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In August of 2024, a trial court in California dismissed a price-fixing claim in Verity Health System of California, Inc. v. MultiPlan Corporation. MultiPlan, a provider of health care data analytics, allegedly used its algorithmic repricing tool to set and to lower reimbursement rates health plans paid to out-of-network hospitals.  

The Facts

A bankruptcy liquidator for Verity sued MultiPlan claiming violations of federal and California antitrust laws.  
Specifically, Verity alleged that MultiPlan entered into an illegal “hub-and-spoke” agree-ment with commercial insurers to share competitively sensitive data and produce only one low out-of-network price for services that did not differ by insurer.  

A hub-and-spoke agreement involves a central actor (the hub) working with several other actors (the spokes) who forge an arrangement or understanding between or among direct competitors to fix or maintain prices, allocate markets, or rig bids through a horizontal agreement.

The Decision

The court concluded that horizontal price-fixing liability could not be assigned here because out-of-network reimbursement rates are not a “discrete product or service that can be bought and the price of which can be fixed through an unlawful agreement.” Basically, how could Verity allege that the insurers were collectively agreeing on a price to pay to out-of-network hospitals, when none of the insurers had any contracts with those out-of-network hospitals?  

The court also found that Verity failed to assert any “antitrust” harm. Again, as an out-of-network provider, how could Verity complain that the price it was paid was too low when Verity and the commercial insurers never agreed upon any price?

Appeal

On appeal, Verity may argue that the trial court was incorrect in its conclusion that the alleged scheme does not constitute price-fixing, since the “price” paid by all of the insurers was allegedly “fixed” by MultiPlan’s algorithm.  

Also, on appeal, Verity may argue that one way commercial insurers compete with each other is by deciding how much they will pay out-of-network providers, because that decision affects whether providers choose to contract with the health insurer or not.  Therefore, MultiPlan’s and the insurers’ alleged hub-and-spoke agreement should be viewed as an unreasonable restraint of trade and violative of federal and California antitrust laws even if the alleged scheme did not constitute per se illegal price-fixing.
 

Kennedy Hagens
410-576-4146 • khagens@gfrlaw.com