Distinguishable Products and Tying Claims in Health Care Markets
Unlawful tying occurs when an entity with market power in one product (the “tying” product) agrees to sell that product but only on the condition that the buyer also agrees to buy a second product (the “tied” product), or at least agrees not to buy the tied product from a different seller. Essential to this definition is that the tying and tied products are two distinguishable products. But determining what constitutes distinguishable products is not always clear.
The Supreme Court, in a case involving an alleged tie between the use of hospital operating rooms and related anesthesiology services, held that the identification of separate products was determined by demand. That is to say, the question is whether there is sufficient demand by patients seeking treatment at the hospital that is separate from the demand for connected anesthesiology services provided at the hospital. Under the facts of the case, the Supreme Court ruled that there was not sufficient separate demand for these services and, therefore, no viable tying claim.
Recently, courts have grappled with the issue of whether single-source contracting by a hospital system could, under certain facts, satisfy the elements of an unlawful tie. At least one court has refused to throw out claims of tying based on the allegation that a health system with market power for general acute care hospital services in one geographic area tied the sale of those services to the sale of general acute care hospital services offered by the same system in a separate geographic area. How this ultimately plays out could have significant implications for health care providers operating in different geographic markets.