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.
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.
Last week, our antitrust colleagues Bruce Sokler, Robert Kidwell, and Farrah Short, published a Health Care Antitrust Alert on the recent settlement with the Federal Trade Commission by a Puerto Rican ophthalmologist cooperative on charges that the cooperative orchestrated an illegal boycott of a health plan.
As noted in the alert, the case represents the risks of concerted action among competitors, even when that concerted action is facilitated by an otherwise lawful trade association or membership organization.
Earlier this week my colleagues, Bruce Sokler and Farrah Short published an alert detailing the FTC‘s creative solution to permit a presumptively anticompetitive merger for a financially failing medical practice. The FTC entered into a proposed settlement with two Minnesota health care providers, allowing them to proceed with a planned merger that, according to the agency, combines “the two largest providers of adult primary care, pediatric, and OB/GYN services in the St. Cloud area.” The FTC’s willingness to accept the proposed settlement permitting was premised on (1) the fact that one of the medical groups “is a financially failing physician practice” and (2) “concerns regarding disruptions to patient care and possible physician shortages.”
The full alert on the FTC’s envelope-pressing consent solution can be found here.
On Friday, Robert Kidwell and Bruce Sokler, members of the Firm’s Antitrust and Federal Regulatory practice group, presented a webinar on the Third Circuit’s hotly anticipated decision on the FTC’s appeal of the District Court’s denial of its request for a preliminary injunction on the merger of Penn State Hershey Medical Center and Pinnacle Health System.
This case became a topic of interest after the U.S. District Court for the Middle District of Pennsylvania denied the FTC’s request for a preliminary injunction in May 2016. In reaching its decision, the District Court defined the “relevant geographic market” in a manner that, if upheld on appeal, would have essentially gutted the FTC’s approach to hospital merger enforcement. Ultimately, the Third Circuit found that the District Court committed legal error in failing to properly formulate and apply the “hypothetical monopolist test” and issued an opinion that Rob and Bruce characterized as a “big win” for the FTC.
Rob and Bruce also expect this decision to be helpful to the FTC in its ongoing challenge to the Advocate/North Shore merger in Chicago (check out our previous blog post on this topic by clicking here). Stay tuned for further updates!
Join us this Friday at 1:30 pm EDT for a webinar with two of our Antitrust colleagues, Robert Kidwell and Bruce Sokler. They will discuss recent events in the Hershey Hospital merger and their impact on FTC’s hospital merger enforcement program. Learn more about these recent updates from the comfort of your computer in our one-hour webinar.
Hershey Hospital Merger Blocked
Yesterday, the Third Circuit granted a preliminary injunction preventing the merger between Penn State Hershey Medical Center and Pinnacle Health System. Previously, the district court had denied the FTC’s and State of Pennsylvania’s motion challenging the merger. The district court found that the merger challenge was not meritorious, particularly in light of Affordable Care Act policies. But the FTC’s hospital merger enforcement program was revived with yesterday’s Third Circuit’s decision, which is significant to healthcare lawyers and providers.
During the webinar, Rob and Bruce will review this important decision and the court’s approach to:
- Geographic markets in hospital merger cases
- The central role of the FTC’s hypothetical monopolist test
- Renewed emphasis on the testimony and role of insurers
- Using the efficiency defense in merger litigation
- Relevance of merging parties’ forward-looking contracts with payers
- The capital-avoidance justification for mergers
- The place of the ACA in hospital merger analysis
Possible Impact on Advocate Merger
And because Pennsylvania can’t have all the fun, Rob and Bruce will also discuss how the Hershey decision might impact the FTC’s pending challenge to the Advocate merger in Chicago, which we have blogged about before.
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
Last week, in Deborah Heart & Lung Center v. Virtua Health, Inc., the Third Circuit affirmed a lower court’s dismissal of a suit filed by a hospital alleging an illegal exclusive dealing arrangement by a competing hospital and physician group for referrals made by the defendants to a third hospital rather than to the plaintiff hospital. In its decision, the court emphasized the importance of market definitions in antitrust cases, and clarified an antitrust plaintiff’s burden when alleging a Sherman Act Section 1 claim with no allegation of market power. The court held that anticompetitive effects in those cases must then be shown on the relevant market as a whole, not only on a small subset of the market. In a Health Care Antitrust Alert, our antitrust colleagues Bruce Sokler and Farrah Short analyze the Third Circuit’s decision.
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.
Dionne 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. Her experience also includes serving as a trial attorney at the DOJ Antitrust Division Health Care Task Force Section.
The AHLA Antitrust Practice Group addresses enforcement activity and competition policy that affect all areas of the health care industry.