NAT. GERIMEDICAL, ETC. v. Blue Cross of Kansas City

• Decision Date: 02 November 1979
• Docket Number: No. 78-0359-CV-W-3.,78-0359-CV-W-3.
• Citation: 479 F. Supp. 1012
• Parties: NATIONAL GERIMEDICAL HOSPITAL AND GERONTOLOGY CENTER, Plaintiff, v. BLUE CROSS OF KANSAS CITY and Blue Cross Association, Defendants.
• Court: U.S. District Court — Western District of Missouri

479 F. Supp. 1012

NATIONAL GERIMEDICAL HOSPITAL AND GERONTOLOGY CENTER, Plaintiff, v. BLUE CROSS OF KANSAS CITY and Blue Cross Association, Defendants.

No. 78-0359-CV-W-3.

United States District Court, W. D. Missouri, W. D.

November 2, 1979.

COPYRIGHT MATERIAL OMITTED

James M. Beck, Steven M. Leigh, Johnson, Lucas, Bush, Snapp & Burgess, Kansas City, Mo., for plaintiff.

John C. Noonan, Randall E. Hendricks, Stinson, Mag & Fizzell, Kansas City, Mo., for defendant Blue Cross Assn.

Shughart, Thomson & Kilroy and Max O. Bagby, Bagby, Benjamin & Arnold, Kansas City, Mo., for defendant Blue Cross of Kansas City.

ORDER

RUSSELL G. CLARK, District Judge.

On May 23, 1978, plaintiff, National Gerimedical Hospital and Gerontology Center (hereinafter referred to as National Gerimedical) filed a complaint against Blue Cross of Kansas City and Blue Cross Association alleging violations of the antitrust provisions of state and federal statutes.

Count I of the complaint alleges that the defendants and various named co-conspirators have engaged in a conspiracy in restraint of trade in violation of § 1 of the Sherman Act, 15 U.S.C. § 1. Plaintiff alleges in Count II that the defendants engaged in a continuing combination and conspiracy to boycott National Gerimedical in violation of § 1 of the Sherman Act, 15 U.S.C. § 1. Count III alleges that defendant Blue Cross Association and Blue Cross of Kansas City and their co-conspirators have combined and conspired in a continuous combination and conspiracy to boycott plaintiff hospital and coerce all Blue Cross subscribers to refuse to deal with plaintiff, in violation of § 1 of the Sherman Act, 15 U.S.C. § 1. Count IV alleges that the defendants' actions were an effort to control market entry and dictate terms of access to the health care services market and constitute an unlawful abuse of monopoly power in violation of § 2 of the Sherman Act, 15 U.S.C. § 2. Counts V through VIII allege violations of similar provisions of the state antitrust laws, Missouri Revised Statutes § 416.031, subd. 1 through § 416.031, subd. 2.

On July 14, 1978, defendant Blue Cross Association and defendant Blue Cross of Kansas City filed motions to dismiss plaintiff's amended complaint. After considering the parties' suggestions in support and in opposition thereto, the Court refrained from deciding the issues raised by the motion to dismiss pending the Supreme Court's decision in Group Life and Health Ins. Co. v. Royal Drug Co., 440 U.S. 205, 99 S.Ct. 1067, 59 L.Ed.2d 261. Subsequent to the Supreme Court decision in that case on February 27, 1979, the parties have briefed the issue of the application of that case to the present facts. The defendants base their motion to dismiss the federal causes of action on essentially four grounds: (1) The conduct complained of is exempted from the antitrust laws by the provisions of the McCarran-Ferguson Act, 15 U.S.C. §§ 1011-1015; (2) the National Health Planning & Resource Act of 1974 impliedly repealed the antitrust laws where the challenged conduct is necessary to effectuate the purpose of the Act; (3) plaintiff's complaint does not allege any ultimate facts to support a claim that the defendants engaged in a conspiracy within the meaning of the antitrust laws; and (4) prepaid medical plans offered by not-for-profit corporations are not "trade or commerce" within the meaning of the Sherman Act. Additionally, the defendants argue that if the federal claims are dismissed for lack of jurisdiction, the Court should exercise its discretion and dismiss the pendent state claims.

In an order issued October 11, 1979, this Court indicated that because it was considering matters outside the pleadings presented by the parties, it would treat the motion to dismiss as one for summary judgment in accordance with Rule 12(b)(6) of the Federal Rules of Civil Procedure. The parties were given an opportunity to present additional evidence or to oppose this proposed action. All parties have indicated that they have no further evidence to present and do not oppose this treatment by the Court.

Rule 56(c) provides in part that summary judgment should be granted when:

. . . the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.

