Antitrust Law Daily Wrap Up, ANTITRUST—9th Cir.: Conspiracy, monopolization claims against Kaiser, SEIU properly rejected, (Mar 3, 2016)

By Greg Hammond, J.D.

A health care services company failed to sufficiently allege harm to competition or monopoly power in favor of conspiracy and monopolization claims against a competitor and two unions, the U.S. Court of Appeals in Pasadena has affirmed. The lower court’s order dismissing the antitrust claims was therefore affirmed (Prime Healthcare Services, Inc. v. Service Employees International Union, March 2, 2016, per curiam).

The health care services company—Prime Healthcare Services, Inc.—claimed that Kaiser Permanente, certain Kaiser affiliated companies, Service Employees International Union, and United Healthcare Workers-West (1) conspired to eliminate competing non-unionized hospitals, including Prime, in violation of Section 1 of the Sherman Act under the guise of the collective bargaining process and a labor-management agreement; and (2) monopolized, attempted to monopolize, and conspired to monopolize the acute care emergency hospital services market in similar geographies. The federal district court in San Diego dismissed the antitrust claims, finding that Prime failed to adequately allege its conspiracy and monopolization claims.

Harm to competition. The appellate court first agreed that Prime failed to sufficiently allege a conspiracy claim because there were no facts demonstrating that the defendants harmed competition in the acute care emergency hospital services market. Prime never alleged facts that any competitors have exited the market or reduced their production due to the alleged conspiracy, or that the defendants’ actions actually caused health care consumers to face higher prices or a reduction in quality of care, quantity of services, or overall choice of providers, the court noted. Further, conclusory allegations that an agreement had the effect of reducing consumers’ choices or increasing prices to consumers were insufficient to allege an injury to competition.

Monopoly power. Prime also failed to allege that the defendants possessed monopoly power in the relevant market, the court concluded. The complaint did not contain direct or circumstantial evidence of Kaiser’s alleged monopoly power. Instead, Prime claimed that: (1) the relevant hospital market includes at least 125 hospitals; (2) Kaiser owns 15 of those hospitals; and (3) Prime owns 11 hospitals. Kaiser’s ownership of 12 percent of the hospital market, however, “is simply not sufficient to show market dominance,” the court determined. In addition, allegations that Kaiser was affiliated with at least ten hospitals and otherwise contracts with more than 100 others were insufficient to demonstrate that Kaiser exercises power to control prices or exclude competition at these institutions.

The case is No. 13-57185.

Attorneys: Amanda Catherine Fitzsimmons (DLA Piper LLP) for Prime Healthcare Services, Inc. Nicole G. Berner for the Service Employees International Union. Jason Craig Murray (Crowell & Moring, LLP) for Kaiser Permanente. Scott K. Attaway (Kellogg, Huber, Hansen, Todd, Evans & Figel, PLLC) for Southern California Permanente Medical Group, Inc.

Companies: Prime Healthcare Services, Inc.; Service Employees International Union; United Healthcare Workers-West; Southern California Permanente Medical Group, Inc.

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