Blue Cross & Blue Shield v. Marshfield Clinic

• Decision Date: 27 October 1994
• Docket Number: No. 94-C-137-S.,94-C-137-S.
• Citation: 881 F. Supp. 1309
• Parties: BLUE CROSS & BLUE SHIELD UNITED OF WISCONSIN and Compcare Health Services Insurance Corporation, Plaintiffs, v. The MARSHFIELD CLINIC and Security Health Plan of Wisconsin, Inc., Defendants.
• Court: U.S. District Court — Western District of Wisconsin

881 F. Supp. 1309

BLUE CROSS & BLUE SHIELD UNITED OF WISCONSIN and Compcare Health Services Insurance Corporation, Plaintiffs, v. The MARSHFIELD CLINIC and Security Health Plan of Wisconsin, Inc., Defendants.

No. 94-C-137-S.

United States District Court, W.D. Wisconsin.

October 27, 1994.

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James R. Troupis, Michael, Best & Friedrich, Madison, WI, for Blue Cross & Blue Shield United of Wisconsin, Compcare Health Services Ins. Corp.

Steven J. Caulum, Bell, Metzner, Gierhart & Moore, Madison, WI, for Marshfield Clinic, and Security Health Plan of Wisconsin, Inc.

MEMORANDUM AND ORDER

SHABAZ, District Judge.

Plaintiffs Blue Cross & Blue Shield United of Wisconsin ("Blue Cross") and Compcare Health Services Insurance Corporation ("Compcare") commenced this action against defendants The Marshfield Clinic ("Marshfield") and Security Health Plan of Wisconsin, Inc. ("Security") for damages, injunctive and declaratory relief. In their complaint plaintiffs allege defendants violated the Sherman Antitrust Act; the Wisconsin antitrust statute, section 133.03(2), and the illegal contracts section of the Wisconsin statutes, section 133.14.

Jurisdiction exists pursuant to 15 U.S.C. § 4 and 28 U.S.C. §§ 1331 and 1337. The action is before this Court on defendants' motion for summary judgment.

FACTS

All factual disputes have been resolved in favor of the nonmoving party. Blue Cross is a Wisconsin service insurance corporation. It sells indemnity insurance to employers and individuals and pays for services rendered by the Marshfield Clinic on behalf of its insureds. Compcare is a health maintenance organization ("HMO") organized under the Wisconsin statutes. Marshfield is a physician-owned clinic in the State of Wisconsin. According to one source Marshfield employs every physician in eight municipalities and one entire county and two thirds of all physicians in a 10 county region. Security is a Wisconsin HMO wholly owned by Marshfield.

Blue Cross asserts that it acts as a knowledgeable purchaser of physician services for its customers and for self-insured employers who contract with Blue Cross for administrative services. Once Blue Cross expects to obtain indemnity insurance customers in a particular area, it approaches providers of physician services in order to negotiate rates and arrange for payments. Marshfield has negotiated or entered into a course of dealing with Blue Cross to accept payments directly from Blue Cross for services rendered by Marshfield and its physicians. For the past six years Blue Cross has directly paid¹ Marshfield for physician services provided by Marshfield doctors. Blue Cross and Marshfield use electronic transfer for billing and payment. Blue Cross has paid to Marshfield between $3.2 million and $6.5 million annually since 1988 for which it has never rejected a payment because Blue Cross was the source of the funds rather than the patient. However, Blue Cross does not have a written contract with Marshfield to purchase physician services.

Marshfield's indemnity insured patients sign a standard Authorization to Release and Assign Benefits form which authorizes Marshfield to disclose to the patient's insurance company information relating to his or her treatment, assigns to Marshfield any insurance benefits and by which he or she agrees to be responsible for services not paid in whole or in part by the patient's insurance company.

Marshfield has negotiated prices, individual account settlements and overall administrative matters directly with Blue Cross and others. Agreements have been reached between Blue Cross and Marshfield on matters including: individual authorization for treatment; administrative issues relating to the payment of millions of dollars of Marshfield charges; creation of computer links; those procedures eligible for payment; and manner by which procedures should be coded. Specific claims for amounts due in excess of those Blue Cross would pay are sometimes discussed between employees of Marshfield and Blue Cross. Blue Cross has certain obligations to cover and defend Blue Cross insured patients from actions by the Marshfield Clinic. Marshfield Clinic has never required Blue Cross to involve a patient in meetings concerning a patient's account. Marshfield's rate nearly always crowds or exceeds the 90th percentile for UCR (usual, customary, and reasonable charge.) Blue Cross policies normally obligate Blue Cross to pay only the UCR for a given charge. Blue Cross has paid Marshfield charges that exceed the UCR rate. Blue Cross has paid disputed amounts and Marshfield has accepted those payments. Fee negotiations between Marshfield and Blue Cross have resulted in actual payment being made and balances forgiven by the Clinic.

