BRFHH Shreveport, LLC v. Willis Knighton Med. Ctr.

• Decision Date: 31 March 2016
• Docket Number: CIVIL ACTION NO. 15-2057
• Citation: 176 F.Supp.3d 606
• Parties: BRFHH Shreveport, LLC, et al v. Willis Knighton Medical Center
• Court: U.S. District Court — Western District of Louisiana

176 F.Supp.3d 606

BRFHH Shreveport, LLC, et al

v.Willis Knighton Medical Center

CIVIL ACTION NO. 15-2057

United States District Court, W.D. Louisiana, Shreveport Division .

Signed March 31, 2016

Jerry Edwards, Blanchard Walker et al, S. Price Barker, Scott L. Zimmer, Kean Miller, Shreveport, LA, Lara Fetsco Phillip, David A. Ettinger, Honigman Miller et al, Detroit, MI, Michael M. Meunier, Vinson J. Knight, Sullivan Stolier et al, New Orleans, LA, James R. Chastain, Jr., Linda G. Rodrigue, Kean Miller, Baton Rouge, LA, for BRFHH Shreveport, LLC, et al.

Darryl W. Anderson, Eliot Turner, Lauren Etlinger, Layne E. Kruse, Norton Rose Fulbright, Houston, TX, Lamar P. Pugh, Pugh Pugh & Pugh, Shreveport, LA, Lesley Reynolds, Norton Rose Fulbright, Washington, DC, for Willis Knighton Medical Center.

MEMORANDUM RULING

ELIZABETH ERNY FOOTE

, UNITED STATES DISTRICT JUDGE

Plaintiffs BRFHH Shreveport, LLC (“BRFHH”), and Vantage Health Plan, Inc. (“Vantage”), a healthcare provider and a healthcare insurer respectively, allege that past and present acquisitions by the Defendant, also a healthcare provider, in Shreveport and Bossier City, Louisiana, violate federal antitrust laws. Before the Court is the Defendant's Motion To Dismiss, [Record Document 30], limited at this stage in the litigation to the question of whether Federal Rule of Civil Procedure 12(b)(6)

requires dismissal of Plaintiff Vantage Health Plan Inc.'s federal monopolization claims, Record Document 83. The parties have extensively briefed this question, together filing three memorandums on the initial, broader dismissal arguments raised by the Defendant, Record Documents 30, 65, 75, and four memorandums on the narrower dismissal issue now before the Court, Record Documents 89, 90, 93, 97. After consideration of the foregoing, the Court hereby DENIES the Defendant's motion.

I. Background

A. The Parties

Plaintiff BRFHH Shreveport, LLC, is the operator of University Health Hospital (“University Health”) in Shreveport. Once a state-owned and -operated charity hospital, University Health has been operated by BRFHH Shreveport since September of 2013, when Louisiana State University (“LSU”), whose neighboring medical school has traditionally supplied physicians for University Hospital, and the parent entities of BRFHH Shreveport signed a Cooperative Endeavor Agreement transferring hospital management authority from the state of Louisiana to BRFHH Shreveport's parent entity. Record Documents 49, p. 3, and 77-1, p. 89. The privatization effected by the 2013 agreement, however, is not unbounded: under the terms of the 2013 agreement, University Hospital continues to depend exclusively on admissions from LSU physicians and treat a substantial portion of the Shreveport area's indigent population. Record Document 1, p. 6, 8. According to BRFHH Shreveport, sustaining these mandates while remaining financially viable requires that a critical, if minority, mass of the patients treated at University Health have private, commercial insurance; the higher reimbursement rates associated with commercial insurance help offset the relatively low profitability of treating the indigent. Id. at 8. Vantage Health Plan, Inc., is a health insurance provider specializing in lower-cost HMO coverage. Id. at 6, 18. Vantage is headquartered in Monroe, Louisiana, where the large majority of its 35,000 subscribers reside. Id. at p. 6, 18, 43. Defendant Willis-Knighton Medical Center (“Willis-Knighton”) is a competing healthcare provider that operates four hospitals and at least six free-standing clinics in Shreveport and Bossier City. Record Document 48, p. 39. University Health participates in Vantage's Tier-1 network; Willis-Knighton does not. Id. at 18.

B. Relevant Geographic Market

According to the Plaintiffs, Shreveport and Bossier City (the “Shreveport area”) together form the relevant geographic market in which Defendant's antitrust violations occurred and will occur. Id. at 43. Within the Shreveport area there are three entities that operate hospitals: Willis-Knighton, BRFHH Shreveport, and CHRISTUS Health Northern Louisiana (“CHRISTUS”). Id. at 7. According to the Plaintiffs, Willis-Knighton's share of hospital admissions in the Shreveport area is approximately 60% overall and approximately 75% among commercially insured patients, while University Health and CHRISTUS each approximately have a 12% share of commercially insured patients. Id.

