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From Antitrust Law Daily, March 23, 2016

Boycott claims revived against hospital network

By Jeffrey May, J.D.

Four hospitals that entered into a joint operating agreement (JOA) could have conspired to deny a small, physician-owned hospital access to managed care contracts needed to compete in the hospital market in Dayton, Ohio, a divided U.S. Court of Appeals in Cincinnati has decided. Summary judgment in favor of the defending hospitals on the ground that the hospital “network” was a single entity incapable of conspiring was reversed, and the case was remanded for further proceedings. The holding will likely make it more difficult for hospitals working together under JOAs to avoid trials in antitrust disputes with excluded rivals (Medical Center at Elizabeth Place v. Atrium Health System, March 22, 2016, Merritt, G.).

The question of whether this joint venture constituted a single entity incapable of conspiring or whether it became a vehicle to facilitate a conspiracy among separate entities could not be answered in the abstract, according to the appellate court. A genuine issue of material fact foreclosed summary judgment. The facts suggested that the defending hospitals were actually competitors attempting to boycott another competitor through concerted action.

The court looked to the U.S. Supreme Court's 2010 decision in American Needle, Inc. v. National Football League, 560 U.S. 183, for the standard to apply in distinguishing concerted from unilateral action. In American Needle, the joint venture formed by 32 National Football League teams was engaged in concerted action “at least” with regard to their decision collectively to license the teams’ independently owned intellectual property.

The appellate court came to the same conclusion when examining the defendants' conduct and the relationship among the defendant hospitals pursuant to the JOA. There was evidence of the defendants’ intent to keep the plaintiff out of the Dayton market, evidence of coercive conduct threatening both physicians and insurance companies with financial loss if they did business with the plaintiff, evidence of continued actual and self-proclaimed competition among the defendant hospitals, and evidence that the defending hospitals’ business operations were not entirely unitary, according to the court.

As for the relationship between the defending hospitals, they only “partially” united their economic interests. They continued to have distinct, potentially competing interests, the court explained. Moreover, there was evidence that the defending hospitals viewed themselves as competitors. The district court improperly excluded statements by executives or “key” stakeholders of the defending hospitals to that effect as inadmissible hearsay, in the appellate court’s view.

Dissent. A dissenting opinion concluded that the defending hospitals and their joint operating company shared “a complete unity of interest” and represented a single center of decision making. Therefore, the dissent would have upheld summary judgment in the defendants’ favor. The dissenting judge advocated focusing on how the defendants “actually operate” amongst each other under the defendants’ JOA. According to the dissent, the majority improperly considered how the defendants “actually operate[d]” with regard to plaintiff and the intent of the defendants to exclude others from the market.

This is Case No. 14-4166.

Attorneys: Richard A. Ripley (Haynes and Boone, LLP) and James Alan Dyer (Sebaly Shillito & Dyer) for Medical Center at Elizabeth Place, LLC. Charles Joseph Faruki (Faruki Ireland & Cox PLL) and Thomas Demitrack (Jones Day) for Atrium Health System.

Companies: Medical Center at Elizabeth Place, LLC; Atrium Health System

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