Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Aetna, United Healthcare allegedly used group boycott to control ambulatory surgical center market, (Oct 29, 2015)

By Linda O’Brien, J.D., LL.M.

Two major health care insurance companies and several operators of ambulatory surgical centers engaged in anticompetitive concerted action to deny reasonable out-of-network payments to and/or compensatory in-network contractual arrangements with seven competing ambulatory surgical centers in order to control the market and reimbursement rates, according to a complaint filed in the federal district court in San Jose, California (Bay Area Surgical Management, LLC v. Aetna Life Insurance Company, October 27, 2015).

Physician-owned Bay Area Surgical Management, LLC, Bay Area Surgical Group, Inc., Forest Surgery Center, L.P., Soar Surgery Center, LLC, Knowles Surgery Center, LLC, National Ambulatory Surgery Center, and Los Altos Surgery Center operate ambulatory surgical centers (ASCs) that provide same-day outpatient surgical services.

Aetna Life Insurance Co. and United Healthcare are managed health care companies that offer health benefit plans under which their insureds receive surgical and facility services covered by the plan that are reimbursable. The amount paid by the plan is further dependent upon whether the services were provided by in-network or out-of-network providers. In-network providers accept a discounted rate in exchange for participation in the insured’s network. Out-of-network providers submit bills for their services to the insurance carrier on behalf of the insured and the carrier determines the amount it will pay.

The complaint states that Aetna and United are two of the largest health care carriers in the highly concentrated health insurance industry and wield control over the ASC market in- and out-of-network contracts and reimbursement for ASC facilities, physicians, and patients. Because out-of-network providers, such as the plaintiffs, cannot seek payment for their services based on pre-negotiated fixed rates, Aetna and United have unfettered control to deny reasonable payment to out-of-network ASC facilities and physicians, or charge patients for a higher portion of the surgical procedure for choosing an out-of-network provider.

In recent years, the plaintiffs contracted with an “all star” cast of surgeons and quality ASCs which created a great surge in demand for access to their ASCs. Defendants E3, Alpine, Silicon Valley Surgery Center, Waverly Surgery Center, Bascom Surgery Center, Campus Surgery Center, and El Camino Ambulatory Surgery Center, experienced new and fierce competition from the plaintiffs and conceived an anticompetitive scheme to eliminate the plaintiffs from the ASC market. The scheme would only work if the dominant insurance carriers actively participated, the complaint alleges.

According to the complaint, the coordinated conspiracy began in March 2010 when, at a California Ambulatory Surgery Association trade association meeting, executives of E3, Aetna, and United discussed “unlawful” exorbitant surgical fees charged by out-of-network ASCs. At E3’s urging, Aetna requested various state agencies to investigate the plaintiffs’ financial and marketing practices. After no action was taken by any state agency in response to the request, E3 and Alpine threatened to terminate their in-network contracts with Aetna and United if the carriers did not agree to end reasonable reimbursement payments to the plaintiffs, deter surgeons from performing surgical procedures at the plaintiffs’ facilities, and financially discourage patients from using the plaintiffs’ surgeons and ASCs. The alleged purpose and goal of the defendants’ conspiracy has been to suppress and eliminate the plaintiffs as viable ASC competitors.

The complaint also alleges that the defendants’ coordinated action had disastrous effects on the plaintiffs’ revenues, profits, growth, and number of surgical procedures performed at their ASCs. Between 2010 and the present, United has refused to pay any amount to the plaintiffs on 154 surgical cases and Aetna has refused to pay any amount on 124 surgical cases, representing over $6 million in losses to the plaintiffs. Through their acts of boycott, coercion, and intimidation at the urging of E3 and Alpine, Aetna and United have intentionally ruined the plaintiffs’ ability to effectively compete as out-of-network ASC providers and refused to do business with the plaintiffs unless they accept below market rates or agree to other oppressive in-network contract terms.

The plaintiffs assert claims for interference with prospective economic advantage, interference with actual contractual relations, and unfair competition in violation of Section 1 of the Sherman Act, and California’s Cartwright Act and Unfair Competition Law. The action seeks declaratory and injunctive relief, treble and punitive damages, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 5:15-cv-01416-BLF.

Attorneys: Maxwell M. Blecher, Donald R. Pepperman, and Taylor C. Wagniere (Blecher Collins Pepperman & Joye) for Bay Area Surgical Management, LLC, Bay Area Surgical Group, Inc., Forest Surgery Center, L.P., Soar Surgery Center, LLC, Knowles Surgery Center, LLC, National Ambulatory Surgery Center, and Los Altos Surgery Center.

Companies: Bay Area Surgical Management, LLC; Bay Area Surgical Group, Inc.; Forest Surgery Center, L.P.; Soar Surgery Center, LLC; Knowles Surgery Center, LLC; National Ambulatory Surgery Center; Los Altos Surgery Center; Aetna Life Insurance Company; United Healthcare Services, Inc.; E3 Healthcare Management, LLC; Alpine Healthcare, LLC; Silicon Valley Surgery Center, L.P.; Waverly Surgery Center, L.P.; Bascom Surgery Center, L.P.; Campus Surgery Center, L.P.; El Camino Ambulatory Surgery Center, LLC

News: Antitrust CaliforniaNews