Presque IsleColon & Rectal Surgery v. Highmark Health

• Decision Date: 22 July 2019
• Docket Number: Civil Action No. 17-122
• Citation: 391 F.Supp.3d 485
• Parties: PRESQUE ISLE COLON AND RECTAL SURGERY, on Behalf of Itself and All Others Similarly Situated, Plaintiff, v. HIGHMARK HEALTH, Highmark Inc. f/k/a Highmark Health Services, and Highmark Choice Company f/k/a Keystone Health Plan West, Inc., Defendants.
• Court: U.S. District Court — Western District of Pennsylvania

391 F.Supp.3d 485

PRESQUE ISLE COLON AND RECTAL SURGERY, on Behalf of Itself and All Others Similarly Situated, Plaintiff,

v.HIGHMARK HEALTH, Highmark Inc. f/k/a Highmark Health Services, and Highmark Choice Company f/k/a Keystone Health Plan West, Inc., Defendants.

Civil Action No. 17-122

United States District Court, W.D. Pennsylvania.

Signed July 22, 2019

Kenneth J. Grunfeld, Golomb & Honik, P.C., Philadelphia, PA, for Plaintiff.

Daniel I. Booker, Courtney B. Averbach, William J. Sheridan, Reed Smith LLP, Pittsburgh, PA, for Defendant.

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS

BARBARA J. ROTHSTEIN, UNITED STATES DISTRICT JUDGE

I. INTRODUCTION

The matter before the Court is Defendants Highmark Health, Highmark Inc., and Highmark Choice Company's (collectively "Highmark") second motion to dismiss. Plaintiff Presque Isle Colon and Rectal Surgery

("Plaintiff") instituted this action against Highmark alleging in its original complaint that Highmark violated Sections 1 and 2 of the Sherman Antitrust Act as well as Pennsylvania's antitrust laws, breached the parties' contract and implied covenant of good faith and fair dealing, and was unjustly enriched. Dkt. No. 1. Highmark then moved to dismiss Plaintiff's claims, arguing that Plaintiff failed to sufficiently allege a violation of the federal antitrust laws. Dkt. No. 17. This Court agreed with Highmark and dismissed largely for failure to sufficiently set forth a federal antitrust violation but granted plaintiff leave to amend its federal law claims and replead its pendent state and common law claims. Dkt. No. 35.

Plaintiff filed an amended complaint on December 3, 2018. Dkt. No. 42. In it, Plaintiff reasserts its claims as to Highmark's violations of the Sherman Antitrust Act, Pennsylvania's antitrust laws, and Pennsylvania common law causes of action including unjust enrichment, breach of contract and covenant of good faith and fair dealing, and reformation or rescission. Dkt. No. 42. Currently before the Court is Highmark's motion to dismiss the amended complaint in its entirety, pursuant to Federal Rule of Civil Procedure 12(b)(6), arguing that the amended complaint still fails to state a claim on which relief can be granted. Dkt. No. 47.

Having reviewed the motion to dismiss the amended complaint, the opposition thereto, the record of the case, and the relevant legal authorities, the Court will GRANT in part and DENY in part the motion. Specifically, the Court will grant the motion as to Plaintiff's Section 1 and related Pennsylvania common law claims, as well as its claims of unjust enrichment and breach of contract. The Court will deny, however, the motion as to Plaintiff's Section 2 and related Pennsylvania common law claims, as well as its claims for breach of implied covenant of good faith and fair dealing and reformation and rescission. The Court's reasoning follows:

II. BACKGROUND

The Court assumes familiarity with the facts of this case, as described in the Court's September 6, 2018 Memorandum Order granting the Highmark's first motion to dismiss for failure to state a claim. Dkt. No. 17. For clarity's sake, however, the Court will reiterate some of the salient facts, as pled in the amended complaint. Dkt. No. 42.

A. The Parties

Plaintiff operates an independent physician-run medical practice organized under the laws of Pennsylvania and located in Erie County, Pennsylvania, part of the Erie County Metropolitan Statistical Area ("MSA"). Dkt. No. 42 at ¶ 14.¹

Highmark is comprised of three Pennsylvania corporations that provide health insurance coverage to its members under various healthcare plans, including PPOs, HMOs, and ACA² -compliant private health insurance plans. Id. at ¶¶ 15–17; Dkt. No. 47 at 3. In the healthcare industry, medical service providers, such as Plaintiff, are considered sellers because while they provide care to patients they sell their services to insurers, like Highmark, in exchange for contractually determined "reimbursements."³ Dkt. No. 35 at 2–3 (internal citations removed). Insurers, such as Highmark, are then considered buyers of physician services. Id. (internal citations removed).

Highmark is one of the largest health insurers in the Commonwealth of Pennsylvania, with "more than 4 million covered lives." Dkt. No. 42 at ¶¶ 2, 42; Dkt. No 47 at 3 n.3. Plaintiff alleges that Highmark is the "dominant" health insurer in the region, insuring at least 65% of health insurance enrollees in Western Pennsylvania⁴ and far in excess of 65% of enrollees in the Erie County MSA. Dkt. No. 42 at ¶¶ 2, 43. Additionally, Plaintiff contends that Highmark "controls commensurate shares of reimbursements" to independent physicians in both the Erie County MSA and Western Pennsylvania based on the assertion that it is "responsible for ‘buying’ " at least 65% of the outpatient physician services to insured patients in Western Pennsylvania and "well in excess" of 65-70% of the same services in the Erie County MSA. Id. at ¶¶ 3, 43. Thus, Plaintiff asserts, "Highmark is both the largest health insurer and the, largest buyer of outpatient physician services in these areas." Id. at ¶ 3 (emphasis in original).

