Insurer Escapes Antitrust Suit, But Hospital Must Continue the Fight

A large regional health insurer extricated itself from an antitrust suit, leaving the dominant local hospital to square off alone versus an ambulatory surgical center (ASC). The U.S. District Court for the Southern District of Illinois dismissed exclusive dealing allegations against BlueCross and BlueShield of Illinois (BCBSI) for failure to state a claim but allowed various antitrust claims to proceed against Southern Illinois Healthcare (SIH).

The plaintiff ASC, Marion HealthCare, is a multi-specialty freestanding outpatient surgery center. Defendant SIH is a nonprofit corporation that offers both inpatient and outpatient medical services through its acute-care hospitals. SIH also owns various freestanding outpatient surgical service providers. Marion alleges that, within the relevant geographic area, SIH enjoys a 77 percent market share for inpatient surgical cases and a 76 percent market share for outpatient surgical cases. This dominant market share, according to Marion, makes SIH a “must-have” hospital for insurers, including the largest health insurance company in Illinois and the region, BCBSI.

Marion claims that it submitted multiple applications to BCBSI seeking acceptance as an in-network provider. BCBSI denied each request, citing its exclusive contract with SIH, which prohibited BCBSI from contracting with competitors for in-network coverage in the geographic market. Marion alleges that ASCs in the region cannot remain competitive so long as the arrangement between BCBSI and SIH exists.

Marion thus brought exclusive dealing claims against BCBSI and SIH under Section 1 of the Sherman Act and analogous state law. Marion further alleged that SIH violated Section 1 of the Sherman Act and analogous state law by illicitly tying discounts for coverage of SIH’s inpatient hospital services with exclusive contracting for in-network coverage of SIH’s outpatient services. Finally, Marion added a monopolization claim against SIH in violation of Section 2 of the Sherman Act for good measure.

Using a rule of reason analysis, the court dismissed all claims against BCBSI. The court first reasoned that, if an exclusive dealing claim does not fall within the broader prescription of Section 3 of the Clayton Act, then it is not forbidden by Section 1 of the Sherman Act. And Section 3 of the Clayton Act does not provide for liability of the buyer out of concern that such liability may chill competitive conduct. Here, the court held that BCBSI acted solely as a purchaser of services and thus cannot be held liable for an exclusive dealing contract. Marion attempted to argue that this was an exceptional case where the buyer actively and aggressively promoted the exclusive arrangement and so should share liability with the seller. The court did not find this argument persuasive in the face of overwhelming contradictory precedent.

SIH, however, did not fare so well. The court refused to dismiss any claim against SIH, finding that SIH’s market power could plausibly prevent entry into the in-network surgical services market of BCBSI. Further, SIH’s “must-have” status may have clouded the independent business judgment of BCBSI, allowing SIH to coerce the insurer into an illegal exclusive arrangement. Finally, market share data and alleged “supracompetitive” pricing by SIH support Marion’s monopolization claims. The hospital must therefore face the ASC in round two on all its antitrust allegations.

The case is Marion HealthCare, LLC v. So. Ill. Healthcare, Civil Action No. 12-cv-871 (S.D. Ill. May 29, 2015).

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