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From Antitrust Law Daily, February 14, 2014

Restraint of trade conspiracy alleged by ambulatory surgery centers supportable against hospitals but not insurers

By Edward L. Puzzo, J.D.

Claims by ambulatory surgery centers of a conspiracy in restraint of trade by competing hospitals and surgery centers were sufficient to survive motions to dismiss, but similar claims against a trade group and health insurers were not, the federal district court in Denver has ruled (Kissing Camels Surgery Center, LLC v. Centura Health Corporation, February 13, 2014, Martinez, W.).

Background. The plaintiffs alleged that defendants Centura and HCA, operators of hospitals and surgery centers which directly competed with plaintiffs’ non-hospital ambulatory surgery centers, acted in restraint of trade by conspiring to use their market power to pressure physicians and insurers to not do business with plaintiffs, in an effort to reduce competition for ambulatory surgery services, in violation of the Sherman Act and the Colorado Antitrust Act. The Defendants moved to dismiss.

The court explained that, since Section 1 of the Sherman Act does not prohibit all unreasonable restraints of trade but only those put into effect by concerted multilateral action, the crucial question here was whether the challenged anticompetitive conduct stemmed from independent decision or from a tacit or express agreement.

Centura. The plaintiffs alleged that defendant health insurers, who needed Centura’s and HCA’s hospitals in their provider networks, were pressured by Centura and HCA to penalize physicians referring business to plaintiffs’ ambulatory surgery centers. The insurers allegedly terminated physicians for out-of-network referrals to plaintiffs’ facilities and refused to negotiate network agreements directly with plaintiffs.

The plaintiffs also alleged that defendants Centura and HCA refused to sign transfer agreements between their hospitals and plaintiffs’ facilities, something non-hospital ambulatory surgery centers must have in case their patients require emergency hospitalizations.

Centura, HCA and trade association CASCA allegedly held a meeting on August 30, 2012 in which they requested that insurers join them in a concerted boycott of plaintiffs, on the basis of allegedly illegal billing practices.

Defendant Centura argued that the above allegations were conclusory, and not well-pleaded factual allegations, and therefore should be dismissed, but the court disagreed. A conclusory allegation, the court stated, would state little more than that the defendant joined a conspiracy to unreasonably restrain trade, but in contrast, the plaintiffs alleged specific actions Centura took with both insurers and plaintiffs, that supported the allegations of an overt agreement between competing parties to influence physicians and insurers to not do business with plaintiffs, with the goal of reducing competition for their own respective hospitals and surgery centers. These were factual, not conclusory, allegations that the court must take as true when considering Centura’s motion to dismiss, the court stated.

It was true, the court continued, that a general reference to opportunities to conspire, such as alleging a number of meetings between alleged co-conspirators, might be an insufficient basis from which to infer an agreement. Here, however, the plaintiffs alleged an overt attempt by Centura and HCA to persuade the insurers to assist with Centura’s and HCA’s conspiratorial goals, after which a number of the insurers took the actions Centura and HCA discussed. Therefore, the plaintiffs sufficiently alleged a conspiracy in restraint of trade between HCA and Centura, so Centura’s motion to dismiss must be denied, the court ruled.

CASCA. Defendant Colorado Ambulatory Surgery Center Association, Inc. (CASCA) is a trade association for ambulatory surgery centers. At least two HCA employees sat on CASCA’s Board of Directors. At the request of Centura and HCA, CASCA’s Executive Director sent a letter to the Colorado Department of Regulatory Agencies (DORA), asking it to take legal action against plaintiffs for allegedly violating state law prohibiting them from waiving or discounting insurance copayments and deductibles. DORA took no action against plaintiffs based on this letter, noting that no complaints had been received by the Colorado Medical Board for unlawful billing practices.

CASCA argued that its role in providing a venue for the trade association meetings at which the alleged conspiracy was formed does not necessarily imply that CASCA itself was a member of the conspiracy. The court agreed, stating that CASCA’s role as the venue for conspiratorial meetings is insufficient, on its own, to establish its agreement to join as a conspirator.

It further argued that its letter petitioning the state government to take action against plaintiffs is protected by the First Amendment and the Noerr-Penningtondoctrine. The court agreed that, under that doctrine, Sherman Act liability does not arise from a concerted effort to influence public officials, regardless of anticompetitive intent or purpose.

The court found that plaintiffs’ limited allegations against CASCA, that it sent the petition, provided the meeting venue, and was controlled by HCA and Centura, were insufficient to support a plausible inference that CASCA joined HCA and Centura in conspiring to put plaintiffs out of business. At most, the court continued, the allegations suggest that CASCA provided passive facilitation of the conspiracy, not tacit or express participation. Therefore, the court ruled, the allegations are insufficient to allege a plausible Sec. 1 Sherman Act claim, and must be dismissed.

Insurers. The plaintiffs’ allegations of the specific actions each insurer defendant took against physicians and health care providers using plaintiffs’ facilities are numerous and detailed, the court stated, but are insufficient to support allegations of an agreement to conspire. The allegations only indirectly support an inference of an agreement between insurers and Centura and HCA, pleading parallel acts by each insurer against physicians that were using plaintiffs’ facilities. Conscious parallel conduct could give rise to a plausible Sec. 1 Sherman Act claim, the court stated, if the allegations suggest a preceding agreement, but not if that conduct could also be explained by independent action. At this stage, plaintiffs need not disprove all possible independent motivations or show that a conspiracy is more probable than independent action, the court continued, but they must show that the existence of a prior agreement is at least plausible, not merely possible.

The court found that the plaintiffs’ allegations of parallel conduct by the insurers were not sufficient to suggest that the conduct was the result of an agreement instead of independent factors, such as physician breaches of their network contracts or the possibility that plaintiffs’ billing practices violated state law. The plaintiffs’ allegations with respect to the insurers did not suggest that they made a conscious commitment to a common scheme designed to achieve an unlawful objective. Therefore, the court ruled, the insurer defendants’ motions to dismiss must be granted.

The case is Civil Action No. 12-cv-3012-WJM-BNB.

Attorneys: Deborah Jane Winegard (Whatley Kallas, LLC) for Kissing Camels Surgery Center, LLC, Arapahoe Surgery Center, LLC, Hampden Surgery Center, LLC, and Cherry Creek Surgery Center, LLC. Melvin B. Sabey (Kutak Rock, LLP) for Centura Health Corporation.

Companies: Kissing Camels Surgery Center, LLC; Cherry Creek Surgery Center, LLC; Arapahoe Surgery Center, LLC; Hampden Surgery Center, LLC; Centura Health Corporation; Colorado Ambulatory Surgery Center Association, Inc.; Rocky Mountain Hospital and Medical Service, Inc., d/b/a Anthem Blue Cross and Blue Shield of Colorado; UnitedHealthCare of Colorado, Inc.; Audubon Ambulatory Surgery Center, LLC; Aetna, Inc.

MainStory: TopStory Antitrust ColoradoNews

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