Antitrust Law Daily Wrap Up, ANTITRUST—E.D. Mich.: Blue Cross unable to exclude evidence of labeling of MFN contracts as schemes, (Apr 15, 2015)

By Linda O’Brien, J.D., LL.M.

Blue Cross Blue Shield of Michigan could not preclude a competitor’s introduction of expert evidence relating to the labeling of contracts between Blue Cross and various hospitals as schemes and strategies that harmed competition, the federal district court in Detroit has ruled. Thus, the provider’s motion in limine was denied (Aetna, Inc. v. Blue Cross Blue Shield of Michigan, April 14, 2015, Hood, D.).

Blue Cross Blue Shield of Michigan is the leading provider of health insurance and administrative services to managed health care plans in the state. In December 2011, Aetna brought an action claiming that Blue Cross used most favored nation (MFN) clauses in contracts with hospitals to protect its dominant position and thwart competition from Aetna and other competitors. Aetna claimed that it was harmed by the Blue Cross practice of entering into exclusionary contracts, under which it agreed to pay hospitals more money if the hospitals increased the rates they demanded to treat patients covered by its competitors’ health plans.

The U.S. Department of Justice and the Michigan Attorney General also brought an action against Blue Cross challenging its contracting practices. However, the government dismissed the suit as unnecessary in 2013 after the State of Michigan passed a law banning the use of MFNs by health insurers, such as Blue Cross. Meanwhile, Aetna's action proceeded. Before the court were cross motions in limine, seeking to exclude certain evidence at trial.

Use of MFNs. Blue Cross argued that Aetna’s claims were based solely on alleged injury from 67 MFN contracts and Blue Cross’ efforts to enforce those contracts. It further contended that Blue Cross could not be liable for rate decisions by hospitals without MFNs because they were unilateral decisions made by those hospitals. As such, evidence primarily by experts labeling the contracts or Blue Cross’ conduct as a scheme or contracting strategy should be excluded. The court determined that Blue Cross was seeking to exclude broad categories of evidence as to the reasons why the hospitals did not or could not give Aetna better rates. Aetna alleged harm by showing that, even though certain hospitals were not parties to the MFN contracts, their unilateral rate decisions were impacted by the MFN contracts. Thus, evidence demonstrating that non-MFN hospitals were hesitant to give Aetna discounted rates was relevant to the issue of whether the MFN contracts impacted competition.

However, any antitrust concerns raised either by the hospitals or Blue Cross during the negotiations of the contracts were not relevant to how the MFN clauses affected competition after the contracts went into effect. There was no dispute that the hospitals entered into MFN contracts with Blue Cross. The court noted that legality of the contracts between the hospitals and Blue Cross was not at issue. Rather the issue was whether the contracts with MFN clauses illegally affected competition. Since Aetna made no claims of a conspiracy, the hospitals’ concerns before entering into the contracts were not relevant and Blue Cross’ motion to limine to exclude evidence of all references to antitrust or other legal concerns expressed by the hospitals or Blue Cross relating to the use of MFN clauses was granted.

Blue Cross’ motion to exclude evidence of the changes to state law was also granted. In 2013, the State of Michigan passed the Nonprofit Health Care Corporation Reform Act, which prohibited the use of MFN clauses by health insurers. According to the court, the law change was not relevant to whether the contracts with MFN clauses caused injury to Aetna and did not establish any material fact at issue.

Social mission. Finally, in denying Aetna’s motion to exclude any reference at trial to Blue Cross’ status as a nonprofit or its social mission as a justification for entering into MFNs, the court found that evidence of the nature of Blue Cross’ business was relevant in determining whether the MFNs were illegal. Since Aetna must establish that its injury flowed from the anticompetitive effects of the MFNs and not from other reasons such as the hospitals’ desire to contract with Blue Cross instead of Aetna, the status of Blue Cross and how the hospitals perceived Blue Cross and Aetna were relevant to Aetna’s claimed antitrust injury.

The case is No. 11-cv-15346.

Attorneys: Daniel Matheson (Gibson Dunn & Crutcher LLP) for Aetna Inc. Alan N. Harris (Bodman PLC) for Blue Cross Blue Shield of Michigan.

Companies: Aetna, Inc.; Blue Cross Blue Shield of Michigan

Cases: Antitrust MichiganNews