Kansas Clinic Settles Antitrust Suit Against Insurers

By Erin Marie Daly, Friday, Mar 21, 2008 --- A Kansas physician-owned specialty clinic has reportedly laid to rest its long-running antitrust lawsuit against a slew of the state's major hospitals and health care insurers the clinic alleges conspired to drive it out of business.

The plaintiff, Heartland Surgical Specialty Hospital LLC, recently reached confidential settlements with defendants HCA Midwest Division, St. Luke's Health System, Shawnee Mission Medical Center, Carondelet Health System, Coventry Health Care of Kansas Inc. and Aetna Inc., the Associated Press reported Thursday.

Several other defendants in the case - North Kansas City Hospital, Blue Cross and Blue Shield of Kansas City, United Healthcare Inc., Humana Health Plan Inc. and Cigna Health Care of Kansas/Missouri - had previously agreed to settlements that were also confidential, the AP said.

Heartland Chief Executive Officer Mary Nan Holley said the clinic was pleased to resolve the case and "look forward to a very bright future, with the ability to provide patients choice in their health care decisions," the AP said.

A federal judge last October refused to throw out the case, ruling that there was sufficient evidence of a conspiracy to boycott a competitor for the suit to proceed.

Heartland, a specialty hospital clinic based in Kansas City, launched the legal action in April 2005. The complaint claimed that six managed care organizations and five hospitals had breached antitrust laws by conspiring to drive it out of business.

According to Heartland, the MCOs conspired with the hospitals to shut Heartland out of managed care contracts, "to respond to the competitive threat that Heartland and other specialty hospitals posed."

The 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%.

In October, Judge Monti L. Belot 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.

Judge Belot also said Heartland's theory of the economic motives for the conspiracy was plausible. Heartland had 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 said.

This theory, together with 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 was initially scheduled to go forward in April 2008.

Heartland was represented in the case by Stueve Siegel Hanson LLP. The defendants were represented by Latham & Watkins LLP, Stinson Morrison Hecker LLP and Husch Blackwell Sanders LLP, among others.

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

--Additional reporting by Christine Caulfield

 

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