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From Antitrust Law Daily, August 28, 2014

Cancer treatment facility’s antitrust claims against health system may proceed

By Linda O’Brien, J.D., LL.M.

A cancer treatment facility sufficiently alleged monopolization, attempted monopolization, and unfair competition claims against a healthcare system and its affiliated health plan provider for allegedly using their dominance in the market for private health insurance to force the facility out of the market for comprehensive oncology services, the federal district court in Santa Fe, New Mexico has held. However, the facility lacked standing to bring claims under the Racketeer Influenced and Corrupt Organizations Act (New Mexico Oncology and Hematology Consultants, Ltd. v. Presbyterian Healthcare Services, August 22, 2014, Vazquez, M.).

New Mexico Oncology and Hematology Consultants, Ltd. (NMOHC) is an integrated, comprehensive cancer treatment facility that offers patient services at a free standing cancer center. Presbyterian Healthcare Services (PH) owns and operates eight acute care hospitals in New Mexico and offers a full range of services, including comprehensive oncology services. PH is also the parent company of Presbyterian Network, Inc. (PHP), which operates various health maintenance organizations (HMOs), preferred provider organizations (PPOs), and other health insurance products.

NMOHC filed a complaint against PH and PHP, alleging monopolization and attempted monopolization claims under Section 2 of the Sherman Act, unfair competition under the New Mexico Unfair Practices Act (UPA), and violations of the Racketeer Influenced and Corrupt Organizations (RICO) Act, among other claims. Specifically, NMOHC claimed that the defendants used their dominance in the market for private health insurance and hospital inpatient services to drive the plaintiff out of the market for comprehensive oncology services. The defendants moved for dismissal of the complaint.

Monopolization. The court found that NMOHC had standing to assert a monopolization (or monopsonization) claim. In rejecting the defendants’ argument that the plaintiff was not a competitor or consumer in the private health insurance market, the court noted that NMOHC sufficiently showed that it had suffered an antitrust injury. NMOHC asserted that PHP (1) lowered its reimbursement rates without any business justification; (2) entered into an exclusive contract with health insurer United HealthCare; and (3) threatened to end NMOCH’s status as contracting PHP healthcare provider. Thus, the plaintiff’s status as a perceived competitor of PHP by virtue of its affiliation with PH was sufficient to confer antitrust standing.

NMOHC adequately stated a claim for monopolization (or monopsonization), according to the court. To bring a monopolization (or monopsonization) claim, a plaintiff must allege the possession of monopoly power and the maintenance of that power through exclusionary conduct. NMOHC’s allegation of a moderate market share—that PHP had a 46 percent share of the private health insurance market—did not preclude the presence of monopoly power. The plaintiff alleged additional factors—including (1) the private insurance market is highly concentrated, (2) PHP is the most significant competitor, (3) the defendants had tied up additional health insurers with exclusive dealing arrangements, and (4) there are significant barriers to entry by new competitors—that weighed in favor of a finding that the defendants possessed monopoly power in the private health insurance market.

NMOHC also alleged facts to establish the maintenance of its monopoly power in the private health insurance market. The court noted that, although a party with substantial power on the “buy side” of the market is free to choose whom with which it deals, the party may be culpable as a monopolist for abusing its monopsony power. In this case, PHP lowered its reimbursement rates to NMOHC. The plaintiff also alleged that PHP expressly refused to deal with it and increased barriers to entry by declining to cover services offered by the plaintiff. Thus, the allegations were sufficient to satisfy the second element of a monopolization claim.

Attempted monopolization. The court determined that NMOHC stated a claim for attempted monopolization. According to the court, NMOHC alleged facts that the defendants engaged in anticompetitive conduct by lowering the plaintiff’s reimbursement rates and entering into an exclusive dealing contract with United HealthCare. The plaintiff also sufficiently alleged that PH had a dangerous probability of achieving monopoly power in the comprehensive oncology services market by (1) employing up to 43 percent of medical oncologists and 50 percent of radiation oncologists in the relevant market and (2) engaging in conduct that may eliminate NMOHC from the market.

Unfair competition. NMOHC’s unfair competition claim was based on the defendants’ alleged coercion of patients to switch to PH physicians, limiting PH physicians’ ability to make referrals to NMOHC, and requiring PH patients to use the hospital’s specialty pharmacy. The court looked to the elements of the claim as set forth in the Restatement (Third) of Unfair Competition, which bars particular types of conduct, including practices determined to be an unfair method of competition. The conduct that fell within this residual category was generally means of competition that was tortious with respect to the injured party. In rejecting the defendants’ contention that the Unfair Practices Act preempts common law claims for unfair competition, the court found that such claims were viable under the UPA and the defendants’ alleged conduct could form the basis of an unfair competition claim under the Restatement’s residual rule.

RICO. However, the court determined that NMOHC failed to state a claim under RICO. The plaintiff alleged that the defendants’ purchase of discounted drugs under the federal 340B program and requirement that every senior enrolled in PHP’s HMO or PPO purchase their drugs through PH’s specialty pharmacy violated RICO because the defendants falsely represented their purchase and sale of 340B program drugs were in compliance with the law. Although NMOHC sufficiently alleged that pharmaceutical companies relied on PH’s representations that its drug purchases were consistent with the requirements of the 340B program, the plaintiff did not show that the alleged violation led to the plaintiff’s loss of sales, according to the court. While the alleged scheme to increase its profits presumably hurt PH’s competitors, as they did not have the same opportunity to increase their profit margin, this type of indirect injury was not sufficient to establish proximate cause or to confer standing under RICO, the court concluded.

The case is No. 12-00526.

Attorneys: George M. Sanders (Law Offices of George M. Sanders) for New Mexico Oncology and Hematology Consultants, Ltd. Bruce D. Hall (Rodey, Dickason, Sloan, Akin & Robb) for Presbyterian Healthcare Services, and Presbyterian Network, Inc.

Companies: New Mexico Oncology and Hematology Consultants, Ltd.; Presbyterian Healthcare Services; Presbyterian Network, Inc.

MainStory: TopStory Antitrust RICO NewMexicoNews

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