Plaintiffs assert that health insurers are directly affected by and attempt to minimize the overall cost of physician services. Marshfield's actions directly affect Blue Cross by causing it to pay allegedly excessive fees. If an element of a paid claim reflects high prices, then the return of the indemnity insurer is diminished by the amount of that excess fee or price, whether such diminution occurs in the form of loss or lesser gross profit. It is disputed as to the extent if any this may be passed on to the insured. In addition, when physician fees increase for any reason, the UCR rate structure for similar physician services is impacted. The UCR system is driven by periodic calculations for charges within particular CPT codes. As revised increased fees are included, the UCR system will automatically readjust upward to continue to capture 90 percent of the charges. Charges by a large provider, such as the Marshfield Clinic, can cause an upward adjustment in the UCR approved charges and will impact the cost to Blue Cross of payment of physician fees throughout the State of Wisconsin. A UCR rate or fee is not meant to represent a "competitive" rate or fee. Marshfield's rate nearly always crowds or exceeds the 90th percentile for UCR.

Compcare has paid Marshfield for physician services incurred on behalf of its subscribers on an "out-of-area" basis which occurs when a Compcare subscriber requires emergency care and goes to a non-affiliated provider, in this case Marshfield Clinic.

While defendants have not monopolized any relevant health care financing product market, plaintiffs allege that they have dominated the HMO services market. While defendants allege that Security only insures 20% of the population in its service area, plaintiffs allege that Security insures a very large percentage of the HMO market. There are a variety of mechanisms for financing the provision of health care, including traditional indemnity insurance, participating provider networks, preferred provider organizations ("PPOs"), traditional health maintenance organizations ("HMOs"), "open-ended" or "point-of-service" ("POS") HMOs, and various forms of self-insurance. These products constitute the health services financing market and share one or more common features. However, plaintiffs allege that there is an HMO submarket because HMOs have peculiar characteristics and uses. Among these characteristics are distinct cost advantages that are confirmed by market data, management of care through utilization controls and prevention oriented steps and sharing of risk among providers, through capitation, withhold, or otherwise marketed by lower pricing and means.

Plaintiffs allege that a panel of Marshfield physicians is necessary to form an HMO to compete with Security and that Marshfield has denied them such access. Marshfield wholly owns Security HMO. Virtually every aspect of Security is under the direct control of Marshfield's physicians. As noted above, Marshfield employs a majority of physicians in its service area. Plaintiffs allege that there are insufficient physicians in certain geographic areas and insufficient physicians in certain specialties to form a competing HMO. Moreover, plaintiffs allege that because of Marshfield's monopoly there are barriers to market entry by bringing in new physicians. Marshfield did not offer Compcare any of its physicians on any basis except full fee payment until after receiving a copy of a draft Complaint. In a competitive environment where adequate physician provider panels are available to HMOs, the success of an HMO is judged in significant part by its managed care controls over usage and costs, including physician and other fees. In fiscal year 1993 and for the current fiscal year as of April 3, 1994, Security's practice resulted in an even greater return to Marshfield than fee for service payments such as traditional indemnity insurance. Competitive HMO pricing is driven by the contracts the HMOs are able to execute with providers. The contracts sometimes take the form of a capitation arrangement. They may also take the form of a withhold, plus either a fixed fee schedule or discounted fee-for-service arrangement. Plaintiffs allege that Marshfield has attainted control of physician services in its market sufficient to prevent creation of competing products.

MEMORANDUM

Summary judgment is appropriate when, after both parties have the opportunity to submit evidence in support of their respective positions and the Court has reviewed such evidence in the light most favorable to the nonmovant, there remains no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Rule 56(c), Federal Rules of Civil Procedure.

A fact is material only if it might affect the outcome of the suit under the governing law. Disputes over unnecessary or irrelevant facts will not preclude summary judgment. A factual issue is genuine only if the evidence is such that a reasonable factfinder could return a verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). Under Rule 56(e) it is the...