On March 30, 2017, in a closely watched case, a federal district court denied the Motion for Judgment on the Pleadings filed by Carolinas Healthcare against a Complaint filed by the DOJ Antitrust Division and the State of North Carolina. The Complaint alleged that Carolinas Healthcare insisted on contract provisions with payors that limited or prohibited steering to lower-cost providers. In its motion, Carolinas Healthcare relied heavily on the Second Circuit decision in United States v. American Express Co., 838 F.3d 179 (2d Cir. 2016), where the Second Circuit had reversed a trial verdict condemning steering restrictions in Amex’s contracts with merchants. This alert reviews the court’s ruling and considers its implications for future health care antitrust cases.
Dionne Lomax is a Member in the firm’s Antitrust and Health Law practices and is based in the Washington, DC office. She provides counsel and representation on health care–related mergers and acquisitions, international mergers, joint ventures, other commercial arrangements, antitrust investigations, and other antitrust matters. Dionne’s experience also includes serving as a trial attorney at the DOJ Antitrust Division Health Care Task Force Section.
The Federal Trade Commission (“FTC”) and the State of Illinois successfully concluded their challenge to the proposed merger of Advocate Health Care and NorthShore University Health System earlier this month, when the U.S. District Court for the Northern District of Illinois granted the plaintiffs’ request for a preliminary injunction enjoining the health systems from consummating their proposed merger. The parties subsequently abandoned the transaction without appealing the district court’s decision.
The district court had previously denied the motion for a preliminary injunction. It believed that the geographic market proposed by the plaintiffs was too narrow and found the evidence “equivocal” regarding the importance of patients having access to hospitals close to their homes. As such, it held that the plaintiffs had not met their burden of proving a relevant geographic market and thus, did not demonstrate a likelihood of success on the merits. However, in October 2016, the U.S. Court of Appeals for the Seventh Circuit reversed and remanded for further proceedings on the issue of geographic market definition, holding that the lower court erred in its factual findings regarding critical aspects of the geographic market, as well as the remaining preliminary injunction elements that the district court did reach in its first decision.
This alert examines the court’s decision, which not only supports the FTC’s hospital merger enforcement program but continues to up the ante for merging parties attempting to persuade a court that the proposed efficiencies are sufficient to offset alleged anticompetitive effects.
Earlier this week, the U.S. Department of Justice (“DOJ”) and the Federal Trade Commission (“FTC”) filed an amicus brief with the Fifth Circuit stating that the Texas Medical Board’s (the “Board”) appeal was inappropriate and the Court does not have jurisdiction over the appeal. But the government did not stop there. The brief goes on to argue that if the Court does in fact find that it has jurisdiction, it should affirm the district court’s order denying the Board’s motion to dismiss and allow the case to proceed. Continue Reading Teladoc Receives Support from the Feds
In another procedural defeat for the Texas Medical Board (the “Board”) over its embattled telemedicine rule, last week, a federal judge held that the Board waited too long to request certification of appeal to the Fifth Circuit. Thus the Board’s existing appeal will move forward under the collateral-order doctrine. The Board’s brief is available here. Though this is a procedural setback for the Board, its appeal of the decision regarding its ability to escape antitrust liability under the state-action immunity doctrine is still pending before the Fifth Circuit.
As we have been closely following, in January 2015, the Board issued an “emergency” proposed rule requiring physicians to perform a face-to-face or in-person physical examination of a patient prior to issuing a prescription or risk sanctions for unprofessional conduct. Teladoc, Inc. and other Plaintiffs subsequently brought an antitrust claim against the Board alleging that the new regulation violates Section 1 of the Sherman Act and the Commerce Clause. The Board filed a motion to dismiss arguing (1) that the Board is entitled to state action immunity; (2) Plaintiffs’ claims were barred by the statute of limitations; and (3) Plaintiffs failed to state a claim under the Commerce Clause. A federal district court denied the Board’s motion to dismiss on all three grounds and specifically found that the Board is not entitled to state action immunity because its actions are not actively supervised by the state.
On June 17, the Texas Medical Board (“Board”) filed a brief with the Fifth Circuit Court of Appeals reiterating that the Board’s rulemaking processes are protected under the state action immunity doctrine, noting that the case could significantly impair state agencies in carrying out their governmental functions. The Board’s brief is the most recent action in the Teldoc case that has dragged on for almost two years and left little certainty for those who provide telemedicine services in the State.