It is well established that in considering a motion for summary judgment, the Court examines the evidence not to decide issues of fact but to determine if any real issues exist. Krupin v. United States, 439 F.Supp. 440 (E.D.Mo.1977); Bazzano v. Rockwell International Corp., 439 F.Supp. 1167 (E.D. Mo.1977). The existence of some disputed facts in a case does not necessarily preclude the Court from granting summary judgment. To preclude summary judgment, the disputed facts must be material and of the type that would affect the outcome of the litigation. Hahn v. Sargent, 523 F.2d 461, 464 (1st Cir. 1975). Where legal questions of statutory construction involving legislative history and policy are concerned, summary judgment is an appropriate mechanism for disposing of these issues. Mobil Oil Corp. v. Federal Energy Adm., 566 F.2d 87, 91-2 (Em.App.1977).

The Eighth Circuit has consistently recognized that summary judgment is an extreme remedy which should not be granted unless the movant establishes his right to judgment with such clarity as to leave no room for controversy. Ledwith v. Douglas, 568 F.2d 117 (1978); Unlaub Co. v. Sexton, Inc., 568 F.2d 72 (8th Cir. 1977).

In considering this motion the Court must view the facts most favorably to the party opposing the motion and give that party the benefit of any reasonable inferences to be drawn from the facts. Ledwith, supra; Unlaub, supra; New England Mutual Life Ins. Co. v. Null, 554 F.2d 896, 906 (8th Cir. 1977). From all of the pleadings the Court has reviewed, it would appear that there is no material dispute as to the following facts which are a summary of the essential allegations of plaintiff's complaint by Blue Cross of Kansas City:

1. Plaintiff is a Missouri not-for-profit corporation which will open a new hospital on or about July 30, 1978 (Paragraph 3, Complaint);

2. Defendant Blue Cross of Kansas City is a Missouri not-for-profit Health Service corporation which offers private individual and group health care reimbursement plans and programs to the general public in Missouri and Kansas, and which contract with member hospitals and with other health service provides for the administration of its health care reimbursement plans (Paragraph 4, Complaint);

3. Blue Cross is a major provider of private health care plans in Western Missouri and Eastern Kansas (Paragraph 13, Complaint);

4. All acute general care hospitals except plaintiff in the Blue Cross service area have contracted with Blue Cross and thus are "participating" hospitals. (Ibid.);

5. Blue Cross reimburses its individual subscribers for 100% of all covered hospitals services, by direct payment to the hospital, for services at a participating hospital (Ibid.) 6. Blue Cross subscribers receive payment for 80% of covered hospital services performed at a non-participating hospital, which reimbursement is paid directly to the subscriber, not the hospital (Ibid.);

7. Blue Cross denied plaintiff a participating Member Contract solely because plaintiff failed to demonstrate a need for its hospital (Paragraph 17, Complaint);

8. Among the "Prerequisites" for membership in Blue Cross, was the requirement that a hospital "meet a clearly evident need for health care services in its defined service area." (Paragraph 18, Complaint);

9. In order to determine "clearly evident need" Blue Cross designated Mid-America Health Systems, Inc. ("MAHSA") a not-for-profit, non-governmental organization, engaged in the voluntary evaluation of health care services in Missouri and Kansas as the agency to conduct "need review" (Paragraphs 6 and 18(a), Complaint);

10. Blue Cross will not contract with any hospital as a "participating member hospital without MAHSA approval of need" (Paragraph 18(a), Complaint);

11. MAHSA has no power to impose sanction to enforce its determinations nor to compel review (Paragraph 18(b), Complaint);

12. MAHSA has publicly stated that it will disapprove and not consider favorably the addition of any acute care hospital beds.

Plaintiff's answers to interrogatories clarify one point. National Gerimedical Hospital's initial application to become a Blue Cross member hospital was made October 4, 1977 and was amended and resubmitted on February 15, 1978. (See Plaintiff's answer to Interrogatory No. 9, Ex. D.) On March 21, 1978 National Gerimedical Hospital was denied member status because it had not received approval through the voluntary health planning process. National Gerimedical has indicated that it never sought review by Mid-America Health Systems Agencies. (See Plaintiff's answer to defendant's interrogatory No. 16, Ex. F.) Thus this is not a situation where Mid-America Health Systems has refused to issue a certificate of need to National Gerimedical Hospital, but rather plaintiff is challenging the policy of Blue Cross requiring them to seek Mid-America Health Systems' approval.

Application of McCarran-Ferguson Act

§ 2 of the McCarran-Ferguson Act, 15 U.S.C. § 1012(a) and (b) provides in part:

(a) The business of insurance, and every person engaged therein, shall be subject to the laws of the several States which relate to the regulation or taxation of such business.

(b) No Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance, . . . Provided, That after June 30, 1948, the Act of July 2, 1890, as amended, known as the Sherman Act, and the Act of October 15, 1914, as amended, known as the Clayton Act, and the Act of September 26,

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