Antitrust Law Daily Wrap Up, TOP STORY—NDIll: County's Mental Health Board Immune from Treatment Provider's Antitrust Claim, (Apr 24, 2013)

By Jeffrey May, J.D.

Applying the U.S. Supreme Court's recent decision in FTC v. Phoebe Putney Health System, Inc., 133 S.Ct. 1003, 2013-1 Trade Cases ¶78,269, the federal district court in Chicago has ruled that an Illinois county's community mental health board was immune under the state action doctrine from the monopoly claims of a provider of chemical dependency treatment services. The antitrust claim was dismissed with prejudice (Advantage Group Foundation v. McHenry County Mental Health Board, April 23, 2013, Reinhard, P.).

The provider had entered into a series of annual agreements to provide outpatient substance abuse treatment on a fee for service basis. Following an audit of the complaining provider, the board sought to recoup over one million dollars paid to the provider based on the provider's purported improper billing and coordination of benefits. In response, the provider filed suit, alleging among other things, that the board and its members, in their official capacities, prevented it from competing to provide outpatient substance abuse treatment services in violation of Section 2 of the Sherman Act.

Citing Phoebe Putney, the court explained that "when a local government entity acts pursuant to a clearly articulated and affirmatively expressed state policy to displace competition, it is exempt from scrutiny under the federal antitrust laws" and the clear-articulation test is met "if the anticompetitive effect was the ‘foreseeable result’ of what the State authorized."

The board's actions were foreseeable under the state's grant of authority to the board, the court ruled. The board was established by an Illinois county pursuant to the state's Community Mental Health Act. Under state law, a community mental health board "may enter into multiple-year contracts for rendition or operation of services, facilities and educational programs." It was foreseeable that the board would enter into contracts with providers, that the board would "make rules and regulations concerning the rendition or operation of services and facilities which it directs, supervises, or funds," and that the providers being awarded contracts would change over time, the court explained.

"Phoebe Putney does not compel a different result," the court noted. The "defendant is serving simply as a source of funding for providers of mental health services. A function the statute clearly authorizes and from which it is foreseeable that defendant would make choices among providers to fund," in the court’s view.

The case is No. 12 C 50374.

Attorneys: Steven M. Ruffalo (Fuchs & Roselli, Ltd.) for Advantage Group Foundation. Kevin Michael O'Hagan (O'Hagan Spencer, LLC) for McHenry County Mental Health Board.

Companies: Advantage Group Foundation.

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