Mid-Atlantic Health Law TOPICS
When is Too Big Too Big?
Two recent cases demonstrate that the maintenance or attempted acquisition by health care providers of too large a market share may lead to antitrust challenges.
A. Rome Ambulatory Surgical Center v. Rome Memorial Hospital
A federal district court in New York has ruled that a freestanding ambulatory surgical center may proceed with three of its antitrust claims against an acute general hospital that also offered ambulatory surgery services.
Rome Ambulatory Surgical Center (Rome ASC) was opened by a group of surgeons in 1999. In the same month, Rome Memorial Hospital amended its bylaws to allow it to deny admitting privileges to any doctor who referred patients to other facilities. The hospital also entered into exclusive contracts with two major insurers to provide ambulatory surgery services for all patients covered by the insurers.
In the eighteen months Rome ASC operated, the hospital allegedly lost 20 percent of its ambulatory surgery cases to Rome ASC.
However, while the hospital's by-law provision was never used, the exclusive insurance contracts reduced referrals to Rome ASC to such an extent that the freestanding center was ultimately forced to close.
Rome ASC then sued the hospital, claiming various violations of the antitrust laws. The hospital responded by unsuccessfully seeking to have the complaint dismissed.
The court held that Rome ASC's allegation that the hospital's exclusive contracts foreclosed 65% of the relevant market would, if true, constitute an unreasonable restraint of trade. Furthermore, Rome ASC's allegation that the hospital had a 70% share of the outpatient surgery market before Rome ASC opened, would support a finding that the hospital had monopoly power, and, therefore, the hospital's threat to deny privileges might constitute an illegal attempt to maintain that power.
B. Minnesota v. Allina Health System
Meanwhile, in Minnesota, the State Attorney General, Mike Hatch, sued Allina Health System to block its proposed purchase of two cardiology groups, stating that the purchase would substantially impair competition for cardiology services in the Twin Cities.
In 2003, Attorney General Hatch learned that Allina's Minneapolis Cardiology Associates had entered into merger/acquisition discussions with St. Paul Heart Clinic and Metropolitan Cardiology Consultants. The State requested that the parties sign an agreement not to merge for three years, but Allina and the two clinics refused to sign such an agreement.
In January of this year, in what appears to be another chapter in a long-running tumultuous relationship between the State and Allina, the State sued Allina when it believed that acquisition negotiations with the two cardiology clinics were continuing. The State asserted that the proposed transactions would violate Minnesota's antitrust laws.
The complaint also noted that, if the transactions were completed, Allina's Minneapolis
Cardiology Associates, already the market leader, would control about 38 percent of all cardiologists in the Twin Cities. Moreover, the State alleged that the 38 percent market share would allow Allina to raise its prices for cardiology services, and to direct patient referrals to particular locations.
Allina asked the court to dismiss the State's complaint, claiming that it had ceased acquisition negotiations in the fall of 2004, and that the later discussions with the clinics only involved standards of care, and not acquisition or merger. Allina also asked the court to impose sanctions on Attorney General Hatch, stating that he had acted irresponsibly in bringing suit.
In June, Allina and the State entered into a settlement agreement whereby Allina agreed not to acquire the two clinics, or hire away a majority of the clinics' cardiologists, for two years. Allina and the State also agreed that their lawyers would meet on a monthly basis to improve communication, and to avoid future suits.
December 22, 2005