Antitrust Law Daily Wrap Up, ANTITRUST—N.D. Okla: Blue Cross Blue Shield dismissed from health care center’s suit, (Jun 9, 2016)

By Jody Coultas, J.D.

Health Care Service Corporations (HCSC) and Blue Cross and Blue Shield Association (BCBSA) were dismissed by the federal district court in Tulsa from an antitrust suit brought by Bristow Endeavor Healthcare over purported efforts to keep Bristow Healthcare’s Center for Orthopaedic Reconstruction & Excellence (CORE) out of the Northeast Oklahoma/Tulsa market for inpatient and outpatient healthcare services (Bristow Endeavor Healthcare v. Blue Cross and Blue Shield Assn., June 8, 2016, Egan, C.).

The suit arose over Bristow Healthcare’s inability to have CORE added to Bristow Healthcare’s existing provider agreement with HCSC—a managed care contract under which HCSC agreed to reimburse Bristow Healthcare for in-network, covered services provided at Bristow Healthcare’s Bristow Medical Center (BMC) and Cimarron Healthcare Center (Cimarron). HCSC notified Bristow Healthcare that it would not agree to add CORE as a provider under the existing provider agreement, but it would consider contracting separately with CORE if it obtained a separate National Provider Identifier.

Bristow Healthcare believes that Hillcrest Health System (HHS), a non-profit corporation that operates at least nine hospitals or medical centers allegedly owned and operated by Ardent Medical Services, Inc., and Ardent engaged in an anticompetitive scheme to exclude CORE from the market in violation of Section 1 of the Sherman Act. Bristow Healthcare also alleged that the defendants monopolized the relevant market.

The court granted BCBSA’s motion to dismiss on the basis that Bristow Healthcare failed to allege BCBSA played any role in the alleged conspiracy. BCBSA argued that it was not a proper party because there were no allegations that BCBSA played any role in the alleged conspiracy. Bristow Healthcare stated that HCSC was an independent Blue Cross Blue Shield company and referred to BCBSA and HCSC collectively as "Blue Cross Blue Shield." No other allegations specifically mention BCBSA. There was evidence to support an inference that HCSC was the alter ego of BCBSA, and the complaint clearly stated that HCSC was an "independent" corporate entity operating under the tradename Blue Cross and Blue Shield of Oklahoma. Although a BCBSA employee met with a CORE representative of CORE, there were no allegations that the BCBSA employee knew about the alleged conspiracy involving HHS, Ardent, and HCSC or that the employee acted in furtherance of the conspiracy.

Also, there were insufficient factual allegations in the complaint to give BCBSA notice of the basis for the assertion that HCSC was the alter ego of BCBSA, according to the court. The only fact specifically concerning BCBSA’s involvement in the alleged conspiracy was the meeting with CORE, and this was insufficient to support an inference that BCBSA had any role in the alleged conspiracy or that BCBSA intended to disregard the corporate separateness of HCSC.

Bristow Healthcare alleged that the denial of its request to add CORE to the existing provider agreement was part a conspiracy with HHS and Ardent to exclude CORE from the healthcare marketplace, and that Tulsa Spine, HHS, and Ardent agreed that HCSC would reimburse them at rates well above the rates paid by Medicare and that HCSC agreed to pay the higher rates requested by Tulsa Spine, HHS, and Ardent. HCSC argued that the complaint failed to provide details of the alleged conspiracy and failed to state a plausible case that HCSC would enter a conspiracy under which it would lose money by paying higher rates to HHS and Ardent. Bristow Healthcare did not put forth a theory under which per se liability would apply, and the court found the claim to be governed by the rule of reason.

The court concluded that Bristow Healthcare failed to allege enough facts to state a Section 1 Sherman Act claim against HCSC. Bristow Healthcare made numerous allegations concerning HHS, Ardent, and Tulsa Spine’s alleged conduct and their motivation for keeping CORE out of HCSC’s provider network, but there were no allegations that HCSC participated in any meeting or communications with them before HCSC denied Bristow Healthcare’s request to add CORE to the existing provider agreement. There were no allegations that HCSC received any benefit from the conspiracy. Rather Bristow Healthcare suggested that HCSC conspired with HHS and Ardent to reduce competition and actually pay higher reimbursement rates to HHS and Ardent.

Antitrust injury. There was also insufficient evidence of an antitrust injury to support the claims against HCSC, according to the court. Bristow Healthcare’s alleged injury was that health care consumers will have reduced choice and higher prices because of the alleged conspiracy. Although HCSC pays higher reimbursement rates to HHS than it does to Bristow Healthcare, there was no allegation that patients paid more for medical treatment at HHS. Also, the court noted that there is an inherently anticompetitive aspect of health insurance, because an insurer will include some providers in a network and exclude others and an insurer’s customers will be encouraged to visit in-network providers. Bristow Healthcare could not plausibly allege that the exclusion of CORE actually had an anticompetitive effect because health care consumers do not possess an absolute right to go to a provider of their choice at reduced in-network rates.

Monopolization. The Oklahoma Antitrust Reform Act monopolization claim against HCSC was dismissed by the court. Bristow Healthcare alleged that HCSC was liable under a monopsony theory, because it had alleged that HCSC used its market power to decrease market demand for its services. To allege a monopolization claim, a party must allege: (1) the relevant market; (2) a realistic probability that the defendants could achieve monopoly power in the market; (3) specific intent to monopolize; and (4) conduct in furtherance of the attempt to monopolize. HCSC had up to a 64% share of the health insurance marketplace in Northeast Tulsa/Oklahoma, but the alleged monopoly did not concern the product market of buying or selling health insurance. The "relevant market" was persons or entities who actually provided healthcare. Also, there were no allegations that HCSC’s conduct decreased market demand for healthcare or that HCSC engaged in a conspiracy to drive down the cost of healthcare for the purpose of driving Bristow Healthcare out of the market.

The case is No. 16-CV-0057-CVE-PJC.

Attorneys: Chad R. Rothschild (Brennan, Manna & Diamond, LLC) and Jack Ledrew Neville, Jr. (Hartzog Conger Cason & Neville) for Bristow Endeavor Healthcare, LLC. Adam C. Doverspike (Gable & Gotwals) and Debra H. Dermody (Reed Smith LLP) for Blue Cross and Blue Shield Assn.

Companies: Bristow Endeavor Healthcare, LLC; Blue Cross and Blue Shield Assn.

Cases: Antitrust OklahomaNews