Insurer and Physician Hospital Organization Turn Back Provider “Refusal to Deal” Antitrust Case
On April 16, Judge James M. Moody Jr. (E.D. Ark.) issued a ruling in Tri State Advanced Surgery Center v. Health Choice, dismissing an antitrust claim that Cigna Healthcare and Health Choice, a physician hospital organization, had entered into an unlawful agreement to destroy the business of the plaintiff, an ambulatory surgery center serving the greater Memphis metropolitan area. Specifically, the plaintiff maintained that Cigna and Health Choice, which includes Methodist LeBonheur Healthcare (the largest hospital system in the Memphis metropolitan area), had conspired to harm Tri State by agreeing that Cigna would threaten physicians with expulsion from Cigna’s PPO network if they continued to refer patients to Tri State.
In support of its claim, Tri State maintained that the alleged agreement was an anticompetitive boycott of its services, entitled to per se condemnation. However, the Court rejected plaintiff’s argument, holding that the per se rule is limited to horizontal agreements to harm competitors, and that while plaintiff had alleged that “Health Choice had made the agreement on behalf of its joint venture partner Methodist, in an attempt to eliminate competition against Methodist,” because Methodist was not a defendant in the case, and neither Cigna nor Health Choice was a competitor or Tri State, this allegation was insufficient. Accordingly, plaintiff’s claim was required to be assessed under the rule of reason.
Examining plaintiff’s allegations under the rule of reason, the Court then held that Tri State’s allegations were insufficient as a matter of law. Required to show either “market power or proof of actual detrimental effects,” Tri State’s complaint did not measure up. First, the court held that Tri State’s allegations of detrimental effects were inadequate, because Tri State did not allege that patients could not obtain ambulatory surgery services elsewhere in the region, and that Tri State “is still in business and all its services [remain] available to patients.”
Turning next to whether Tri State had sufficiently alleged market power (which would permit a presumption of harm), the Court held that Tri State’s allegations in this regard were also inadequate. The relevant product market for Tri State’s claim was not patients covered by Cigna insurance, but the market for all patients requiring surgical services that do not require hospitalization. Because plaintiff’s complaint did not contain any market share information related to this market, and because Cigna holds only a 42% share of the commercial insurance market in the area, plaintiff’s allegations failed as a matter of law.
In addition, finding that “the deficiencies [in Tri State’s] complaint are inherent in the nature of the claims and not likely to be cured by further pleading,” Judge Moody dismissed Tri State’s antitrust claim with prejudice. Judge Moody then declined to exercise supplement jurisdiction over the plaintiff’s state law claims, dismissing them without prejudice. Whether Tri State will appeal the ruling is unclear at this time.