Greater Providence Mri v. Medical Imaging Network

Decision Date10 December 1998
Docket NumberC.A. No. 98-0027L.
Citation32 F.Supp.2d 491
PartiesGREATER PROVIDENCE MRI LIMITED PARTNERSHIP, d/b/a MRI Center of Greater Providence, Plaintiff, v. MEDICAL IMAGING NETWORK OF SOUTHERN NEW ENGLAND, INC. and United Healthcare of New England, Inc., Defendants.
CourtRhode Island Supreme Court

Maria J. Goncalves, James McKay, Adler, Pollock & Sheehan, Providence, RI, for plaintiffs.

Patricia A. Sullivan, Edwards & Angell, Providence, RI, and Michael F. Brockmeyer, Piper & Marbury, Baltimore, MD, for Medical Imaging.

R. Kelly Sheridan, Jr., Roberts, Carroll, Feldstein & Peirce, Providence, RI, Barbara H. Ryland, Arthur N. Lerner, Michaels, Wishner & Bonner, Washington, DC, for United Healthcare of N.E., defendants.

MEMORANDUM AND ORDER

LAGUEUX, Chief Judge.

Magnetic resonance imaging ("MRI") allows doctors to peer inside a patient's body and diagnose maladies invisible to x-rays and standard examination. In Rhode Island, the only companies currently licensed to provide those services are Greater Providence MRI Limited Partnership ("plaintiff") and Rhode Island Magnetic Resonance Imaging Network, Inc. ("RIMRIN").

Plaintiff alleges antitrust violations against United Healthcare of New England, Inc. ("United"), a health maintenance organization, and Medical Imaging Network of Southern New England, Inc. ("Medical Imaging"), a company that provides MRI services in Rhode Island by subcontracting to RIMRIN. United and Medical Imaging ("defendants") have an exclusive contract by which United only reimburses its customers for MRIs performed by Medical Imaging and its subcontractor RIMRIN. Plaintiff alleges that the contract has the effect of reducing competition and facilitating a monopoly by Medical Imaging and RIMRIN in Rhode Island.

Specifically, plaintiff filed a five-count Amended Complaint: Count I for exclusive dealing under Section 3 of the Clayton Act, 15 U.S.C. § 14; Count II for restraint of trade under Section 1 of the Sherman Act, 15 U.S.C. § 1; Count III for exclusive dealing under Section 6 of the Rhode Island Antitrust Act, R.I.Gen.Laws § 6-36-6; Count IV for restraint of trade under Section 4 of the Rhode Island Antitrust Act, R.I.Gen.Laws § 6-36-4; and Count V for exclusive dealing under Section 6 of the Rhode Island Antitrust Act.

Plaintiff defines the relevant geographic market as greater Providence, including Providence, Kent and Bristol counties. Plaintiff defines two separate and independent business markets involving the use of MRI machines: 1) a product component consisting of the scans recorded on film ("MRI Scans") and 2) a service component consisting of the diagnostic interpretation of the film ("Diagnostic Services"). Plaintiff alleges that three insurance providers, United, Blue Cross & Blue Shield and Medicare/Medicaid, account for more than 85% of Rhode Island's insured patient base.

Plaintiff alleges that physicians determine the need for MRI Scans and refer their patients to an MRI provider. Therefore, it is critical for an MRI provider to be able to market its products and services to physicians. Those physicians, plaintiff alleges, want diagnostic facilities to handle all three major insurance providers so physicians need not worry whether a specific patient will be reimbursed for using a specific MRI provider. Because MRI Scans are expensive, patients "virtually never" go outside their insurance plans.

Each defendant has filed (1) a motion to dismiss all counts on the ground that no antitrust violation (state or federal) has been alleged, and (2) a motion to dismiss or grant partial summary judgment on Counts III, IV and V, the state law claims, on the ground that the exclusive contract here is exempted under state antitrust law because it was approved by two state regulatory agencies.

In considering the first motions to dismiss, this Court must take all well-pled allegations as true. This analogizes to a doctor who can only examine by hand a patient with a possible malignancy buried beneath bone and flesh. The doctor must assume the worst because she cannot see inside the patient's body. In the future, a summary judgment motion may, like an MRI scan, provide this Court with relevant facts from which to draw inferences and settle whether defendants' contract is a malady that must be cured. And, of course, there always lurks the possibility of the law's invasive equivalent of an operation — a trial to root out any malignancy through the details of testimony and evidence.

However, at this stage, it is inappropriate to dismiss plaintiff's allegations. As outlined below, plaintiff has alleged facts that, if proven, may constitute a federal or state antitrust violation. United's counsel is correct that the claims are remarkable, but the law is clear that this Court cannot consider the likelihood of plaintiff's success at this juncture. Therefore, each defendant's motion to dismiss all counts is denied.

