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From Antitrust Law Daily, June 1, 2017

Blue Cross not liable for restraining trade in Oklahoma medical service industry

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

Healthcare provider Bristow Endeavor Healthcare, LLC failed to state a claim against a Blue Cross and Blue Shield Association for conspiracy to restrain trade for medical services in northeast Oklahoma because its allegations lacked the required specificity, such as who was alleged to have done what to whom, the U.S. Court of Appeals in Denver has ruled. An inference of a conspiracy was insufficient where the Blue Cross’ alleged participation in the conspiracy was contrary to its own financial interests and its conduct was consistent with explanations at least as plausible as a conspiracy (Bristow Endeavor Healthcare, LLC v. Blue Cross and Blue Shield Assn., May 31, 2017, Lucero, C.).

Bristow Endeavor Healthcare operates three facilities in northeast Oklahoma. Blue Cross and Blue Shield Association, of course, is a national federation of independent Blue Cross and Blue Shield companies. One such company is Health Care Services Corporation (HCSC), which operates as Blue Cross Blue Shield of Oklahoma. One of Bristow’s three facilities, Bristow Medical Center, was an in-network provider with HCSC. Following negotiations between Bristow Endeavor and HCSC, a second facility, Cimarron Healthcare Center, joined the HCSC network. Bristow Endeavor efforts to have its third facility, the Center for Orthopaedic Reconstruction and Excellence (CORE), join the network failed, when the two parties failed to reach an agreement.

Ardent Health Services owns Hillcrest Healthcare System, which operates several healthcare facilities in northeast Oklahoma in competition with Bristow Endeavor. In fact, Hillcrest is Bristow Endeavor’s main competitor and holds a higher share of the healthcare market in northeast Oklahoma than Bristow Endeavor. After the negotiations about CORE joining the HCSC network failed, Bristow Endeavor filed suit in Oklahoma federal district court against Blue Cross and Blue Shield Association, HCSC, Ardent, and Hillcrest, alleging a conspiracy to keep CORE out of the market. The complaint made claims for (1) a violation of Section 1 of the Sherman Act, (2) state law conspiracy, (3) state law attempt to monopolize, and (4) state law tortious interference with business relations. The trial court granted motions to dismiss filed by Blue Cross and by HCSC. Bristow then voluntarily dismissed its claims against the other defendants and appealed the decision to the Tenth Circuit.

Federal and state conspiracy claims. The appellate court noted that HCSC benefits from competition in the healthcare provider market in northeastern Oklahoma. If it entered into a conspiracy with Hillcrest, it would be acting directly against its own interest by agreeing to reduce competition in the market. To establish a conspiracy, Bristow Endeavor would need to explain why HCSC would act against its own financial interests. But Bristow Endeavor’s complaint never offered any reason why HCSC might join the conspiracy, such as what HCSC might have received from Hillcrest to justify abandoning its self-interest. Bristow Endeavor’s theory on appeal—that HCSC engaged in the conspiracy to maintain Hillcrest’s business—was never supported by any particularized allegations backing such a theory.

Bristow Endeavor supported its conspiracy claim with two pieces of evidence. The first was a statement that a Blue Cross representative made to a Bristow Endeavor representative that the CORE application was denied for "CORE’s own protection" and that he would similarly protect Bristow Endeavor if Hillcrest tried to open a facility in Bristow Endeavor’s territory. The second piece of evidence was a statement made by an Ardent representative to a representative of one of Hillcrest’s facilities that he could leverage his relationship with Blue Cross to keep CORE out of the network. While the two statements might indicate a conspiracy, the court said, they still do not explain the necessary specifics, such as who at HCSC talked to the Ardent representative, what they agreed to do, and why HCSC would act against its self-interest. Furthermore, the Blue Cross representative offered to protect Bristow Endeavor without any existing agreement to do so. Perhaps it made the same offer to Hillcrest without any conspiracy agreement. Without any plausible allegations that HCSC or Blue Cross conspired to restrain trade, the Tenth Circuit said, the trial court was correct in dismissing the Sherman Act claim and the state law conspiracy claim.

Monopoly claim. Bristow Endeavor supported its monopoly claim by noting that Hillcrest had a 64% share of the market. Market dominance, however, is not the same as a monopoly. The complaint otherwise failed to plausibly allege, as required, that a dangerous probability existed that the healthcare market in northeast Oklahoma would be monopolized. The Tenth Circuit, therefore, agreed with the lower court that the monopoly claim was insufficiently pleaded, and it agreed with the lower court’s decision to dismiss the state law monopoly claim.

Tortious interference with a business relationship. The Tenth Circuit also agreed with the lower court that the complaint alleging tortious interference with a business relationship was merely a "formulaic recitation" of the elements of the cause of action, without the necessary specifics, such as which contracts or relationships HCSC or Blue Cross might have harmed. Without those specifics, the Tenth Circuit said, the lower court was correct in dismissing the tortious interference claim because HCSC and Blue Cross lacked sufficient notice to defend the claim.

The case is No. 16-5149.

Attorneys: Michael Burrage (Whitten Burrage Law Firm) and Drew Neville, Jr. (Hartzog Conger Cason & Neville) for Bristow Endeavor Healthcare, LLC. Martin J. Bishop (Reed Smith LLP) for Blue Cross and Blue Shield Association and Health Care Service Corp. Mary Quinn Cooper (McAfee & Taft), Elizabeth Helmer (Alston & Bird LLP) and Jo Lynn Jeter (Norman Wohlgemuth Chandler Jeter Barnett & Ray) for AHS Hillcrest Healthcare System, LLC.

Companies: Bristow Endeavor Healthcare, LLC; Blue Cross and Blue Shield Association; Health Care Service Corp.; AHS Hillcrest Healthcare System, LLC

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