Marion Healthcare, LLC v. S. Ill. Healthcare
| Decision Date | 14 March 2018 |
| Docket Number | Case No. 12-cv-871-SCW |
| Parties | MARION HEALTHCARE, LLC, Plaintiff, v. SOUTHERN ILLINOIS HEALTHCARE, Defendants. |
| Court | U.S. District Court — Southern District of Illinois |
I. INTRODUCTION
Plaintiff Marion Healthcare ("MHC") brought the present antitrust action against Southern Illinois Healthcare ("SIH") pursuant to sections 1 and 2 of the Sherman Act (15 U.S.C. §§ 1 & 2), as well as, provisions of the Illinois Antitrust Act (740 ILCS 10/1, et seq.). MHC—an outpatient surgery center—alleges that SIH—a large hospital system in southern Illinois—illegally suppressed competition for outpatient surgical services in a specified market in southern Illinois through exclusionary agreements with certain commercial health insurers.
On October 22, 2012, MHC filed its First Amended Complaint, naming SIH and Health Care Service Corporation, d/b/a BlueCross and BlueShield of Illinois ("BCBS") as defendants. (Doc. 13). Some of the claims raised were dismissed with prejudice by Judge Herndon on August 26, 2013. (Doc. 57). Shortly thereafter, MHC filed its Second Amended Complaint, (Doc. 58), and this matter was subsequently transferred to Judge Yandle. In ruling on motions to dismiss filed by both defendants, Judge Yandle dismissed all claims against BCBS with prejudice, and denied SIH's motion. (Doc. 16). On February 17, 2016, MHC filed its Third Amended Complaint, which is the current, operative complaint, naming only SIH as a defendant. (Doc. 127). Subsequent to the filing of that complaint, the parties consented to the disposition of this matter before the undersigned.
This matter is before the Court on SIH's Motion for Partial Judgment on the Pleadings (Doc. 273). As the basis for the motion, SIH indicates that written contracts containing exclusivity provisions with BCBS and another payor named Health Alliance only existed during certain time periods. SIH argues that MHC cannot recover on its antitrust claims for the time periods in which SIH did not have in effect written contracts with exclusivity provisions. Among its arguments raised in response, MHC asserts that expert discovery has demonstrated evidence that SIH's exclusionary agreements continued on a "constructive" or de facto basis during times in which there were no explicit and written exclusionary agreements in effect. Since there appear to be issues of fact as to whether SIH continued to have de facto exclusionary agreements with BCBS and Health Alliance even when no such written agreements existed, and since the Third Amended Complaint adequately placed SIH on notice of such a claim, SIH's Motion for Partial Judgment on the Pleadings is DENIED.
II. BACKGROUND AND ALLEGATIONS
According to the allegations raised in the Third Amended Complaint, MHC is a multi-specialty freestanding outpatient surgery center offering outpatient surgical services to residents of Williamson and Jackson Counties, as well as, the local surrounding area. SIH is a nonprofit hospital system which owns three hospitals in Jackson and Williamson Counties: Memorial Hospital of Carbondale, Herrin Hospital, and St. Joseph Memorial Hospital. MHC alleges that the geographic market relevant to its suit comprises Williamson and Jackson Counties, as well as, the surrounding area.
According to MHC, in this geographic market, SIH has approximately a 77% share of the market for inpatient hospital services reimbursed by commercial insurers and a greater than 85.3% share of the market for outpatient services reimbursed by commercial insurers. MHC also alleges that SIH has roughly a 72.3% share of the market for inpatient hospital admissions and 75% market share for inpatient days reimbursed by all payors. It has a greater than 77.2% share of the market for outpatient services reimbursed by all payors. According to MHC, most all health insurance payors in the relevant market consider SIH a "must-have" hospital system due to the fact that it is easily the largest hospital in the region and the only local provider of essential services.
