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From Antitrust Law Daily, January 23, 2015

Monopoly claims may proceed against “fully integrated” health care provider

By Greg Hammond, J.D.

A “fully integrated” health care corporation and its subsidiaries could not avoid antitrust allegations that they attempted to establish a vertically integrated, self-reinforcing, illegally-maintained health care monopoly in Southern Brevard County, Florida. In denying the defendants’ motion to dismiss, the federal district court in Orlando determined that the plaintiff physicians and physician practice groups had standing to bring their Sherman and Clayton Act claims; adequately identified the relevant product and geographic markets; and plausibly alleged a conspiracy (OMNI Healthcare, Inc. v. Health First, Inc., January 21, 2015, Dalton, R.).

Background. OMNI Healthcare, Inc. and other physicians and physician practice groups filed suit against “fully integrated” health care corporation Health First, Inc. and three of its wholly owned subsidiaries: Holmes Regional Medical Center, Inc. (Holmes RMC), Health First Health Plans, Inc. (HF Health Plans), and Health First Physicians, Inc. (HF Physicians). OMNI alleged that the defendants have been engaging in an anticompetitive scheme to monopolize Southern Brevard County’s interrelated health care markets for years and that the scheme has largely been successful.

Specifically, the plaintiffs assert that Health First and its subsidiaries have already obtained or have nearly obtained market power in the following relevant markets: acute-care inpatient hospital services, physician services, ancillary services, private health care insurance, and Medicare Advantage Plans. Health First purportedly used its market power to coerce independent physicians into joining its subsidiaries or entering into exclusive referral arrangements designed to perfect Health First’s control over the relevant markets. The plaintiff physicians further allege that they refused to join Health First’s subsidiaries and that Health First excluded them from its provider network, stopped referring patients to them, and revoked their hospital privileges.

The physicians filed a ten-count complaint, challenging Health First’s acquisition of Melbourne Internal Medicine Associates—the largest physicians practice group in Southern Brevard County other than HF Physicians—and alleging: (1) monopolization or attempted monopolization in the relevant markets, in violation of the Clayton and Sherman Acts; (2) conspiracies to restrain trade in and to monopolize all relevant markets in violation of the Clayton and Sherman Acts; and (3) violations of the Florida Deceptive and Unfair Trade Practices Act (FDUTPA). The defendants moved to dismiss the third amended complaint.

Standing. In its first argument for dismissal, the defendants alleged that the plaintiff physicians lacked antitrust standing for their Clayton Act claims because: (1) the resulting injury in this case—increased treatment prices and decreased treatment quality—would be to insurers and patients, not physicians; and (2) the plaintiffs are not customers or competitors in the relevant markets, and can therefore not be efficient-enforcers.

The court disagreed with the defendants’ arguments, finding that the plaintiff physicians have antitrust standing to raise all of their Clayton Act claims. First, the court noted that the defendants incorrectly presume that antitrust plaintiffs must suffer the same injury as the consuming public, noting that the two injuries can differ as long as they “coincide.” In this case, the plaintiffs adequately alleged financial harm from defendants’ efforts to exclude them from the physician and ancillary service markets. According to the court, both the physicians’ injuries and the injuries to the consuming public flow from the defendants’ supposed interference with the freedom to compete, and are consequently both remediable under the Clayton Act.

Second, the court determined that there is no “customer or competitor” requirement to be an efficient-enforcer. The efficient-enforcer factors weighed in favor of antitrust standing because: (1) the plaintiffs’ injuries are direct; (2) the plaintiffs refused to give up their referral control; (3) the defendants responded with exclusionary tactics causing the plaintiffs to sustain financial loss; (4) the losses are discrete, quantifiable, non-duplicative, and unlikely to require complex apportionment; (5) the plaintiffs’ injuries are financially motivating and congruent with the consuming public’s interest in dissolving the defendants’ alleged tying and exclusive dealing arrangements; and (6) there is no indication that the plaintiffs and their counsel could not enforce a favorable judgment.

Market definitions. The defendants next argued that the plaintiffs failed to sufficiently define the product and geographic dimensions of the ancillary service markets. The court disagreed, finding that the plaintiffs adequately alleged that the ancillary services market is a plausible “cluster market.” In addition, the court found that the plaintiffs’ “sparse” allegations that Southern Brevard County’s “unique geography” and population dynamics make the geographic boundaries coincide in this case, were sufficient enough to survive a motion to dismiss. The geographic allegations also gave the defendants notice and concrete boundaries for discovery purposes, the court found.

Conspiracy. In their third argument for dismissal, the defendants asserted that the plaintiffs merely demonstrated “parallel conduct” between Health First’s subsidiaries and the independent physicians who stopped referring patients to the plaintiff physicians. Therefore, the plaintiffs failed to allege a plausible conspiracy, the defendants asserted. Once again, the court disagreed, finding that the plaintiffs’ allegations of meetings with Health First’s representatives, along with their subsequent exclusion from HF Health Plans’ provider network and “blacklisting” by its in-network providers set forth sufficient “context” to raise a suggestion of an agreement to boycott physicians who refuse to enter into exclusive referral arrangements with Health First. The context was sufficient to plausibly allege a conspiracy, rather than mere parallel action.

FDUTPA. The defendants also moved to dismiss the plaintiff physicians’ FDUTPA claims for the same reasons as the antitrust claims, and—alternatively—that the defendants are exempt from suit under the FDUTPA because the challenged activity in this suit is subject to laws administered by the Office of Insurance Regulation of the Financial Services Commission. The court rejected both arguments, finding that the motion to dismiss the FDUTPA claims should be denied for the same reasons as the court denied the motion regarding the antitrust claims. In addition, the court found that the defendants’ characterization of the challenged activity was too narrow, and that none of the statutes that the defendants’ cited indicated that the Office of Insurance Regulation would regulate the challenged activity in this case.

The case number is 6:13-cv-1509-Orl-37DAB.

Attorneys: David S. Oliver (Morgan & Morgan, PA) and Deborah J. Winegard (Whatley Kallas, LLC) for OMNI Healthcare, Inc. Dominic C. MacKenzie (Holland & Knight, LLP) for Health First, Inc., Holmes Regional Medical Center, Inc., Health First Physicians, Inc., and Health First Health Plans, Inc.

Companies: OMNI Healthcare, Inc.; Health First, Inc. Holmes Regional Medical Center, Inc.; Health First Health Plans, Inc.; Health First Physicians, Inc.

MainStory: TopStory Antitrust StateUnfairTradePractices FloridaNews

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