Health Law Daily Wrap Up, ANTITRUST—E.D.N.Y.: Neurosurgery practice’s antitrust claims against Empire dismissed over failure to show consumer harm, (Aug 18, 2026)

By Martin A. Steinberg, J.D.

Neurosurgery practice failed to plausibly allege that the HMO’s allegedly below-cost reimbursement agreements with hospitals produced anticompetitive effects in the market for neurological services.

The federal district court in Brooklyn dismissed without prejudice antitrust claims brought by Neurological Surgery Practice of Long Island, PLLC, against Empire Healthchoice HMO, Inc., and Empire Healthchoice Assurance, Inc., holding that the plaintiff failed to plausibly allege that Empire’s reimbursement agreements with in-network hospitals unreasonably restrained trade. The plaintiff alleged that Empire negotiated below-cost reimbursement rates for neurosurgical services with hospitals, which could offset those losses through revenue from ancillary services, and then used those rates to disadvantage freestanding neurosurgery practices. The court held that the complaint did not plausibly allege direct anticompetitive effects because it failed to connect Empire’s reimbursement agreements to the departure of freestanding practices, show that consolidation reduced the number of neurosurgeons or procedures, substantiate claimed declines in quality, or explain how lower reimbursement rates caused higher prices or out-of-pocket costs. The court also found insufficient indirect evidence of anticompetitive effects because Empire’s alleged 26.2% share of the private health insurance market did not support an inference of market power. Because the Sherman Act claim failed, the court also dismissed the parallel Donnelly Act claim. The court allowed the plaintiff 30 days to seek leave to amend (Neurological Surgery Practice Of Long Island, PLLC v. Empire Healthchoice HMO, Inc., No. 2:21-cv-02204-RPK-AYS (E.D.N.Y. Aug. 14, 2026)).

Background. Neurological Surgery Practice of Long Island, PLLC, is a freestanding medical practice that provides neurosurgical care to patients throughout the New York metropolitan area. Neurosurgical services include preventing, diagnosing, surgically treating, and rehabilitating disorders involving the brain, spinal cord, nervous system, and cerebrovascular system. Freestanding neurosurgical practices, multispecialty groups, and hospitals provide those services. Because patients generally seek neurological care close to where they live or work, the plaintiff alleged that the relevant geographic market is no larger than the New York metropolitan area.

Defendants Empire Healthchoice HMO, Inc. and Empire Healthchoice Assurance, Inc. are affiliated private health insurers operating in New York and allegedly accounted for 26.2% of the private health insurance market in the New York metropolitan area as of 2019. Medical providers may be either in network, in which case reimbursement rates are established by agreement with the insurer, or out of network, where no contractual agreement exists between the insurer and the provider. However, reimbursement may still be available under the insurer’s agreement with its members. Empire maintains relationships with both types of providers.

The plaintiff alleged that Empire uses its agreements with in-network hospitals to exclude freestanding neurosurgery practices from the metropolitan-area neurosurgery market. According to the amended complaint, Empire demands extraordinarily low, below-cost reimbursement rates for neurosurgical services on a take-it-or-leave-it basis when negotiating hospital provider agreements. Hospitals nevertheless accept those rates because Empire negotiates reimbursement across the hospital’s full range of services, allowing revenue from ancillary services associated with neurosurgical treatment to offset the losses incurred on the neurosurgical services themselves. Freestanding practices, by contrast, receive only the allegedly below-cost reimbursement for the primary neurosurgical service and lack comparable ancillary revenue.

The plaintiff alleged that Empire’s hospital agreements allow it to impose the same low reimbursement rates on freestanding practices, threatening their financial viability while hospital-based providers can absorb the losses. According to the complaint, the resulting pressure has caused freestanding neurosurgical practices either to close or sell to hospitals or multispecialty groups and has impaired the ability of surviving practices to compete. The complaint cited the departure of at least three large freestanding neurosurgical groups from Long Island in recent years. It further alleged that this consolidation has reduced output and quality, increased prices and wait times, diminished consumer choice, and forced patients into high-volume hospital practices that allegedly provide less personalized care. The plaintiff also asserted that patients with high-deductible plans or substantial out-of-network cost-sharing requirements have incurred increased out-of-pocket expenses. Based on these allegations, it asserted claims under Section 1 of the Sherman Act and New York’s Donnelly Act.

