Health Care Providers Lose Bid To Toss Antitrust Case

By Christine Caulfield

Portfolio Media, New York (October 19, 2007)--A Kansas judge has refused to throw out an antitrust case against the state's major health care providers, ruling there was sufficient evidence of a conspiracy to boycott a competitor for the suit to proceed.

In a decision unsealed on Wednesday, Judge Monti Belot denied motions to dismiss the suit filed by the defendants, among them Aetna Health Inc. and Midwest Division Inc., saying the plaintiff -- a specialty hospital based in Kansas City -- had shown evidence of an agreement and a plausible economic motive.

The plaintiff, Heartland Surgical Specialty Hospital LLC, sued in April 2005, claiming that six managed care organizations and five hospitals had breached antitrust laws by conspiring to drive the physician-owned hospital out of business.

Originally named in the suit were hospitals HCA Midwest, St. Luke's, Carondelet, Shawnee Mission Medical Center and North Kansas City Hospital, and MCOs Blue Cross and Blue Shield of Kansas City, Aetna Inc., Coventry Health Care of Kansas, Cigna Health Care, Humana Health Plan and United Healthcare.

Heartland settled with North Kansas City Hospital, Blue Cross, Cigna, Humana and United earlier this year.

The suit alleged that the named MCOs conspired with the named hospitals to shut Heartland out of managed-care contracts, "to respond to the competitive threat that heartland and other specialty hospitals posed." Defendants retorted that Heartland had not met its initial burden of showing evidence of an agreement to restrain trade.

The MCOs account for about 90% of managed-care enrollment in Kansas City, and the hospital defendants' total share of patient revenues in the metropolitan area is 74%.

The judge agreed with Heartland that testimony by one defendant alluding to an unwritten policy between MCOs of not extending managed care contracts to specialty hospitals was evidence of a conspiracy between the defendants to boycott it.

"No inference is needed to support a finding of an agreement from this testimony. An unwritten understanding is clearly an agreement," the judge said. "Viewed in the light most favorable to Heartland, this testimony indicates an agreement among MCOs to work collectively to exclude Heartland."

The judge also found Heartland's theory of the economic motives for the conspiracy was plausible. Heartland alleged that the hospital defendants wanted to keep a competitive new entrant from the market to protect their profitability. In exchange for the MCO defendants' cooperation, the hospitals agreed to lower reimbursement rates.

"Heartland's economic theory leaves little to be interpreted and defendants make no serious effort to dispute it," he added.

This theory, together with the testimonial evidence, which also included acknowledgment of a "gentleman's agreement" among MCOs that they would include facilities majority-owned by hospitals in their contracts, was evidence enough to deny summary judgment, Judge Belot said.

"Heartland has shown consistency of behavior by the hospital defendants and the MCO defendants," the judge said. "In addition, Heartland has shown a plausible economic theory based on the hospital defendants' desire to protect their market share and profits and the MCO defendants' desire to negotiate reduced payments while maintaining networks similar to their competitors."

In addition to this were the compelling uncontested facts that the hospitals named in the suit had opposed specialty hospitals and fiercely discouraged the MCOs from contracting with them, the judge said.

Judge Belot did, however, find insufficient evidence that one hospital defendant, Carondelet Health System, had conspired with the others to boycott Heartland.

A trial is scheduled for April 2008.

The Heartland Surgical Specialty Hospital LLC v. Midwest Division Inc., case number 05-2164, in the U.S. District Court for the District of Kansas.

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