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From Antitrust Law Daily, July 02, 2014

Healthcare services provider could pursue injunction against conspiracy to monopolize managed care services

By Linda O’Brien, J.D., LL.M.

A rural healthcare services provider, alleging that a health maintenance organization and county board conspired to monopolize managed healthcare services in the county, could pursue claims for injunctive relief against the defendants, the federal district court in Fresno has decided. However, the provider could not pursue claims for antitrust damages or violations of the California Cartwright Act (Horisons Unlimited v. Santa Cruz-Monterey-Merced Managed Medical Care Commission, June 27, 2014, O’Neill, L.).

Background. Horisons Unlimited and Horisons Unlimited Health Care (collectively “Horisons”) are nondenominational religious-based providers of healthcare services and operate clinics in rural areas of Merced County. Santa Cruz-Monterey-Merced Managed Medical Care Commission, d/b/a Central California Alliance for Health (“Alliance”), is a health maintenance organization that provides managed healthcare services to publicly supported programs, businesses, and individuals. Under a County of Merced ordinance, all county residents eligible for Medi-Cal, the state Medicaid program, were required to be members of the sole county-approved managed care plan, Alliance, in order to receive services under Medi-Cal and all healthcare providers seeking to provide services to those beneficiaries would have to be contracted with Alliance. The contract with Alliance required Horison to comply with Alliance’s credentialing standards for its healthcare providers. Although the contract allowed for temporary credentialing , Alliance refused to temporarily credential many of Horisons’ otherwise licensed physician providers. However, Alliance allowed Golden Valley Health Centers, Horison’s main competitor, to use temporarily credentialed physician providers.

In December 2013, Alliance ceased new enrollments at Horisons of persons in Alliance’s managed care plan on the ground that Horisons’ temporary credentialing violated the contract and threatened to terminate Horisons’ contract. Horisons filed suit against Alliance and the County, alleging violations of Sections 1 and 2 of the Sherman Act and California’s Cartwright Act, among other claims. Specifically, Horisons alleged that the County establishment of Alliance as the sole Medi-Cal managed care plan was a restraint of trade and eliminated competition among managed care plans in the county. Alliance and the County moved to dismiss for lack of subject matter jurisdiction and failure to state a claim.

Subject matter jurisdiction. The court had subject matter jurisdiction, since Horisons sufficiently alleged that the defendants conduct affected interstate commerce. Horisons alleged that the conduct of the County and Alliance limited access to crucial health services for persons who relocate to Merced County, frustrated the movement of licensed physicians for professional experience and training through interstate commerce, and interfered with the establishment of rural health services. The allegations plausibly demonstrated a substantial effect on interstate commerce, according to the court.

Immunity. The court determined that the County’s establishment of Alliance as the sole Medicaid managed care plan, which allowed Alliance to maintain a monopoly in the managed care plan market, was not a violation of the Sherman Act. Under the Omnibus Budget Reconciliation Act (OBRA), a state may require an individual who is eligible for medical assistance to enroll with a managed care entity as a condition of receiving such assistance but is not required to allow that person to choose a managed care entity from at least such entities. The court noted that Congress possessed the authority to regulate the requirements of state Medicaid programs in order to receive federal funding. Since OBRA was “clearly incompatible” with the Sherman Act, as it allowed a state to require individuals to enroll in managed care plans without permitting them to choose between entities, the defendants conduct complied with the Sherman Act.

Injunctive relief. However, the count found that Horisons alleged the essential elements of a prima facie claim against the defendants for conspiracy to monopolize with Golden Valley. To state a claim for conspiracy to monopolize, a plaintiff must allege the existence of a conspiracy to monopolize, an overt act in furtherance of the conspiracy, the intent to monopolize, and causal antitrust injury. Horisons alleged that Alliance allowed Golden Valley to use temporarily credentialed professional providers while failing to credential any of Horisons’ providers. As a result of Alliance’s discriminatory failure, Horisons lost millions of dollars due to non-enrollment of new members and faced financial difficulties.

In rejecting the defendants’ argument that the state action doctrine granted immunity to a state’s imposition of market restraints, the court noted that the defendants failed to show a clearly articulated state policy to displace competition in the Medi-Cal healthcare provider market in the county. Although the Local Government Antitrust Act (LGAA) precluded the recovery of damages against a local government or governmental unit for Sherman Act violations, the LGAA did not extend to injunctive relief. Thus, the defendants’ motion to dismiss Horisons’ claim for antitrust damages was granted and denied as to its claim for injunctive relief.

Cartwright Act. Horisons failed to show that either the County or Alliance was a “person” who may be sued under the Cartwright Act. The Cartwright Act defines defendants as “corporations, firms, partnerships, and associations.” The court noted that the County, a political subdivision of the state, could not be sued as a defendant under the Cartwright Act. Moreover, Horisons failed to show that Alliance, which was created by a political subdivision of the state, was a “corporation, firm, partnership or association” within the meaning of the statute.

Joinder. Finally, the court ordered that Golden Valley Health Centers be joined as a defendant. Horisons’ alleged that the defendants and Golden conspired to monopolize the provision of Medi-Cal healthcare services. Since Golden Valley had an interest in the subject of the action such that disposal of the action may impede Golden Valley’s ability to protect that interest, Golden Valley was a required party.

The case is No. 1:14-CV-00123-LJO-MJS.

Attorneys: Daniel O. Jamison (Dowling Aaron Inc.) for Horisons Unlimited and Horisons Unlimited Health Care. Anthony R. Eaton (Wilke Fleury Hoffelt Gould and Birney LLP) for Santa Cruz-Monterey-Merced Managed Medical Care Commission. Roger S. Matzkind for County of Merced.

Companies: Horisons Unlimited; Horisons Unlimited Health Care; Santa Cruz-Monterey-Merced Managed Medical Care Commission

MainStory: TopStory Antitrust CaliforniaNews

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