C. Plaintiffs' Claims

1. Past Conduct

BRFHH Shreveport and Vantage describe two sets of antitrust claims. The first set is about prior conduct: Vantage—and Vantage alone—asserts that some of Willis-Knighton's prior acquisitions, physician referral practices, and non-compete employment contracts violated section 2 of the Sherman Act, which prohibits monopolization and attempted monopolization, and section 7 of the Clayton Act, which prohibits anticompetitive acquisitions and mergers. Id. at 10, 15-21, 74-76. From Vantage's perspective, this prior-conduct theory of liability explains how Willis-Knighton has historically violated antitrust laws to exclude Vantage from participating in the Shreveport area healthcare insurance market and why Vantage is therefore entitled to recover damages. It proceeds in four parts.

First, at some point in the last fifteen years, Willis-Knighton allegedly gained monopoly power in the Shreveport area in at least the markets for general acute-care hospital services, adult primary care, and Obstetrics/Gynecology (“Ob/Gyn”). Id. at 10, 74. As broad evidence of this ascent, the complaint states that since 2000, Willis-Knighton has enjoyed a sevenfold increase in the number of physicians it employs and a fivefold increase in revenues.¹ Id. at 10. It cites assertions made by Willis-Knighton CEO James Elrod in his autobiography that Willis-Knighton is the “dominant” provider in the area. Id. at 10. It also alleges that based on Blue Cross reimbursement rates, Willis-Knighton now charges up to three times more than University Health does for the same general category of service, such as inpatient stays. Id. at 14. More specifically, Vantage alleges that as of 2014-2015, Willis-Knighton's market share of commercially insured patients in the Shreveport area was 78% for general acute-care hospital services, 80% for adult primary care, and 60% for Obstetrics/Gynecology (“Ob/Gyn”). Id. at 10-11, 42-43, 74-75.

Second, over this same period, and while it had monopoly power, Willis-Knighton is alleged to have engaged in various anticompetitive acts in the Shreveport area to gain or maintain the monopolies described above. Some of these anticompetitive acts were acquisitions of rival healthcare providers. Specifically, the complaint alleges Willis-Knighton acquired the following five providers: Bossier Medical Center, Doctor's Hospital, CHRISTUS's acute-care services, the Northwest Louisiana Surgery Hospital, and “a previously independent cardiology group.” Id. at 5-6, 10, 17. With respect to the acquisitions of Bossier Medical Center, Doctor's Hospital, and CHRISTUS's acute care services, the complaint describes a type of multi-step acquisition in which first Willis-Knighton acquired physicians from the competing provider, then the competing provider failed, and finally, in two (unidentified) instances, Willis-Knighton purchased the remaining physical assets of the shuttered entities. Id. at 5-6. According to the complaint, the closure of CHRISTUS Schumpert's acute care services occurred in 2013. The complaint does not date the other acquisitions.²

In addition to acquisitions, Vantage also alleges that Willis-Knighton gained or maintained its monopoly power through coercive offers to buy medical offices of competing physicians, non-compete contracts with its physicians, and “ruthless” control of physician referrals. Id. at 12-13. According to the Plaintiffs, Willis-Knighton has coerced competing physicians by “offering to purchase their medical offices and move them to the Willis-Knighton campus.” Id. at 12. If the physicians decline the offer, they likely suffer “huge declines in referrals from Willis-Knighton's primary care physicians.” Id. Willis-Knighton also allegedly requires anticompetitive non-compete agreements with its physicians. Id. The agreements allegedly prohibit “the physician from practicing anywhere in Caddo or Bossier Parishes for two years after termination of the agreement.” Id. Further, many of the agreements provide a financial penalty for failing to treat a prescribed number of patients annually but also defer collection of that penalty until the physician leaves Willis-Knighton, the alleged result of which is that the debt accumulated by many Willis-Knighton physicians deters them from leaving Willis-Knighton when they otherwise would do so. Id. Finally, Willis-Knighton allegedly restricts virtually all of the referrals by its physicians to other Willis-Knighton physicians. Id. at 13. According to the Plaintiffs, Willis-Knighton accomplishes this by imposing sanctions on noncompliant physicians. Those sanctions allegedly include “the termination or non-renewal of leases for physician office space, and the direction of its network primary care physicians' referrals away from those specialty physicians who compete with Willis-Knighton or do not refer the bulk of their patients to Willis-Knighton facilities.” Id.

Third, throughout this same period, Willis-Knighton never accepted Vantage's repeated offers to include Willis-Knighton in Vantage's Tier-1 network. Id. at 15-16. According to Vantage, it has unsuccessfully tried to contract with Willis-Knighton for fifteen years. Id. Those attempts were apparently fruitless because Willis-Knighton either was unwilling to engage with Vantage or was willing to engage but only under terms—90% reimbursement of Willis-Knighton's charges—that Vantage saw as “completely uneconomic for any health plan, and would not allow it to compete effectively in virtually any market.”³ Id. at 16. Vantage...