Delaware Health Care Inc. v. Mcd Holding Co.
Decision Date | 20 February 1997 |
Docket Number | Civil Action No. 94-406 MMS. |
Citation | 957 F.Supp. 535 |
Parties | DELAWARE HEALTH CARE, INC., a corporation of the State of Delaware, Plaintiff, v. MCD HOLDING COMPANY, a corporation of the State of Delaware d/b/a Infusion Services and d/b/a Infusion Services of Delaware, and MCD Foundation, a corporation of the State of Delaware and its subsidiaries: the Medical Center of Delaware, Inc., a corporation of the State of Delaware, a/k/a (1) Christiana Hospital, (2) Wilmington Hospital d/b/a First State Health Plan, Genesis Health Network, Genesis Integrated Health Care Services, Mid-Atlantic Integrated Health Care Services, Mid-Atlantic Health Net, Champion Health Services, Cornerstone Healthcare, Eastern Integrated Health Care Service, and Visiting Nurse Association of Delaware, a corporation of the State of Delaware, Defendants. |
Court | U.S. District Court — District of Delaware |
Christopher J. Curtin, of Erisman & Curtin, Wilmington, Delaware; of counsel: Joanne Zack, Michael J. Boni, and Craig W. Hillwig, of Kohn, Swift & Graf, P.C.; Philadelphia, Pennsylvania, for plaintiff.
Stephen E. Herrmann, of Richards, Layton & Finger, Wilmington, Delaware; of counsel: Brian M. Peters, Kathleen M. Chancler, Jonathan B. Sprague, Mark L. Mattioli, Mark L. Mattioli, and Katherine Layman, of Post & Schell, P.C., Philadelphia, Pennsylvania, for defendants.
This lawsuit alleging violations of federal antitrust laws was brought in 1994 by Delaware Health Care, Inc. ("DHC"), a provider of home health care. See Docket Item ("D.I.") 1. Defendants are MCD Foundation ("the Foundation"), its wholly owned subsidiaries, The Medical Center of Delaware ("MCD"), MCD Holding Company ("MCD Holding") and the Visiting Nurse Association of Delaware ("VNA"), and related entities Infusion Services of Delaware ("ISD"), and the Christiana and Wilmington Hospitals. Id.; A-81; A-527-611. The two hospitals constitute MCD, which the parties agree is Delaware's largest hospital system. D.I. 121, at 4; D.I. 126, at 2.
Before the Court is the defendants' motion for summary judgment on Counts I, II and III of the plaintiff's complaint, and accompanying motion to dismiss the plaintiff's state claim for lack of supplemental subject matter jurisdiction. In opposition papers, the plaintiff informed the Court it was abandoning its claims under Counts I and III of the complaint; remaining for consideration is Count II, alleging "Attempted Monopolization, Monopolization and Predatory Conduct" under Section 2 of the Sherman Act. See D.I. 1, at 11-13; D.I. 126, at 31 n. 15. Jurisdiction is based upon 28 U.S.C. § 1337 and 15 U.S.C. §§ 15, 26. D.I. 1, at 2.
DHC was established by Lawrence and Margaret ("Peggy") Carroll in 1990 as a home health care agency designed to deliver infusion and other health care services to medical patients in their homes. A-1086-88.1 Home infusion services include delivery of pharmaceutical or nutritional products to patients as well as related nursing care. A-913; B-100. DHC supplied both the pharmaceutical product and the nursing service components of home infusion services. B-99-101.
Home health care services are sought largely by individuals who have been discharged from hospitals yet remain in need of continuing medical care. A-913. Home health care providers often rely on referrals and contractual positioning (hereafter referred to collectively as "referrals") as sources of business; such referrals come from hospitals, physicians, insurance companies, health maintenance organizations ("HMO's"), nursing homes, state contracts and other patients. A-246; A-1454. Home infusion therapy is considered by some to be the most profitable of home health care services. A-770.
DHC originally operated as a corporate agent of Norrell Healthcare, Inc., a temporary staffing agency. A-1088; A-1428. In November 1993, Norrell's home health care division was sold to Nurse's House Call ("NHC"), and DHC did business under NHC's name. A-1089; A-1428. At the end of 1994, DHC and NHC terminated their relationship and DHC became known as Delaware Home Care, Inc. Id.; B-101.