MHC alleges that SIH has maintained a monopoly power in the relevant geographic market by entering into exclusionary contracts with commercial healthinsurers such as BCBS, Health Alliance, and others. MHC has attached some of the exclusivity agreements to the Third Amended Complaint. In referring to an Illinois Department of Insurance report, MHC alleges that in 2010, BCBS received 47.46% of all premiums for insurance companies selling group health insurance plans in the entire state, while the next closest insurer had a market share of 6.46%. MHC also alleges that Health Alliance is the largest health plan in downstate Illinois.
MHC alleges that the exclusionary contracts effectively prevent insurers from contracting with other health-care facilities competing with SIH, including MHC. In the fall of 2003, MHC applied to become a network provider for BCBS. The application, however, was denied. At various times between the fall of 2003 and October 2011, MHC made renewed requests to join BCBS's provider network; however, it was declined. Similar requests to join Health Alliance's network were also declined.
(Doc. 127, p. 29; Doc. 127-9, p. 2). According to MHC, SIH has also entered into an exclusivity agreement with Health Alliance dating back to 2003.
MHC alleges that due to SIH's exclusionary contracts, most patients must paysubstantially more for its outpatient services as compared to having a procedure performed at an independent, non-SIH, outpatient facility. The exclusionary contracts, according to MHC, effectively prevent members of the public from accessing full service outpatient surgical services in a cost efficient manner. MHC alleges that SIH has (1) delayed and prevented the expansion and entry of SIH's competitors, which has likely lead to higher healthcare costs and higher insurance premiums; (2) limited price competition for price sensitive patients, likely leading to higher healthcare costs for such patients; and (3) reduced quality competition between SIH and its competitors.
MHC alleges SIH has violated both the Sherman Antitrust Act and Illinois state antitrust law. First, MHC alleges that SIH has entered into exclusive dealing contracts that violate section 1 of the Sherman Act, 15 U.S.C. § 1, and the Illinois Antitrust Act, 740 ILCS § 10/3. Second, MHC alleges that SIH's exclusive contracts constitute illegal tying arrangements in violation of section 1 of the Sherman Act and the Illinois Antitrust Act. It alleges that SIH illegally coerced BCBS, Health Alliance, and other payors into entering into agreements that tied discounts for coverage of SIH's inpatient hospital services with exclusive contracting for in-network coverage of SIH's outpatient surgical services, which prohibited the payors from contracting for in-network coverage with competing independent outpatient surgery centers in the region.
Finally, SIH is also alleged to have violated section 2 of the Sherman Act, 15 U.S.C. § 2. MHC alleges that SIH has a monopoly in the market for outpatient surgical services in the relevant geographic market, regardless of whether the market is definedas being reimbursed by any payors1, or merely by commercial insurers. It is alleged that SIH acted to willfully maintain and extend its monopoly power in the market for outpatient surgical services by using its market power to coerce payors into accepting exclusivity provisions with respect to outpatient services in contracts, which were not wanted by the payors, in exchange for discounted inpatient services, which the payors required.
In the motion at-bar, SIH indicates that it did not have contracts containing the exclusivity provisions at issue for the entirety of the timeframe alleged in the Third Amended Complaint. According to SIH, there were no exclusivity provisions between it and BCBS prior to January 1, 2007, and there were no such provisions between it and Health Alliance between December 1, 2005 and May 31, 2007 and again from June 1, 2010 to the present. SIH argues that MHC cannot demonstrate antitrust injury, causation, or injury-in-fact during the time period which SIH did not have exclusivity contracts.
MHC raises multiple arguments in response. First, it argues that a partial judgment on the pleadings is procedurally improper under Federal Rule of Civil Procedure 12(c). Next, generally, MHC argues that the effects of a contract can extend even beyond the time it is in existence, and that the question of damages is a factual issue to be determined by the trier of fact. Finally, MHC asserts that the issue of what agreements were in effect at what times is a question of disputed fact. MHC points toevidence that the exclusionary contracts continued on a de facto basis even when the written contracts were not in effect. The Court need not address all of these arguments, as MHC's final argument is dispositive.
III. JUDGMENT ON THE PLEADINGS STANDARD
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