As to each defendant's motion to dismiss or grant partial summary judgment on Counts III, IV and V, this Court enjoys less guidance. Defendants argue that state antitrust law does not reach this case because the statute exempts contracts approved by a state regulatory agency. Plaintiff offers a conflicting reading of the statute, and this Court finds no compelling or even persuasive precedent in Rhode Island law. These counts are significant but secondary to the federal claims, and as such, it is appropriate to allow Rhode Island to articulate its own law. Therefore, the Court will not make brevis disposition and may certify a question to the Rhode Island Supreme Court, if that becomes necessary, when the facts are sufficiently developed.

DISCUSSION
I. Legal Standard for Motion to Dismiss

In ruling on a motion to dismiss, the Court construes the complaint in the light most favorable to the plaintiff, taking all well-pleaded allegations as true and giving the plaintiff the benefit of all reasonable inferences. See Negron-Gaztambide v. Hernandez-Torres, 35 F.3d 25, 27 (1st Cir.1994), cert. denied, 513 U.S. 1149, 115 S.Ct. 1098, 130 L.Ed.2d 1066 (1995). Dismissal under Rule 12(b)(6) is appropriate only if "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957).

II. Defendants' Motions To Dismiss All Counts

The tests for exclusive dealing are essentially the same under Section 1 of the Sherman Act and Section 3 of the Clayton Act. See Mozart Co. v. Mercedes-Benz of North America, Inc., 833 F.2d 1342, 1352 (9th Cir.1987). The substantive test under Rhode Island antitrust laws is comparable. See R.I.Gen.Laws § 6-36-2(b). See also ERI Max Entertainment, Inc. v. Streisand, 690 A.2d 1351, 1353 n. 1 (R.I.1997).

This case does not present any allegations, such as secondary boycott, that would require a per se test. See U.S. Healthcare, Inc. v. Healthsource, Inc., 986 F.2d 589, 593 (1st Cir.1993). Instead, the test to be applied is the so-called "rule of reason." See Tampa Elec. Co. v. Nashville Coal Co., 365 U.S. 320, 329, 81 S.Ct. 623, 629, 5 L.Ed.2d 580 (1961); U.S. Healthcare, 986 F.2d at 595. The plaintiff must establish that "performance of the contract will foreclose competition in a substantial share of the line of commerce affected." See Tampa Elec. Co., 365 U.S. at 327, 81 S.Ct. at 628. In determining the probable effect of the contract on the market, this Court must consider the extent of the foreclosure, the relative strength of the party, the relative value of the commerce at issue, and the buyer's and seller's business justifications for the arrangement. See Tampa Elec. Co., 365 U.S. at 329, 81 S.Ct. 623; Barry Wright Corp. v. ITT Grinnell Corp., 724 F.2d 227, 236-37 (1st Cir.1983).

In support of the motions, defendants argue that plaintiff has not met its burden under the test, specifically the burden to allege that performance of the exclusive agreement forecloses competition in the MRI Scan and Diagnostic Services markets. United summarizes the argument succinctly:

Such a phenomenon, however, cannot in antitrust terms be said to result from the defendants' conduct in entering into an exclusive dealing arrangement. This purported harm arises out of the independent acts of the referring physicians, based on their own assessment of the convenience, utility, and advantages of using one provider versus another.

(Mem. In Supp. of Mot. To Dismiss or, in the Alternative, for Partial Summ. J at 7.) Offering a colloquial analogy, United compares its contract to an exclusive deal between the Providence Bruins and an orthopedic surgery group practice. That deal might increase the doctors' reputations. Patients might prefer to use the same doctors as the Bruins, thereby decreasing business for competing surgeons. (See id. at 7-8.)

The flaw in the analogy shows why this case must survive motions to dismiss. Plaintiff has not alleged that Magnetic Imaging's reputation was enhanced by its exclusive agreement with United. If plaintiff lost business because doctors or patients perceived Magnetic Imaging as merely preferable, then that would not be an antitrust injury.

Plaintiff has alleged that the exclusive contract between United and Medical Imaging closes it out of the market because no company can compete without serving United, Blue Cross & Blue Shield and Medicare/Medicaid. It alleges that doctors will not send business to a company that cannot provide "one stop" coverage for those three programs. Thus, it alleges a nexus between the exclusive contract and its injury. Admittedly, the language in the Amended Complaint is wan:

Diagnostic specialists typically want outside diagnostic facilities to also be allowed to handle patients covered by all the major insurance providers so that the physician does not have to be concerned with what coverage the patient has that would limit the physicians'...

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