Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Complaint Alleges Hospital System Attempted to Drive Competitors Out of Three-County Illinois Market, (Feb 11, 2013)

By Tobias J. Gillett, J.D., LLM.

OSF Healthcare System, doing business as Saint Francis Medical Center (Saint Francis), has engaged in anticompetitive conduct aimed at monopolizing the markets for the sale of general acute-care inpatient hospital services and outpatient surgical services to commercial health insurers in a three-county area in Illinois, according to a competitor’s complaint filed in the federal district court in Peoria (Methodist Health Services Corp. v. OSF Healthcare System, February 5, 2012).

Saint Francis and Methodist Health Services Corporation are hospital systems that compete in the Peoria, Illinois, region. According to Methodist’s complaint, Saint Francis has engaged in conduct aimed at excluding its competitors, particularly Methodist, from the markets for the sale of general acute-care inpatient hospital services and outpatient surgical services to commercial health insurers in the Illinois counties of Peoria, Tazewell, and Woodford. According to the complaint, Saint Francis holds 53% of the market for those inpatient services and greater than 50% of the market for those outpatient surgical services, with Methodist as its closest competitor.

Methodist alleges that Saint Francis’s dominant share of the markets has led commercial health insurers to regard it as a “must-have” hospital, and that Saint Francis has taken advantage of that fact to impose contracts that prevent those insurers from contracting with other hospitals.

Saint Francis allegedly accomplishes this by threatening to withdraw from the insurers’ networks, in the process depriving the insurers of services only Saint Francis can provide, and by imposing financial penalties if insurers include competitors in their networks. In addition to 53% of the inpatient market, Saint Francis is the only provider of services such as tertiary pediatric services, solid organ transplants, and NICU for low birth weight babies, and is the only hospital in the region with a Level 1 Trauma Center. Methodist points to Saint Francis’s 37% higher average charge per patient admission when compared to Methodist’s charges as evidence of Saint Francis’s market power.

The complaint alleges that Saint Francis’s actions have reduced competition over inpatient hospital services and outpatient surgical services by “delaying and preventing the expansion and entry of Saint Francis’s competitors” and by “reducing quality competition between Saint Francis and its competitors.” This has resulted in higher healthcare costs, higher health insurance premiums, and reduced choice for consumers in the affected markets, according to Methodist.

Saint Francis has allegedly focused its efforts on driving Methodist out of the market to eliminate Methodist’s price competition. Among the six hospitals in the three-county area, Methodist identifies only three general, acute care hospitals, with Saint Francis as easily the largest, and Methodist as its nearest competitor. The smaller hospitals “do not meaningfully compete with Saint Francis in a way that could reduce its bargaining power with commercial health insurers.” Saint Francis has allegedly pressured health insurers such as Blue Cross Blue Shield, Humana, Aetna, and Health Alliance to drop Methodist from their networks or to refuse to contract with Methodist. This deprives Methodist of access to over 60% of the fully insured (and thus most profitable) patients in the region, according to Methodist, and prevents it and other competitors from expanding, entering the market, or engaging in quality competition with Saint Francis. The conduct allegedly also discourages physicians from referring patients to Methodist and from conducting work at Methodist.

The complaint asserts that Saint Francis’s conduct constitutes exclusive dealing, monopolization, and attempted monopolization in violation of federal and state antitrust laws. The complaint requests actual damages in excess of $100 million, treble damages, attorney fees, punitive damages, a permanent injunction, and other relief.

The case is No. 1:13-cv-01054-SLD-JAG.

Attorneys: Richard T. Greenberg (McGuireWoods LLP) for Methodist Health Services Corporation.

Companies: Methodist Health Services Corporation; OSF Healthcare System

News: Antitrust IllinoisNews