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From Antitrust Law Daily, April 4, 2017

Blue Cross decision to deny coverage for heart monitors was not an antitrust violation

By Robert B. Barnett Jr., J.D.

Blue Cross and Blue Shield’s decision that a particular heart monitoring device was never medically necessary and, thus, the cost of the device was never reimbursable, did not violate antitrust law because all makers of the device were treated equally, a Pennsylvania federal district court has ruled. Because the Sherman Act protects competition, not competitors, such a claim would require a conspiracy between Blue Cross and one or more of the plaintiff device maker’s competitors to restrain trade. Absent such a conspiracy to reduce competition, the decision to deny coverage for all such devices was nothing more than a legal exercise of an insurer’s right to decide what to cover and what not to cover (Lifewatch Services, Inc. v. Highmark, Inc., April 3, 2017, Robreno, E.).

Background. Four categories of heart monitoring devices exist for remotely recording a patient’s EKG. One of those four categories is known as mobile cardiac outpatient telemetry (MCOT) devices. Lifewatch Services, Inc., a maker of MCOT devices, contends that the devices are far superior to the other three device choices in detecting arrhythmias and in reducing intervention times when arrhythmias occur. MCOT devices are also three times more expensive than the other three device options.

Lifewatch sued Blue Cross and Blue Shield Association and five of its licensed but separately owned health insurance plans, called Blue Plans, for conspiring to deny coverage for MCOT devices in violation of Section 1 of the Sherman Act. Lifewatch alleged that the six entities conspired in a horizontal agreement that Lifewatch called the Uniformity Rule to deny coverage for MCOT devices despite medical evidence that such devices were superior to the other device choices. The Uniformity Rule, Lifewatch alleged, created anticompetitive effects, including poorer patient monitoring, reduction of MCOT devices in the market, and inhibition of further development of MCOT devices. And, of course, it harmed Lifewatch by reducing its revenues. The Blue Cross entities filed a motion to dismiss the complaint.

Antitrust violations. Even if the Uniformity Rule exists, the court said, and even if it constitutes a conspiracy to deny coverage for MCOT devices, those actions did not violate antitrust law. The Sherman Act’s purpose is to protect the public from market failures caused by restraints on trade. Thus, its focus is on conduct that destroys competition itself. In this case, the Blue Plans never acted to restrain trade, which would have required either a conspiracy between a Blue Plan and any MCOT provider to harm Lifewatch or a conspiracy between two entities to protect one another from competition. Absent such a conspiracy, no antitrust violation occurred.

Furthermore, Blue Cross’s decision to refuse coverage of MCOT devices did not constitute competition-reducing conduct. It might have, if all MCOT device providers were not treated equally. But because all MCOT device makers were treated equally, no Sherman Act violations occurred. Blue Cross, for example, could have simply decided that the higher costs (three times what the other devices cost) outweighed the benefits, whatever they were. Lifewatch was able to persuade other insurance companies that the costs outweighed the benefits. The fact that it was unable to convince all insurance companies did not harm competition. Blue Cross’s decision to refuse coverage of any MCOT device was, therefore, simply a legal exercise of its buyer-side power in the marketplace. Absent evidence of any antitrust violation, the court granted Blue Cross’s motion to dismiss the lawsuit.

The case is No. 12-5146.

Attorneys: Andrew M. Meerkins (Shook Hardy & Bacon LLP) and Michael J. McCarrie (Artz Health Law) for Lifewatch Services, Inc. Daniel E. Laytin (Kirkland & Ellis LLP) for Highmark, Inc. and Blue Cross and Blue Shield Association. Craig A. Hoover (Hogan Lovells US LLP) for Wellpoint, Inc. and Horizon Blue Cross Blue Shield of New Jersey.

Companies: Lifewatch Services, Inc.; Highmark, Inc.; Blue Cross and Blue Shield Association; Wellpoint, Inc.; Horizon Blue Cross Blue Shield of New Jersey

MainStory: TopStory Antitrust PennsylvaniaNews

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