Antitrust Law Daily Wrap Up, ANTITRUST—W.D. La.: Health care insurer’s monopolization claims against provider proceed, (Apr 1, 2016)

By Greg Hammond, J.D.

A health care insurer and hospital have adequately alleged anticompetitive conduct and antitrust injury in support of claims that a health care provider engaged in monopolization and attempted monopolization of the general acute-care hospital services, adult primary care, and Obstetrics/Gynecology markets in the Shreveport area. The federal district court in Shreveport, Louisiana, therefore denied the defendant health care provider’s motion to dismiss (BRFHH Shreveport, LLC v. Willis Knighton Medical Center, March 31, 2016, Foote, E.).

BRFHH Shreveport, LLC—the operator of University Health Hospital—and health care insurer Vantage Health Plan, Inc. filed suit against Willis Knighton Medical Center.

Vantage claimed that Willis Knighton violated Section 2 of the Sherman Act and Section 7 of the Clayton Act through some of Willis Knighton’s prior acquisitions, physician referral practices, and non-compete employment contracts. Vantage further argued that Willis Knighton’s prior conduct explained how Willis Knighton had historically violated antitrust laws to exclude Vantage from participating in the Shreveport area health care insurance market and why Vantage was therefore entitled to recover damages.

In addition, both Vantage and BRFHH claimed that a new joint venture to open clinics located at Willis Knighton facilities, but staffed by Louisiana State University (LSU) physicians that also staff University Hospital, constituted an illegal combination under Section 1 of the Sherman Act, an illegal monopoly and illegal attempted monopoly under Section 2 of the Sherman Act, and an illegal merger under Section 7 of the Clayton Act.

Anticompetitive conduct. In its motion to dismiss, Willis Knighton argued that Vantage failed to plead anticompetitive conduct with regard to its monopolization claim. The court disagreed, finding that the previous acquisitions of Northwest Louisiana Surgery Hospital and a “previously independent cardiology group” were apparently outright takeovers, which could plausibly constitute anticompetitive conduct under Section 2 of the Sherman Act. Allegations of Willis Knighton’s non-compete agreements with its physicians and its control of physician referrals, however, were not evidence of anticompetitive conduct, because Willis Knighton had claimed a rational business purpose—to treat more patients—and the complaint alleged nothing to contradict this purpose.

Antitrust injury. Vantage argued that it suffered antitrust injury because Willis Knighton refused to contract with Vantage, which was allegedly made possible by the monopoly power Willis Knighton achieved through its anticompetitive acquisitions. The court first determined that Vantage had not alleged anticompetitive conduct to the extent that it was allegedly injured by Willis Knighton refusing to contract with Vantage. Willis Knighton’s refusal to contract with Vantage was unrelated to its ability to exploit its monopoly power, the court reasoned, because Willis Knighton could have decided not to contract with Vantage even if it had no market power whatsoever.

Vantage did plead antitrust injury, however, to the extent that Vantage alleged it was injured because Willis Knighton demanded exorbitant reimbursement rates. Willis Knighton’s purportedly required high reimbursement rates were the type of injury that flowed from Willis Knighton’s market power, according to the court, because Willis Knighton could not have demanded what were effectively higher prices without market power.

Specificity. Lastly, the court rejected Willis Knighton’s argument that Vantage’s claims must be dismissed because they lacked specificity. In particular, the court found that: (1) Vantage had described with detail how Willis Knighton was presently engaged in a joint clinic with LSU physicians working at University Health; (2) allegations that LSU physicians, currently in their Tier-1 network, would effectively become employees of Willis Knighton when they participated in the joint LSU-Willis Knighton clinics—provided a link to explain how the LSU/Willis Knighton clinics were like other Willis Knighton clinics in which LSU physicians practiced and did not accept Vantage Tier-1 coverage; and (3) Vantage has also alleged that in the past, whenever a physician under contract with Vantage joined the Willis Knighton Physician’s Network, that physician immediately canceled his contract with Vantage. In addition to pleading with adequate specificity, these allegations also satisfied the injury-in-fact requirement of Article III standing.

Willis Knighton also argued that Vantage’s allegations concerning Willis Knighton’s past conduct failed to state a claim under Twombly because they alleged insufficient details about either the prior alleged acquisitions or the relevant markets that Willis Knighton monopolized or attempted to monopolize. However, the court concluded that by providing the high shares in these markets that Willis Knighton currently enjoys, the complaint provided sufficient information to make past monopoly power plausible. In addition, by providing the names of all the entities that Willis Knighton has acquired, the way in which Willis Knighton controls referrals, and the type of non-compete agreements it employs, the complaint pleaded facts that make anticompetitive conduct plausible, which was sufficient to state a claim for Willis Knighton’s prior antitrust violations.

The case is No. 15-2057.

Attorneys: David A. Ettinger (Honigman Miller Schwartz and Cohn) and Vinson J. Knight (Sullivan Stolier Kovata Knight LC) for BRFHH Shreveport LLC. James R. Chastain, Jr. (Kean Miller LLP) and Scott P. Perlman (Mayer Brown) for Vantage Health Plan Inc. Darryl W. Anderson (Norton Rose Fulbright) and Lamar P. Pugh (Pugh, Pugh & Pugh, LLP) for Willis-Knighton Medical Center.

Companies: BRFHH Shreveport LLC; Vantage Health Plan Inc.; Willis-Knighton Medical Center

Cases: Antitrust LouisianaNews