As we previously reported, it all began when the Texas Medical Board issued an emergency proposed rule clarifying that physicians must perform a face-to-face or in-person physical examination of a patient prior to issuing a prescription or risk sanctions for unprofessional conduct. Teladoc, whose business model is based on providing health care services via telephone and without a face-to-face or in-person physical examination, sued the Texas Medical Board, alleging that the proposed rule violated antitrust laws. Late last year, a federal district court denied the Texas Medical Board’s motion to dismiss, finding that the Board is not entitled to state action immunity because its actions are not actively supervised by the state. Continue Reading Texas Medical Board Seeks State Action Immunity Protection in Fifth Circuit Brief
On Tuesday, June 14, 2016, the U.S. District Court for the Northern District of Illinois declined to temporarily block the proposed merger of Advocate Health Care Network and NorthShore University HealthSystem in the Chicago area, handing the FTC its second hospital merger loss this year. The FTC and the State of Illinois filed an administrative complaint in December 2015, seeking a temporary restraining order and a preliminary injunction to block the transaction. As discussed in our previous blog post, the FTC alleged that the combined entity would operate the majority of the hospitals in the North Shore area of Chicago, and control more than 50% of the general acute care inpatient hospital services. Continue Reading FTC Suffers Another Hospital Merger Loss in Advocate-NorthShore
A popular weapon used to contain health care expenditures is the creation by payors and employers of tiered provider networks, which by differentiated co-pays attempt to steer insureds to less expensive choices. In connection with such networks, providers will often provide better pricing in order to be placed on more favorable tiers. In a new antitrust suit, the Antitrust Division of the Department of Justice (“DOJ”) and the State of North Carolina have challenged the attempt by the dominant health care system in North Carolina to use contractual anti-steering provisions to avoid being disfavored. This Alert analyzes the Government’s complaint and how this lawsuit fits into the DOJ’s views of contractual restraints of this type.
The Third Circuit granted on Tuesday the Federal Trade Commission’s (“FTC”) request for an injunction pending appeal of the proposed merger between Penn State Hershey Medical Center and Pinnacle Health System. The injunction comes just before the temporary restraining order against the merger issued by the U.S District Court for the Middle District of Pennsylvania was set to expire on Friday. Earlier this month, the district court denied the government’s request to block the merger. Continue Reading FTC Wins Stay of Pennsylvania Hospital Merger Pending Appeal in Third Circuit
Two West Virginia hospital systems settled a lawsuit filed yesterday by the Department of Justice (“DOJ” or “Department”) alleging that they agreed to allocate territories for marketing health care services in violation of Section 1 of the Sherman Act. The DOJ alleged that Charleston Area Medical Center (“CAMC”) and St. Mary’s Medical Center (“St. Mary’s”) agreed not to advertise in each other’s geographic territories, which the Department said deprived customers of useful information about competing health care providers. U.S. v. CAMC, Case No. 2:16-cv-03664 (S.D. W.VA. Apr. 14, 2016).
Certain types of agreements between competitors (e.g., market allocation, price fixing) are strictly prohibited under Section 1 of the Sherman Act. These types of agreements are considered per se illegal and are presumed as harmful because they deprive consumers of the benefits of competition and provide no offsetting benefit to consumers. This case is a reminder that the antitrust authorities can, and do, challenge market allocation arrangements and other naked restraints of trade that violate Section 1 of the Sherman Act. Continue Reading Hospitals Settle DOJ Suit Alleging Illegal Division of Marketing Territories
The antitrust suit against Willis Knighton Medical Center will continue following the denial of its motion to dismiss. BRFHH Shreveport v. Willis Knighton Med. Ctr., case number 5:15-cv-02057 (W.D. La. Mar. 31, 2016). The case was filed last July by BRFF Shreveport, a competing healthcare provider, and Vantage Health Plan, a health insurer. The district court held that plaintiffs had sufficiently pled anticompetitive conduct and injury relating to Willis Knighton’s acquisitions of competing providers.
Plaintiff BRFHH Shreveport is the operator of University Health Hospital in Louisiana. Plaintiff Vantage specializes in lower-cost HMO coverage. Defendant Willis Knighton operates four hospitals and six clinics in the Shreveport area. According to plaintiffs, Willis Knighton’s share of hospital admissions in the Shreveport area is approximately 60% overall, and approximately 75% among commercially insured patients.
Plaintiffs previously sought a preliminary injunction to block the joint venture, which the district court denied. Willis Knighton then sought to dismiss all claims against it. Ruling from the bench, the district court previously denied the motion to dismiss on all but one ground—Vantage’s Sherman Act Section 2 claim. Specifically, Vantage alleged that Willis Knighton’s prior acquisitions of competitors, physician referral practices, and non-compete employment contracts violated Section 2. That claim was addressed in the district court’s 50-page order. Continue Reading LSU Hospital Operator May Proceed with Antitrust Suit Against Competing Health System