Sherman Act violation. The court held that Neurological Surgery failed to state a claim under Section 1 of the Sherman Act because, even assuming Empire entered the alleged agreements with in-network hospitals, the plaintiff did not plausibly allege an unreasonable restraint of trade. The challenged arrangements were vertical agreements under which Empire allegedly paid, and hospitals accepted, artificially low reimbursement rates for neurosurgical services.

Vertical restraints are evaluated under the rule of reason. For purposes of the motion, the parties accepted a relevant market consisting of medically necessary neurological services for privately insured patients in the New York City metropolitan area. Neurological Surgery therefore had to plausibly allege a substantial anticompetitive effect harming consumers, either directly through effects such as reduced output, increased prices, or diminished quality, or indirectly through market power combined with evidence of harm to competition. Harm to an individual competitor alone was insufficient.

Direct evidence of actual anticompetitive effect. The court rejected the plaintiff’s theory that Empire’s below-cost reimbursement agreements forced freestanding neurosurgery practices out of the market, thereby reducing output and quality and increasing prices.

First, the complaint did not plausibly link Empire’s reimbursement agreements to the alleged decline in independent practices. Although it cited long-term consolidation in medicine and alleged that at least three large freestanding neurosurgical groups had departed Long Island in recent years, it did not allege facts showing that Empire’s reimbursement rates caused those departures rather than broader consolidation trends or other factors. Nor did it provide a historical benchmark suggesting that three departures over several years were atypical.

Second, the loss of freestanding practices did not itself establish reduced output. Neurosurgeons may work in private practices, multispecialty groups, or hospitals, so consolidation or a change in ownership does not necessarily reduce the amount of neurological care available. The complaint did not allege a reduction in the number of neurosurgeons or procedures performed, only that some freestanding practices had closed or sold to other providers.

The allegations of reduced quality were likewise insufficient. The complaint generally asserted that private practices provide more personalized care, shorter wait times, and lower patient volumes, while hospital practices tend to be higher-volume and more impersonal. But it did not allege facts showing that the particular practices that closed provided superior care to the providers that absorbed their patients. Generalizations about how different practice types “typically” operate did not establish an actual decline in quality.

The court also found inadequate support for the allegation that Empire’s agreements increased prices. The complaint did not explain how agreements requiring Empire to pay lower reimbursement rates for neurological services produced higher market prices. Similarly, although patients with high deductibles or substantial out-of-network cost sharing may incur greater personal expenses, the complaint did not plausibly connect those costs to Empire’s lower in-network reimbursement rates. The plaintiff therefore failed to plead direct evidence of a substantial anticompetitive effect through reduced output, higher prices, or diminished quality.

Indirect evidence of actual anticompetitive effect. Neurological Surgery also failed to establish anticompetitive effects indirectly because it did not plausibly allege that Empire possessed market power. Indirect proof requires market power plus some evidence that the challenged restraint harms competition. The court noted that, when market share is used as a proxy for market power, courts have generally held that firms with market shares below 30% are presumptively incapable of exercising market power. The plaintiff relied on Empire’s alleged 26.2% share of the private health-insurance market in New York City. The court held that this market share did not plausibly establish market power, citing decisions finding shares below 30% insufficient and noting that even a 33% share had been held not dominant in another health-insurance case. The plaintiff cited no authority treating a comparable market share as sufficient. Because it failed to plausibly allege either direct anticompetitive effects or market power supporting an indirect showing, the court dismissed the Section 1 claim.

Donnelly Act claim. Because the Donnelly Act is generally coextensive with the Sherman Act, the court dismissed the state-law claim for the same reasons it dismissed the Section 1 claim. The plaintiff also conceded that the court should analyze its Donnelly Act claim under the same standard as its Sherman Act claim.

The Case is No. 2:21-cv-02204-RPK-AYS.

Judge: Kovner, R.

Attorneys: Daniel Scott Hallak (Rupp Pfalzgraf LLC) for Neurological Surgery Practice of Long Island, PLLC. Matthew J. Aaronson (Troutman Pepper Locke LLP) for Empire HealthChoice HMO, Inc.

Companies: Neurological Surgery Practice of Long Island, PLLC; Empire HealthChoice HMO, Inc.

Cases: CaseDecisions AntitrustNews GeneralNews NewYorkNews