Antitrust Law Daily Wrap Up, ADVERTISING—S.D. Tex.: Hospital’s Lanham Act claims against Aetna fail, (Oct 28, 2015)

By Linda O’Brien, J.D., LL.M.

A local hospital failed to establish an injury required to pursue false advertising claims under the Lanham Act against managed health care company Aetna for allegedly disseminating untrue statements to Aetna plan sponsors and members about the hospital’s business practices in order to dissuade them from obtaining medical services from the hospital, the federal district court in Houston has held. Thus, Aetna’s motion for summary judgment was granted (Koenig v. Aetna Life Insurance Company, October 27, 2015, Hoyt, K.).

Physician-owned North Cypress Medical Center is a general acute care hospital offering a range of medical services, including an emergency room, surgery center, oncology unit, and pediatrics unit. Aetna Life Insurance Co. is a managed care company that provides access to coverage to its members pursuant to several health care benefit plans. Two of its plans—Preferred Provider Organization (PPO) and Point of Service (POS)—permit subscribers to obtain health care services from medical providers who set their fee schedules and have no contractual relationship with Aetna to provide services at reduced, pre-negotiated rates, referred to as “out-of-network” providers.

In 2007, North Cypress, an out-of-network provider for Aetna, implemented a “prompt pay discount” program in which patients received a discount on their coinsurance obligation if they paid upfront or within a limited time period. Since North Cypress was not a contracted medical provider with Aetna, it submitted claims for reimbursement for medical services rendered to various Aetna plan members.

In February 2013, North Cypress commenced suit against Aetna for nonpayment or underpayment of certain health care claims, alleging, in part, false advertising in violation of the Lanham Act. Specifically, North Cypress asserted that Aetna attempted to encourage plan sponsors and members to procure health care services from in-network providers rather than out-of-network providers by damaging North Cypress’ reputation in the market. Aetna filed a counterclaim for fraudulent billing and moved for summary judgment on certain North Cypress claims.

Lanham Act. The court found that North Cypress failed to identify an injury within the meaning of the Act. To establish a claim for false advertising under the Lanham Act, a plaintiff must show that the defendant made a false statement of fact about its product in a commercial advertisement, the statement actually deceived its audience, the deception was likely to influence the purchasing decision, and the plaintiff was injured as a result.

North Cypress alleged that Aetna engaged in false advertising by: (1) sending mailings to plan members advising them not to utilize North Cypress treatment facilities; and (2) communicating to plan sponsors untrue statements regarding North Cypress’ business practices, such as that North Cypress engaged in fraudulent billing, admitted non-emergent members to its ER and provided non-medically necessary services to make more money, and waived patient responsibilities.

According to the court, North Cypress did not provide evidence of false advertising disseminated by Aetna or that it lost business as a result of any false or misleading advertising circulated by Aetna. Allegations regarding communications between Aetna and a plan sponsor during which the sponsor expressed concern about North Cypress’ excessive charges were typical private business discussions relative to their ongoing business arrangement and not the type deemed actionable under the Lanham Act.

Furthermore, North Cypress presented no evidence that Aetna made false or misleading statements concerning North Cypress’ medical services or practices, thereby causing consumers to avoid obtaining treatment at North Cypress. Accordingly, North Cypress failed to raise a genuine issue of material fact on its false advertising claim and Aetna was entitled to summary judgment, the court determined.

The case is No. 4:13-cv-00359.

Attorneys: J. Douglas Sutter (Kelly, Sutter & Kendrick, P.C.) for North Cypress Medical Center Operating Co. Ltd. and North Cypress Medical Center Operating Co. GP, LLC. John Bruce Shely (Andrews Kurth LLP) for Aetna Life Insurance Co.

Companies: North Cypress Medical Center Operating Co. Ltd.; North Cypress Medical Center Operating Co. GP, LLC; Aetna Life Insurance Co.

Cases: Advertising TexasNews