Mid-Atlantic Health Law TOPICS

A version of this article was published in The Daily Record on July 15, 2015.

The federal antitrust laws prohibit conspiracies to restrain trade, attempts to monopolize, as well as mergers that may substantially lessen competition. States also have similar laws.

Recently, a Florida federal court allowed several doctors to pursue their monopolization claims against the leading provider of health care services in Southern Brevard County, and a Massachusetts state court stopped a Massachusetts hospital system from acquiring more hospitals.

A. Health First

In January 2015, a federal district court in Florida denied Health First's attempt to dismiss a complaint based on federal antitrust and Florida state law claims.

The action involves an alleged attempt to create a "vertically integrated, self-reinforcing, illegally maintained health care monopoly in Southern Brevard County." The case was filed by various independent physicians and physician practice groups. The defendants are Health First, a "fully integrated" health care corporation, along with three of its wholly-owned subsidiaries: Holmes Regional Medical Center, a hospital; Health First Health Plans, a private health insurer; and Health First Physicians, a physician practice group.

According to the doctors bringing the action, Health First has been engaged for years in an anti-competitive scheme to monopolize Southern Brevard County's interrelated health care markets. Health First and its subsidiaries have allegedly already gained or nearly gained market power in: acute-care inpatient hospital services; physician services; ancillary services; private health insurance; and Medicare Advantage Plans.

Health First and its subsidiaries are now allegedly using that market power to coerce independent physicians into joining Health First's subsidiaries, or entering into exclusive referral arrangements designed to perfect Health First's control over all relevant markets. The independent doctors claim that they refused to acquiesce to this coercion, prompting Health First and its co-conspirators to retaliate with exclusionary tactics designed to drive the doctors out of practice.

Health First asked the federal court to dismiss the complaint because the doctors did not allege that they suffered damages that the antitrust laws were designed to address, and, therefore, these allegedly aggrieved doctors did not have "standing" to bring this action.

The court rejected that request. The court noted that, while the anti-competitive scheme allegedly injures the consuming public by subjecting it to increased prices and decreased quality, the doctors themselves also claim a more discrete injury: financial harm from the efforts to exclude them from the physician and ancillary service markets. The court stated that the two injuries are distinct, but both flow from "interference with the freedom to compete" and thus both are remediable under the antitrust laws.

The court also concluded that the allegedly aggrieved doctors plausibly alleged a conspiracy as opposed to merely "parallel conduct" between Health First's subsidiaries and the independent, in-network physicians who stopped referring patients to the allegedly aggrieved doctors. As the court stated, the doctors' meetings with Health First's representatives, coupled with their subsequent exclusion from Health First Health Plans' provider network, and "blacklisting" by its in-network providers, plainly provided "context that raises a suggestion of a preceding agreement" to boycott physicians who refused to enter into exclusive referral arrangements with Health First.

B. Partners HealthCare System

Partners HealthCare System, the largest health care provider system in Massachusetts, decided to abandon its proposed acquisition of South Shore Health, after a Massachusetts state court rejected a proposed consent judgment related to the acquisition.

Partners sought to acquire two hospital systems - South Shore and Hallmark Health. These acquisitions would have enabled Partners to add three acute care hospitals to its system within the Greater Boston area, and to add at least 800 physicians. The Massachusetts Attorney General filed a complaint in a Massachusetts state court based on the Massachusetts Consumer Protection Act, and the parties simultaneously submitted a proposed consent judgment.

In January 2015, the Massachusetts state court formally rejected the proposed consent judgment. First, the court concluded that the proposed consent judgment was not in the "public interest."

The court stated that by permitting the acquisitions, the settlement would have cemented Partners' already strong position in the health care market, and given it the ability, "because of this market muscle, to exact higher prices from insurers for the services its providers render." The court found that the costs would ultimately be borne by consumers and employers in the form of higher insurance premiums and higher deductibles on their insurance plans.

The court concluded that the proposed consent judgment, which contained temporary price caps and other so-called "conduct-based remedies," did not reasonably or adequately address the harm that was almost certain to occur as a consequence of Partners' alleged anti-competitive conduct.

Second, the court indicated that it had serious concerns as to the enforceability of the proposed consent judgment. The court stated that the proposed consent judgment envisioned a ten-year period during which the court could be called upon to resolve disagreements among the parties in at least ten different areas, including complicated issues relating to health care pricing. The court stated that it was ill-equipped to keep abreast of changes in the health care field as they unfold over the next decade, or to predict at this point how such changes would affect the meaning and application of the proposed consent judgment going forward.

In February 2015, the Massachusetts Attorney General, Partners, South Shore, and Hallmark jointly stipulated that Partners and South Shore will not proceed with the proposed acquisition of South Shore by Partners. The stipulation indicated, however, that the Attorney General's office would further evaluate Partners' proposed acquisition of Hallmark.