Court Rejects Claim that a Doctor’s Loss of Privileges is an Antitrust Injury

A federal appeals court held that a doctor who lost his privileges at a local hospital failed to establish an antitrust injury sufficient to confer standing under the Sherman Act. The United States Court of Appeals for the Third Circuit affirmed a district court ruling that Dr. Victor Novak could not show that he had been excluded from the market or that patients were restrained in physician choice when he lost his privileges at the hospital. Because Dr. Novak failed to establish an antitrust injury, the court granted summary judgment to the hospital.

Dr. Novak practices as an independent general surgeon located in Somerset, Pennsylvania. In 1993, he joined the staff of Somerset Hospital, a small community hospital. Five years later, he joined the medical staff at Conemaugh Hospital, a larger, more comprehensive facility located 32 miles from Somerset Hospital. Until 2005, Dr. Novak performed surgeries at both facilities.

In August 2005, Dr. Novak performed two surgeries without proper authority, leading to the loss of his privileges at Somerset Hospital. According to the surgeon, however, the termination of his privileges was due to a conspiracy by hospital board members to reduce the likelihood that Somerset patients would be treated at Conemaugh. Dr. Novak thus brought an antitrust suit under the Sherman Act, alleging that Somerset Hospital illegally shut him out of the relevant market and restrained patient choice.

The district court found no antitrust injury and granted summary judgment to the hospital, and the Third Circuit affirmed. First, Dr. Novak failed to demonstrate he had been excluded from the relevant product market. Dr. Novak claimed that, because Conemaugh offers more comprehensive services than Somerset, the hospitals do not compete in the same product market. However, the court pointed out that both hospitals provide the general and gastrointestinal surgical services provided by Dr. Novak, as evidenced by his holding privileges at both hospitals.

Second, the court denied Dr. Novak’s attempt to restrict the relevant geographic market to only Somerset Hospitals. The court noted that the “relevant geographic market is the area in which a potential buyer may rationally look for the goods or services he or she seeks,” and more than 32 percent of patients from Somerset Hospital’s primary service area were admitted to other hospitals, including Conemaugh. The court concluded it was therefore “illogical” to believe that patient choice was restrained by the hospital’s actions.

This case demonstrates the importance of market definitions in an antitrust claim. Dr. Novak had a better chance to survive summary judgment if, for example, Somerset patients refused to travel 32 miles to seek care at another hospital, or if he practiced a specialty offered only at Somerset in that geographic market. In this case, though, competition proved to be Somerset’s ally.

The case is Novak v. Somerset Hosp., Civil Action No. 14-4354 (3d Cir. Aug. 20, 2014).

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