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From Antitrust Law Daily, August 21, 2017

Case involving definition of product market allowed to proceed

By Stephanie K. Mann, J.D.

A class action suit against a manager of a network of chiropractors has been allowed to proceed on claims on antitrust violation by a North Carolina superior court. The court found that the defendant’s claim that a motion for summary judgment should be granted because the plaintiff failed to demonstrate a relevant product market in which defendants participate to be unconvincing (Sykes v. Health Network Solutions, Inc., Aug. 18, 2017, Gale, J.).

Four North Carolina-licensed chiropractors filed a class-action suit against Health Network Solutions, Inc., which contracts with insurance companies and third-party payors to arrange chiropractic services for the insurer’s subscribers. HNS then contracts with chiropractors for these services on the condition that an HNS member may be terminated from the network if the average patient cost exceeds the benchmark average. Those chiropractors that contract with HNS are considered "in network" with the insurance companies that contract with HNS.

The chiropractors who brought the claim alleged that the review process that HNS employs to monitor the cost of its members’ services unlawfully restricts the output of medically necessary chiropractic services and violates the North Carolina Insurance Code. Additionally, they claim that HNS achieved this output restriction by illegally conspiring with insurers to exercise their combined market power.

Market power. The central premise behind the plaintiffs’ case is that in order to participate in the HNS network, all chiropractors must agree to restrict their average per-patient cost of medically necessary chiropractic services. The mere fact that HNS and the insurance companies have success in achieving this output restriction demonstrates that HNS has the necessary market power necessary to prove their case, argues the chiropractors.

The chiropractors argued that there are four separate product markets that HNS falls within—HNS market; comprehensive health market; insurance health market; and North Carolina market. However, HNS contends that while the broadest of the four markets is legally cognizable, a motion for summary judgment should be granted because it does not participate in that market as a buyer or seller of chiropractic services. The court examined each potential product market in turn.

  • HNS market—defined by the plaintiffs as "the market in which in-network managed care chiropractic services (a wholesale market of purchases by aggregated buyers) are provided to the Insurers and their North Carolina patients through HNS," in this market, HNS acts as the single agent for the insurers’ aggregated purchases of in-network chiropractic services. The court found that evidence presented in the case demonstrated that each of the chiropractors treated patients through a number of different payment methods. Therefore, the product market could not be so narrowly construed.
  • Comprehensive health market—defined by the plaintiffs as "the market for in-network chiropractic services provided to individual and group comprehensive healthcare insurers and their patients in North Carolina," this market includes the HNS network but further includes services provided by other chiropractic networks on an in-network basis. The court reiterated that the chiropractor’s admission of treating patients outside of the HNS system negated this argument.
  • Insurance health market—defined by the plaintiffs as "the market for insurance reimbursed chiropractic services in North Carolina," this market includes all insured chiropractic services, without regard to whether the chiropractor is in or out of a particular insurer’s network, but excludes alternative purchasers such as self-paying patients or patients covered by government-funded insurance. The court dismissed this product market as being too narrowly construed.
  • North Carolina market—defined by the plaintiffs as "the market for chiropractic services provided in North Carolina," this market includes all chiropractic services, including patients with private insurance, self-paying patients, and patients covered by government programs. The court accepted this definition as a proper product market.

Despite the court’s ruling that the North Carolina market is an acceptable product market, HNS argued that they should still be granted a Motion to Dismiss as they were neither a buyer nor seller of chiropractic services. However, the court found that there are disputed issues of fact as to whether HNS participates in that market, specifically whether arranging the delivery of chiropractic services should be considered "buying" or "selling" those services. In addition, even if HNS is not considered a buyer or seller, the court must also determine whether it is sufficiently tied to insurance companies to be considered co-conspirators in that market.

Learned-profession exception. The court barred the chiropractor’s claim under N.C. Gen. Stat. § 75-1.1 under the learned-profession exemption, citing numerous precedents that have established that the exemption is not limited to just the actual delivery of professional services, but also extends to decision-making that affects the delivery of those services. The court notes the chiropractors have been very frank in their desire to shut down HNS is entirety, thereby fundamentally changing the marketplace in which chiropractors deliver their services and the way in which insurance companies contract for the delivery of those services to their subscribers. Therefore, the court granted HNS’s motion to dismiss.

The case is No. 13 CVS 2595.

Attorneys: Robert E. Fields III (Oak City Law LLP) and Samuel Pinero II (Craige Jenkins Liipfert & Walker LLP) for Susan Sykes d/b/a Advanced Chiropractic and Health Center. Jennifer K. Van Zant (Brooks, Pierce, McLendon, Humphrey & Leonard, LLP) for Health Network Solutions, Inc. f/k/a Chiropractic Network of the Carolinas, Inc.

Companies: Health Network Solutions, Inc. f/k/a Chiropractic Network of the Carolinas, Inc.

MainStory: TopStory Antitrust NorthCarolinaNews

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