Antitrust Law Daily Wrap Up, ANTITRUST—E.D. Ark.: Health care provider’s deficient refusal to deal claims discharged, (Apr 17, 2015)

By Greg Hammond, J.D.

Three health care providers failed to state valid refusal to deal claims under the Sherman Act against a third-party administrator and a joint venture. The federal district court in Jonesboro, Arkansas, dismissed the providers’ federal antitrust claims, finding that there were insufficient allegations to plead a proper product or geographic market (Tri State Advanced Surgery Center, LLC v. Health Choice, LLC, April 16, 2015, Moody, J.).

Background. Tri State Advanced Surgery Center is an ambulatory surgery center that offers outpatient surgery services to patients and provides increased patient choice in surgery options. Glenn Crosby and Michael Hood are surgeons who utilize Tri State to perform outpatient procedures on their patients. Health Choice is a physician-hospital organization between MetroCare Physicians, an independent physician association, and Methodist LeBonheur Healthcare, the dominant hospital system in the Memphis metropolitan area.

Tri State, Crosby, and Hood filed a complaint in June 2014, alleging that Health Choice engaged in a conspiracy with Cigna Healthcare, a major provider of commercial health insurance products, to boycott the plaintiffs and prevent them from contracting with insurers and referring patients to Tri State. As part of the conspiracy, Cigna allegedly agreed to terminate Crosby and Hood from its provider network and threatened to terminate other physicians unless they ceased referring patients to Tri State. Health Choice allegedly made the illegal agreement on behalf of Methodist to attempt to eliminate competition for Methodist, and Cigna made the agreement to keep Methodist in its provider network. Health Choice and Cigna moved to dismiss the plaintiffs’ claims.

Detrimental effects. The court first noted that the appropriate analysis in this case was under the rule of reason, where the plaintiffs were required to show that the agreement at issue had the potential for genuine adverse effects on competition, which could be shown by either market power or by proof of actual detrimental effects.

The plaintiffs argued that they alleged actual detrimental effects on competition. However, the court disagreed, finding that the plaintiffs failed to allege that (1) patients could not receive Tri State’s services absent in-network referrals or that patients could not obtain ambulatory surgical services elsewhere in the market; or (2) there had been a decline in the number of facilities that perform surgical procedures which do not require hospitalization or in the actual quality of these procedures. Further, Tri State was still open for business and all of its services were still available to patients.

Market power. As there was insufficient evidence of actual detrimental effects, the court noted that a more thorough analysis of market power is required under the rule of reason. The plaintiffs, according to the court, limited the market for surgical services or procedures obtained by patients covered by Cigna health insurance which do not require hospitalization. However, the relevant market must include all alternative patients available to plaintiffs and not be limited to those who pay by private insurance bought from Cigna or any other insurer, the court stated. The product market was therefore too narrow.

The court additionally found that the complaint lacked a well-defined relevant geographic market, which was defined as “the Memphis, Tennessee metropolitan area, including the adjacent counties in Mississippi and Arkansas.” However, the allegations in the complaint failed to name the adjacent counties or make any allegations specifically concerning those counties. Consequently, in the absence of sufficient allegations concerning the proper product and geographic markets, the court dismissed the Sherman Act claim with prejudice. Further, because the court dismissed all of the federal claims, it declined to exercise supplemental jurisdiction over the remaining state law claims.

The case number is 3:14cv143-JM.

Attorneys: Corey Darnell McGaha (Emerson Poynter LLP) for Tri State Advanced Surgery Center LLC. Lea Carol Owen (Baker, Donelson, Bearman, Caldwell & Berkowitz, PC) for Health Choice LLC. Chad W. Pekron (Quattlebaum, Grooms & Tull PLLC) for Cigna Healthcare of Tennessee Inc.

Companies: Tri State Advanced Surgery Center LLC; Health Choice LLC; Cigna Healthcare of Tennessee Inc.

Cases: Antitrust ArkansasNews