In addition to its health insurance business, Highmark recently entered the outpatient physician services market by acquiring several hospitals and other healthcare facilities. Id. at ¶¶ 4, 46. Highmark now controls St. Vincent Hospital, which Plaintiff explains is the "largest hospital system in Erie." Id. at ¶ 4. Plaintiff also reports that Highmark has announced plans to build or operate at least four other facilities in Pennsylvania. Id. at ¶ 4 n.2.

In 2011, Plaintiff and Highmark signed a Professional (or Participating or Preferred) Provider Agreement ("PPA"), in which Plaintiff agreed to render medical care to Highmark-covered patients and Highmark, in turn, agreed to pay, or "reimburse," Plaintiff for its services. Dkt. No. 42-1; see also Dkt. No. 42 at ¶¶ 14, 59–61.⁵ The PPA governs the reimbursement terms between the parties and includes two relevant clauses to the instant case. First, the PPA provides for a variable reimbursement rate, in which "allowances [paid to specialist] may be reviewed and adjusted from time to time during the Term." Dkt. No. 42-1 at Att. 6.1 § 4.2; see also Dkt. No. 42 at ¶ 60. Second, the PPA contains an "all products" clause, through which Plaintiff agreed to treat patients enrolled in any insurance product offered by Highmark (the "All Products Clause"). Dkt. No. 42-1 at § 4.1; see also Dkt. No. 42 at ¶¶ 13, 61.⁶

B. The Current Dispute and The Court's Previous Order granting Motion to Dismiss

Relations between the parties deteriorated when Highmark implemented a 4.5% "across-the-board" reimbursement rate cut effective April 1, 2016, for outpatient services rendered to patients covered by one of Highmark's ACA-compliant healthcare plans. Dkt. No. 42 at ¶¶ 10, 65, 164. Plaintiff instituted the instant action on May 11, 2017, alleging antitrust violations of both Section 1, 15 U.S.C. § 1, and Section 2, id. at § 2, of the Sherman Antitrust Act, as well as related Pennsylvania common law causes of action. Dkt. No. 1. Plaintiff's original complaint focused on the PPA, alleging that it constitutes an unreasonable restraint of trade under Section 1, Dkt. No. 1 at ¶¶ 111–12, 126–27, and that Highmark maintains and abuses monopsony⁷ power by combining the reimbursement rate cuts with the All Products Clause to "forc[e] upon independent physician" an "anticompetitive scheme." Dkt. No. 35 at 6 (internal quotations and citations removed). As stated above, Highmark moved to dismiss the original complaint for failure to state a claim, which this Court granted in a written decision dated September 6, 2018 ("hereinafter, "the September Order"). Dkt. Nos. 17 and 35.

The September Order focused on Plaintiff's Section 1 and 2 claims. In regard to the Section 1 claim, the Court held that Plaintiff failed to allege an "agreement" which is required to satisfy Section 1's prohibition against "agreement [s] that unreasonable restrain trade." Dkt. No. 35 at 9 (emphasis in original). With respect to the Section 2 claims, the Court held that Plaintiff failed to satisfy both the requirements of antitrust injury and the substantive requirements of Section 2, which prohibits "unlawful monopsony" and attempted monopsony. Id. at 9–16. This Court's reasoning rested on the conclusion that a unilateral depression of reimbursement rates "does not, on its own, run afoul of § 2." Id. at 10. As this Court stated, "absent ‘special circumstances, where, for example, a price is below incremental cost,’ there is no harm to the market, i.e. , there is no ‘antitrust injury." Id. at 11 (emphasis in original) (quoting Kartell v. Blue Shield of Massachusetts , 749 F.2d 922, 927 (1st Cir. 1984), cert. denied , 471 U.S. 1029, 105 S.Ct. 2040, 85 L.Ed.2d 322 (1985) ); see also W. Penn Allegheny Health Sys., Inc. v. UPMC , 627 F.3d 85, 103 (3d Cir. 2010) (" West Penn ")). Therefore, this Court dismissed the complaint with leave to amend.

As both parties have noted in their briefing, see, e.g. , Dkt. No. 48 at 1–2, the Court invited Plaintiff in its repleading to address how (1) Highmark's acquisition of Saint Vincent enhanced its unlawful monopsony as a health insurer and (2) Highmark treats independent physicians differently from Highmark-acquired hospitals, Dkt. No. 12–13. In addition, this Court instructed Plaintiff to provide a "breakdown of [its] insured, non-insured, and ACA-insured patients," as well as additional business-related information, necessary to support a predatory pricing claim. Id. at 13–14.

C. Amended Complaint and Motion to Dismiss

Plaintiff has now provided an amended complaint. Dkt. No. 42. Plaintiff still advances causes of action under Section 1 of the Sherman Antitrust Act (Counts 5 and 7) and related Pennsylvania common law antitrust claims (Counts 6 and 8); Section 2 of the Sherman Antitrust Act (Counts 1 and 3)...