Defendant ISD, an unincorporated division of defendant MCD Holding, was established in 1990, also with the goal of supplying home infusion pharmaceutical products. A-725. Defendant VNA, in turn, was to provide the home nursing services necessary to administer ISD's pharmaceutical product. A-1407. The relationship among ISD, VNA and MCD — all owned by MCD Foundation — and the resulting referral of MCD patients to ISD/VNA form the basis of this lawsuit.2
Plaintiff asserts prior to ISD's formation, discharge planners recommended home health care providers to patients on an informal rotating basis.3 See e.g. B-35. This rotation process was dismantled at the same time ISD was formed, plaintiff says, and in its place a directive was issued to refer patients only to ISD/VNA. See e.g. B-180-182; B-612; B-800. In practice, plaintiff says, patients were channeled to ISD even when they specifically requested a different provider. See e.g. B-345-52; B-429.
In addition to patient channeling, plaintiff charges defendants permitted ISD — and ISD alone — access to patients in their hospital rooms. This practice allowed ISD to offer superior services which in turn led to even more referrals. While all the other home care providers were barred from soliciting patients in their hospital rooms, plaintiff proffered deposition testimony that ISD's administrative director Mary Fitzpatrick often met with patients in their hospital rooms, both before and after a formal relationship between the patient and ISD had been established. B-44; B-52; B-141; B-185-86. Plaintiff has adduced evidence Mary Fitzpatrick met with patients in need of home care and taught them about home health care services before they left their hospital beds. B-185-86; B-200. Plaintiff contends this access is a selling point for ISD. D.I. 126, at 12-14.
Since its inception, ISD quickly gained market share. According to plaintiff's experts Dr. Solow and Dr. Black, ISD served 44.9% of the New Castle County home infusion therapy market in 1993.4 B-505; B-540. In 1994, the figure was 59%, and in 1995 it was 49.4%. B-505; B-540. The rest of the home infusion therapy market was divided among some 14 other providers.5 B-542. ISD was even more successful among the group of home infusion therapy patients who were discharged from MCD. Of those patients, ISD cared for 60.2% in 1993, 76.4% in 1994, and 77.1% in 1995. B-505; B-535. ISD earned gross revenues of $4,585,066 in 1994 and $5,822,456 in 1995. B-674-75.
DHC on the other hand cared for 28 patients, or 3.6% of the New Castle County home infusion therapy market, in 1993. See B-542. In 1994, it cared for 35 patients, or 3.5% of the market. Id. In 1994, it earned gross revenues from its infusion products of $186,511. B-676; B-704. It appears it earned no income from infusion products in 1995. Id.6
Summary judgment is governed by Federal Rule of Civil Procedure 56, and will be granted when, on the record before the Court, "there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). On this summary judgment motion, "[t]he evidence of [the nonmovant] is to be believed, and all justifiable inferences are to be drawn in [their] favor." Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451, 456, 112 S.Ct. 2072, 2076, 119 L.Ed.2d 265 (1992) (citations omitted).
The moving party "bears the burden of proving that no genuine issue of material fact is in dispute." Ideal Dairy Farms, Inc. v. John Labatt, Ltd., 90 F.3d 737, 743 (3d Cir. 1996) (citation omitted). Once the moving party has carried its burden, the nonmoving party "must come forward with `specific facts showing that there is a genuine issue for trial.'" Id. "The non-movant must present concrete evidence supporting each essential element of its claim." Id.
In Count II of the complaint, plaintiff alleges: D.I. 1, at 12. In its brief opposing summary judgment, plaintiff limited its Sherman Act Section 2 claims to attempted monopolization.7 D.I. 126, at 31.
The elements of a claim of attempted monopolization are "(1) ... the defendant has engaged in predatory or anticompetitive conduct with (2) a specific intent to monopolize and (3) a dangerous probability of achieving monopoly power." Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 456, 113 S.Ct. 884, 890, 122 L.Ed.2d 247 (1993). As in all antitrust cases, plaintiff here must additionally prove antitrust injury. Mathews v. Lancaster Gen. Hosp., 87 F.3d 624, 641 (3d Cir. 1996) (Sherman Act § 1 conspiracy claim); Schuylkill Energy Resources, Inc. v. Pennsylvania Power & Light Co., No. 95-4885, 1996 WL 284994, at *2 ( ).
Plaintiff has alleged two specific methods by which defendants have worked to achieve their attempted monopoly: "leveraging," and denial of access to an "essential facility."8 With respect to the former, plaintiff says MCD Foundation "leveraged its monopoly power, in the hospital market, to extend its monopoly in the home health market through Defendant Hospitals." D.I. 1, at 12-13. Plaintiff's essential facilities argument is:
Defendant Hospitals denied the Plaintiff any access to home care patients...
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