have” have capitulated to Saint Francis’s demands.

In support of its claims, Methodist specifically alleges that Blue Cross Blue Shield of Illinois, the largest commercial health insurer in the area, denied Methodist’s request for network admission “because of pressure from Saint Francis,” and that “Blue Cross Blue Shield explained [to Methodist] that it could not offer Methodist an in-network contract because Saint Francis threatened to withdraw from BCBS’s PPO network if Methodist became a participating provider.” Methodist also alleges similar conduct by Saint Francis with respect to Humana and Aetna, and claims that Saint Francis “negotiated an agreement with Aetna [that required Aetna] to terminate its 23 year relationship with Methodist,” which Aetna did because it “needed Saint Francis as an in-network provider to compete with BCBS.”

As a consequence of Saint Francis’s alleged exclusionary conduct, according to Methodist, Methodist’s ability to obtain commercial insurance business has been largely foreclosed, leaving Methodist to compete only for Medicare, Medicaid and Tricare business, which offer lower reimbursement rates than commercial carriers. Methodist claims that Saint Francis’s conduct has caused it harm in excess of $100 million, which it seeks to have trebled under federal antitrust law principles and paid to Methodist in damages. A response to the complaint has not yet been filed by Saint Francis.

Notably, none of the insurers mentioned in Methodist’s complaint have been named as co-defendants in the action. Nevertheless, the case is another example of a health insurer being drawn into a provider antitrust dispute (as a third party witness, if not a party), which is an increasingly common phenomenon that imposes significant burdens on insurers. Given the recent increase in cases of this nature, the Methodist case is one to watch going forward.