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From Antitrust Law Daily, June 2, 2015

Surgery center states exclusive dealing, tying, monopoly claims against competitor

By Greg Hammond, J.D.

Marion HealthCare, LLC, a multi-specialty freestanding outpatient surgery center, has sufficiently alleged exclusive dealing, tying, and monopolization claims against competitor Southern Illinois Healthcare. The federal district court in Benton, Illinois, granted BlueCross and BlueShield of Illinois’ (BCBS) motion to dismiss, however, finding that the health insurance company cannot be liable under Section 1 of the Sherman Act or Section 3(4) of the Illinois Antitrust Act, because the company is a “purchaser” (Marion HealthCare, LLC v. Southern Illinois Healthcare, May 29, 2015, Yandle, S.).

In its second amended complaint, Marion set forth seven claims, including exclusive dealing against Southern and Health Care Service Corp., doing business as BCBS, in violation of Section 1 of the Sherman Act and Section 3(4) of the Illinois Antitrust Act; tying against Southern in violation of Section 1 of the Sherman Act and the Illinois Antitrust Act; and monopolization against Southern in violation of Section 2 of the Sherman Act.

Specifically, Marion claims that Southern, through exclusionary contracts with BCBS, has violated antitrust law through exclusive dealing, tying, and monopolization. The antitrust violations allegedly delayed and prevented expansion by competitors in the relevant geographic area, limited price competition, reduced quality competition in the area, and reduced health care options for patients in need of outpatient surgery, without a valid business justification. The defendants moved to dismiss for failure to state a claim.

BCBS exclusive dealing claim. In support of its motion to dismiss, BCBS argued that Marion cannot assert exclusive dealing claims against it as a purchaser of the outpatient surgical services at issue. The court agreed, noting that Section 3 of the Clayton Act does not impose liability to buyers or purchasers, and that the claim could therefore not be brought under Section 1 of the Sherman Act. Marion admitted that BCBS is the purchaser of outpatient surgical services. Because Marion failed to provide any authority that has construed Section 3 of the Clayton Act to cover “the sins of the purchaser or buyer,” the exclusive dealing claims against BCBS were dismissed with prejudice.

Marion exclusive dealing claim. Similarly, Southern moved to dismiss Marion’s exclusive dealing claim for failure to allege facts that Southern forced or coerced BCBS to contract with Southern for outpatient surgery services as a condition of contract for inpatient hospital services. More specifically, Southern asserted that Marion failed to adequately plead substantial foreclosure from the relevant market. The court rejected this argument, finding the claim sufficiently pleaded. Marion alleged that it has been foreclosed from access to payments for both inpatient and outpatient surgical services from all payors; that he market power that Southern wields in the relevant geographic area is substantial, accounting for a 77 percent market share in inpatient surgical cases and 76 percent market share in outpatient surgical cases; and that Southern’s market power has prevented competitors from expanding. The motion to dismiss was consequently denied with regard to the exclusive dealing claim against Southern.

Tying. The motion to dismiss the tying claim against Southern was also denied. The court determined that Marion properly alleged an illegal tying arrangement between Southern and BCBS by asserting that: (1) Southern has significant market power in the in- and out-patient services market, Marion agreed to exclude out-of-network outpatient surgical service providers; (2) BCBS agreed to its arrangement with Southern because Southern is a “must have” surgical services provider hospital; and (3) Southern coerced BCBS, and it was not the exercise of reasonable and independent business judgment that led BCBS to agree to the arrangement.

Monopolization. Lastly, Southern argued that Marion failed to plead that Southern acquired or maintained an alleged monopolistic position unlawfully, and that the monopolization claim should be dismissed. The court disagreed, noting that Marion pleaded sufficient facts to infer market power due to Southern’s charging of supracompetitive prices for the sustained period, without consequence. Specifically, Marion alleged that Southern willfully maintained its monopoly through its actions of exclusive dealing and tying arrangements; significant foreclosure from the most profitable health insurance contracts and foreclosure from the ability to compete adequately in the market; as a result of the foreclosure, it and others cannot remain viable and competitive; the exclusive dealing arrangement has prevented significant competition and has harmed consumers in the relevant geographic market; and consumers have suffered direct harm through increased prices for patients and employers, suppressing price competition, decreasing the number of options available, and decreasing the overall quality of care.

The case number is 12-cv-871-SMY-PMF.

Attorneys: Thomas J. Pliura (Law Offices of Thomas J. Pliura) for Marion HealthCare, LLC. David Marx, Jr. (McDermott Will & Emery LLP) for Southern Illinois Healthcare.

Companies: Marion HealthCare, LLC; Southern Illinois Healthcare

MainStory: TopStory Antitrust IllinoisNews

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